How to estimate the market value of your home

How much is my home worth? Whether you’re selling it, refinancing it or simply curious, knowing the market value of your home is essential. However, if you’re unsure how to go about it, the process can be difficult and have negative consequences. Is your listing price too high? You may need to lower it or wait longer to find a buyer. On the other hand, if the price is too low, you could lose money on the sale. To avoid this type of situation, it’s best to do your homework from the start and adopt a strategic plan, like having a real estate broker assist you.   

In this blog post, we will explain which factors influence the true value of a home, how to calculate it, and what resources are available to help you.

What is the market value of a home?

What does market value mean? Market value refers to the estimated value of an asset based on supply and demand in an open market. It is what a home is worth based on the state of the real estate market and the characteristics of the property. It is also sometimes referred to as the “commercial value.”

What’s the difference between market value and municipal assessment?

The market value of a home is the price that a buyer would most likely be willing to pay (and that a seller would most likely accept) for a particular property under normal selling conditions. A municipal assessment , on the other hand, is mainly used to determine the value of a property for municipal and school tax purposes. While these two concepts are often confused, they serve very different purposes.

Market value

A home’s market value is a current and personalized estimate. It reflects the actual condition of the property, the demand in a given sector, real estate market trends and the economic context.

Note that market value is not the same as replacement value, which is the cost of rebuilding the home from scratch and does not include the value of the land. This estimate is often used for home insurance purposes.

Municipal assessment

Conversely, a municipal assessment – also referred to as a property assessment roll – is carried out every three years by appraisers for the city. It is based on overall data (block approach ), often grouped by sector or property type, and on the home’s estimated value at July 1 of the year preceding the effective date of the new roll . It does not necessarily reflect fluctuations in the real estate market, changes to your neighbourhood or your property’s characteristics. Relying solely on the municipal assessment to determine how much your home is worth could lead you astray.

To better understand the difference between a home’s market value and municipal assessment, see our blog post Municipal assessment or market value?

Why is the market value different from the municipal assessment?

There is often a difference between the value of a home according to the municipal assessment and its sale price. This is partly due to the delay between the property assessment and listing dates, but also to the limitations of the block approach used by cities. Real estate market conditions, which fluctuate rapidly, also play a part.

Tips and tricks In Quebec, it’s easy to find a home’s property assessment roll online. Simply consult the “Property Assessment Roll” section of your municipality’s website or the Registre foncier du Québec en ligne . You can search for a property by address or lot number. You can also find this information in your municipal tax account, where the property assessment is posted every year. Finally, for properties currently for sale, the municipal assessment is usually shown in the listing on Centris.ca , which may be useful for comparing several homes in the same area.

Factors that influence the market value of a home

A home’s market value goes beyond its appearance or original purchase price. It depends on many factors, which are based on the law of supply and demand and change according to real estate market trends and the economic context. You also need to consider the purchasing power of future buyers, which is highly influenced by mortgage interest rates. 

The following are the main factors that can affect the market value of a property.

Location

This is one of the most important criteria. Two identical homes may have very different values depending on their location. For example, a home in a sought-after neighbourhood will naturally be worth more than a similar one in a less appealing area.

Proximity to schools, shopping, public transit, parks and hospitals usually improves buyers’ perception of a home’s value, as does easy access to major roads and the neighbourhood’s development potential.

Characteristics of the property

The property type (single-family, semi-detached, townhouse, condo), lot size, living area, number of rooms, materials used, construction year and overall condition of the home all contribute to its market value.

Recent renovations, like a modernized kitchen or refurbished roof, can also increase its value. However, some improvements, such as adding a pool, may not be seen as a plus by everyone.

Other distinctive features, such as a fireplace, garage, panoramic view or exterior landscaping, can influence how much a property is worth. Given current environmental trends, there is increasing demand for energy-efficient homes in Quebec, particularly ones that are well insulated or equipped with a high-performance heating system.

The local market

A seller’s market, where supply is scarce and demand is high, tends to drive prices up. Conversely, in a buyer’s market, sales are slow and homeowners may need to adjust their expectations. The local market may also be affected by factors such as comparable properties for sale, the time it takes to close, and current mortgage interest rates.

Tips and tricks While you can’t change the location of a property, you can use some home staging tips to get the best possible price for it. To find out more, read our blog post 7 things that lower the value of your home .

How do you estimate a home’s market value?

