Knowing the historical cost and fair market value of your home can be useful for various reasons. You have to know the market value before you list your house for sale. You also need to know it when you are applying for a loan against your home. Now, you must be thinking about how to find historical fair market value of home.
There are a few ways to find out the fair market price of your home. You can use an online tool, hire an appraiser or conduct a comparative market analysis (CMA). You should follow more than one method to be sure about the right price. Checking house purchase documents can give you an idea of the historical cost.
In this article, I will talk about historical cost and the fair market value. Then, I will explain how you can calculate or find these things and also discuss a little about their use. So, I advise you to keep on reading.
Historical Cost and Fair Market Value
There is a big difference between the historical price of your house and the current fair market value. To understand the difference, you have to know what the historical cost and fair market value mean.
Historical Cost of a Home
In simple words, the historical cost of a house means the price you have paid to buy the house or the actual monetary value of it. You must have the purchase documentations including trade and sales papers of all the assets of the house.
Fair Market Value of a Home
The fair market value of a house is the present price of the house. The pricing of a house depends on its current demand, age, size, style, renovations, overall condition, and location. Calculating the fair market price of a house requires professional assistance at some point.
As you can see, there is a significant difference between historical cost and fair market value. Historical cost is the price you have paid in the past to acquire the house, and fair market value is the estimated recent price.
For example, the price of your house was $75,000 when you bought it, but after five years, the fair market value of the house can be $90,000 to $100,000.
So, the historical cost of your house will not matter so much when you are selling it in the current market.
How To Find Historical Cost?
To find the historical cost of your house, just check your house purchase documents like deeds and bills of sale. You can also check the county commission minutes or invoices to know the price.
However, people can sometimes lose the documents. Or maybe, you have inherited the house but lost the papers. There can be many other incidents. In this case, the historical cost of the house can be estimated by comparing it to the historical costs of similar houses. Besides, you can use an inflation or deflation calculator to find out the cost by using the current pricing.
The historical price of your house may not matter when you are selling it to a buyer, but you may need to know the money spent on purchasing the house. Sellers must compare the historical cost of their homes with the current market value to ensure getting the right price.
How To Find Fair Market Value?
The fair market value of a house is always different from its historical cost. As I have mentioned before, many factors influence the market price of a house. There are several ways to find out the current value of your home in the real estate market, such as online researching, consulting appraisers/real estate agents, and checking recent sales.
So, if you are planning to sell your house or you are thinking about buying a new one, you can follow these steps:
Using Online Tools
Start your primary research by using online tools for home valuation. Most of these tools are free and easy to use. So, anyone can use these tools to evaluate the fair price of their homes.
You just have to fill in all the required information on these sites. Then, the tools will quickly check the public records of your locality to generate the estimated price of your house. You can also add information about any renovations or changes made to your home on some of the tools so that they can show you the accurate price.
Fair market value calculators like PennyMac and Zillow are great for getting an initial idea about the actual market price of a house. Put the address of your house in these calculators, and they will give you a rough idea of the house value considering property details, value history, and price per square foot of your home.
Do Your Research
If you have sound knowledge about real estate or property selling and buying, you can do your own research. It is called Comparative Market Analysis (CMA). Start from your neighborhood. Make a spreadsheet on recently sold houses that are similar to your house.
You can access many public databases to find the necessary information. You must know the following information about the sold-out houses:
- Age and size of the houses
- Number of bedrooms, bathrooms, kitchens, and other features
- Location
- Style and view
- The sales prices
Compare the data of these houses with your house, and you can estimate a fair market price. Moreover, you will get an idea about the demand of your type of house in the market and how long it takes to be sold.
If you are willing to do further research, get documents of property tax assessment of your house from the local taxing authority. Find out what percentage of your home’s value you are paying as a tax. Then divide the yearly tax with your tax rate.
Consult with a Real Estate Agent
If you are not sure about your result of the fair market price of your house, you should take advice from a real estate agent. Real estate agents are experts in buying and selling houses. They can give you a clear idea about the types of homes that are in demand in the current market.
Real estate agents are also aware of the current pricing of all kinds of houses. Therefore, they can help you to evaluate your research on the fair market value of your house. Besides, they have more access to local databases like Multiple Listing Service (MLA) of an area.
Hire an Appraiser
An appraiser can be hired by both buyer and a seller of a house to make sure the price is accurate. If you do not have much idea about researching the fair market value of a house, you should definitely hire an appraiser. Appraisers charge $300 to $600 depending on the required services.
An appraiser conducts a thorough research on a house. They spend hours and days visiting the house and the neighborhood to gather information. They often follow a checklist to determine the value of a house.
The checklists include the location of the house, the facilities (schools, hospitals, stores, etc.) in the area, the condition of the house, and many other things.
The appraiser will consider all these factors and the price of similar houses to make a report. Thus, you can get a fair market value of the house in the current market.
Conclusion
By now, you must have understood how to find historical fair market value of home. The process of selling a house becomes much easier once you have a clear idea about the fair market price of your home. So, use all these methods mentioned in the article to know the accurate price for your house.
