Tip Tuesday: What’s Your Value?

    When selling your home, many phrases are bounced around regarding value…market value, appraised value, and assessed value.  What do they mean?  What’s the difference?  And how does it affect you?

    Market Value:  The most profitable price that a property should bring in a competitive and open market under all conditions requisite to a fair sale.  A comparative market analysis (CMA) on your home done by a licensed Realtor can help you to understand what the home’s neighborhood’s market trends are, what aspects of a home are valuable in the current market, and what a fair price range is.

    Photo Credit: resources.point.com
    • Tip to Seller:  You may have a price in your mind as to what your home sells for, but remember that even though you set the price, the Buyer determines the value and how much they’re willing to pay for it. A Realtor may suggest a slightly higher price based upon some aspects of your home that they think may be desirable to Buyers.  However, understand that it may not appraise so be prepared to have to lower your price if the appraisal is too low.
    • Tip to Buyer: Even though CMA’s are commonly done for Sellers, if you’re interested in purchasing a home, be sure that your Realtor conducts a CMA for you on the home you’re interested in.  A home may be listed at $350,000 but based upon a CMA, your Realtor will tell you that it’s only worth $320,000. Their goal is not have any issues with appraisal value and potentially have the deal fall apart after you’ve paid for inspection and appraisal and not have you overspend for a home.

    Appraised Value:  The appraised value is a licensed Appraiser’s opinion of a property’s market value based on their professional knowledge, experience and analysis of the property.  An appraisal is usually done by the bank that the Buyer is using.  A bank will not allow the Buyer to borrow more than the appraisal value.  For example,  if the purchase price is $400,000, but the Appraiser values it at $350,000 then the Bank will not allow the Buyer to borrow more than that.

    • Tip to Seller: Be sure that your Realtor explains to you what type of mortgage the Buyer is using because many mortgages won’t even allow the home to sell for more than the appraisal value.  Know what bank and what type of loan the Buyer is using so that you can understand potential pitfalls that come with that.  In addition, some mortgages have requirements of the home such as no peeling pant that you may have to address prior to or after an appraisal.
    • Tip to Buyer:  If you have a mortgage that would allow you to purchase the property for more than the appraisal (such as a conventional mortgage), be sure that your Realtor includes an Appraisal Rider to allow for the re-negotiation of price if the appraisal comes back lower than the purchase price.  This will protect you from overpaying for the home.

    Assessed Value: The valuation placed on a property by a public tax assessor for purposes of taxation.

    • Tip to Seller: Be sure that the town has accurate records of your home because the Appraiser will use town records to add value to your home.  If you have 2 baths, but the town only says 1 then many times the Appraiser won’t use that 2nd bath for a value, which brings your total value down.  While a higher assessment may raise your taxes slightly, it will prevent less headaches come selling time.
    • Tip to Buyer:  Many times Buyers are confused by the assessed value and the market value.  Simply knowing the difference between these 2 things can help you understand how to look at home values and move forward with an offer.

    Are you ready to find out your home’s value?  Click here!

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