, Author at Verifiable Value https://verifiablevalue.com Real Estate Appraisals Fri, 13 May 2022 17:49:19 +0000 en-US hourly 1 https://wordpress.org/?v=6.4.4 https://i0.wp.com/verifiablevalue.com/wp-content/uploads/2022/04/cropped-For-Beginners41.png?fit=32%2C32&ssl=1 , Author at Verifiable Value https://verifiablevalue.com 32 32 230926193 How to Calculate Square Footage Adjustments https://verifiablevalue.com/2022/05/13/how-to-calculate-square-footage-adjustments/ https://verifiablevalue.com/2022/05/13/how-to-calculate-square-footage-adjustments/#respond Fri, 13 May 2022 17:44:06 +0000 https://verifiablevalue.com/?p=1913 If you’ve just received an appraisal report for a refinance or purchase transaction, you might be wondering how the appraiser came up with the square footage adjustment. Or, if you’re just starting out as an appraiser, you might be wondering how to make adjustments in the first place. While we can’t speak for everyone, this …

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Square Footage Adjusting

How Appraisers Come Up With Square Footage Adjustments

Verifiable Value

If you’ve just received an appraisal report for a refinance or purchase transaction, you might be wondering how the appraiser came up with the square footage adjustment. Or, if you’re just starting out as an appraiser, you might be wondering how to make adjustments in the first place.

While we can’t speak for everyone, this article will give you a general idea of how to go about it. We’ll even include some free resources (our Square Footage Adjustment Calculator) for you to try out on your next report.

In short, there are four basic approaches:

  1. General Range
  2. Matched Pairs
  3. Grouped Data
  4. Cost Analysis

1. General Range

An appraiser already has a general idea of the square footage adjustment that’s appropriate for your area.

Appraisers are state-certified experts for the region in which they’re practicing. In order to become an appraiser, a person has to apprentice under another appraiser for 1,500 hours for at least one year, take anywhere from 150-300 hours of focused coursework, and pass the Certified Residential Appraiser exam, a fairly grueling 4-hour test with a 40-50% fail rate. They’ve crunched the numbers on hundreds of properties similar to yours.

In northeast Ohio, for example, that number usually (but certainly not always) boils down to somewhere in these general ranges:

  • 0-$150,000: $15-$50 per square foot
  • $150,000-$250,000: $30-$60 per square foot
  • $250,000-$350,000: $40-$80 per square foot
  • $350,000-$550,000: $50-$100 per square foot
  • $550k+: $100+ per square foot

These numbers are not set in stone. They are a general range to start with. In order to come up with the actual adjustment, it needs to be based on market data. Market data might suggest that the square footage adjustment needs to be outside of the listed ranges. That’s okay, and it’s to be expected. These numbers might be applicable for some markets in the Midwest, where the average sales price is around $200-300k, but they might be completely baseless for properties in Southern California.

Even though they shouldn’t, some appraisers stop here.

They decide to pull a number out of thin air using a general range, and so their adjustment is completely unsupported by any actual market data. If they ever get pulled in front of the state board to defend their adjustments, they could get into a lot of trouble.

Pros of Using a General Range

  • Simple, back-of-the-napkin solution.
  • Good for realtors adjusting their CMAs.
  • Can give you a good idea of whether or not a property is actually comparable before diving into other adjustments.
  • Gives laypeople a general idea of the value of additional square footage (adding additional square footage to a $90k home isn’t going to add $500/sf of value most of the time).

Cons of Using a General Range

  • Can, very simply, be outright wrong. If it isn’t based on actual market data, it’s essentially a number pulled out of a hat.
  • Is indefensible to the state board.
  • Can get you trapped in a cycle of laziness, where your adjustments aren’t based on anything other than intuition.

2. Matched Pair Analysis

Matched pairs are one way of bullet-proofing your square footage adjustments so that they’re actually supported by something concrete. Matched pair analysis involves looking at two similar properties and isolating a differing variable to figure out how much it’s worth.

