Market versus appraised value

The appraised value of a property is a professional estimate of a property’s market value. It’s based on the recent sales of similar properties, square footage, location, construction quality, and more. An appraisal varies in cost depending on the price and size of the home. Most lenders require appraisals as part of the loan application process.

But don’t confuse the appraisal with market value. The appraised value is a certified appraiser’s opinion of the worth of a home at a given point in time. And it should give you a pretty good idea what your home will sell for. Ultimately, though, your home’s market value is the price a buyer is willing to pay for it. Having your home professionally appraised before putting it on the market will help you and your Texas Realtor® determine a fair asking price.

There are other methods of determining the value of your home, including a comparative market analysis (CMA). A CMA compiles information and sales prices from homes similar to yours from your neighborhood that have sold recently. Many Realtors perform CMAs for clients and potential buyers.

Whether you rely on a CMA, an appraisal, or both, you will be able to price your home according to objective measures rather than a gut feeling or a number plucked from the air.

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Don’t be deceived by numbers

There’s a common statistic in the real estate world called Days on Market, or DOM. Some people believe a property that has been on the market for a while must have serious problems, but this is not necessarily the case. Don’t let the number of days a property has been on the market dissuade you from making an offer on a house you really like.

Some houses are listed before they’re actually ready to sell—perhaps the house is on the market despite the fact that it’s undergoing remodeling or repairs. In this case, the home was just listed too early and probably isn’t showing well. The days on market will increase, but after 90 days of renovations, it’s not the same house, and it will show a great deal better.

There are also situations where the seller may not be motivated—maybe he doesn’t need to sell and is simply testing the market. Perhaps he has a price in mind and is willing to wait for the market to catch up with that number.

Maybe the property has simply gone unnoticed—obviously a roadblock to a timely sale. Some homes may be tenant-occupied, which can complicate the showing process; others may not be marketed well, especially on the Internet.

Sometimes property is simply too specific for most buyers. It may have an amenity or quirk that just doesn’t work for 99 people out of 100, but if you’re that 100th person who appreciates the unconventional feature, you might immediately make an offer.

The bottom line is that there are many reasons a property may linger, and all that really matters is what you think.

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Landlord in the making?

Are you considering buying an investment home as a rental property? This may be a good time to start.

Don’t be misled by national news; real estate markets are highly localized. Even in a small city, there may be a neighborhood where home values are consistently growing, yet just down the road another neighborhood may have leveled off. Historically, though, investments in real property in Texas have performed well and are fundamentally solid.

First, ask yourself if you’re willing to become a landlord. Do you have experience with tenants? Is there a steady stream of tenants in the area? Are you going to be close enough to get to the property in case of an emergency? Who is going to handle repairs and maintenance? What insurance should you get?

For a rental house, it’s obviously of primary importance to keep tenants in the property. Almost as important is to make sure that what the tenants pay covers your expenses of owning the home. These expenses should include mortgage, tax, insurance, and maintenance. If you can break even, you enjoy available tax benefits and profit from the overall appreciation of the property. Additionally, rents tend to go up over the years while your mortgage payment, assuming standard financing, is fixed.

Your insurance coverage will be substantially different as well. In addition to items covered by a typical homeowner’s insurance policy, landlord insurance can protect you from loss of income in the event that the property becomes uninhabitable or during a tenant/landlord dispute.

When you’re interviewing a Texas Realtor®, find one who specializes in investment property. Your wants and needs are much different from a retiree or a first-time homebuyer. Your Realtor® will understand this, and may even own investment properties herself. She can also provide some history about the neighborhood, as well as give you a pretty good idea as to the estimated cost of repairs.

Once you’ve acquired the property, consider hiring a property management company – particularly if you’re not located close to the property. A property manager can screen tenants, collect rent, inspect and maintain the property.

Another option is to purchase a home warranty for the property, which will cover the appliances, electrical infrastructure, and the plumbing. These warranties are typically affordable and give you peace of mind. Be sure to read the policy to know exactly what is covered.

There are pros and cons to owning rental properties, but if you’ve got what it takes and your financial situation allows for it, it’s an excellent way to accumulate wealth.

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what’s your home worth?

When putting your home on the market, there are two ways to go about estimating what your property is worth. The first is a professional appraisal, and the second is a comparative market analysis (CMA). If you are thinking about listing your home, talk to your Texas Realtor® about hiring a professional appraiser, conducting a CMA, or doing both.

A professional property appraisal is done by a certified appraiser and estimates your home’s value based on a variety of things, including square footage, design and floor plan, the neighborhood, schools, landscaping, any additions or updates, and more. The cost of an appraisal varies and usually can be done in an hour or so.

If you get an appraisal and then decide you are not quite ready to sell, don’t assume that appraisal will be very helpful in the future. Markets can change quite rapidly. If you determine that a professional appraisal is right for you, ask your Texas Realtor® for a reputable appraiser in your area.

In addition to finding a professional appraiser, your Texas Realtor® can also conduct a CMA for you. A CMA is a market analysis that compares similar properties in the area that have recently sold. This is an informal assessment that can go a long way in establishing a benchmark of where your asking price should be.

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Myths about homeownership

Many consumers believe that they can’t qualify for a home loan because of a variety of reasons, including spotty credit and no money for a down payment. But times have changed. Most lenders evaluate mortgage applications a lot differently today than they did even 10 years ago. Below are some common homeownership myths.

Myth: You need perfect credit to become a homeowner. Fact: You can buy a home with less-than-perfect credit. Sit down with your Texas Realtor® and discuss your financial situation. Your Realtor® can help you determine if homeownership is a good option for you at this point in your life, and can help you find a loan that meets your budget.

Myth: You need a 20 percent down payment to buy a home. Fact: There are a number of programs and resources available for first-time homebuyers who have little or no money for down payment and closing costs. Ifyou’re interested in finding out about programs in your area that you may qualify for, contact a Texas Realtor®.

Myth: You can’t buy a home in Texas if you’re not a citizen. Fact: If you’re a legal resident, you can purchase a home anywhere in the United States.

Myth: If you don’t have a bank account or credit cards, you can’t qualify for a mortgage. Fact: While credit cards and a bank account are a great way to establish credit, they may not be necessary for obtaining a mortgage loan. Some lenders will approve you without either. It’s important to note that if you don’t have these things, you will likely need to keep records of a history of payments you’ve made for items such as utilities, rent, and car payments.

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Consider resale value when you buy

There are many things you should consider when buying a home, and resale value is an important one. It may seem strange to think about selling a home you haven’t even purchased yet, but there’s no better time to consider it.

Most of us will not live in the same house our entire lives. Many first-time buyers expect to buy a bigger and better home later. Long-time homeowners often sell when they retire. So when purchasing that first home, keep in mind what factors contribute to the home’s resale value, including location, features, neighborhood, size, and number of bedrooms and bathrooms.

Of course, you might think that what’s desirable today may not be what’s important to homebuyers five years from now, but they’re good factors to consider when searching for a home.Remember, buying an attractive property not only will help resale value but also the time it takes to sell your home when it comes time to do so.

Purchasing a home with good resale-value potential may take a bit more time and a little more effort on your part, but you’ll enjoy the payback when you are ready to move on.

TEXAS ASSOCIATION OF REALTORS®