Does anyone know how the value to a home is figured out?
Answer:
Most important by far: What have home approximately like it sold for in the immediate neighborhood recently.
If you're looking to set an asking price, you want to make adjustments for the state of the market, and asking prices on other similar homes currently for sale, etcetera.
Depending upon what you're trying to do, ask prospective listing agents for Comparative Market Analyses, ask your buyer's agent to help you decide on an initial offer, or engage an appraiser. The appraiser is the definitive maximum as far as lenders are concerned, but also the most expensive.
A general pricing= zillow.com
An official pricing= a licensed appraiser
It's usually based upon the going rate for which equivalent homes in the area have been sold. You can watch your local papers to see how this changes over time. Then based upon whether the particular home is better or worse than the other homes valued around it, it is either valued more or less.
Every several years the property assessor will come around to determine the rough value of your home for property taxing.
With a whole lot of experience. Let a real estate agent do it for you. Location biggest key. Comparable sold properties in the surrounding area, as well as those currently for sale. Price per sq. foot based on the quality of improvements, etc, etc, etc.
How to value a property during market downturn?
Housing market continues to slump. Now we can calculate true value of a property easily. As price decline, we don't need to guess and factor in the potential price appreciation while calculating home value. Without the guesswork, figures are more accurate.
Let's use following example:
Today, a typical 15 years old, two bedrooms condo/townhouse is priced around $500,000 and $550,000 in Sunnyvale, California. Rent for similar condo/townhouse is $2000/month.
If you are a home owner, $2,000/month in rent means $20,000 a year in profit ($24,000 per year in rent, minus $4,000 maintenance costs). A $20,000 income is equilevant of owning $400,000 bonds or CDs, because current yield of 30 Years U.S. treasuries are 5% (5% of $400,000 is $20,000). Bank CDs have similiar yields.
In our example, the two bedrooms condo/townhouse is 20% to 25% overpriced. They should be priced at $400,000.
It is interesting to note that if we redo the calculation from buyer's perspective instead of seller's perspective, the figures are even more shocking.
Mortgage payment consists of two parts: mortgage interests and mortgage principal. The interests portion is similar to rent. If you pay interest, it disappears and doesn't add equity to the property. To fully simulate characteristics of renting, we assume buyer will apply for a zero down, interest-only loan.
It turns out that rent of $2000/month is equivelant to mortgage payment of a $340,000 loan at 7.0% APR. And comparing $340,000 loan to $500,000 or $550,000 price tag, from buyer's view, the two bedrooms condo/townhouse is 30% to 35% overpriced.
One may ask, why is there a discrepancy between two perspectives of the buyer and owner?
The discrepancy is a result of 2% differences in interest rate that buyer borrow comparing to yields of bonds and CDs that owners would get. We understand that buyer would always pay more. That is the premium of buying to own. However, looking from home owner's perspective, current housing market is probably 20% to 25% overpriced. We recommand investors to wait for a better entry point.
http://biz.yahoo.com/brn/060909/19463.ht.
http://money.cnn.com/2006/09/08/real_est.
http://money.cnn.com/2006/09/05/real_est.
The answers post by the user, for information only, BAnswer.com does not guarantee the right.
Other Questions and Answers: