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Right now, may be a very good time to think about selling. Before listing your home, you need to know what it is worth so that you can price it accordingly. This is one of the key things to know before moving any further. Read on, then, to find out how to know whether you are getting a good price for your house in San Francisco.
Common Home Valuations
Knowing your home value allows you to know whether you are getting a good price for your house in San Francisco. So, let’s look at some common home valuations.
Fair Market Value
Fair market value is assuming that both home buyer and seller aren’t desperate to make a sale and are reasonably aware of a home’s features. This means that the buyer has carefully weighed each house on the market if it fits their needs.
As you know emotions have a factor in many decisions, which affect the value. Values change when there is a job change, new pet, newborn, or even a inheritance. These all effect the fair market value because now new emotions are being tied into the deal and it affects how someone wants to buy or sell the home.
Appraised Value
Appraised value is typically the closest to Fair Market Value because it is done by a 3rd party that assumes buyers and sellers are looking at houses logically.
The appraiser considers the characteristics of the property, such as bedrooms, bathrooms, location, appliances, structure, landscaping, and many more to get an accurate price for the house. Professional appraisers are typically licensed/certified by California and can provide an objective valuation, but their services will cost you around $800 on average for a single-family home.
A licensed appraiser has 3 typical approaches to form the opinion of value, which is sales, cost, and income. These 3 approaches come from the prospective of an end user aka home buyer, builder, and investor respectively. The reason is because each property has the potential for a different use. The typical question I get asked is who will pay the most? Typically, the sales approach aka the home buyer would fetch the highest price.
One of the best way to get an accurate home value estimate is to hire a professional appraiser since unlike Realtors they don’t have an incentive to tell you a higher price. They are paid based on their accuracy for the current market. If you do decide to hire an appraiser know that it is the same document that a mortgage lenders look at if you want to refinance your mortgage to get cash out.
Assessed Value
This is the valuation used by the county for tax purposes. The assessed value is typically lower than fair market value unless it was bought recently, or the house was overpaid for.
Here is a typical example in San Francisco. There is a person who bought a family home in 1930, which has been passed on for generations. Asking them their assessed value it would be about $60,000 but if you ask a Realtor or Appraiser they would say 1.1 million. Why the difference? It is because California limits the amount the assessed value can increase to a maximum of 2% a year, which is typically slower than appreciation.
So assessed value isn’t as much help for knowing whether you’re getting a good price. Having laid that groundwork, let’s now look at some ways you can calculate the value of your home.
Use an Online Home Value Estimator
A good starting point to find out whether you’re getting a good price for your house is to use an online home value estimators like Zillow. You can type in your property address, and it’ll give you a Zestimate.
The downdraw is that these online tools use algorithms to generate an estimate, which might be inaccurate. For example, as of December 2022 San Francisco has the highest median error of any metropolitan area at 3.33%, which doesn’t seem like much. Until you dig in that the US Census has about 412,000 housing units as of July 2021 and Zillow only has data for about 9,600 units. What this means is that Zillow is only Zestimating about 2.3% of all housing units in San Francisco. Not a very big sample.
The reason for this inaccuracy is because the reliance on algorithms and public data. Public data in an historical city like San Francisco is inconsistent. The reason is because most of San Francisco housing was built by the mid-1900s, which predates the first computer. Even further algorithms don’t “take into consideration factors such as recent upgrades, condition of the house, curb appeal, and external factors such as traffic noise.’
Get Your Agent to Perform a Comparative Market Analysis
Another way to know if you’re getting a good price for your house in San Francisco is with a comparative market analysis, CMA. Your agent can perform a CMA to accurately determine your home’s market value – that is, what it their best guess on your house value. Your agent will consider the human value of a house from wall colors, houses on a hill, current trends, layout and more.
“To complete the CMA, agents pull data about recent home sales in the area, looking more closely at recent 3 months to houses with similar square feet and layout. They then draw on their knowledge of the neighborhood and any special characteristics of your property to estimate its market value. A good agent follows the market, looks at home conditions, and knows the neighborhood – all while making determinations using both data and their experience.”
Asking an agent or hiring an appraiser is perhaps the best and most accurate way to determine your home’s value so that you can know if you’re getting an accurate price. If you are looking for a San Francisco Realtor then I have the experience to help you with achieving your goal. Feel free to contact me at 415-830-1423.
