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Home Care & Ownership Tips
Understanding Home Value and How It’s Calculated

If you are thinking about selling your home, you may be wondering how to even put a value on the place that has been your sanctuary and your family gathering spot. For you, the value is tremendous, but, in the real world, the value of your home is based on just about every factor other than the intangible value of emotion.

Lately, however, the whole concept of home value may even make you violently ill. The markets have been on a head-spinning descent after so many years of hitting unbelievable record highs. The summer of 2008 reported a historical low for home values across the nation with no signs of leveling out, according to Standard & Poor’s housing index. Like everything in life, real estate valuation is part of a cyclical process.

Gaining a better understanding how home values are calculated will enable you to, in the best of circumstances, time the sale of your home at a time where you can gain the maximum value for all your effort in maintaining and upgrading the property.

Sifting Through the Jargon

Although looking at what the experts say seems like a great place to start in terms of understanding what home values mean, it is often difficult to get past all the jargon and nonsensical words and commentary that they use to “explain” it. Below are some simplified definitions of what all those big words mean as explained by the National Association of Realtors.

Median Price This is the midpoint of all the prices of homes that have been sold in a specific area over a certain period of time. Do not confuse this with the average price. This is one strong indicator of where the housing market is going in terms of home values.
Price Discount This is the percentage difference between what the seller initially asked in terms of the sales price and the actual price that it sold for. The difference in the price discount determines whether it is a seller’s market or a buyer’s market.
Affordability Index This index measures whether a typical family that earns a median income in a particular area can afford to qualify for a mortgage based on the purchase of a median-priced home.
Unsold Inventory This index measures how long it takes to sell a median-priced home in the current market. A shorter time on the market favors sellers while a longer time favors buyers.

Looking at All the Factors

You might have studied economics and school and just assumed that like most things for sale, homes are simply affected by supply and demand. However, that is only one part of the complex equation that calculates home values. There are other factors that affect what type of value you can place on your home and, unfortunately, many of these are completely out of your control:

  • Environmental issues, such as air pollution and noise.
  • Economic instability, including high interest rates, high unemployment, and tougher home lending guidelines.
  • Neighbors who are not concerned with keeping the community at a high value mark by not caring for their property or being as concerned about regular home maintenance.

Many times, homeowners also confuse the concepts of price and value. What is important is that value is so much more important than the actual dollar amount, especially in the minds of buyers. Value equates to the location of the home, its features, its condition, and its status as compared to other homes on the market. In this sense, although the market might be a difficult time to sell, if you find a buyer who values everything that your home has to offer, it is still quite possible that you will still be able to sell the home for what you want.

Stay in Touch with Real Estate Reality

The best way that you can keep up with home value is to do your research and pay attention to what is happening in your local area. For instance, watch what homes sell and for what price. Take the time to go to open houses in your area because this is an opportune time to be nosey and see inside these homes so you know what types of amenities are exciting buyers enough to make an offer or pay a certain price. This will help you decide what type of strategy to take with home maintenance or remodeling project to get that extra value. Also, it is an excellent idea to stay attuned with the external factors in your area so that you can gauge how these are affecting local home values.

If you want to find out more, a local Realtor will also help educate you on what you need to know in terms of calculating and understanding home values so that you can make a wise decision on how you should price your home when you are ready to sell.

Keeping it Online and in Perspective

There are numerous ways to track the current price of homes sold and for sale in your local area. You can also apply all the information that you have gathered about your own home to help provide you with an estimate that will be useful for any Realtor you work with so that they can understand what has been upgraded or remodeled in your home to validate a higher asking price.

Companies, such as Ownersite Technologies, have been helping homeowners track everything about their home, including inventory, maintenance, mortgage payments, home insurance, property tax, and home values. Working with an online service like Home Ownersite is an excellent way to have real time information on your home and how it measures up to the current home sales market so that you can gauge if this is the right time to put it out there amongst the competition.

While there may be real estate cycles that are harder than others in terms of getting the return on investment that you want, it pays to be educated and prepared to demonstrate why your home demands top dollar in the market by providing any potential buyer with comprehensive documentation on how you have cared for your home and made it a model of reliability, security, and value.

In terms of keeping it in perspective, make sure that when you put your home up for sale that you hopefully have provided yourself with the luxury of time so that you are not disappointed and have to accept an offer that is far below the value of your home. It is important to remember that every home, no matter how many intangibles it provides you and your family, is also an investment and a business transaction. So, even when the real estate market looks like the latest thrill ride at the local amusement park, stay level-headed, do not become greedy, and approach the sale and value of your home with reason and good business acumen.

Ownersite Technologies is happy to offer a free 30-day trial of Home Ownersite, the comprehensive, web-based tool that simplifies home inventories and recordkeeping. With plans starting at only $29.95 per year, Home Ownersite is the perfect tool to manage the complete ownership lifecycle for your home and valuables. To start your free, no-obligation trial or to review the different plans available, please click here.


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