For example, imagine you have two comparable sales. One is a 1440 square foot Colonial home that sold for $250,000. The other is a house next door that is similar in every way, except it’s 1640 square feet and it sold for $260,000.

First, find the difference in the variable that you’re looking to isolate. In this case, that variable is square footage. Luckily, you don’t have to make any other adjustments to isolate this variable since it’s similar to the house next door in every way.

Divide the Difference in Price By the Difference in Square Footage

1640 square feet – 1440 square feet = 200 square feet

Next, find the difference in price…

$260,000 – $250,000 = $10,000

Finally, divide the price difference by the variable…

$10,000 / 200 square feet = $50/sf

Seems easy, clean, and simple, right? Unfortunately, the only place that you’ll find two comparable sales this simple is in a textbook. In real life, adjustments are much messier.

Every once in a while, in fact, you’ll find two similar comparable properties with the numbers reversed from what we saw above: The bigger one actually sold for less than the smaller one — even for arm’s length transactions that have been adjusted for market conditions and other variables. Why? Maybe a realtor did a fantastic job of marketing and negotiating one of the sales. Maybe the “Efficient Market Hypothesis” of the real estate industry failed us this time.

Either way, if you’re an appraiser, use your common sense and don’t adjust negatively for additional features. It’s possible that some features, because of their cost to maintain, actually do detract from value, like in-ground pools in a neighborhood where that feature is uncommon. However, an additional bathroom, bedroom, and/or family room shouldn’t result in a negative adjustment.

If you already have your comps lined up, you can try our Square Footage Adjustment Calculator. It will do all of the calculations for you to determine a matched pair that’s reflective of your square footage adjustment.

Pros of Using Matched Pair Analysis

  • Can bullet-proof your adjustments using actual data.
  • Are fairly simple and straightforward.
  • Sometimes easy to do using the comparables you’ve already selected.

Cons of Using Matched Pair Analysis

  • Your sample size is only two comparables. Those comps may or may not reflect the overall market, but it isn’t hard to cherry-pick data to support a preconceived notion of what you think the square footage adjustment should be rather than doing a deep dive into actual statistically significant market data.
  • Sometimes leads to wonky conclusions.
  • No two properties are ever identical.

3. Grouped Data Analysis

Group pairs are a step up from matched pairs, so they offer much stronger evidence for making adjustments. Instead of using just two comparable sales to find the appropriate adjustment, you can look at all similar properties in the neighborhood, group them together, and then compare them to another group of properties.

For example, after you’ve drawn your neighborhood boundaries, you can search for every property in the area that’s between a certain square footage. If necessary, adjust for other factors like age and total bed/bath count. After you have a few groups of this data, you can find out the approximate amount that a buyer is willing to pay in this market for additional square footage. If you’re looking at making a 200 square foot adjustment like the one we talked about above, you can find a group of properties between 1300-1400 square feet, 1400-1500 square feet, and 1500-1600 square feet:

group pairs analysis for square footage adjustments
Data from MLS Now on homes that sold in the Stow CSD between 1300-1400 square feet, 1400-1500, and 1500-1600.

So, the difference between the first group of data is $28,133 ($215,500 – $187,367) and 84 square feet (1440sf – 1356sf). That indicates buyers are willing to pay $334/sf (the difference of $28,133 divided by the difference of 84 square feet) — far outside of our established range. However, the first group of data is also much older than the second group (by ten years), and we haven’t adjusted for land values, either.

The difference between the second and third groups is $17,500 ($233,000 – $215,500) and 117sf (1557sf – 1440sf). That gives us a much more reasonable $149/sf. It’s still, however, far outside of what you would expect.

Narrowing It Down

After you’ve done that initial grouping, you can narrow down your groups to be more indicative of the overall market. In this case, I looked at some properties in the 1400-1500 and 1500-1600 group and found a pocket of 4-6 directly below Kent Rd but north of N River Rd (by Adell Durbin and Ron Marhofer Chevrolet) and found the following:

group pairs analysis for square footage adjustments
Data from MLS Now. Group pairs trimmed down to a specific area.

