What Is My House Worth?

How Much is My House Worth?

All homeowners want to know what their home is worth—especially in a hot market. What goes into pricing a home? How do real estate agents and appraisers decide how much your house is worth?

If you’re a Seller: it’s important to know how your agent is appraising your home and how Buyers will decide what your house is worth.

If you’re a Buyer: it’s important to know how the Seller has arrived at their asking price. If you’re in a bidding war, it’s even more important to understand how market value is determined so that you can put your best foot forward, without paying too much.

While every REALTOR approaches a home’s valuation slightly differently, here’s the lowdown on how a Comparative Market Analysis (CMA) is performed and the factors that are taken into consideration.

1. We look at Recent Sales

When pricing a home, real estate agents and appraisers will look at recent sales on your street and in your neighborhood.

The first step in deciding how much a home is worth is choosing nearby sold properties to compare the house to. While Sellers may be tempted to cherry-pick the comparable sales that support the highest price (and Buyers are tempted to cherry-pick the comparables that support the lowest price), the best comparables for a home are:

• Nearest in location (same street or nearby similar streets)
• Most recently sold (in the last weeks or months)
• Closest in size, style, and condition

The key when looking at comparable sales or comps is to use the homes that have actually sold in the current market. Unsold or active listings are part of the CMA because they represent the competition, and we need to know what we are up against, but they shouldn’t be the basis of setting your price range.

We determine the price range from the sold properties using the 3 criteria location, size, and style in descending order of importance :

Location

The most important driver of real estate value is the location of the property. So when you’re picking comps, you start by looking at the homes in the immediate area preferably within a half-mile radius same street or nearby similar streets.

Size

Now within the location, we narrow down on the ones closest in size in terms of the overall square footage, number of bedrooms and bathrooms, lot size, and things like that. A home with more square footage, or more bedrooms, is generally going to sell for more than a smaller home.

Style

And then once you’ve found your nearby, similarly-sized homes, you prioritize the homes with a similar style. Style refers to the type of home: single family, split, ranch, townhome, condominium, etc. If the home is a colonial, other colonials are better comps than, say, a ranch or a contemporary.

2. We make Adjustments

Once we establish the price range, we start making adjustments – adding and subtracting $$ to account for how the homes differ to figure out the price within that range. Every home is different, and every difference has a small but meaningful impact on the valuation.

For example, finished basements and second bathrooms add value, corner lots and next-to-no storage detract; the house backing onto the railway tracks is worth less than the one backing onto woods. Experienced REALTORS and appraisers know what value people have historically put on certain features and can adjust your price accordingly.

When comparing houses and making adjustments for a CMA, there are many factors to consider, including:

• Number of bedrooms – most single-family houses in New Jersey have four bedrooms – there’s a bonus for 5+ bedroom houses especially when they are on the first floor.
• Number of bathrooms – a two-bathroom home is more valuable than a one-bathroom home
• Location, including positive and negative influences – a home backing onto a cemetery won’t sell for as much as the neighbor across the street that backs onto woods.
• Lot size – besides the size, is it leveled or on a slope, does it have a lot of trees and woods?
• Square footage/size – Bigger is obviously more valuable
• Layout – Open layouts are more valuable these days than houses with a lot of closed-off rooms. The flow of the space is important too.
• Parking – What’s the penalty for having no parking? How much value does having a garage add? Or two spots vs one? Driveway vs laneway parking?
• Outdoor space – How do the outdoor spaces compare? It’s not just size that matters – style, design, prior maintenance, views, the neighbors – a lot of factors are considered.
• School district – Homes in superior school districts sell for more. 
• Condition of the home – Has the house been well maintained? Are the floors and carpets in good condition? Are the mechanicals in good condition – electrical, plumbing, furnace, A/C,  roof?
• Amenities: features such as hardwood floors, updated kitchens, updated bathrooms and bedrooms, pools, fireplaces, landscaping, etc.
• Finishes – Comparing finishes is very subjective. How do the finishes compare in style, quality and recency of renovation? How would an average Buyer see the finishes? If a Seller spent $50,000 personalizing a home, how much will the average Buyer value those renos? It’s important not to put too much emphasis on personal taste but instead look at what an average Buyer would do; so while you might hate the kitchen in the house you’re thinking of selling and want to tear it out, if the average Buyer wouldn’t do that, the market value of the house wouldn’t be affected in the same way as an unusable bathroom that everybody would have to replace.
• Basement – What’s the difference in price for a house with a finished basement vs a house with an unfinished basement? How does that value change if the unfinished basement can be finished?
• Taxes: whether the property taxes of your comps are higher or lower than your taxes.
• Local environment: issues such as neighborhood appearance, power lines, or traffic flow all affect pricing within the range.

