An Old Fashioned Way of Determining Value for a Home

Value of housing has many variants. The value of a certain home is determined by lots of factors specific to that property. It's difficult to asign economic value to each of these factors. This is especially true when buyers and sellers do not not have complete information about each factor.

Some web sites (like S&P and Case-Shiller) use mathematical weighting formulas to come up with opinion on home value.

However, they don't consider whether buyers have actually seen or previewed the houses and the neighborhoods.

So these sites and indexes are incapable to accurately determine economic value or price of a home.

Lenders don't look to computer-generated models to make decisions. They instead rely on old fashioned buyer and seller factors, such as comparable sales to determine how much to loan on a given property.

Buyers count on such things as appearance of the home, character and neutrality of improvements, landscaping, what kind of light the interior of the home is exposed to, character of the town and neighborhood, schools, whether others homes on the street have been improved, positive activities in the area, and management of the homeowner association.

We believe the old fashioned way of determining home value will be making a comeback.

Posted by Harrison K. Long, Explore Properties Group, June 1, 2008