Here we have a $5,000 difference and roughly a 100sf difference, for a total adjustment of anywhere from $45-50. I eliminated one outlier from the 1400-1500 data, but this still gives us something that’s a bit more data-driven since it’s more than one matched pair.

Additionally, there are services like Spark and Solomon that assist you in doing more advanced analysis, like regression. This can help you separate the land value and improvements value so that you can more accurately determine the actual square footage adjustment.

Pros of Using Grouped Data

  • More pairs, more authority. The more data to back up your adjustments, the better. You can prove that there’s a correlational relationship between the factors you’re looking at, and from there you can find an adjustment.
  • Still fairly approachable and quick.
  • If there’s a lot of market data, it’s very easy.
  • Easiest to defend. You don’t have just one pair of comps that show this relationship, you have several.

Cons of Using Grouped Data

  • Doesn’t necessarily reflect your comps. Market averages are just averages.
  • Finding groups of comps might be difficult in some rural areas.
  • A bit more time-consuming.
  • One massive factor difference can throw it off. If the age is very different for one group, it can be difficult to adjust.

4. Cost Analysis

Some appraisers also use cost analysis, particularly when there’s no data available. If two homes are equal in all ways, the value of an additional bedroom is probably equal to the cost that it would take to build one.

However, this isn’t always the case. Market participants sometimes don’t recognize the value of certain features as being equal to their cost. In other words, just because someone paid $10,000 for something doesn’t mean it’s worth $10,000. In appraisal, this is called the Law of Contribution. An amenity is only worth as much as the typical buyer is willing to pay for it.

Final Thoughts: Square Footage Adjustments

Appraisers use a number of methods to determine square footage adjustments, and while I tend to lean toward group pairs, no one method is better than any other. In fact, using only one method can lead you to determine adjustments that just don’t make any sense.

It’s unlikely, for example, that a buyer is willing to pay just as much for additional square footage than the actual existing price per square foot. In other words, if a square footage adjustment is $140/sf (or higher) and the actual price per square foot of the property is $140/sf, that means that the appraiser is saying 100% of the value of the property is in the square footage. This is almost never the case.

The land has value, the existing improvements have value, and any additional square footage will only be a fraction of the current price per square foot. While it would be nice to build a 10×10 room and have the market pay an extra $14,000 for it, that’s very, very uncommon.

However, some of these approaches may suggest a square footage adjustment that’s in the ballpark of 100% (or more) of the price per square foot. In those cases, even though you used market data to derive adjustments, you can be even more wrong than the lazy appraiser who picked a number out of a hat.

In conclusion, it’s important to make sure that your adjustments 1) make sense and 2) are based on actual market data and not just intuition.

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How to Pass the Certified Residential Appraiser Exam in 2022 https://verifiablevalue.com/2022/05/10/how-to-pass-the-certified-residential-appraiser-exam-in-2022/ https://verifiablevalue.com/2022/05/10/how-to-pass-the-certified-residential-appraiser-exam-in-2022/#respond Tue, 10 May 2022 01:52:42 +0000 https://verifiablevalue.com/?p=1733 40% of trainees fail to pass the Certified Residential Appraiser exam the first time. That’s why I put together this guide. There’s a lot of outdated material out there. Reading this guide might take twenty minutes, I promise it will likely save you hours in the long run. My name is Phil and I was …

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Certified Residential Appraiser Exam, work, homework, real estate

How to Pass the Certified Residential Appraiser Exam in 2022

Pass the CRA Exam on Your First Try

Verifiable Value

40% of trainees fail to pass the Certified Residential Appraiser exam the first time.

That’s why I put together this guide. There’s a lot of outdated material out there. Reading this guide might take twenty minutes, I promise it will likely save you hours in the long run.

My name is Phil and I was trainee at Verifiable Value for a year and a half before passing the Certified Residential test last month.

