What is the Actual Value of Your Home? Find Out What Buyers are Willing to Pay in Today’s Market

Scottsdale townhomes with a beautiful sky background

It’s simple to check the amount of money in your savings account or the current value of your stock investments. Determining the value of a home is more complex than checking a bank balance or stock price. For sellers, accurate pricing is crucial to avoid prolonged market listings or undervaluing their property.

Understanding the value of your home helps you set the right price when you list it for sale. If you price it too high, it might linger on the market. Even though the Phoenix market is still bustling, some areas are facing more competition with other sellers and if they price their place too high in comparison, their home could remain on the market for longer than the average selling time. This could command price reductions down the line. Buyers are hesitant when they see a house that has been on the market for a long time.

If you price it too low, you could be missing out on a significant amount of money (nobody wants that!). We rarely see properties priced too low, and it's usually with For Sale By Owners, although sometimes it's the opposite. In the current market we're seeing, a low-priced property would have so many offers that the price would be brought up to what it is really worth. Some agents talk their sellers into purposely pricing on the low end to create a bidding war situation. My only problem with doing this is that there is no guarantee multiple offers will happen. Then what? It's difficult to increase the asking price since the pricing history is available to buyers. They will wonder if a big improvement was made to the home to warrant an increase.

Buyers need to know a home's worth to make competitive yet prudent offers. We prepare a Comparative Market Analysis (CMA) for our buyers if they're interested in making an offer on a home. We explain the current market along with the CMA and let the buyers decide what they want to offer. Buyers want their offer to be competitive, but they don’t want to overpay for the property.

Even current homeowners benefit from tracking their property's value to understand market trends and identify optimal selling opportunities. Or they might be considering refinancing (probably not with today's high rates, but refinancing will become more popular again once rates drop to more affordable numbers). Keeping track of your home’s value year over year helps you understand market trends. This way, when you are ready to sell, you can take advantage of a favorable opportunity.

The great news is that a knowledgeable real estate agent—who understands the specifics of your neighborhood—can determine the true market value of your property… and at no cost to you!

While online estimators provide a starting point, they lack the nuanced understanding of local markets that real estate professionals possess.

Let's Explore the Three Main Types of Home Values and How They're Determined

1. An Appraisal - Licensed appraisers, typically required by lenders for financed purchases, determine this value. They consider factors such as:

  • Comparable neighborhood sales
  • Property location and size (finding the square footage of the home and the lot size)
  • The number of bedrooms and bathrooms
  • The age and condition of the property
  • Appliances and upgrades
  • Interior and exterior condition

These are a handful of a long list of items appraisers will consider for each home they appraise. The appraised value helps lenders ensure buyers aren't overpaying for a property. Some cash buyers will also hire an appraiser to judge appraised value vs. what the accepted contract price is.

Why does the bank care what the appraised value is if you agreed on a price with a seller (or buyer if you are the seller)? In most cases, the bank is providing a large mortgage while in contrast, you are putting down a small percentage of that. If you pay over the appraised price and you don't have much skin in the game, it is a lot easier for you to walk away (foreclose) rather than be stuck with a higher-than-appraised-value mortgage amount.

Can you appeal a low appraisal? Yes, but there is no guarantee you will win. I have won several appeals and the seller and buyer agreed to go 50/50 on the shortfall of another. That was many years ago and it is considered more difficult to win an appeal today. Some buyers will actually switch lenders to get a different appraiser. But with an FHA mortgage, the original appraisal price stays in force for 180 days. So switching lenders will not give you the opportunity to get another appraisal.

Even though the current market is down in many areas, in the Phoenix area there is still a shortage of inventory in many towns and popular subdivisions. So there are still multiple offers on the best-priced properties (based on area and condition). Some buyers are waiving low appraisals, which means they will pay the difference. Many buyers can't do that, so it is one way to win in multiple offers.

2. Assessed Value - Local municipal assessors calculate this value annually for property tax purposes. They evaluate:

  • Recent sales of similar properties
  • Home size and age
  • Overall condition
  • Improvements and upgrades

This is where you're hoping for a lower value as your taxes will be based on this assessment. If you think the assessed value is too high, you can appeal it. You can do it on your own or hire a company that specializes in tax assessment appeals. They usually take a percentage of the lowered value if successful.

Many counties apply a multiplier (often 60-80%) to the initial assessment to determine the final taxable value. That can get complicated so look up your county to get more information on how that is done. It might even show on your tax bill.

