For homeowners, knowing the value of your home is more than just an important piece of information. It's obviously important in any transaction related to the house, but more than that, it's also a significant tool that you can use to add wealth and improve your lifestyle.
So you might ask yourself "What is my house worth?" It's a great question and it's very important information to have at hand. Essentially, it's determined by two things: supply and demand, and how much someone is willing to pay for it. And these two things are inextricably linked.
What is the value of my home is one of the first questions you might ask when you are considering selling your home. It doesn't matter if it's a lake home on Lake Wisconsin, a ranch home in a nice Sauk city neighborhood or a mansion up in the bluffs of Baraboo, knowing where you are at financially as far as the estimate real estate value is a key factor.
Not knowing "What is the fair market value of my home" and posting it up for sale or approaching a realtor have it listed is a bit like going to buy a new car without having any clue how much the car is really worth new, or used.
As you know, when facing any car salesperson you want to be well armed with as much information possible on the type of vehicle, how much it goes for on other lots, how much certain bells and whistles like fancy wheels, DVD players, a moon roof etc might add to the end cost.
Without this knowledge at hand you are more or less going in blind. Most of you reading this would probably not do that, right? Well it's important that you extend that same mentality when dealing with buying or selling a home. You want to be in the drivers seat at all times!
Start with supply and demand. Actually, the most valuable thing about your home is the land it sits on, because land is a scarce resource with a limited supply (i.e., no one's making more of it). That makes it an asset that's appreciating in value, especially if it's a quality lot in a desirable location with a well-maintained, attractive house sitting on it. The location is especially crucial in determining the value of your home. Is your house in a good section of town? Close to shopping, schools, or the town center? If it's in a rural area, are you close to conservation land, parks or attractive tourist destinations? All of these things will come into play in determining the value of your home.
This is where the “whatever someone is willing to pay for it” element comes into the home value equation. To some extent, potential buyers, appraisers and evaluators have different criteria when it comes to what they want in a home and a lot. Some want flexible zoning, while others will value pristine landscaping, multiple bedrooms, attached garages, etc. Some people treasure privacy, while others put a priority on convenience.
To level the playing field in these preferences, housing comparisons are used. In the real estate world, the value of your home is often determined by the value of other houses around it, especially those that have recently been sold. One of the most convenient formulas for determining home value is to take three recently-sold homes close to yours, average their sales prices, and use the result as a viable figure for your house.
The actual house itself is a double-edged sword when it comes to determining value. The structure is a depreciating asset, because it requires infusions of capital for maintenance, along with updates to keep it from falling out of style. Improvements can add to the value, though, if they're the right ones in a given market and they help augment the positive features of the house.
The final element in determining the value of your home is the financial side, i.e., the loan taken out to purchase the house. While the value of a house on the open market tends to be relatively fixed, it's personal value can vary widely based on how much equity you've built up and the terms of the loan. The more equity you have and the longer you've had it, the more valuable your home is in your personal financial portfolio, provided the house has been maintained to remain contemporary and any updates are in line with current market preferences.
These are the basic elements that you can use to determine the value of your home. The more you know about them, the more you can use them to help increase its value and make it a significant asset as well as a great place to live.