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The past few years have been a roller coaster ride on many fronts. For the housing market, the height of the pandemic had a silver lining for sellers: soaring home prices amid hot buyer demand.
However, mortgage interest rates ticked steadily upward throughout 2022 amid the Federal Reserve’s efforts to ease inflation, which put a damper on homebuyer enthusiasm. This in turn, caused home prices to decline.
All of these twists and turns may leave homeowners wondering what their home is worth now, and whether it’s a good time to sell — or tap your equity. As you consider the options, a good starting point is to ask yourself: Exactly how much is my house worth?
How much is my house worth?
When getting a home value estimate, consider the three main types of valuation:
- Fair market value: Fair market value encompasses what your home looks like to prospective buyers compared to other homes in the area. Consider the sale price of a home that’s similar to yours (same number of bedrooms and bathrooms, square footage or outdoor space, say). If you work with a real estate agent to help you sell your home, this is where your agent will start: by looking at comps to gauge what buyers have been willing to pay for a property comparable to yours.
- Appraised value: While the appraised value of your home factors in comps, it differs from fair market value. To calculate appraised value, a licensed appraiser considers the location, size and condition of your home, and any renovations you’ve completed. The appraised value is what mortgage lenders look at when a borrower buys a home or refinances their mortgage.
- Assessed value: The assessed value is the assigned dollar value of your home used by local county tax assessors to determine property taxes. “Tax assessors calculate assessed value based on various factors, which may include the appraised value and the fair market value, as well as any home improvements, whether you generate income from the property and any tax exemptions,” says Jade Lee-Duffy, a Realtor with TXR Homes in San Diego. Usually, the assessed value is lower than fair market value and doesn’t actually represent how much a property could sell for, she says.
How can I add value to my home?
You don’t get a second chance to make a first impression, and this bit of wisdom also applies to your home’s value. To that end, it’s important to ensure your home’s exterior is appealing and well maintained in order to maximize your property value.
“Your property’s curb appeal does make a difference,” says Lee-Duffy. “Make your home welcoming and tidy — cut your grass, trim any shrubs and add some new plants or flowers.” A fresh coat of paint, either on the interior or exterior of the house, will more than pay you back for the money spent, she adds: “This is one of the most cost-effective ways to improve value.”
A minor bathroom or kitchen update (as opposed to large-scale renovations) can also help improve your home’s resale value. You can simply replace an outdated sink, old tiles or dated light fixtures to give these spaces an affordable refresh.
5 ways to find out how much your house is worth
1. Use a home value estimator
- Best for: Sellers, buyers or anyone curious about the ballpark value of a home.
There are loads of online tools that offer a quick home value estimate. These tools — called automated valuation models, or AVMs — use algorithms and publicly available data, such as recent sales, tax assessments and other public records, to generate an estimate. Each one uses a different methodology, so your estimate can vary. Popular choices include:
- Zillow “Zestimate”
- Realtor.com MyHome
- Redfin home value estimator
- Chase home value estimator
- RE/MAX home value estimator
“Home value estimators are good starting points to assess the value of your home very quickly,” Lee-Duffy says. “However, this value is based on an algorithm that usually takes into account the number of bedrooms, square footage, location and market activity. It doesn’t take into consideration factors such as recent upgrades, condition of the house, curb appeal and external factors, such as traffic noise.”
In addition to an online estimator tool, you might choose to see how much an iBuyer is willing to offer you. “Both a home value estimator and an iBuyer company provide sellers with some idea of what their home is worth,” says Arlene Reed, an agent with Coldwell Banker Warburg Realty in New York City. But “the information from both is frequently inaccurate.”
- Pro: The algorithms that power online estimators and iBuyer offers can be simple ways to get a fast ballpark estimate (or offer) just by typing in an address.
- Con: Take these computer-generated estimates with a grain of salt. They may sometimes be based on incomplete or erroneous data, or may not take into consideration a recent high-end kitchen renovation or bathroom addition, for example.
2. Ask an agent for a comparative market analysis
- Best for: Those who are selling or considering selling a home.
Real estate agents typically offer a comparative market analysis (CMA) to sellers for free in hopes of winning their business. To complete the CMA, the agent pulls data about recent sales of comps in the area. They then draw on their knowledge of the neighborhood and any special characteristics of your property to estimate its value. A buyer’s agent may also provide this same service for any home a buyer wants to make an offer on.
“A good agent will have the tools necessary to drill down and find an accurate market value,” says Robert Krasow, a Realtor with Michael Saunders & Company in Sarasota, Florida. “An experienced professional follows the market, looks at home conditions and knows the neighborhood — all while making determinations using both data and their expertise.”
- Pro: It’s helpful to have an expert identify comps, answer questions and give guidance.
- Con: Different real estate agents may use different comps or have conflicting opinions of your home’s value. In addition, if there haven’t been many sales in the neighborhood or the comps are not that similar to your property, the estimate won’t be as accurate.
3. Check your county or municipal website
- Best for: Those who want to understand their home’s value from a tax perspective.
County auditors periodically assess the value of residential properties for property tax purposes, and this information is public and searchable online. You can look up the assessed value of your house to see if it has appreciated, or compare the figures with other homes for sale.
- Pro: This objective data is easily accessible and provides another point of comparison.
- Con: This estimate is for the taxable value of your home and may not reflect some of the market factors that affect sale price, such as time of year, competitiveness or curb appeal. In some localities, assessed values may be far off from market values.
4. Identify trends in the FHFA House Price Index
- Best for: Those who want to understand property price trends in their area over time.
The Federal Housing Finance Agency’s House Price Index (HPI) calculator offers yet another take on home value. The tool analyzes historical mortgage data to project what homes in your state or metropolitan area are likely to be worth based on the rate of appreciation of all homes in the area over a given period.
