Why Knowing the Value of Your Home is Important
A home valuation tells you the value of your home. This is used during real estate transactions such as buy-sell or refinances to ensure homeowners or buyers are not over-borrowing for a property. The home is used for collateral in a mortgage, and if the borrower defaults on his or her loan, the lender will sell the home to recoup the money lent to buy it. If the home was overvalued and they lent too much, they could lose money. A home valuation ensures they will be able to recoup costs should the mortgage not be paid in full.
If you’re using an online platform such as Zillow to get a free home valuation, you may get a skewed result.
While these platforms have historically provided relatively accurate estimates based on generic numerical data, they’ve recently changed their algorithm.
Even back when these platforms were fairly accurate, they still only provided an estimate as opposed to a true valuation done by an appraiser or Comparative Market Analysis (CMA).
The main difference between using Zillow and working with an agent is that with Zillow, there is no actual person involved who views your home, compares it against others on the market, and produces a detailed report that accounts for the unique features of your home, historical data, design context, or current neighborhood information.
This is where we come in.
When we conduct a valuation, we are actively involved in the process and create a valuation that is personalized to you and your property.
Outstanding client service, experienced business practices, and creative, far-reaching marketing strategies are what have made us the top Compass team in Corona del Mar, and why our clients routinely rely on us to achieve their real estate goals.
A Comparative Market Analysis (CMA) is a tool used by real estate agents to value a home. It evaluates similar homes that have recently sold in the same area. Agents find comparable sales and use them to conduct a sales comparison. In most cases, an agent will find three homes that have recently sold and are as similar to and located as close to the home being valued as possible. Each one is then analyzed to pinpoint differences between it and the home being valued. Once these differences are priced out, the price of each comp is adjusted to see what it would cost if it was identical to the home being valued were it to be sold in the current market.
An appraisal is an unbiased valuation of a home based on a professional’s opinion. They are usually what mortgage companies use for home purchases and refinances. A lender usually orders a home appraisal and the cost of the appraisal, sometimes up to $500, is paid by the homeowner. An appraiser does a complete visual inspection of the interior and exterior of the home as well as taking into consideration recent sales of similar properties and market trends. The appraiser then compiles a detailed report on the home, including an exterior building sketch, a street map showing the home and any comparable sales, photos of the home and street, an explanation of how the square footage was calculated, and any other relevant information.
Lenders base the amount of their loans on the value of your property and usually allow you to borrow a maximum of 75% to 96.5% against your property. Knowing what your home is worth allows lenders to calculate your equity in the home. The more equity you have, the better terms you will receive on your refinance.
If you’re doing home improvement projects to increase the resale value, you want to make sure you’re not pricing it out of the market. If your home is already priced on the high-end for your neighborhood, making too many improvements could make it more difficult to sell. When you get a valuation, you can see how your home compares with others in the neighborhood and let this guide your home improvement decisions.
If you want to borrow cash against your home, getting a Home Equity Line of Credit (HELOC) could be a good option. To qualify, you must have a certain level of equity in your home. Most lenders require at least 20%. Getting a home valuation will help you determine if you qualify and will be used by the lender to make a decision on your loan.
Though it’s not a necessity, simply knowing the value of your home is good information to have. It will help you plan for the future and deal with unforeseen circumstances when you might be in a position that requires extra money or a quick relocation. Knowing how much equity you have in your home and how much you may be able to borrow against it or sell it for will help you respond to any financial curveballs that life throws at you.
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(310) 594 5705Address
Compass - 1221 Hermosa Avenue, Suite #210, Hermosa Beach, CA 90254
John Bathurst | CA DRE# 01977487