After years of taking care of your home, some minor home improvements or maybe even a major renovation, you are ready to sell. But the trouble is, you think your home is worth more than what the experts are saying.
According to valuation company RPS Real Property Solutions, 26% of homeowners overestimate the value of their home by more than 10% of the appraised value.
It is understandable whether you are watching the home prices go up in your neighbourhood, you want to get the most for your largest asset or you are simply experiencing the “Endowment Effect” (an emotional bias toward an object you own), many homeowners think their house is worth more than it is.
Why is the appraised value lower than expected?
Many of us see the sentimental value of the cherished memories in our home but the pride we feel for our homes does not translate to actual dollar value. The charm of a cozy kitchen spent sharing meals with loved ones can be seen as too small or too dark for prospective homebuyers.
What is the post-renovation value of my home?
Another reason for overestimating a home’s price point is the value homeowners attribute to renovations they have made. If you have watched the end of a home makeover show on TV, the homeowner often finds that their home is worth more than the pre-renovation value and the cost of the renovation combined. That isn’t always the case. It’s true that your investment does increase the value of your home, but it may not be as much as you think.
Where does that leave home sellers?
RPS recommends caution and preparation as approaches to take for anyone looking to sell and buy. Often, home sellers rely on the value of the home they are selling to support the financing of the home they are looking to buy. In such cases, if the home you are selling will not sell for the amount you thought it would, you will have a financing gap. Before you are left scrambling, work closely with your real estate agent and your lender or mortgage professional to explore different scenarios and your options.