There is only one way to determine the market value for single-family houses -Comparable Sales, and it is the most accurate way to determine the market value of a house. Comparable sales are recent sales of similar houses in the same or similar, nearby locality. This approach is called the "market comparison" method and is the method used by professional, licensed real estate appraisers for appraising single-family houses. Here are a few ways by which NOT to determine the fair market value of a single family home: replacement cost coupled with depreciation, the income approach, IRR, URR, tax assessor value, calling your builder etc. The "assessed value" of the house can be ignored. Tax assessments vary dramatically from one area to another. The information is rarely current, and this approach may or may not have any bearing on the real market value of the property. Never rely on assessment and tax information to determine current market value unless you are an expert on tax assessments for your area. Like tax assessments, it is not safe to rely on the "Last Sale Price" of the house. The previous buyer of the house may have paid too much or too little for it. Moreover, the Last Sale Price is an event that occurred much too far in the past to be relevant to current market value. You should always do your own market value analysis, rather than relying on the agent's opinion regarding market value. Your own opinion will be much more accurate once you have learned the correct way to determine market value. Real estate agents unduly complicate matters. For instance, in determining market value, many agents consider the "listed" or asking price of houses that have not yet sold. The only measure of market value is what a house sells for, which can be taken as final. The asking price and the actual selling price differ a lot. The asking price may be inflated for several reasons. Sellers just want to test the market to see what they could get for the house if they really wanted to sell it. The listed price also may be inflated because of the real estate agent who obtained the listing. Real estate agents compete vigorously with each other to get these listings. The agent who has the listing earns a commission when the house sells, even if some other agent actually sells the house. There are several ways to find comparable sales for an area. In many states, you can get a "Property Profile." This a document that contains information about a particular property. Most title insurance companies send you a property profile for free. The most important part of the property profile is the section labeled "Comparable Sales." This section contains detailed information about each property sold within the last six to twelve months and within a certain distance from the specified address. To accurately determine the market value of a house, stay as close to the target house as possible. For a comparable sale to be truly "comparable" to the target house, it must be similar. That means not only that the house should be located in a nearby similar neighborhood, but also that the house should be similar in size and age.
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