A home's market price is the actual value a home sells for in a given market. Its fair market value, however, is the highest price that a buyer is likely to pay and the lowest price that a seller is likely to accept. Estimating the fair market value of your home will provide a good indication of what it's worth. This is useful if you are planning on selling the property soon.
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Look for other homes in your area that are comparable. "Comparable" refers to homes that are similar in location, size, style, age and condition of the house you are estimating (the subject property). You will obtain a more accurate market value depending on how close and similar the comparable properties are to the subject property.
Check with the county property appraiser's office. This will provide data on what your own home's estimated market value is and also the value of the comparable properties. Use sale data only for those comparable properties sold within the last year.
Review the subject property and the comparable properties. Values may be adjusted to account for differences in features. This can include amenities such as a fireplace, tile floors, patio or a swimming pool.
Estimate the value of the land. Obtain sale information from the county property appraiser's office on vacant-land properties in the area that have sold within the past year.
Estimate the current cost of replacing your home. Contact a builder for information regarding the current price to build a new home equivalent to your current one.
Estimate the depreciation. This is the amount your home has dropped in value based on its age. You can contact your home's insurance company for this information or a local real estate agent.
Subtract the estimated depreciation from the estimated replacement cost.
Add the estimated land value to the figure you obtained in Step 4.
Determine the property's "probable monthly rental income." This is the average rental income the property would be expected to receive.
Compare the monthly rental income against that of comparable properties.
Look at the actual sales prices of comparable properties recently sold in the area. You can obtain the sale information from the local property appraiser's office. Your property's estimated market value is based on the return other properties are currently receiving in terms of rent and sale price.
Tips and warnings
- The replacement-cost method is typically used when there are few similar properties in the area, which makes the comparative market analysis method difficult.
- Time on the market is a figure difficult to obtain. The longer a home has been listed for sale, the more willing the owners might have been to reduce their selling price. This lowers the value of your property when you use the sale data to obtain market value.
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