DISCLAIMER: Prior to taking the test, PSI has you sign a contract saying that you will not communicate any testing materials to anyone. None of this material is taken directly from the test.

Additionally, there are NO affiliate links in this post.

Summary: How to Pass the Certified Residential Appraiser Exam

If you aren’t interested in reading this full guide, here’s a short summary:

  • Buy CompuCram
  • Practice test every module into the ground until you score 90%+ three times. 
  • Start on the Simulated Exam and score 90%+ at least three times. 
  • When you’re taking the test, make sure you understand what the question is asking. 
  • Go all out for as long as it takes you to finish.

I’ve also included some other resources that you’ll probably find helpful. This is by no means a definitive guide. A lot of the material out there is outdated and I’m just trying to save you some time. For example, I tried to contact the guy from appraisaltests.com and got nothing back. People say it’s a decent resource, but if it hasn’t been updated in six years, I’m hesitant.

That applies to everything you’re reading here, too. If you’re reading this in 2030, it’s probably not going to be that helpful. It will take care of the broad strokes (~65% of the exam), but not those fine little details (the remaining ~35%). 

If you ask an appraiser who got licensed ten years ago for tips on how to pass, they’re likely to give you advice for a test that, nowadays, looks pretty different.

In order to understand why, let’s go over how the test is structured.

Basic Overview: Test Length and Number of Questions

The exam is 4 hours long and contains 110 questions. 15 of them are non-scored questions that are presented randomly. While they don’t contribute to your overall grade, these questions are necessary for PSI to make the next test. That means there are only 95 questions that count.

In order to pass, you need to earn a scaled score of 75 or more. There are multiple variations of the test. Based on the pass/fail rates of students taking each variation in the past, some are easier and some are more difficult. So, a “scaled” score means that, if you got an easier test, you need to score more than 75 to pass; if you got a hard test, you can score less than 75 and still pass. The scales themselves technically range from 0-110. 

Why You Shouldn’t Skip a Single Question…

All nice in theory, of course, but what does that mean for you? Well, I’ve seen some advice to count how many questions you think you got right and gauge how you’re doing from there. As soon as you get 75, you’re in the clear. While it isn’t bad advice, I’d highly dissuade you from doing that. Not only are there 15 unscored questions per test, but we actually have no idea how the test is scaled. A raw score of 82/95 could be a failing grade and a 67/95 could be a pass. Realistically, I doubt that the scale is THAT severe, but to be on the safe side, go all out the whole time. Don’t assume that just because you think you got 75 right, you can skip the rest.

Every year, they take the hardest, most-missed questions from the previous year to make a new variation. Each year, then, the test becomes more and more difficult. Why? Probably to sell test materials and raise funds for the state.

INSERT PIC OF PASS RATES:

2015-2021 pass rates for National Uniform Licensing and Certification Examination
Pass rates for Licensed Residential, Certified Residential, and Certified General first-time test takers, from The Appraisal Foundation.

1. The HP-12C

This one’s a no-brainer.

Your best friend for the next couple of months…

If you don’t have this calculator, you need to buy it. I got away with an emulator online for a little bit during my courses, but I lucked out when my girlfriend’s dad, a retired accountant, pulled a mint HP-12C out of a drawer and handed it to me. Could’ve cried. Felt like God’s will. No one wants to blow $110 on a calculator when you make like $6/hr, but you’re probably gonna have to.

Make sure you know the keystrokes for Six Functions of a Dollar, standard deviation, and mean.

2. CompuCram

CompuCram is solid. They offer a money-back guarantee if you use their program and still fail. In order to qualify for the money-back guarantee, you have to go through every module three times with above an 80%, and then take the simulated exam (125 questions, 4-hour limit) three times and score above 80% each time. I’d recommend 90% as a bare minimum. The simulated exam is fantastic because it trains your mental endurance and replicates the testing environment. However, only ~86% of the people who use CompuCram pass, so drill it into the ground. If you end up being one of the 14%, at least you get your $149 back.

