Stop Guessing: The Wrong & Right Ways to Value a Home
When buying or selling a home, knowing the actual value is critical. Yet so many people, buyers and sellers alike, lean on quick rules of thumb or “word on the street” ideas that can be wildly off base.
Let’s break down the most common mistakes people make when trying to figure out a home’s value, and what actually works.
Wrong and right ways to value a home: Common Mistakes Buyers & Sellers Make When Valuing a Home
Mistake #1. Trusting online estimates from portals
It’s tempting to check a website, see a dollar figure pop up, and take it as gospel. But online estimates are based on broad algorithms. They’ve never walked through your home, smelled fresh paint, or noticed the outdated HVAC. The real estate portal might be $20,000 or $50,000 off (sometimes more). These tools are helpful for getting a ballpark, but they’re rarely accurate enough to make big financial decisions.
Mistake #2. Taking a neighbor’s word for it
We all know someone who claims, “My house down the street sold for $650,000!” But did it actually close at that? Was there a huge seller concession? Did it include extra acreage or high-end upgrades? Relying on neighborhood chatter is a fast way to misjudge your own situation.
Mistake #3. Looking at active listings instead of sold homes
An active listing shows what a seller hopes to get, not necessarily what the market will pay. You need to look at recent sales, because that’s the only place where money truly changed hands.
Mistake #4. Using the tax assessment
Your county’s assessed value is mainly used to calculate property taxes. It may have been updated years ago or rely on broad mass appraisals. It’s almost never aligned with today’s true market value.
Mistake #5. Doing simple “price per square foot” math
This is one of the most common mistakes, and one of the most misleading. People will say, “Homes around here sell for $250 a square foot, so mine should be worth $500,000.” But homes aren’t priced like bulk flooring.
- Small homes usually have a higher per-foot cost because of the kitchens, bathrooms, and mechanical systems, which are the most expensive areas.
- Larger homes often have a lower per-foot cost, even though they may cost much more overall.
- Plus, upgrades, lot size, views, pools, floor plan efficiency, or even just charm can dramatically shift value in ways a price per foot misses.
While price per square foot can provide a rough benchmark, it’s never the whole story.
The Right Way: Use Comparable Sales (Comps)
If you really want to know what a home is worth, you look at comparable sales, or “comps.”
What are comps?
Recent sales of homes that are similar in size, age, condition, and location.
Why it matters:
These show what buyers have actually been willing to pay in your area, under real market conditions.
Adjusting for differences:
A good agent doesn’t just look at raw numbers. They’ll adjust for differences , like adding value for your new roof or subtracting for that home’s finished basement when yours is unfinished.
A thorough comparative market analysis (CMA) by an experienced local agent pulls all of this together, so you see a realistic range that reflects both the hard data and the nuances of your home’s appeal.
The Bottom Line
Pricing (or offering on) a home based on guesses, online calculators, neighbor rumors, tax records, or simple square-foot math can leave you badly misinformed. Whether you’re buying or selling, the smartest way to protect your money is to use real, recent comparable sales with expert adjustments.
By Dan Krell
Copyright © 2025
Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.
