How Do I Determine The Value Of A Home?
How do I determine value in a home? Basically I just look at a ton of properties. That is the only way you can truly determine the value of a home. I try to tour at least 10 homes per day in south Minneapolis so I am always on top of the market. When I pull up to a house here is what I do to determine the value of the property.
1. Analyze the location. Real estate is all about location so I am looking to see if it is on a busy street, close to a bus stop, if there is airplane noise, if the other houses on the block are in good condition or bad condition. I am looking to see if it is close to parks, lakes, creeks, restaurants, commercial buildings etc. The location will have a lot of value if there are things close by that people like and it will not have a lot of value if there are things close by that people don’t like. It is really that simple.
2. I determine the condition of the exterior and the interior of the home. Basically as soon as I pull up to the property I am making a mental note in my head of any items that need to be repaired or replaced on the property and how much that is going to cost to fix. From my years of remodeling and being in construction, buying and flipping a lot of houses, I have a pretty good general idea on how much it is going to cost to repair most items on a house.
So I look at the condition of the sidewalk, the front steps, the foundation, the siding, gutters, roof, windows, doors, chimney, soffits, facia, the landscaping. Once I get into the home I do the same thing. I analyze the condition of the hardwood floors, doors, trim, windows, ceilings, walls, tile, granite, appliances etc. I add up the total cost to fix the items that I think need to be addressed and then I add that number to the list price of the home. If that number is more then I think the house is worth then I ask myself, “what is the most I can pay for this house, after fixing all the items and still not over pay?” As long as I am not paying more then fair market value I am ok.
3. I analyze the lot. This kinda goes back to location, but you can have a really nice lot in a horrible location so let me explain. In south Minneapolis under the $250,000 price range I am really looking to see how build able the lot is. I do this because I know that over time a lot of these small houses are going to be torn down so the buyer can build a modern home that is more suitable to the way most people live now days. So if I can get a good home, in a good location, on a good lot then I really like my odds, as long as the price is right. So I am looking to see how level it is, what the size is, what the elevation is. If it is too small to build on then it is worth less, if it is big or really flat or extra wide then it is worth more. In the end I just want a lot that is at least about average.
So that is how I determine value. Most of it is common sense, it just takes practice. Each home will be judged based on its competition, which is the other properties that are for sale. Buyers will always choose the house they perceive as the best value compared to their other options. So tour a lot of properties to figure out value or hire a good real estate agent to do it for you.