When looking at a past sale to help determine the price of a house, other factors influence the price too:

• The time of year it was sold – was it sold in a hot market or in the Christmas season?
• Whether the home was staged – staging can add tens of thousands of dollars to the sale price
• The quality of the photos – houses with bad flip-phone photos sell for less.
• How the house was marketed – if there are tons of mistakes in the MLS listing and no marketing efforts, that impacts value
• How easily the home could be seen – could potential Buyers easily book a showing or did they have to see it between 2-4 on Mondays and Wednesdays?
• Motivation – Sometimes, a house sells unnaturally low because the Sellers were desperate and just wanted out. There are some tell-tale signs that REALTORS use to see if a Seller was particularly motivated or unmotivated, so that can help explain some of the comparable sales too.

Now one thing to note is that all these factors don’t change your price range, just where you fall within that range. The same goes for condition. You want your listing to be immaculately staged and detailed, and in fantastic showing condition, because that makes it easier to sell and gets you the best price possible in your range. But it generally doesn’t change the range that you’re in.

3. Validating the Home’s Value

While a lot of agents skip this final validation step, we like to estimate a house’s value by performing a 3-way analysis and look for consistencies, trends and anomalies across the values.

When valuing a home, we

• Perform statistical analysis on the house since it was purchased. We look at average prices when it was last purchased and average home prices today. If nothing was renovated since it was purchased, how much would it be worth today if it appreciated in value along with the rest of the market?  
• Perform a neighborhood analysis – On average, what do similar homes sell for in the neighborhood? In the last year, what’s the average price of a 4-bedroom single-family house in the neighborhood irrespective of adjustments?
• Perform a competitive analysis  – What’s happening in the neighborhood right now? Are houses selling in multiple offers in 6 days or are they on the market for 30 days? How does the demand for the area compare with the supply? We drive by homes to verify the home style, location, talk to the listing agent, and get feedback on the sales.

4. MLS Data Only Goes So Far

It’s great to see photos and details about recent sales and current competition, but MLS data can be deceiving.

Before we can suggest a price for your home, we also need to become familiar with the other homes that are for sale at the same time as yours – the active competition. We need to know what potential Buyers are going to see at the same time as they look at your home. Will they walk in and think it’s overpriced because the other two homes they’ve toured seem like better value? Will we outshine them because we’re sparkly clean and staged? When we list a house or condo for sale, we physically go see the other properties we think your target Buyer will see – and recommend a price accordingly.

5. The Economic Reality

Supply and demand drive prices – when there are too many buyers chasing too few houses, prices go up. Prices are further affected by prevailing interest rates and the overall state of the economy. Just ask any homeowner who has lived through a recession – it doesn’t matter how great your granite countertops and hardwood floors look if 15% of the people in your city are unemployed and they owe the bank more than their house is worth.

6. The Buyer Demographic

Who’s most likely to buy your home?

– A starter home may attract first-time buyers.
– A four-bedroom colonial may appeal to growing families.
– A townhouse in a walkable downtown may be perfect for young professionals.

👉 The broader the appeal, the stronger the demand—and the higher the potential price. How many Buyers who are out there right now, want what you have to offer?

7. The Neighborhood

Trendy neighborhoods come and go…is your house in a HOT ‘hood? Is it growing or is it already mature? What new shops, services, and transportation options are coming in? Has something negative happened (violence, poor school ratings) that will affect value?

8. What Doesn’t Affect The Value of Your House

There are also factors that are NOT relevant in determining market value:

• The price the Seller needs to get to break even
• How much you spent on renovations
• The asking price on the MLS listing
• Automated online estimates

9. Ultimately the market sets the price

“You don’t set the price, and the realtor doesn’t set the price—the market sets the price.”

What do we mean by that? Well, too often, sellers price their home based on other considerations having nothing to do with what the market is telling them like :

• Pricing on what they need to get to their next home without understanding that buyers simply do not care.
• Pricing on improvements thinking if they bought the house for $400,000 and put in a $50,000 kitchen, it’s worth at least $450,000. Homes appreciate but the stuff in them depreciates. They need to check the “Cost vs. Value Report” from Remodeling Magazine which shows how most home improvement projects return 50-75 cents on the dollar.
• Pricing on Zestimate if the Zestimate is above market value

10. Your Home’s Value Is a Moving Target

What your house or condo is worth today is not necessarily what it is worth tomorrow, or next week or next year. As the factors that affect price change, so does how much your house is worth.

At the end of the day, your home is worth what someone is willing to pay for it. But a lot more goes into pricing a home and an experienced New Jersey REALTOR can make sure that you sell for top dollar.

✨ If you’re wondering what your house is worth, get in touch. We’ll happily give you a no-obligation evaluation. We’ll walk through your home, analyze the market, and give you a clear idea of what your home is worth in today’s real estate market.