If you’re like many people, you’re not quite sure how banks determine a home’s value – and there’s a good reason for that: it’s a very involved process.
How Do Banks Determine a Home’s Value?
There are several steps a lender goes through in order to determine how much a home is worth.
Appraisals: The Low-Down on How Banks Determine a Home’s Value
Typically, a bank will buy an appraisal. That means they’ll hire a professional appraiser to inspect the home. The appraiser will walk through and look at:
- Number of rooms
- Size of living space
- Size of the garage and attic
- Size of outdoor living space
- Special features
- Serious flaws in your home
The appraiser will also look at homes in your neighborhood that have features similar to yours; in many cases, they’ll look at other neighborhoods in the area, as well. By comparing the sales prices of those homes, an appraiser can get a good idea of where yours should fall on the spectrum.
While it’s not an exact science, most appraisers will come up with roughly the same figures given the same set of data.
Why Do You Need to Know a Home’s Value?
Naturally, there are a number of reasons you’ll need to know a home’s value – most of all, though, it’s so that you’re not paying too much money for too little home.
What About Online Home Value Estimators?
Because there’s no human element involved in online home value estimates, they’re not as reliable as authentic appraisals. Typically, the online home value estimators you’ll see on major real estate websites fail to account for several major factors – and those prices can be off by thousands (or even tens of thousands) of dollars.
Do You Need a CMA?
If you’re thinking of selling a home in Lake City or the surrounding communities, you could benefit from a comparative market analysis. A comparative market analysis, or CMA, involves your Realtor® performing many of the same functions as an appraiser would. Your Realtor will compare your home to those with similar features, just as an appraiser would, to find out approximately what your home is worth.
This is essential if you’re selling, because you need to put your home on the market at the right price. If you don’t, it could sit on the market for too long (or sell so quickly that you’ve left money on the table).