5 Easy Ways to Determine the Value of Your Home

home value

Use online tools, comparable properties and appraisals to determine value and buy, sell or refinance like a pro.

Discover how to accurately determine the value of your house with these simple methods. Knowing the worth of your home is crucial for making informed decisions.

Wonder what your house — or a house you might buy — is really worth?

The short answers easy: A house is worth whatever someone will pay for it. The long answer depends on the market and whether youre asking a lender, an agent or a county tax assessor. But why take their word for it?

Knowing how to calculate your homes value with the help of online tools and trained professionals better prepares you to buy, sell, refinance, tap into your homes equity or even negotiate lower property taxes.

It can also provide a picture of your overall financial health. Nearly three-quarters (73%) of Americans say knowing the value of their home is important for precisely this reason, according to a NerdWallet survey conducted online by The Harris Poll in August 2018.

Discover five different ways to determine the value of your home below.

How to find the value of a home

1. Use online valuation tools

Searching “how much is my house worth?” online reveals dozens of home value estimators. In fact, 22% of U.S. homeowners who determined their homes value used an online estimator, according to the survey. The technical term for these tools is automated valuation model, or AVM, and theyre typically offered by lenders or real estate sites like Zillow and Redfin.

Using public records like property transfers, deeds of ownership and tax assessments along with some mathematical modeling, these tools try to predict your homes value based on recent sales and listing prices in the area.

“Most AVMs on real estate sites are generally for marketing and lead generation purposes,” says David Rasmussen, senior vice president of operations at Veros Real Estate Solutions. “Theyre tasked with returning a value for just about every property even when data is limited. And in doing so, they water down the accuracy.”

The AVMs used by lenders and real estate professionals are different. These tools use a “confidence score” to indicate how close the AVM provider thinks an estimate is to market value. A confidence score of 90% means the estimate is within 10% of market value, for example, though each AVM has its own way of calculating confidence.

Professional-grade AVMs with confidence scores linked to accuracy are a step up from the real estate sites, Rasmussen says. But you should always talk to a local real estate expert to get more insight into any online valuation.

2. Get a comparative market analysis

When youre ready to dive deeper into your home value, you can ask a local real estate agent for a comparative market analysis, or CMA.

Though not as detailed as a professional appraisal, a CMA provides an agents evaluation of the home and market to provide an estimate of value, typically for listing purposes.

Local real estate agents may provide a CMA for little or no cost, but be aware: They may do so with hopes of being hired as your selling agent.

3. Use the FHFA House Price Index Calculator

If youre wary of AVMs but still want a quick estimate of what your home is worth, the Federal Housing Financing Agencys house price index (HPI) calculator applies a more scientific approach.

The tool uses the “repeat sales method,” says FHFA senior economist Will Doerner. Armed with millions of mortgage transactions gathered since the 1970s, the FHFA tracks a houses change in value from one sale to the next. Then it uses this information to estimate how values fluctuate in a given market.

Sounds great, right? Well, keep in mind the HPI calculator looks at conforming home mortgages (loans less than $726,200 and up to $1,089,300 in high-cost areas) and isnt adjusted seasonally or for inflation.

Still, “if you have a conventional, conforming loan, the HPI calculator is an easy way to see how much your house may have appreciated over time,” Doerner says.

» MORE: Differences between conforming and nonconforming loans

4. Hire a professional appraiser

Lenders require a home appraisal before theyll approve a mortgage, but as a property owner, you can hire an appraiser to estimate home value at any time. More than one-fourth (28%) of U.S. homeowners determined their homes value through an appraisal, according to the survey.

“As an appraiser, my job is to give a value based on the needs of my clients,” says Ryan Lundquist, owner of an appraisal company based in Carmichael, California. “Sometimes clients want the value for a date in the past, and other times its a current market value for a refinance or purchase.”

Among other things, appraisers evaluate:

  • Market: The region, city and neighborhood in which a home is located.

  • Property: Characteristics of the house, including improvements and the land it sits on.

  • Comparable properties: Sales, listings, vacancies, cost, depreciation and other factors for similar houses in the same market.

This information is combined to create a final opinion of value for the home and delivered in an official report.

» MORE: 4 ways to strengthen your homes refinance appraisal value

5. Evaluate comparable properties

One thing appraisals and AVMs have in common is their reliance on the recent sale value of comparable properties, often called “comps.” Well over half (56%) of U.S. homeowners estimated their homes value by looking at comparable properties. On its face, this approach seems simplest.

Pulling comps is one way to determine market value without paying an appraiser, but use good judgment. “Just because the property next door sold doesnt mean its a comp,” Lundquist says.

To choose accurate comps, you must employ an “apples to apples” approach, Lundquist says. Think about which properties would interest a buyer if yours weren’t available. Look for similar size, location, condition and upgrades.

To get started:

  • Browse a site where MLS listings are displayed, to find the recent sale prices of comparable houses in your neighborhood.

  • If there arent enough recent sales, look at listing prices, but remember they might not be realistic.

  • Youll need at least three valid comps to come up with a likely range of market value for your house.

Once youve chosen comparable properties, things get a little tricky. Youll need to adjust for differences between your house and the comps, such as adding value to the comp price if it has more bedrooms than your house or subtracting value if its interior is outdated, for example. How much you add or subtract depends on conditions in your market, which can vary widely. After adjusting values, look at your highest and lowest comps. A rough estimate of your home value is somewhere in the middle.

Keep in mind that, in a rapidly rising or declining market, home price information can become outdated quickly — and data from home sales a few months ago might not be a very helpful comp. Again, a local real estate professional will have more current information.

» MORE: Home improvements that improve property value

Why home value is important

Knowing your homes value allows you to evaluate what you can afford, determine whether a listing is priced appropriately and decide how to price your own home, says Gayle Weiswasser, senior vice president of marketing and communications at Homesnap, an app that offers home value estimates.

And the benefits of finding a homes value dont end with a purchase or sale: Refinances, home equity lines of credit, insurance premiums and annual property taxes are all based on home value.

Determining your homes value means greater control over these processes. Property taxes are almost always open to appeal, for example. If you can prove an assessment is too high by pulling comps, you may be rewarded with a lower tax bill.

Additional reporting by Elizabeth Renter.

» MORE FOR CANADIAN READERS: How much is my home worth?

The HPI calculator is an easy way to see how much your house may have appreciated over time.”

Will Doerner, FHFA Senior Economist

Thanks to Source


home value

home value

home value