We all want to know how much our home is worth. There is a reason why home value websites, such as Zillow, are so popular. However, having already addressed in my last blog post how inaccurate Zillow is, it’s worth discussing the flip-side of things – how much is your house actually worth?
First, let’s think about the term “value” on a general level. Something’s value – what it’s worth – is only as much as someone is willing to pay for it. You might think your car is worth $15,000, but if you can’t find anyone to buy it for more than $10,000, then the real value is $10,000. It is no different with houses.
Here is a general rule of thumb – the only sure way to accurately appraise how much your house will sell for is to use this formula: the general value of homes in your neighborhood minus the cost of repairing/renovating your house minus 20-30% equity. Let’s break down the pieces of this formula.
Most people understand that their home value correlates in some way to the value of the other homes in their neighborhood. But how do you determine what those homes are worth? This is actually very simple – you just look at what the similar homes that are nearby to your home have sold for in recent months. For instance, if there have been four homes in your neighborhood that recently sold in the range of $70,000-80,000, then your home, after any necessary repairs have been done, is worth about that much.
However, that doesn’t mean that you can just sell your home for that price. You still need to factor in the repairs that need to be done on your home. Let’s say that homes in your neighborhood sell for $70,000-80,000, but your home needs $10,000 in repairs done. Here is the reality: no one is going to buy your house for $70,000-80,000 because after the repairs, they have paid more than what the home is worth!
Now, it’s worth mentioning that most people would not be willing to purchase your home with $10,000 worth of repairs to be done on it. Most homebuyers want you to do the repairs for them, and then they purchase the home after you do those repairs. But when it comes to the numbers, the end result is the same: if you do the repairs yourself, you may sell the home for $10,000 more but you will be out $10,000 from when you did the repairs. You lose out on the repair money either way.
There is one more consideration: equity. The days are long gone that someone is willing to buy a home for simply what it’s worth. Everyone these days understands that home values can plummet overnight, and they want to play it safe by getting a home with equity – in other words, purchasing the home for slightly less than what it’s worth. The general rule of thumb is if you want to sell your house fast, you should plan on giving your buyer 20-30% equity in the home. If you aren’t willing to give your buyer equity, there is a possibility that you may still be able to sell your home, but you can plan on having it sit on the market for a very long time (something I discussed in point #2 of this blog post), which I assume, since you are on this site, you want to avoid.
So let’s give an example. Let’s say your house is in a neighborhood that typically sells homes for $70,000-80,000. That means your home is worth about $75,000. But you also have about $10,000 of repairs that need to be done and about 25% equity ($18,750) that needs to be factored in. The real value of your home is approximately $75,000 – $10,000 – $18,750 = $46,250.
You might be thinking: “$46,250! That’s all I can sell my home for!??” In this case, yes – but if you were to sell your home to Upstate House Buyers, that number isn’t as bad as it may seem. With Upstate House Buyers, you don’t pay any closing costs, realtor fees, attorney fees, commissions, etc. – fees which can run into the tens of thousands of dollars – and you don’t even need to repair or clean your house. We will buy it as-is and take care of all the other expenses for you. (You can see a breakdown of how much money you could save by selling to Upstate House Buyers in point #5 of this blog post.)
The good news is that you can get a free evaluation and estimate of what Upstate House Buyers will purchase your home for by simply clicking here and filling out our survey. The worst thing that can happen is that you decide not to sell us your house – no harm is done to you or to us! So give us a shot, and let us know how we can help you.