MM Money

What Is Your Home Worth?

Excerpt: So how, then, do you determine what a house is really worth? The only real way to tell is to do (or, more likely, ask a local real estate agent to do) what's called a comparative market analysis.

We're considering buying a home that has an assessed value of $120,000 for tax purposes and an asking price of $140,000. How can we determine what the house is really worth?

—Sharon, Trinity, North Carolina

The first thing I can tell you is that I wouldn't rely on either the assessed value or the asking price.

When a home is assessed for local real estate taxes, the assessor typically makes some estimate of market value and then applies a tax rate to come up with a real estate tax bill.

But assessments involve a lot of subjectivity and they can vary significantly even for similar homes in the same neighborhood. That's why there's a thriving business for services that help people challenge their assessments in hopes of lowering their property taxes. (For more on this topic and what you can do if you think your home's tax tab is too high, click here.)

As for asking price, well, that's nothing more than what the owner of the house hopes a buyer will pay. In some cases, this asking price may be realistic, but the price could represent nothing more than wishful thinking. And it's always important to remember that a bit of negotiation and haggling is usually built into asking prices.

So how, then, do you determine what a house is really worth? The only real way to tell is to do (or, more likely, ask a local real estate agent to do) what's called a comparative market analysis.

Such an analysis would have several parts. First, you would look at what homes similar to the ones you are considering have sold for over the past six months or so. By similar, I mean homes in the same neighborhood in the same condition with roughly the same square footage and the same number of bedrooms and bathrooms.

READ FULL STORY ...

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