17 Aug The Single Best Way To Value Your House
Put it on the market.
It is as simple as that. There are no tricks or magic formula. The only way to find out how much your house is really worth is to put it on the market and see what someone pays for it. This post is also geared towards those who are trying to figure out how much to offer in bidding wars.
Many people think that real estate agents have all the answers. We don’t. We look at comparable sale prices and make an educated guess. Many times we are way off. You can’t really blame us. There are just too many unknowns.
Trying to over analyze every single variable is a waste of time. Everyone values things differently. Here are some examples:
Seller’s Thoughts: I put Italian marble everywhere. Surely it will increase the value of my house
Prospective Buyers Think: That marble is the first thing to go when we move in.
Seller’s Thoughts: It has hardwood throughout. The last house that sold had carpet upstairs.
Prospective Buyers Think: We can’t move in until we rip up all the hardwood floors and put down something more modern.
Seller’s Thoughts: We just re-did the kitchen about 4-5 years ago.
Prospective Buyers Think: I guess we can live with this kitchen for now. Let’s see what our budget looks like once we move in.
The above sounds harsh, but the reality is that you will value your home differently than someone who walks in and is judging it against a multitude of other properties. You know of every penny spent on the property. You’ve lived in it for the last X amount of years. You picked out this and that and spent the time and effort to upgrade your home. Unfortunately others will not see it the same way. They spend 15 minutes browsing then make a decision.
Here is what matters the most when trying to value your home (or trying to value a property you are thinking of purchasing):
I don’t really need to explain this one. Are homes selling in a week? Are you competing against 5 bidders every time on offer night? Is it easy to borrow money? Etc.
How Many Offers are you competing against?
This is a spillover from the previous point but warrants a separate bullet point. You could micro analyze every tiny detail of a neighbourhood and be an expert by offer night. On offer night you are up against 5 other bids. Everything you just looked at goes out the window. For every offer that you are up against you raise your offer 5k, 10k, 20k (depends on the area but you get the point) and then hope for the best. I would say the number of offers is the one variable you have to fight against the most when purchasing in a hot market. It is ridiculously annoying and you need to have a plan so as not to let emotions take over.
How much someone wants the property
You can never gauge how much someone wants a certain property. You also do not know the events that have led up to offer night. If you are up against Sally and Fred who have just lost out on 4 other properties and think that this one is “the one”, you’re screwed. Until you lose on a few properties yourself and find that perfect house, you will never understand why someone seemed to have “overbid” for a property. It is always painful to give that extra 10-20k until you lose. Your property is an investment, but it is the only investment you will live in. To some, paying 10-20k not to lose out on their dream home is a bargain.
Does your property flow throughout?
I mentioned that your upgrades don’t really matter as much as you think. They usually don’t, but there is an exception. If you have updated or renovated most of your home, have done a good job (always subjective) and everything matches throughout then you will usually receive some type of premium. I know, still not a very good explanation. The simple version is: if you’ve only upgraded the kitchen and the powder room but everything else looks standard and plain jane, then your renovations will most likely not give you too much of a boost on offer night. The best way to show you is an example.
The property shown in the picture below was not holding back offers but was so well put together that 5 people put in offers on the first day, essentially creating a bidding war on day 1. People walked in and immediately knew, before seeing any more of the house, that they were going to submit an offer. This is just a dinky semi-detached in Barrie. The finishes aren’t even that amazing and there is carpet in some areas of the house. If this were a million dollar home in Toronto or the suburbs, the effects of a well put together property would be pretty significant. I know you are thinking “Thanks captain obvious. You are saying a nice house sells for more”. Of course. Let me end with this: When my eyes quickly scan the small preview version of the photos on a listing and before I’m able to process every picture by itself and really see what the place looks like, I know that this house will be special or at least better than most. You can’t tell me that at first glance, you know this property will be better than most.
So there you have it. To recap: The price you will get for your home is more dependant on the mechanics of offer night and the emotions of the buyers than the analysis you’ve done in the last several weeks.
Here is a link to the globe and mail house price data centre. It might give you a sense of average selling price in your area. Get a ballpark idea and don’t sweat about it. Educate yourself but realize that there is never an exact answer.
Norman Hill Realty Inc
20 Cachet Woods Court #2