If you’re a real estate agent a question friends often ask you – casually over drinks – is “How much is my house worth? I’ve heard the market is going crazy.” Especially today when housing prices have had a Covid-run-up after years of a buyer’s market, people want to know how much more their house is worth. Rather than ask a broker for a wild guess at a party, or request an in-person market appraisal with an agent, it’s fairly easy for most people to access online information and come up with their own informed estimate.
DYI property valuation
Are you considering selling your property some time in the near future or just wondering what it might be worth in today’s market? You can get a rough idea before talking to a real estate broker. Besides, it’s always a good idea to have your own well-founded opinion of your home’s value before you invite a broker to advise you. After showing you what they believe are comparable properties, most agents will ask you what you think your house is worth. Remember the seller does set the listing price based on market conditions when the house goes on the market.
Try to objectively look at your house compared to other homes around you and remember that there is no exact mathematical answer – just a good range of possibilities. It is possible to come up with an estimate in a town that has substantial real estate sales and for a home that does not have special features, is situated on a standard amount of land, is moderate sized, and in good condition.
Let’s get started
For the purposes of illustration we will use an actual house in Lakeville, CT, that went to contract in late December of 2019 and closed in February for $495,000 before the great Covid work-remotely migration began. Located in Lakeville in the town of Salisbury, CT, this house was selected because it was in the median range of homes when it was purchased and in move-in condition. Compared to other towns in our region, Salisbury has a very active real estate market right now with a record 102 sales year-to-date compared to only 47 last year.
Step 1: Gather information on your own property
Type your address into www.realtor.com and first write down the public record of square footage, lot size, and the number of bedrooms and bathrooms (see chart for step-by-step process on the following page). Check to make sure this basic information is accurate against public records.
Please ignore the current price estimates provided by online sites. In this case www.realtor.com calculates $474,600 – less than the purchase price of $495,000. Zillow and Trulia estimate $538,558, while www.redfin.com comes up with $662,669 and a range of $630,000 to $696,000. All the internet sites employ proprietary algorithms based on assessments, sales, size, market, age, etc. to estimate a value; however, these estimates may not be very meaningful in small rural markets with diverse housing stock like ours.
Step 2: Check your property tax assessment and market value
In Connecticut each town’s assessor first estimates the market value of an individual property and then calculates the assessed taxable value at 70%. That’s the amount your property tax is based on. In some towns the market value is a fairly accurate representation of what your house might be worth, and, in others, much less.
For this house Kayla Johnson, Salisbury’s Assessor, determined a market value of $581,714 at the time of the last valuation of all town properties five years ago. Salisbury is now completing a revaluation, which property owners will receive early next year. Johnson expects a slight increase across the board reflecting higher real estate values. Properties in the million dollar plus range will probably see proportionally greater increases. These new values will be reflected on the July 2021 tax bill. On average the six sold houses we selected below for comparison closed at 33% over the assessor’s estimate of market value.
Step 3: Look at recently sold properties near you within the last six months
Online real estate sites will give you a sampling of recent sales. Select listings that are similar to your home in size, style, condition, age, desirability of location, views, and special features like an in-ground pool or fireplaces. While real estate brokers have a much more complete record of recent sales from the Multiple Listing Service, online public sites do provide enough examples for your purpose. Record the sale date, address, square footage, lot size, price, and dollars per square foot. You might want to drive by and try to objectively evaluate sales compared to your own home.
Look at the interior photographs online and try to honestly assess the condition of bathrooms, living spaces, and the kitchen compared to your own. Is your house a “wow” house, just OK, or in need of serious renovation? In this market, despite high demand and low supply, houses requiring renovation sell more slowly at lower price points.
By focusing on houses most similar to our test case, a per square foot of around $300 would translate into a sale price of over $700,000. This is in line with the realtor.com estimated median price of $647,500 and $318 per square foot for all Salisbury real estate. In February 2020 the median house price in Salisbury was $500K, about what this house sold for, and in November 2020 the estimated median sales price had risen to $649,000 – an increase of 30%. This correlates with the fact that these six houses sold for 33% more than their assessed market values. Looks like our test case should have a market value today of between $650,000 and $700,000.
Step 4: What’s on the market now?
When you scan houses on the market now there are fewer comparisons because inventory is so limited. Our test carriage house is certainly not Pocket Knife Square nor does it come with an ore pond. It doesn’t need a total renovation. It’s not a $5.5 million home, a horse property, or a $125,000 tear-down. It’s not near Lime Rock Race Track and it doesn’t have a spectacular view. The three active comparisons selected seem somewhat similar to our carriage house including two village locations. Again the price per square foot is around $300, suggesting that this is what homeowners are expecting.
When doesn’t this approach work?
Trophy properties, estates with large acreage, houses with spectacular views, and homes in less active real estate markets are not appropriate candidates for this systematic approach to valuing your home. This works well for median-priced homes but not for the exceptional or unusual. A farm in the Town of North East, NY, that had been on the market since 2015 recently sold for $2.4 million with silos, barns, a house in need of restoration, and over 300 acres. There’s little information readily available online which might help in figuring out whether this was a great buy or not.
For this type of property in a geographic market where only five properties have sold above $1,000,000 in the last two years, it’s best to consult with an experienced realtor. This agent will have access to more sales data and also have a sense of the demand for this kind of property.
Most importantly an agent can advise you on the steps you might take to maximize the value of your property. Should you add a pool? What about repainting? Is it necessary to redo the bathrooms? Preparing a house for sale takes time – it’s a project. If you think you might want to sell in the spring you should start talking to brokers now.
Where will I go?
Looking at houses on the market and sold properties can also help you decide where you might relocate if you sell your house. The process works for buying as well as for selling! Remember that nationally all housing prices have risen 12.4% over the last year. If you are contemplating selling your house you should also think of how much it will cost to live elsewhere. In Atherton, CA, the most expensive city in the US, a median house is $5.9 million, but you can buy a typical house in Syracuse, NY, for $107,000. Something to consider!
Christine Bates is a registered real estate agent in New York and Connecticut with William Pitt Sotheby’s and has written monthly for Main Street Magazine since its first issue.