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Buying, Finance, Home Values, Selling a Home

Track Your Home’s Value Using This State-of-the-Art Tool

Homes.com’s state-of-the-art valuation tool is sufficiently sophisticated that you can use it to understand and track changing home values in your local neighborhood.

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When you buy or sell a used car, you can get a good idea of its value and the price it will sell for by surfing several widely advertised web sites. When buying or selling a house, you can do the same thing by using Homes.com’s Home Value Calculator which uses automated valuation models, or “AVMs”, to give you an estimate of a home’s value.

Homes.com’s state-of-the-art valuation tool is sufficiently sophisticated that you can use it to understand and track changing home values in your local neighborhood. Hyper-local valuation trends are much more useful and more important to buyers and sellers than the national or regional trends reported in the news media.

Using Homes.com’s AVM When Buying, Selling, or Financing

Having an accurate estimate of a property’s value will help you make selling, refinancing, or buying decisions. Homeowners can get an excellent idea of how much equity they have in their homes without incurring the cost of an appraisal– equity is the difference between the value of your home and the amount you still owe on your mortgage, if any. Owners considering refinancing or selling can use the calculator to help them decide when is the best time to do so. Buyers can use the calculator to compare a seller’s asking price with the AVM’s estimate before they make an offer. The calculator’s valuation estimate will also help buyers avoid low appraisal problems when they are deciding how much to put down.

Here’s how to use the calculator:

  1. Go to Homes.com’s valuation calculator and enter the address of the property.
  2. You will see a satellite map of the neighborhood with the home’s current estimated valuation in blue. On the right-hand side of the screen, you will see a form you can fill out titled “ask about this home.” If you fill it out, you will receive calls from local real estate agents who can tell you more about the home’s value. 
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  3. Scroll down, and in the center you’ll see an Estimated Home Value in large type in the center of the screen. This is the maximum value the property might be worth in current market conditions. To the right of the estimate, you will see a range that ends with the maximum value.
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  4. Scroll down further and you will come to a table that lists the current median value for the zip code, street, neighborhood, city/town, state and the entire nation. Click on each option and you will see a line graph that compares the value of the property with the median value over time. This will give you a good idea of how the home’s value compared with neighboring properties.
  5. Continue to scroll down until you come to “price history.” Here you can find the actual prices paid for the home in past sales. You can find the same historical price information on listings of homes for sale and also find out how long a property has been listed on Homes.com.
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How Automated Valuation Models Work

Using data on recent, nearby home sales and market trends, AVMs can provide an estimate that will be very helpful when you are exploring a new community, making a budget to buy a home, saving for a down payment, preparing an offer or, if you already are an owner, deciding whether or not to refinance. These calculators use algorithms designed with the help of economists and use mathematical modeling to convert the most recent local sales data into an estimate on a property. Like appraisers, AVMs find several homes that are the same size, same age, and are located as close as possible to the property being valued.

AVM estimates can vary as much as 10% from the actual value, primarily because AVMs can’t inspect the property to see if the house might need expensive repairs to fix, such as a wet basement, leaky roof, mold infestation, outdated circuit breaker, or termite damage. It doesn’t know the age or condition of a home’s appliances and its systems― electrical, plumbing, heating, and air conditioning. Big ticket repairs like aging roofs and windows, damaged foundations, or landscaping may be so old that new owners will have to spend serious money soon after they move in.

Until very recently, all mortgage lenders have required an appraisal of a property by a licensed appraiser before they will approve a mortgage. Lenders use the appraisal to determine how much they will lend the borrower. If the appraisal of the home values the property less than the amount the borrower needs to finance the purchase (the sales price minus the borrower’s down payment), either the borrower will have to increase the down payment or the seller must lower his price.  Such low appraisals are a major reason that sales fall through. About 10% of home sales encounter appraisal-related problems.

The variety of and quality of information on home prices and values you can find on Homes.com will give you a good idea of how a home stacks up in your current “hyperlocal” market. Market conditions in your zip code, neighborhood and even on a specific street will be more valuable to you than metro-wide, state or national trends.

Surf through local listings of homes for sale to find nearby properties that are roughly the same size and age as the home you are researching. You can also identify comparable homes that have recently sold to give you a sense of local market trends. You might also conduct valuations once a month to see if values have changed in response to market conditions.  If you are buying or selling, ask your real estate agent for “competitive market analysis” of a property or a neighborhood in which you are interested will include information from recent local sales and professional opinion of the property’s future prospects based on local market trends.

 

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Steve Cook is the editor of the Down Payment Report and provides public relations consulting services to leading companies and non-profits in residential real estate and housing finance. He has been vice president of public affairs for the National Association of Realtors, senior vice president of Edelman Worldwide and press secretary to two members of Congress.

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