- Pro: The calculator draws on data from tens of millions of home sales and offers insights about broad house price fluctuations, so homeowners can compare the relative affordability of neighborhoods over a period of time.
- Con: This calculator doesn’t estimate the market value of a particular house. Instead, it offers a look at home price appreciation or depreciation over time. While this will give you a general idea of the local market, it won’t drill down into the specifics of your property.
5. Hire a professional appraiser
- Best for: Those who want the most professional and accurate home value estimate, and may want to use the data as they consult with a mortgage lender.
Mortgage lenders hire appraisers to confirm the value of a house before approving a loan. Some home sellers choose to take the extra step of hiring an appraiser, but it’s not required. The appraiser considers the characteristics of the property, such as how many bedrooms and bathrooms it has, as well as comps, similar to a CMA prepared by a real estate agent.
- Pro: Professional appraisers are typically licensed or certified by the state they work in and can provide an objective opinion of the value of a home.
- Con: If you’re seeking a mortgage, you’ll have to pay for the appraisal the lender orders. An appraisal costs an average of about $350, but can be up to about $420, according to HomeAdvisor.
My home’s value went up. What should I do?
Your home’s value can rise due to a range of factors. Home prices have increased in many places recently due to a shortage of supply. Prices were also boosted recently by some of the lowest mortgage rates in history — those rates have since increased, but prices remain high. If your home value has increased, you have a few options and considerations to make:
- You might be able to save money by eliminating private mortgage insurance. If you’re paying for private mortgage insurance (PMI) and your home’s value has gone up to the point where you now have at least 20 percent equity, you can ask your lender to cancel your PMI premiums.
- You might need to adjust your homeowners insurance policy. Your homeowners insurance cost and coverage are typically based on your home’s value. If it has increased, you’ll want to make sure you’re fully protected. “It’s important to review your property’s value with your insurance agent yearly to make sure your residence has the proper insurance coverage,” says Kimberly Smith of Garnet Property Group in Bristol, Connecticut.
- You might be in a better position to make improvements. With more equity in the property, you can take advantage of a home equity loan or cash-out refinance and invest in a renovation or remodeling project. “Determining a home’s valuation is useful if you’re considering tapping into your home’s equity in the form of a home equity loan, home equity line of credit or cash-out refinance, so that you know how much equity you’ve accrued,” Smith says.
- You might consider selling your home. You could stand to profit if your home’s value has gone up considerably. But before putting it on the market, carefully evaluate whether it really is the right time to move for you or your family, whether you’ll be able to find a new home quickly and how you’ll pay for it. “If it is a good time, making minor repairs and decluttering your property is always going to help increase the final sale price,” Lee-Duffy says.
My home’s value went down. What should I do?
While home values across the board have generally increased, there could be factors beyond the homeowner’s control that can cause prices to decline.
“Local political issues, climate changes, transportation and employment opportunities — or lack of these last two things — can influence home values,” says Gerard Splendore, an agent with Coldwell Banker Warburg Realty in New York City. “Selling may not be a good idea, unless it is apparent that values will continue to decrease.”
If you can wait out a downturn rather than making a rash decision, that may be best. “Home property values are typically influenced by the current economic climate, as well as the supply of houses on the market, which will change over time,” Lee-Duffy says. “If you can prolong moving, housing prices will eventually start to rebound.”
What factors affect home value?
A number of factors can affect the value of your home, including:
- Home age
- Home condition
- Home size
- Improvements or upgrades
There are other factors that impact property values overall, too. These can include the local housing market, the economy, interest rates and tax rates, Reed says. It’s important to keep each of these factors in mind when sorting through whether you should sell your home now, or wait.
How often should I check my home’s value?
While you don’t need to revisit your home’s value too often, checking on it periodically — say, once a year — is smart for several reasons. Knowing the current value of your home allows you to determine, for example, whether your homeowners insurance policy still adequately covers the property. “The value of your home also affects your taxes,” Reed says. “You might be able to lower your assessment.”
It can also be helpful to know the value of your home so you know how much equity you’ve accumulated, which could allow you to qualify for a home equity loan or line of credit, or cash-out refinance.
Of course, knowing the value of your home is crucial if you’re considering selling, and especially if you’re selling your home one year or less after buying it. In such cases, if you’re selling the home for a profit, you’re likely to face a capital gains tax.
Selling your home faster
It typically takes a couple of months to sell a home, if you go the traditional route. However, there are ways to shorten this timeline if need be and sell your home fast — really fast. For instance, you could opt to sell your home to a cash buyer, which eliminates the need to wait on financing to be finalized. And many iBuyer platforms will make you an offer in just 24 hours or less, plus arrange a closing timeline that suits your needs.
Home estimators provide a good starting point to determine how much your house is worth, but they should be taken with a grain of salt. These tools rely upon algorithms and publicly available data, such as recent sales, tax assessments and other public records, to generate an estimate. They do not, however, take into consideration such factors as recent upgrades or current condition of the home. A professional appraisal is your best bet for accuracy.
Knowing the value of your home is critical when you’re ready to sell, so that you can determine a reasonable asking price. It can also help you determine how much equity you’ve accrued, whether you might be able to obtain a home equity loan or whether your home insurance policy is still adequate.
To calculate your home equity, subtract your outstanding mortgage balance from your home’s market value. In other words, if you owe $200,000 on your mortgage loan and your home is worth $500,000, you have $300,000 of equity in the home.
The primary factors that impact your home’s value include its condition, age, size and any improvements or upgrades you’ve made. In addition, location is always a key factor in real estate values: Your home’s neighborhood and other factors tied to its location will play a role in value. Outside factors, such as the economy and the current mortgage rates, may also affect home value.