I’d then use that to buy the AI’s Questions and Answers class, but I didn’t personally have to go that far. I’ll probably buy that when I upgrade to Certified General one day. I’ve heard nothing but good things about it. Same with stevewilliamson.com

Also, while studying, I have a saying: “Go with what they say.” Don’t argue with a book. What the book says, the test says.

3. McKissock / Qualifying Education Provider

Go over all of the practice tests from your Qualifying Education provider. I used McKissock for most of my upgrade courses, so I went over the “Comprehensive Exams” at the end of each module. This is important just to get a feel for how similar questions can be worded differently.

If you had the privilege of taking classes from the Appraisal Institute, you’re in luck. Some people report that those classes were all they needed. I was only able to afford one AI class and I loved it. Make sure to go over the exams, though.

4. Need to Know

Here’s a list of concepts that you absolutely need to know.

A. Operating Expense Ratio (OER)

Operating expense ratio uses effective gross income. It’s just expenses divided by EGI.

B. Net Income Ratio (NIR)

Net income ratio is NOI divided by EGI.

C. Mill Rate / Property Taxes

The mill rate is the amount of tax payable per dollar of the assessed value of a property. Most questions involving mills will either give you the mill rate (mills/1000) or the number of mills. If the mills are seven, for example, then for every $1,000 of assessed value, $7 is due in property taxes.

The formula for property tax: 

((Assessed Rate x Mills) / 1000) = Property Taxes

D. PGI to EGI to NOI

PGI is potential gross income. It’s how much the property could rent for in an ideal world. If there are 4 units and they all rent for $500, the PGI per month is $2,000 (4 units x $500 each). All of these figures are annualized, though, so you have to multiply that monthly figure ($2,000) by 12 to get $24,000

EGI is effective gross income. It’s how much the property rents for minus vacancy and collection losses. If the vacancy rate for the area is 4%, then the EGI for our example property is $23,040 ($24,000 – (4% x $24,000)).

NOI is net operating income. It’s how much money the property brings in minus expenses and reserves. This figure doesn’t include debt service or taxes. If there are $250/month in fixed and variable expenses, $100/month in reserves, and an $1,100/month mortgage payment then the NOI of our example property is ($23,040 (EGI) – $4,200 ($350/month in expenses) = $18,840).

E. Cap Rate

Remember that video where Tai Lopez is asked by a viewer what the formula for a cap rate is? Don’t be like Tai Lopez. Know your stuff.

Cap Rate = NOI / Value

F. Four Characteristics of Value

Demand, Utility, Scarcity, Transferability (DUST).

Transferability is also sometimes referred to as effective purchasing power.

G. Various agents of production

Capital, Entrepreneurship, Labor, Land (CELL).

Entrepreneurship isn’t always considered.

H. Broad Forces of Value

Physical, Economic, Governmental, Social (PEGS).

Physical is also sometimes referred to as environmental. If “physical” and “environmental” pop up on the test and both seem like they could be the correct answer, toss a coin. Same goes for “geographical,” unfortunately.

I. Rods

The length of a rod is 16.5 feet.

art photograph to help people remember length of a rod
In Flemish, this sign from a famous 16th-century painting says, “behind here are 154 rods of land for sale immediately, either by the rod according to your convenience or all at once”

J. Mile

There are 5,280 feet in a mile.

K. Acres

There are 43,560 square feet in an acre.

L. Sequence of Adjustments

WinTotal does this for you, but you’ll have to memorize it.

1. Property Rights Conveyed.

2. Financing (to arrive at cash equivalency).

3. Conditions of Sale.

4. Expenditures After Sale.

5. Marketing Conditions.

After all of these have been applied, you arrive at what I refer to as the “base price.” From the base price, all other adjustments are made equally and in no specific order.

6. Location, physical differences, etc.

7. Adjusted Sale Price

M. Townships

There are 36 sections in a township.

There are 640 acres in a township section, which measures 1 mile by 1 mile.

