How much is your house worth?

It used to be that when I arrived to discuss pricing with a prospective seller-client many were just waiting for me to share my market analysis, and hoping my opinion of their home’s value was as high as theirs (or at least what they “needed to get”).  They may have talked to other real estate agents, or heard a neighbor talking about what he heard about another neighbor’s sale price, or they might have collected flyers from overpriced houses around the neighborhood to support their own opinion.

Now, most people have checked one or more of many websites that purport to offer “estimates” of market value.  SmartMoney.com offers an interesting discussion on that subject:

The Fuzzy Math of Home Values

That article is a good summary of what consumers should expect from those online estimates.  In short, they may be fairly accurate, but the odds are high that they will be misleading — through no fault of the purveyors of those websites.  It is simply not possible so far for an affordable programmed algorithm to take into account all the variables that influence the market value of a specific home.

That fact is complicated further in “non-disclosure” states like Texas, where sale prices are not public information.  This leaves those algorithms to work with appraised tax values (which may be questionable themselves since the appraisal districts don’t have access to sales data either), extrapolations from recorded mortgage data, etc.

I have seen online home value estimates that were half of actual value, and I have seen them twice as high as homes ultimately sold for.  I have seen a duplex valued based on “comps” that were very nice single family homes in entirely different parts of the city.  Two different websites can provide very different estimates of value for the same home.

Even with all of our technology, there are still only two reasonably reliable ways for a homeowner to get good estimates of market value:  (i) a fee appraisal or (ii) a market analysis from an experienced real estate professional.  Even at that, this is a combination of art and science:  Every share of Dell stock is exactly like every other share, and they all sell for “market value” at any point in time.  On the other hand, five copies of the same house floorplan in the same neighborhood may well have five very different values, based on location, condition, owners’ choices of colors, flooring, countertops, appliances, pre-listing staging, etc.

The take-away:  Consult a professional, and consult more than one if needed.  If properly prepared and presented, the market data will tell a pretty unambiguous picture of the range of market values in which a home can compete effectively.  Get comfortable with the quality of the analysis.  Maybe more importantly, get comfortable with the professional you choose to represent you in this very important process.  A lot depends on that decision.