3. Current Market Value - Real estate agents establish this value based on their expertise in local markets. It reflects what buyers are likely willing to pay for a property. Agents consider:

  • Neighborhood sales data
  • Exterior appeal and style
  • Interior features and square footage
  • Number of bathrooms and bedrooms
  • Property age and condition
  • Local market trends
  • Location desirability

Agents use a Comparative Market Analysis (CMA) to compare these factors and determine a property's true market value. This comprehensive approach accounts for nuances that online calculators often miss, such as buyer preferences in specific areas or the impact of recent local developments.

A Scottsdale Realtor® with buyers

When I create a CMA I try to do it as close to an appraisal as possible. An appraiser follows values for upgrades, rooms, age, size, etc. The book is updated annually. As a Realtor® I don't have access to that book, but knowing the market and comparing similar homes that have sold and closed within the past 6 months (some appraisers prefer to only go back 3 months, but most will consider 6), including Pending and Expired properties, I can come up with a good price.

If a seller wants to start higher I will explain any issues I believe it could cause. I bring factual data with me, so it's not so easy to argue with facts. Sometimes, I will actually pass on a listing if the sellers are being unrealistic. Other times, if I feel the sellers will work with me and allow price reductions if their pricing idea isn't generating interest and offers, I will take the listing and suggest a reduction at some point if the house hasn't received an offer after a certain amount of time.

For sellers, understanding true market value helps in setting an appropriate listing price and deciding on potential pre-sale improvements. I always walk through the property and make suggestions for anything that I think needs to be done to get top dollar. This could be as simple as some decluttering. It won't necessarily cost anything to get your home to show at its best. OK, maybe a little sweat equity. But it will be worth it in the long run.

Buyers can also use this information to craft competitive offers without overpaying. With that said, we're still seeing offers above asking price, and many buyers can't compete. If that is happening to you as a buyer, you might want to start looking in a lower price range so you can afford to offer more than asking if you're looking in an area that is commanding multiple offers. It might not be an entire town or subdivision, but maybe just one beautiful and competitively priced home in that area. If you fall in love with that house, it's a probability that someone else will also love it.

How Accurate Are Online Home Value Estimates?

A woman searching for Scottsdale real estate on her laptop and viewing a beautifully landscaped home in Scottsdale

When figuring out your home’s value, you might be tempted to see what popular real estate sites like Realtor.com, Redfin, Trulia, and Zillow state the value as. These sites can only provide an estimate. It isn't an actual appraisal or the current market value. These sites all have their own special algorithms to arrive at their pricing valuations. Zillow comes up with its “Zestimates” by calculating “public and user-submitted information.” They don't always have every single listing that is active or closed because not all brokerages allow their listings to be shown on Zillow. Realtor.com will try to hook you up with an actual agent who will want to view your home in person. That agent might not be active in your particular area and could be a brand new, inexperienced agent who is paying to be on Realtor.com (same with the others) to try to get buyer and seller leads.

These online estimates can be a great starting point to give you an idea when your real estate agent presents their data about your home’s worth. But even Zillow recommends that you use a real estate agent to determine your home's current market value. The site states that once you get your “Zestimate,” you should still get “a comparative market analysis from a real estate agent.” To bolster this, one of the Zillow founders used a local agent to get the price for his home and to sell it. In fact, his home sold for 40% less than the Zillow Zestimate. Wait, doesn't that mean Zillow gave him a better estimate? A higher estimate, yes. But higher doesn't mean better if a buyer isn't willing to pay 40% more than a home is worth.

Your Agent is Walking the Walk

A scottsdale real estate agent going upstairs with buyers

Your agent is physically out in the market. They have in-depth experience that an algorithm just doesn't have (at least not yet). We know what buyers want and expect in different areas and price ranges. Different types of buyers (first-time buyers, downsizers, any buyer that doesn't want to do a lot of upkeep or yardwork, luxury buyers, etc.) have different requirements, wants, and needs. First-timers might have to scratch some of those off their lists.

Whether buying, selling, or simply curious about your home's worth, consulting with a local real estate professional provides the most accurate and context-specific valuation. They can offer insights into market trends, buyer preferences, and strategies to maximize your property's value in the current market.

By understanding these different types of home values and leveraging professional expertise, you can make more informed decisions about one of your most significant investments. I have over 40 years of experience and real estate continues to be a passion for me. I offer an in-depth and multi-faceted marketing plan to get your property sold at the highest price possible in the current market.

I love working with buyers and I empower you with current market knowledge so you can make educated offers and decisions. You will know what to expect during the entire purchasing process.

Whether you are a buyer or a seller - or both - give me a call at 480-906-1500. Check out some of our testimonials

Posted by Judy Orr on
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