5. Word Salads

Understanding the concept is important, but certainly not as important as understanding what the question is asking in the first place.

Here are some common word salads that have stumped me while taking practice tests. As long as you understand what they mean, they’re simple. While the questions on the test aren’t really this oddly worded, they’re still good practice and they’ll cement these concepts in your brain for eternity. 

A. “What is the functional depreciation due to the deficiency?”

Depreciation is a catch-all term for a loss in value. So, another, much-more-human way of asking this question could be: “How much money did the homeowner lose out on because they didn’t install this feature when the home was first constructed?”

Usually the question will include something like: “homes in this market sell for $13,000 less without this feature. Installing the feature today costs $16,000…” along with a bunch of other superfluous information.

Functional depreciation is always the difference between the cost of installing the item today (post-construction) and the cost of installing the item new (during construction).

B. “What is the incurable functional depreciation due to the incurable deficiency?”

I don’t know if the guy who wrote these questions accidentally swallowed a dictionary or what, but this boils down to the difference between the loss in value and the cost if installed new.

C. “What is the curable functional depreciation due to the superadequacy?”

Cost to Remove the Superadequate Item – Salvage Value + Cost to Install a Market Acceptable Item = Curable Functional Depreciation Due To the Superadequacy. 

Put more simply: How much does this all cost (when you factor in how much money you get back from selling the materials)?

D. “The chronological age is 5 years, and the effective age is 2 years. The remaining economic life is 53 years. What is the total economic life?”

If you’re like most people, you think, “Easy. 57 years. Chronological age (actual age) plus remaining economic life. That’s 2 + 55 = 57.” However, the total economic life isn’t the chronological age added to the remaining economic life, it’s the effective age added to the remaining economic life.

I know that sounds confusing and contrary to known facts, but think about it backward:

“The chronological age is 5 years old. There are 53 years remaining in the subject’s economic life. Total economic life is 55 years. What is the effective age?”

The effective age is the total economic life (55) minus remaining economic life (53). The answer is the effective age: 2 years. Chronological age has almost nothing to do with it.

If you then used that same information from above to calculate total economic life, then, you’d have to use the effective age.

E. “A building has a total expected economic life of x years and an effective age of y years.” Similarly: “A building has a remaining economic life of x years and an effective age of y years.”

Watch out for the wording, because the test will invariably have an option that matches what you’d get if you misused the remaining economic life as the total economic life (or vice versa).

7. Additional Resources

(The Appraisal Foundation writes the test, so the final item on that list is a good example of how the official test questions are worded).

8. Sources

(Scroll down to the bottom for six very accurate practice test questions)

Study Motivation: Examples of People Failing Licensed Residential, Certified Residential, and Certified General

If you’re having trouble motivating yourself to study for the test, read about these experiences. These people are really smart, but they still struggled. I think one of them even mentioned having a Master’s degree. Appraiser’s Forum also has a thread about someone taking the Certified General test who was working for a company with a “no-fail” policy. He ended up losing his job.

9. Closing Thoughts (Read This if You Fail)

Finally, if you fail on the first go, remember that 40% of first-time test takers do, too. It’s not your fault. You probably just couldn’t afford to take classes from the Appraisal Institute, so you had to settle for Hondros and McKissock. You just have to kecoep grappling with the material and you’ll get there.

Keep in mind that the test isn’t real life. If you’re in the position to even take the test, you’ve been practicing as a trainee appraiser for at least a full year. Your supervisor wouldn’t have taken you on if they didn’t see the value in your contributions (they ARE experts at that sort of thing, after all, *winking emoji*).

The basics of real estate valuation are helpful for virtually any career in real estate, whether you’re a broker, investor, analyst, or appraiser — and most appraisers would recommend you to diversify. 

Don’t quit just because of a stupid test.

You’ve got this.

If you have any questions, you can use the “Contact Us” form. I’ll do my best to respond in a timely manner, and I love helping people figure out some of the more difficult questions. It keeps me on my toes and ensures that I don’t forget a lot of the material that I spent so much time studying.

