One of the most valuable assets that anyone will own in their lifetime will be their home. As a general rule, homes and other similar properties go up in price rather than down, and there are a number of different factors for this, including the location of the home, the condition of the property, and the general overlying conditions of the market, how many people are buying and selling, and the economy both nationally and worldwide.
Homes however can go down in price on occasion, particularly if they are poorly maintained, and so looking after a property constantly is an important step in ensuring that it continues to accrue in value throughout its life.
There are lots of reasons why someone may need to get an estimate of the value of their home. The three most common are:
- For insurance purposes – in this case the home needs to be valued so an insurance cost and premium can be determined, so a payout can be made should the home be destroyed by fire or other damage.
- For selling purposes – in this case someone is planning on selling their home, either to raise capital or to fund or part-fund the purchase of another home, so an estimation can be made as to how much money can be raised or how much can be funded towards another purpose. Someone may get an estimation of the value of their home as they are not actively thinking of selling at this point, but are interested in testing the market.
- For valuation of an estate – in this case a home is being valued as the owner of the house has died, so an estimation can be made in terms of valuing the estate.
Estimations of a home’s value are as they suggest, estimations, in that they may not be the exact value that a home will realise on the open market. However, they do provide valuable information that can be used in insuring or selling a home, and there are different methods that can be used.
Methods of estimation
One of the simplest ways of getting an estimate for the value of your home, is to use one of the increasing number of online estimation tools that are available on the Internet.
The advantage of these online tools is that they are quick and easy to use and you can get an estimation of the value of your property typically in just a couple of minutes. You will be asked to input your address, and you are likely to be asked some other simple questions about the nature of your property (the year built, number of bedrooms and living rooms etc.) and you will be given an estimation of the value of the home.
Although this method is quick and easy, it is not yet the most accurate way to get an estimation, although estimation accuracy is improving all the time. The disadvantage of this method is that it does not take into account any of the specifics of your property, such as the condition or any upgrades or home improvements that you have made, and therefore may underestimate or overestimate the value. What it will tell you is a rough idea of for how much similar types of properties in the location are currently selling for, as it generally uses recent geolocated pricing data for sales as its primary input for information.
The most accurate method will be to bring in an estate agent or realtor, or a qualified home inspector, to do the inspection.
The advantage of a real person inspecting and appraising your house for a valuation is that they will take the time to look around the property properly before estimating a value. This will take into account more keenly the key features of the property – what are the construction materials, what year was it built, what condition is it in, are they are any particular home improvements that will improve the value of the property etc.?
This professional eye examining the home will likely give a much more accurate, and certainly more informed, valuation of the property. However, you should be aware that an estate agent or realtor is likely to be estimating the value of your home with the intention of selling it, upon which they will earn a commission. Therefore you must be aware that they may overvalue your home, partly to cover your own fees and partly to flatter you as a potential client, as they may want to convince you that they can get more money for the property than other realtors or estate agents.
You may also want to consider a home inspection as part of the valuation process. This will inform you as to whether there are any parts of the home that are damaged or need repair, therefore reducing the current value of the property until they are rectified.
Factors affecting an estimation
A number of positive factors can improve the value of your home and can be considered before or after estimation in order to improve the value. Obvious factors include a larger number of bedrooms, living rooms or well-appointed kitchens, all of which can be improved further by building an extension or in some situations renovating a basement. Other factors include a well-looked after garden or yard, extra facilities such as a swimming pool or a large garage.
Negative factors will include poor quality maintenance to the inside or outside of the home, and repairs should be considered before getting an estimation if at all possible.
A key factor is also location, as proximity to good schools, shopping, local transport networks and other services can be desirable ‘soft’ factors that can improve the value of a property.
Even simple factors like ensuring that the home is clean and tidy when the value is estimated, if being estimated by an actual person, can make a difference.
There are two main ways of estimating the value of a home, through online estimation tools or having a skilled professional come to the home to value it, and there are a number of things that can be done to both maintain and increase the value of a home.