Monday, October 15, 2007

Retirement Planning and Your Home’s Net Worth

Retirement Planning and Your Home’s Net Worth

While I discuss the importance on factoring your home out of the equation as you make your retirement plan, the value of your house is nonetheless important. But its importance is limited to present financial considerations and not what you might consider wealth.

During the research for the book, I was curious as to the worth of my home, how the process works at many of these sites offering an e-appraisal, and whether the estimate they provided was close to what I considered the actual market value. I contacted, a website that uses readily available information from a variety of sources: taxes, Multiple Listing Services, and recent sales in the neighborhood.

As I made my way through the site, answering the questions on each page, I could see where this was headed. The appraisal would only lead to an actual contact with a real person, possibly a realtor, and because I was not in the market to sell my home, I wanted to avoid the interaction. They can be, given enough information, as annoying as insurance agents. By the time I got to the page that prompted me for my phone number and the best time to contact me, I had had enough. I simply closed the window and ended the experience.

At least I thought so.

Robert B. was in his office at Prudential Properties, logged on to as well. He was – get this – literally following each keystroke entry I was making. As an agent, his registration with the site provides him with a valuable tool to potential sellers in the neighborhood he calls his home district.

Because there were certain criteria about the house entered to determine the worth, he had enough information available to put together a bound introduction packet. This “blind analysis” came with helpful hints on pricing, prepping, and marketing my home, and a newsletter published by RMLS, a regional version the MLS service. On a page title “Final Notes”, Robert B. suggested that the figure he was providing was + or – 7% of the actual value of the home. He would be able to get much closer to a real estimate once inside to see the property for himself.

Also included were comparables, tax and county records, an aerial view of the house (which looked pretty good on the MS Virtual Earth shot in color), some notes suggesting that perhaps I had inflated the actual square footage, and a price range, which, without touring the property was uncannily close to what we assumed it was worth – emotional attachment notwithstanding.

As I said previously, I had backed out of the site and left the house to do some errands. Two hours later I received a cellphone call from my wife. Robert B. it seems was on my doorstep, hand delivering the packet I just described. Surreal possibly; creepy definitely.

Here are some things to consider if you are attempting the same kind of estimating. Personal information need not be given to get an estimate. Use a free email service because you will be contacted.

Be aware that you may live in a nondisclosure state such as Texas. Any estimates on homes that were sold in your neighborhood or one that you are looking to buy into are based on loan information in those states and it comes mostly from affiliate banks and lenders.

The key to getting the best estimate lays with what is known as “available home stock”. This is reference to similar homes that are available for sale or that have recently sold. If activity has been low in your area, the homes are older (which means either there has been little done to the existing home or it has been remodeled extensively and without a peek inside at the work, the estimate could be far from realistic) or the houses are very dissimilar, the estimate could be far below or well above reality.

There are times when an appraiser is necessary without the attachment of a broker. Often, in heavily active markets, tax assessments can swing widely and you may be forced to challenge a bill. In that case, the $200 - $500 fee charger by a certified appraiser could be worthwhile.

These folks, according to The Appraisal Institute offer inspections based on economic principles. They will provide you with some cost analysis on improvements, how those changes will relate to the current value and price of the surrounding homes, and whether the improvement is needed.

This feasibility study can help you determine the price before the realtor tours the property. She or he will determine the price that will sell the house quickly; not the price that the house may be worth. The appraiser can also uncover repairs that a home inspector may report to potential buyers who will be hoping to use the information as a negotiating tool.

The Appraisal Institute suggests the following to homeowners toying with the idea of selling their home (and for those who are willing to spend the money to determine their home’s worth).

Prior to making any upgrades to your home, do your research. This includes:

  • Knowing who’s buying in your neighborhood
  • Going to home fairs and open houses to see local trends
  • Understanding which improvements have the greatest influence on property value
  • Market researching through the help of an Appraisal Institute designated appraiser

To increase the marketability of your home consider the following tips:

  • Avoid overimprovement by sticking to what’s standard in your neighborhood
  • Projects that add square footage to bring a house up to—but not beyond—community norms generally pay off the most
  • Consider adding a bathroom, which is an appealing feature for home buyers
  • Invest in basic upgrades, such as fresh paint (use neutral colors) and new fixtures
  • Clean your house (focus on baseboards, light fixtures, ceiling fans and carpeting)
  • Improve basic curb appeal (clean gutters, pull out dead plants, touch up chipped paint)
  • Remove clutter