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Determining the Value of Your House
We all know that you can't put several numbers in a hat, pick one, and determine the selling price of your home. Yet, many people choose their price in a similar, non-educated manner. There are factors that can help decide the final value of a property but also factors outside of your control. Value is more than just what you paid for the house plus the upgrades you've done, plus what you need to move into a bigger house, and that's how you come to the final price. There is more to figuring out the value of the house and it may surprise you to know that it isn't the usual methods.

If you ask any real estate agent to find the value of your home, they will likely ask you for a couple days to come up with a number. This can be helpful when you are contemplating selling your house, as you may not have realized the decreased value or you may not realize the increased value. Either way, knowing the true value of your home is a great place to start. The real estate agent can give you their opinion but it is also important for you to face, find and gather you own numbers. The agents may not always know the area like you do and it may surprise you to know how they came up with their numbers.

Agents know the more they ask for a house, the higher their commission will be. They also know if the house doesn't sell because the high price scared away buyers, they won't get a commission at all. So pricing the house is important to real estate agents as well as to the sellers themselves. Just because a house seems to be expensive or have a high value, doesn't mean it necessarily will sell for top dollar. When you are trying to sell a house, the price is probably the single most important factor in the listing. With the internet, potential house buyers search for their house by location and price. You the seller cannot change the location so if they do not want the location, they won't even consider your house. The price, if it is within their budget, they may consider the other elements of the house. For a low enough price, many buyers will tolerate a less than ideal kitchen or a backyard that needs some landscaping. But they will not find your house in the list of potential properties if their search parameters won't include it. Many people who may be looking for a house just like yours will miss out on the chance to own it because you did not price it correctly. It is crucial to know how to price and proceed accordingly.

By now, you're probably aware of the things that most agents use to value a property. But here is a short list of ways NOT to use in order to value your house.

Do NOT use the following methods:

* Tax assessments

* Last Sold Price

* Replacement Cost + depreciation

* Income Approach

* Asking the Builder's Opinion

* IRR (Internal Rate of Return)

* What You Paid for it

* Adding up the Investment you've dished out into the house

You may have heard people say that using numbers such as the tax assessment or what it recently sold for are ways to decide on the value of a property but that is wrong. A tax assessor cannot very well go into every home and determine if they have diamond encrusted counter tops so when they assess the house for a reasonable amount of money, they are not taking into consideration the over the top, expensive counters. Granted, not many homeowners would do that but you get the point that tax assessors are limited to what they can see and what they know about a property.

The last sold price is also misleading because the last sellers may have gotten a deal and paid very little or overpaid because they didn't do their homework or loved the house so much, they would have paid anything to move in. This is not a strategic way to price a house and should not be used because it relies on the value that another person placed on the property in years past.

The best way to value a house is to look at what the comps are for the area. This is the one true way to decide what your house is worth. Just because you put in a great deal of money for the renovation doesn't necessarily mean you will recoup those costs. It is not uncommon for homeowners to remodel rooms to their liking and sometimes they don't about the return on investment because they want it a certain way. For example, if you love having a landscaped oasis in the backyard, you may spend thousands of dollars on grass, shrubs, a stone patio, gazebo, hot tub, and many other amenities. This is for your enjoyment and you cannot expect to get that back when you sell. You may find that one buyer who appreciates it as much as you do but they will still want to change some things about it to make it their own retreat.

Your area will determine how much you can get for your house and how to properly price it. If the homes in your area have gone down in value, you cannot expect your house to stand out like a lighthouse in the midst of troubled waters. It is an educated guess based on facts. You have to be prepared to change and tweak the price. Use only recent sales in similar neighborhoods with similar features. Take away the highest and lowest prices and average the rest for a middle ground. You don't want to overprice and scare buyers away but if you under price, you will inadvertently put up red flags for buyers as they wonder what is wrong with the property. Be ready to change the number too. If you have no interested parties and your goal is to sell your house quickly, you will have no choice.

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