What is my home worth?

Have you ever wondered, “What is my home worth?”  If you are looking at Sacramento real estate or are considering listing or putting your home for sale in the Sacramento area, understanding the appraisal process and what drives home values can be very valuable.

There are actually two home values—the value that you place on the home as the homeowner, and the value placed on it by potential buyers.  Unfortunately, the values placed by both are based on emotion and are generally not reasonably based on market data.  Essentially, the seller wants to obtain the maximum price for his or her home and the buyer wants to pay the minimum price to obtain the home.

For instance, as the homeowner, you have spent time in the home, often with a family, years of memories, children growing up, maintenance, perhaps blood sweat and tears in room additions, kitchen or bath remodeling, etc.  Obviously, homeowners place a high value on their home and rightly so.

Potential buyers on the other hand see things differently and act on different emotions.  They are looking for that emotional spark at the first viewing.  The all-important first impression is what drives potential buyers, at least at first.  But, that first impression quickly morphs into affordability, the cost to get in the home, the closing costs, the monthly mortgage, property taxes, etc.  They start thinking of questions like, “Should I make an offer?” and “What is the least amount I can offer?”.

Market Value is often times somewhere between these two emotional extremes.  This is where an appraiser comes in with an objective opinion supported by market data.

Market Value is the price a willing buyer will pay to a willing seller.

Where does the appraiser begin and how do they arrive at those magic numbers called Market Value?  There is nothing really magical about it at all; it is simply a methodical series of analytical steps.

First, the appraiser makes a physical inspection of the property, determining the size of livable floor space, noting all of the amenities, such as the number of bedrooms and bathrooms, the garage, washing and laundry facilities, storage areas, and any other special features such as a fireplace, pool, patio or outbuildings, etc.

After a thorough inspection, the appraiser has a starting point from which he or she can begin to determine the market value.  With all of the physical data collected, the appraiser uses two or three methods to arrive at market value.

The three methods are:

Market Approach:  The appraiser searches for comparable homes in your neighborhood, subdivision or within your city with comparable neighborhoods.

Cost Approach/Cost Analysis:  The appraiser calculates the cost to build your home at current material and labor costs, less depreciation for structural damage, poor upkeep and neighborhood disintegration.

Income Approach:  The income approach does not apply to residential market value.  This approach applies to income producing properties such as residential duplexes, apartments, and of course commercial properties.

If the property being appraised is a residential structure, many factors are considered beyond the physical attributes of the property.  The appraiser also considers the compatibility of your home within the neighborhood, such as does your neighborhood add to or subtract from the value of your home?  This involves pride of ownership factors, which occur in most communities.

However, location, location, location generally drives the final market analysis.

The appraiser considers the ebb and flow of growth and its direction within your town or city due to socio-economic factors.  In addition, future city planning impacts to a large degree whether your home will maintain its present value.

At the end of the day, determining the value of your home is a complex procedure.  The appraiser must know his or her city well and all the socio-economic factors driving the market.  This takes years of observation, study, and considerable research by the appraiser.  If you are considering listing or placing your home for sale in the Sacramento area, I’d be more than happy to speak with you about your particular situation and explore the options available to you.  You can reach me right here https://sharondarelli.com/contact/.


Sharon D’Arelli