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How Much is My Home Worth (Summit County)? https://verifiablevalue.com/2022/05/03/how-much-is-my-home-worth/ https://verifiablevalue.com/2022/05/03/how-much-is-my-home-worth/#respond Tue, 03 May 2022 00:40:10 +0000 https://verifiablevalue.com/testimonials/ How much is my home worth? In Summit County, Ohio, the average single family property is worth roughly $205,000 with a standard deviation of $150,000 as of May, 2022. That means 70% of all homes are worth anywhere between ~$50,000 and $350,000. If you think your home is outside of that range, you’re already one …

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How Much is Your Summit County Home Worth?

And how do you stack up against your neighbors?

Verifiable Value

How much is my home worth? In Summit County, Ohio, the average single family property is worth roughly $205,000 with a standard deviation of $150,000 as of May, 2022. That means 70% of all homes are worth anywhere between ~$50,000 and $350,000. If you think your home is outside of that range, you’re already one standard deviation away from the mean.

Sales Prices from May 2019 – May 2022. Data compiled from local multiple listing service, “MLS Now.”

We crunched the numbers using over 18,000 single family home sales in the Summit County area over the past three years to see how you measure up against others in the same county as you.

Due to the limitations of using such a huge population of data, homes on the extreme end of either range are underrepresented. If you have a 1-bed, 1-bath ranch in Akron that’s suffering from serious deferred maintenance, it’s going to be harder to compare to the rest of the homes in the county. Similarly, if you own a sprawling, 3000 square-foot-plus Colonial on an acre lot in Hudson, you’re going to be a serious outlier. After all, we’re looking at averages — not extremes. That doesn’t mean your home isn’t worth more than half a million, but right off the bat, we can confidently say that if your house is in Summit County, it will probably sell for $50,000-$350,000. That’s quite a range, so it shouldn’t come as too big of a shock.

The Safest Bet is a Professional Appraisal

In order to really know how much your home is worth, you need a professional appraisal. As experts in the Summit County, Portage County, and Cuyahoga County areas, that’s what we do. If that’s something you’re interested in, please contact us.

However, if you aren’t looking to buy, sell, or refinance, you might not want to shell out $300-450 for a professional appraisal of your home. If you truly have no idea how much your home is worth, automated valuation methodology can give you a general ballpark range to work with.

How to Determine Your Home’s Value

For a layman, there are three basic steps to come up with a good idea of how much your home is worth:

  1. Start With Automated Valuation Methods
  2. Find Similar Homes That Sold Recently
  3. Adjust for Features (Advanced Technique)

When appraisers are performing the sales comparison approach, this is — more or less — what they do. Since they’re experienced in the market, though, there’s really no point in looking at the automated valuation methods, since they can be off by 10-50%. If it was perfectly accurate, I’d be out of a job. Keep in mind that an algorithm can’t see inside your home. If you have settlement in the basement, a roof that’s caving in, and features that haven’t been updated since the 1960s, your home is going to be worth much less than what these models tell you.

1. Start with Automated Valuation Methods (Zillow, Redfin, Chase…)

Automated valuation methodology (AVM) attempts to appraise homes in large batches. While it sounds complicated at first, the algorithm behind it is just as simple as what I did to make that bell curve. They compile all the homes inside a certain zip code and find the median sale, adjusted for bedrooms and baths. So, a 2-bed, 2-bath is compared to all the other 2-bed, 2-baths in that zip code. As you can probably tell, this leaves out an enormous amount of really important, high-impact data. Each algorithm attempts to adjust for that high-impact data, but it varies from market to market, and even from neighborhood to neighborhood. Additionally, sometimes the auditor misjudges how many bedrooms and bathrooms a home has, either inflating or deflating the value. That’s why appraisers are hired, so that they can verify the true size, quality, and condition of the home (among other things, of course).

Still, you can plug your address into the following AVMs and get a number that’s probably in the ballpark:

I have no connection with any of these services. If you plug in your address to any of them, don’t be surprised when you get a bunch of mail in your mailbox begging you to sell your home.

