As a homeowner, it is important to stay abreast of the value of your home. Unfortunately, many homeowners do not think about their home’s value until they are considering selling. You should check the value of your home every 6 months or so to determine the trends in your market. A good REALTOR can help you determine the value and knowing the criteria he or she uses will help you better understand the result. While the following may vary from area to area, many of these criteria are standard regardless of where you live:
- Listing Types: You should compare, Active, Pending Sales, and Sold homes. The minimum number of properties to look for is 3 of each type or more. Sold homes (within 90 – 180 days depending on your market and area) are the best indication of what homes are selling for in your area. Pending and active will tell you if there is an up or down trend in your area and what your competition would be like if you decided to sell your home at the present time.
- Neighborhood: Try to stay within the same city if possible and similar neighborhood. Use a radius of 1/2 mile to 1 mile from your home. If you do not find enough comparable homes, you can increase the distance until you do. Not finding many sold homes after increasing the radius is a good indication that there is not a big demand for homes in your area and thus will lower your home’s value.
- Square Footage: Compare homes that are approximately 15% of your home’s square footage. For example, a home with 1,500 square feet should be compared with homes that are 225 sq ft smaller and 225 sq ft bigger.
- Number of Bedrooms: Check comparable homes with 1 less bedroom and 1 more bedroom. This one criteria can vary depending on the number of comparable properties that come up. If necessary, compare with 2 more bedrooms.
- Number of Bathrooms: Since the number of bathrooms can vary between homes, compare homes with 2 less and 2 more.
- Age of Home: Compare homes that are plus or minus 10-15 years from when your home was built.
- Type of Home: When possible, try to compare similar home types. If your home is a ranch style home (which is typical in older homes in the southern California market), compare homes that are one story ranch homes. If your house is a two story home, compare with two story homes, etc….
- Lot Size: Lot size is important but can vary- so staying within 25% plus or minus is a good start. You can adjust the lot size criteria to higher than 25% if your search does not turn up many comparable homes.
- Condition: The condition of a home is important. When comparing homes, look for homes in similar condition (roof, yard, maintenance, etc….). The condition of the homeowner is also important. Generally distressed homes or homeowners (financially that is) will be worth less than non-distressed homes or homeowners.
- Amenities: Pools, built in barbecues, upgraded kitchens, etc play a big role in determining value. If your home has upgraded amenities vs the other homes in the neighborhood, yours will likely be worth more.
- Other factors: Factors such as excessive noise in the area, too many apartments near by, homes next to busy streets or freeways, etc… can significantly decrease the value of a home. Take these factors into consideration.
The above criteria can vary wildly depending on the area. Regardless of the criteria used, your home’s value is solely determined by what someone else is willing to pay for it on the open market. A great way to determine that value is by having a qualified REALTOR complete a comparable market analysis (CMA). It is never too late to get this analysis and REALTORs have the necessary tools to complete a CMA very quickly. It could take you 2 or more hours to complete a decent CMA yourself but a good, qualified REALTOR can complete a very accurate one in 15 minutes or less.
Carlos Barron is a real estate professional servicing the Southern California Market. He can be reached via www.CarlosBarron.com or 714-982-2300