Many homeowners consider their home to be their most important investment. Some think of their property as a business with liabilities and assets. Most residents believe their homes will increase in value over time. Obviously, the real estate crash that began in 2007 has greatly reduced home valuations. How does one find out how much their property is worth today?
“Comps” are the answer. Anyone who wants to put a value upon his or her property must simply find out what comparative properties have recently sold for. This process sounds easy and can be readily accomplished, but there are a few caveats to consider.
During the fast times before 2007, many properties were incorrectly considered comps. If a house existed in Whitefish Bay, Wisconsin for example, any house within a five square mile area would have been considered a legitimate comp. Therefore, a luxury home on exclusive Circle Drive would have been compared equally to a more pedestrian residence on Kent Avenue. A five bedroom Circle Drive home that sold for $900,000 might have been used to prove that a five bedroom Kent Avenue home was worth the same. In actuality, the Kent Avenue property was only worth $410,000, but an out of state lender wouldn’t have known the difference.
Comps must be carefully researched since lots of factors do influence them. The homes to be compared must be similar in size and condition and they must be physically close to the property in question. Also, the sale dates should be very recent.
The first place to look for comps is local property sales records. These are public knowledge and can be researched at the courthouse or online. Again, in these times of falling markets, however, pay close attention to the sale dates, since public records do lag.
Consider the services of a real estate professional. These individuals have access to records concerning sales in process that may be difficult for the average homeowner to locate. A real estate agent can also provide a list of comparable properties currently for sale, so the homeowner can take advantage of the homework that was done by someone else.
Whether the property owner is considering a sale or merely wants to check the current market rate of their home investment, the best advice is:
Do diligent research and do not be overly excited by a comp that may seem very high. Utilize the services of a real estate professional. Once a particular market has been carefully studied, the value of a single home should be easy to determine.