There are several tools and methods you can use to assess the market value of a home . Here is an overview of the most common approaches and the pros and cons of each.

Calculate the value of the home using an online tool

Some free tools enable you to calculate the market value of your home online. Typically, these calculators use publicly available information and real estate statistics to provide a quick estimate. This may give you a rough idea, but watch out: these valuations are often based on averages and don’t take your property’s specific features into account.

Hire a broker to have your home appraised and listed for sale

When establishing the listing price of a property , it’s a good idea to use a real estate broker and their extensive network of experts .Not only will they be able to guide you through each stage of the transaction , but they will also be able to determine the market value while taking market conditions into account. To do this, real estate brokers have different methods at their disposal.

1. Comparative market analysis method

A comparative market analysis (CMA) is the most common method used to determine the market value of a single-family home, a condo or an income property with up to five units or a lot.

It is based on an analysis of the history of similar properties recently sold in your area and draws from databases used by brokers. Unlike online calculators, this method is based on actual sale prices rather than listing prices.

2. Replacement cost method

Brokers can also apply the replacement cost method, which is often used for recent or unique properties. This involves calculating the value of the land, adding the replacement value of a new building and subtracting any form of depreciation. This complex calculation takes amortization into account and may require the expertise of an accredited appraiser.

3. Income method

A broker may also use the income method, which applies to rental properties. This involves determining the value of the property based on its net rental income, capitalized at a market rate for the same type of property sold.

Contact an accredited appraiser

In some cases, a real estate broker may recommend an appraiser accredited by the Ordre des évaluateurs agréés du Québec (OEAQ) . An appraiser can provide a detailed report that is very useful in specific situations, such as a divorce, an estate sale , a sale without a legal warranty or mortgage financing. A well-documented assessment can also serve as a basis for an equitable arrangement between common-law partners .

The appraiser follows specific professional practice standards to estimate the value of a property, especially when there aren’t many comparable ones. This is the case for mixed-income buildings, agricultural land and some second homes .

What mistakes should be avoided when estimating the value of a home?

Estimating a home’s market value can seem straightforward... until you make a costly mistake.

Here are some common pitfalls to avoid:

• Relying entirely on neighbours’ asking prices or the municipal assessment: This data may not be up to date or reflect the reality of the current market.
• Overestimating the value of renovations : Adding an in-ground pool or a finished basement doesn’t always guarantee a good return on investment.
• Letting your emotions cloud your judgement: Your attachment to your home can make you overestimate its value.
• Neglecting certain defects: Structural issues, hidden defects or poor maintenance can cause the sale price to drop considerably.
• Overlooking the economic context: Unrealistic expectations may arise if current mortgage interest rates aren’t taken into account.

To avoid these pitfalls, it’s a good idea to take a step back, use reliable data and hire a professional, if needed. An accurate home assessment is the key to selling at the right price within a reasonable time frame.

Assessing market value: an essential first step

An accurate market valuation is an essential starting point if you want to get the most out of your real estate investment. A correctly priced home inspires confidence, attracts more interest and usually sells faster. On the other hand, an inaccurate appraisal can draw out the sales process… or cost you money.

For an accurate estimate, there’s nothing like the support of a professional. Find a real estate broker at Centris.ca and take the first step towards a successful transaction.

Frequently asked questions (FAQ)

1. What reduces a home’s market value?

There are several factors that can bring down a property’s market value. Location is a key factor: a home located in a flood zone, near a highway or in a less sought-after neighbourhood will see an impact on its price.

The home’s overall condition also plays a major role: poor maintenance or structural issues such as pyrite, asbestos or water infiltration are major drawbacks. Finally, a home that doesn’t meet current market expectations or isn’t very functional will be less attractive and more difficult to sell .

2. Is it possible to boost a property’s market value?

Yes. You don’t have to redo the whole house, just focus on the most profitable improvements. A renovated bathroom, a modern kitchen or some well-thought-out repairs can have a big impact.

Home staging is also an effective strategy, since you can highlight rooms, optimize brightness and make buyers fall in love from the very first visit. Sometimes, decluttering, repainting or reorganizing the space is enough to transform the way potential buyers perceive it.

3. Does the market value change often?

A home’s market value can vary from year to year . Real estate market conditions, supply and demand in a given sector, the state of the economy and mortgage interest rates directly influence the price buyers are willing to pay.