Determining the Value of Your Home

Cost Approach

The cost approach attempts to calculate the cost of replacing the entire home using local construction materials and labor. Using the following steps, the appraiser calculates what it would cost to rebuild the home from the ground up.

1. First, the appraiser determines the value of the lot.

2. Estimate the cost of reproducing the home.

3. Consider the home’s age and condition to calculate depreciation.

4. Subtracts the depreciation figure from the total replacement cost of a brand new structure.

5. Adds in any external improvements, such as pools, landscaping, storage sheds, and decks.

6. Adds the lot value to the total value of improvements and depreciated value to arrive at an accurate replacement cost.

Comparative Market Analysis vs. Home Appraisal

Home appraisals are sometimes confused with another form of real estate valuation called a Comparative Market Analysis (CMA). Although both ultimately put a price tag on a piece of property, a CMA is prepared by a real estate agent, whereas home appraisals are performed by licensed real estate appraisers. The two reports also vary in detail and preparation methods. Depending on an agent’s experience, a CMA might range from basic to very comprehensive. A home appraisal, on the other hand, will always include a detailed analysis of a home’s value using professional real estate appraisal methods. For homeowners looking to list their house for sale, a CMA is a way to estimate an accurate listing price. As the name implies, real estate agents assemble a CMA by comparing homes in the surrounding area and analyzing recent sales of similar properties. By contrast, mortgage lenders use home appraisals to approve financing for real estate purchases, so the value must be as accurate as possible. If you plan to buy a new house or refinance your current home, your lender will require a home appraisal before approving the loan. Some homeowners also go the extra step of hiring a licensed real estate appraiser to value their property so they know exactly how to price it on the real estate market.

Asking Price

Once you and your RE/MAX Hallmark REALTOR® have determined your home’s worth, you will determine the asking price. Our goal is a price that will attract a willing and able buyer, in a reasonable time, at the best price. The price should not exceed market value by more than 5%. If the price is set too high, it may deter prospective buyers. If the price is set too low, buyers may be skeptical and may offer less than asking price.