You have decided to sell your house and your first thought is: “How much is it worth?” You know what you paid for it and how much you owe on the loan. You remodeled a bathroom and finished the basement. You want to buy a new home across town and need $25,000 for the down payment and closing costs. You decide $195,000 sounds like a good price. That figure seems to pop up a lot lately when you check out other homes for sale in your area.
Sound anything like your initial thoughts when you decided to sell your house? This kind of information will definitely affect your final decision to sell, and it should be considered before selling. But, does it affect the value of your house?
Let’s look at five mistakes home owner’s make when pricing their house.
You know what you paid for your house.
Whether you inherited the house outright or paid $300,000 for it does not affect the current value of the house. Owning a house you did not pay for does not mean it’s worthless. Paying $300,000 for your house last year or 10 years ago does not mean it’s worth $300,000 today, however it’s not worthless.
House prices fluctuate over time for many reasons. The general state of the economy affects house prices. The condition of the neighborhood where the house is located becomes more desirable or less over time. The overall condition of the home is a consideration. This is not a viable method for determining a price. สร้างบ้าน
You know how much is owed on the loan.
You may have an extremely low balance remaining on the loan. On the other hand, you purchased the house in the last year. Nearly the whole loan payment has been for interest meaning you practically owe what you paid for it. Does that mean the payoff of the loan is the value of your house?
No, this method assumes your house will always depreciate in value rather than appreciating. You will always lose with this strategy. However, house values do fluctuate with the economy and can go down. Homes bought before a drop in the economy, or in a dropping situation, may be worth less than when you bought it. In that case, your home would be over priced in that type of market and will not command the original price or more.
However, if the economy is picking up, the supply of homes for sale in your area are down, and there are more home buyers in the market than before, the value of your home can increase. Basing the value of your home on the remaining balance of the loan will cost you hard-earned equity.
You remodeled your house.
You bought a home and decided to remodel a bathroom, or finish in the basement, or add a larger deck. Remodeling costs money. Surely, you can add at minimum what was spent for remodeling to the original cost of the home to get its latest value. Can’t you?
No, it’s not that simple. Most improvements will not recuperate the original expenditure. Moreover, it depends on what was done and the quality of the work. High quality kitchen renovations for example may very well make your home worth more than the cost of the renovation.
However, adding an addition that does not fit the architectural style of your home and does not flow with the current floor plan probably will only return a small portion of your investment.
Do not error on pricing your house by adding the remodel cost to the original price of the home to calculate the sales price. Chances are great that formula will over price your house for the market. However, you don’t want to lose money using that formula if your remodel does add real value to the price.
The amount of cash you need to buy your next home.
So you have decided to move. You have already picked out a new house and know how much money you need for a down payment and closing costs in order to buy it. Can you add the am