In my long career as a Realtor, one of the most common problems I encountered was homeowners who had absolutely no idea what their homes were worth. That was before things like Zillow and Trulia popped up, but it’s not like the Internet has been able to make a huge dent in this problem. The thing with real estate is that it’s unique. Each and every property, even in a McMansion cookie cutter style subdivision sits on a different piece of land, it has wood that’s aging at a slightly different pace, the sun hits it differently because of the different trees in the yard, and so on and so forth.
This was a huge point they drove home in real estate school. No two houses are ever alike and if you expect they will be, you need to do something else with your life. They can be similar, but they’re not the same, which is what makes home valuation extremely tricky.
The Psychology of Home Ownership
Although there hasn’t been a ton of research done in this area, any Realtor worth their salt can tell you that buying or selling a home is a mix of complex emotions and intense thought, so much so that many people in the market would be considered totally irrational in any other setting. I’ve read a few interesting articles on this, including The Psychology of Home Environments, but the nuts and bolts of the thing go like this:
A home provides you with a secure foundation, in theory. For many people, the world is a scary place and renting makes them feel like they could be out on the curb at any moment. You’re actually protected by your lease, but I understand what you mean. It is scary, having someone else call the shots. Owning means you’re in charge, including when the A/C fails or the roof starts leaking.
You pour your identity into a house, so you’re heavily invested from the start. Psychologists say that you subconsciously choose a house that reflects something about your psyche. Maybe it reminds you of your grandmother or it has elements that together create a sense of comfort and well-being, or maybe the neighborhood is familiar. Anyway, there’s a part of your identity that goes into buying a house and continues through repairs and upgrades.
Being a homeowner gives you a real investment in your community. There’s a belief that renters don’t get too involved with their neighborhoods because they feel deep down like they’re transient, even if they’ve lived in the same place for years. Homeowners, however, have a financial stake in their neighborhoods being liveable and popular and lovely and safe. My neighborhood association does a great job of illustrating this point by regularly posting the percentage of homeowners in the neighborhood. It’s around 60 percent, if you’re curious.
All these elements taken together mean that there’s absolutely no way you can be objective when determining what your house is worth. I’m sorry, but it’s true. I’ve seen so many situations where someone has been interested in selling because their neighbor just solidified a significant price and they hope to do the same. The difference is that while you love your house and its quirks, the neighbor’s house has been totally remodeled and has 1000 more square feet, plus that double lot it’s sitting on….
Determining the True Value of Your Home
First, before we get into this, I want you to understand something. The value of your house fluctuates day by day, and in some areas even hour by hour. Your home’s value is not a solid thing. It’s prone to wobble a bit, depending on neighborhood conditions and a million other factors. The sooner you realize this, the better you’ll be. However, a professional can determine a range of value based on what other houses have been selling for in your area. And that’s as close as anyone can get because, as previously noted, no two pieces of real estate are the same.
Deciding if it’s time for you to sell often comes down to how much money you can get out of your home, so it’s understandable that you’d want to figure out an estimate on your own before you pay someone. And that’s doable, sorta. It’s doable with caveats, so let me explain.
Sites like Zillow.com and Trulia.com try to give it their best shot, but they base their data on what information the local multi-list system is willing to provide. In some areas, like Springfield, Missouri, that information is tightly controlled by the MLS and is absolutely never shared without written permission from the home’s owner — but they almost never want it disclosed outside the multi-list, and that’s fair. People are often up in each other’s business for no good reason.
But, for this reason, the “estimates” these sites give are just that — estimates — and they’re instead based on self-reported tax data. In some areas they might be worth a try, but unless you belong to the multi-list system, you might not be able to find out if the data on Zillow is from MLS or from self-reported tax data (which is inherently flawed). I just checked my house on Trulia for grins and they don’t even have the number of bedrooms and baths correct (there was an addition at some point in the home’s history).
So, how DO you get a good idea of value?
It’s simple, really. You have to do the legwork. Go to Open Houses in the neighborhood, check fliers hanging on yard signs in front of houses that look like yours, ask new members of your neighborhood association about how much people are paying for houses right now. It could take some time, I won’t lie, especially in a neighborhood like mine where houses have been being built since the early 1900s and every now and again, a new one still pops up.
The best alternative to this is to ask a Realtor to perform a comparative market analysis. They’ll essentially perform a similar search, but instead of hitting the bricks, they’ll do it in the MLS database. In this case, membership has its benefits. Asking for a CMA doesn’t mean you’re signing on with the agent, and if they make that a condition just walk away. This is a service most Realtors will perform for free, especially if they sell a lot of homes in your area.
A CMA isn’t a guaranteed win, either, but it’ll get you much closer. Your Realtor will look at details like the age of comparable homes, the features that they know matter (for example, decks add value) and condition. Then they try to match your house with the closest ones in the area to provide you with a range of value. When I was in the business, we generally limited CMAs by elementary school, but if you’re in a larger neighborhood, your agent may use that to limit their search instead.
The Bottom Line: Let the Pros Determine Your Value, Not a Website
At the end of the day, the best, most accurate picture of your home’s value will come from an appraiser, but the second best option is to ask a Realtor for a CMA. CMAs allow you to see what’s selling, what isn’t and what’s still listed so you can price your home competitively. I know you love your house and you think it’s the best house, but keep in mind that not everyone will share that opinion. That’s why it’s important to get a professional opinion before you decide that it’s time to sell.