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Homeowners InsuranceHow to Easily Determine Your Home's ValueBy Mindy
BillSavings.com Brief:
Whether you’re buying, selling, or rebuilding a home, it’s important to understand home values. Among other things, this bit of knowledge could make the different between thousands of dollars in your bank account or thousands being paid out to others. Read on for guidelines on how to pinpoint home values.
It’s extremely important to understand the value of your home. For one, it helps you set an appropriate selling price if you want to put your house on the market. It also helps you pinpoint a suitable asking price if you’re shopping for a new home. Finally, understanding your home’s value will allow you secure an accurate insurable value so you can fully protect your home from loss. Read on for tips on how to navigate the different levels of home valuation. Distinguish market value from insurance value Before you pinpoint a value for your home, you need to clarify what type of value you’re talking about. To do this, you have to understand that the market value of a home is different from the insurance value.
Land value is one of the main reasons there is a difference between market value and insurance value. If you’re selling your house, the value of the land is included with the cost of your house and so affects the market price. In contrast, the cost to rebuild your house does not include the value of the land. This means the insurance value is usually much lower than the market value. On the same note, it often costs a lot less to rebuild most houses than it does to buy them outright. If you live in a place where land comes cheap, you might find yourself in an opposite situation. It could cost more to rebuild your house than it would to buy a new one of similar structure in a similar location. If your home features expensive materials and high-end architectural details, it may very well cost more to rebuild than to buy. Determine your market value There are several ways to find out the market value of your home. You can ask a Realtor to research it for you or you can investigate on your own. If you choose to research your home’s market value, start by looking at the website for your county. You should be able to locate the recent selling prices for homes in your neighborhood. Figure out how comparable those houses are to your own house in terms of square footage and general condition. Depending on how your home compares, you can adjust those prices up or down to give yourself a baseline price. Another way to determine market value is to hire a professional appraiser. This can cost between $200 and $400, but it will give you the most accurate value for your house. If you’re selling your house you may still need to adjust your asking price away from the appraisal price. If most of the houses in your neighborhood are lower in value, you’ll do better to drop your price a little to stay in range of the neighborhood prices. Similarly, if most houses in your neighborhood are valued higher than your house, you can add a little extra to your asking price. Determine your insurance value It’s always a good idea to get a second opinion on the insurance value of your home. One way to do this is to shop around for different quotes from various home insurance providers. If their numbers vary tremendously, consider getting a full home appraisal from a builder local to your area. Announce your upgrades Any time you add on to your house or conduct an extensive remodel, you should let your home insurance provider know. Depending on the upgrade, the cost of rebuilding your house could go up, thus increasing your insurance value. Upgrades can also affect your market value. If you make upgrades to your home that improve the performance of certain home systems, your market value is likely to go up. Examples include switching out a swamp cooler for refrigerated air, replacing single-pane windows with airtight, double-pane windows, or installing a radiant floor heating system. Upgrades based on personal taste are not likely to move your market value. Personal preference upgrades can mean switching out white wall plates for designer plates or adding a certain style of blinds to all the windows of the house. They’ll look nice, but they aren’t likely to affect total value. Similarly, they may not be covered by your homeowner's policy. Consider an endorsement The cost to rebuild your home is usually calculated by your home insurance provider. Your insurance policy is then structured to cover that cost. If you’re worried the insurance provider may have underestimated the cost to rebuild your home, you can purchase an endorsement. Endorsements are additional insurance policies that provide extra coverage. You can get an endorsement that increases your insurance value by various degrees. Many endorsements increase the insurance value by as much as 25%. This is a way to protect yourself if the cost to rebuild or if the cost of building materials ends up higher than expected. Informed decisions always have a high payoff Making sure your market value and insurance value are accurate is worth the small bit of research you’ll have to do. In the long run, it could bring you thousands of dollars in home sale profit. Similarly, it could save you from having to cough up extra money for building expenses, should you ever need to rebuild. The bottom line is that it’s worth the time and effort. 8/5/2008
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