2. Find Similar Homes with Recent Transactions

Without MLS access, this step is a bit more difficult. You’re going to have to use the Summit County Auditor’s “Property Sales Information” search to try to find homes that are similar to yours. However, just keep an eye out for any neighbors selling homes similar to yours, and then check Zillow to see how much they listed it for. When it looks like the new neighbors have moved in, check the Summit County Auditor again to find the actual transaction amount.

3. Adjust for Any Additional Features (Advanced)

Finally, if you’re really interested in doing the type of analysis that an appraiser might do, take the recent sales and try to adjust the comparable so it more accurately reflects the true value of your home. For example, if your neighbor’s home is identical to yours except they have a finished basement and you don’t, you can try finding another couple sales (matched pairs) to reflect that missing feature. You’ll find one home with a finished basement and a nearly identical home without a finished basement to find out how much that feature is worth. This step can obviously be time consuming, so it might be easier to guesstimate the value of each feature depending on its cost:

  • Another bedroom: $2,500-$10,000
  • Another bathroom: $2,500-$10,000
  • An additional square foot: $15-50 (no adjustment for anything less than 100sf)
  • Finished Basement: $7,500-$20,000
  • Deck: $3,000-$6,000
  • Enclosed Porch: $4,000-$8,000
  • An additional bay in the garage: $2,500-$5,000

Appraisers use the contributory value of each feature to adjust comparables, which means we calculate how much the feature is worth based on how much actual market participants are willing to pay for it. For salient features (like those listed above), this usually correlates with the cost of that feature pretty highly, in the real of 60-120%. For low-impact features that a typical buyer doesn’t care about (like a koi pond or a basketball court in the backyard), no adjustment will be made. Since we also have access to sales contract data, this process is a bit more accessible.

However, when you use all three steps above in tandem, you’ll arrive at a figure that’s much closer than the AVM would give you. In many cases, it will open your eyes to the inaccuracies of those models.

How Does Your Home Compare to Everyone Else? Standard Distribution of Sales Prices in Summit County

Sales Prices from May 2019 – May 2022. Data compiled from local multiple listing service, “MLS Now.”

Going back to the data that I compiled above, you can get a good idea of how “house-rich” you are in comparison to every other homeowner in Summit County.

The data skews low, so if your property is worth even $0-50,000, it’s worth more than almost 20% of all homes in Summit County. Here’s how the rest stack up:

If your home is worth X, it’s worth more than X% of homes in Summit County:

  • $50-100k: ~28% of homes
  • $100-$150k: ~37% of homes
  • $150k-$200k: ~47% of homes
  • $200k-$250k: ~61% of homes
  • $250k-$300k: ~72% of homes
  • $300k-$350k: ~79% of homes
  • $350k-$400k: ~85% of homes
  • $400k-$450k: ~93% of homes
  • $450k-$500k: ~96%+ of homes
How much is my home worth? (Summit County)
Infographic of Summit County Home Values

Conclusion: How Much is My Home Worth? Limitations of the Data

We didn’t filter non arm’s length transactions. When a property is sold to a family member from another family member, the transaction is considered “non arm’s length.” These types of transactions are prohibited when selecting comparables for the sales comparison approach. Instead, we strictly use “arm’s length” comparables: those that have been adequately exposed to the market and sold to someone with which the seller doesn’t have a relationship. However, many non arm’s length transactions aren’t included in the multiple listing service, since a seller is unlikely to have a real estate salesperson list the house if they just plan on selling it to a loved one.

Additionally, since you only have public records data to work with, you don’t have access to concessions. Did that $255,000 sale price contain $5,000 of concessions? That’s a huge amount of money that can throw off your final valuation.

Finally, all numbers based on averages are usually going to ignore some important factors. While it’s a nice place to start, mispricing your home by even $5,000-$10,000 could cost you, well, thousands of dollars. If you want a professional appraisal of your home, please contact us.

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