As a property owner, it is natural to want to know the monetary value of your property. Unless you are into real estate, it will be quite difficult to determine the exact net worth for your property because it is not always static. Just because your home was once a certain amount doesn’t mean it will keep at that value.
Even if your house is the nicest and most updated in the neighborhood, it doesn’t mean it is worth what you think, it will remain at the same amount.
The reality is that the physical structure depreciates over time, meanwhile the value of the area might appreciate.
There are better ways to determine how much a house is worth than by figuring how much you paid for or put into it without considering depreciation and other factors.
DETERMINE THE COMPS ON YOUR HOME
Ask yourself about the other homes that have been sold in your area (within the past 12 months) that are comparable to yours. Consider square footage, the home’s age, number of bedrooms and bathrooms etc. Take note of the condition of your home. You might also get sales information from a title company or realtor. Check the Internet to get information but bear in mind that some municipalities are several days behind in updating their public databases, so the selling price you see online might be the property’s previous selling price. The dates will be listed so you will know if it is current or not. From this information, do a quick comparison of your property to come up with an estimate of your home value.
USE THE COST METHOD
Figure out what it would cost to replace the property. This involves determining building cost, including labor and the cost of materials. Ask a contractor what he would charge you per square foot to build a home similar to yours in your area. This figure gives you the value of a brand new home. Deduct a suitable amount for the current condition of your home. The cost method is more accurate than when the home is newer. This method can also be used when comps are difficult to find because the home might be unusual.
While a valuation is an estimate, the only real test of what your home is actually worth at any given moment is the price someone is willing to pay for it. Unfortunately you only find out this once your property is on the market and someone wants to pay for it.
You could also get an estimate of your home’s value from a real estate agent. Real estate professionals have access to private industry databases with much more complete and recent data on them. Bear in mind though that agents’ work on commission from property sales so unless you are seriously considering hiring the agent to help you sell your property, it is unethical to ask him to do a research for you without any form of compensation.