Content of the material
- 1. Start with online valuation tools
- How can I add value to my home?
- Key factors that influence home value
- Job market
- Property taxes
- Interest rates
- Home maintenance
- 5 ways to find out what your house is worth
- 2. Ask a real estate agent for a free comparative market analysis
- 3. Check your county or municipal auditor’s website
- 4. Identify trends with the FHFA House Price Index calculator
- 5. Hire a professional appraiser
- What Determines the Assessed Value of a Home?
- Step 5: Look at some comps from your neighborhood
- Related Resources
- Home Appraisal Tips For Buyers, Sellers And Refinancers
- What Is Fair Market Value (FMV) In Real Estate And How Is It Determined?
- Should I Remodel Or Move?
- Home Lending Customer Service
- What are comps in real estate?
- What’s the most accurate home valuation website?
- Tracking Your Homes Value
1. Start with online valuation tools
Online home value calculators use the information you provide about your home, along with information gleaned from public records, to calculate an estimated value of the property. They’re a simple and convenient way to get a ballpark idea of what your home might be worth.
For example, PennyMac’s value estimator takes the address of your home and returns an estimate of the overall value, price per square foot, property details, sales history, and value history.
Example of an Opendoor offer.
Pros of online valuation tools:
- Most are free and easy to use.
- They can quickly give you an estimate of your home’s value, often without having to provide a lot of info about your home.
- Many valuation tools update regularly, which is useful if you need to tweak your list price during the selling process.
Cons of online valuation tools:
- These tools are designed to provide an estimate and may not take into account unique aspects of your home that appeal or don’t appeal to buyers.
- Valuations can vary from one tool to the next, depending on which factors the tool uses to determine value.
- These tools generally don’t take into account things like renovations or repairs, which can significantly influence your home’s value.
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 can apply to your home and its value.
“Your property’s curb appeal does make a difference,” Duffy says. “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, Duffy 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 a refresh.
“It also pays to install a new garage door,” Duffy says. “Some reports estimate a new garage door can increase home values by 4 percent — great curb appeal does matter.”
Key factors that influence home value
Home values are usually based on comps, but it’s important to consider a home’s key factors when choosing comps to use. For instance, if a similar, nearby home sold recently, but it’s in a slightly better location, it’s probably worth more. How much more? That’s up to the buyer to determine.
Many features of a home can be changed by the owner — like finishes and even home size. But, you can’t change where the home is located. That’s why location is such an important factor in a home’s value. Outside of standard market appreciation, a home’s land will only increase in value if the area around it improves. For example, 60% of buyers say being in a walkable neighborhood is very or extremely important, according to the Zillow Group Consumer Housing Trends Report 2019.
Here are key location factors that can increase a home’s value:
- Proximity to urban core
- Cul-de-sac location or dead end (less traffic)
- Farther away from railroad tracks, airports, freeway noise and power lines
- Near parks or green spaces
- Sidewalks and walkability
- Proximity to public transit
- Waterfront, water or mountain views
When the job market is strong and incomes are growing, people may look to buy a home, or move into a newer or larger home, increasing the demand for homes and boosting competition among buyers.
Budgeting buyers look at their monthly housing payments including taxes, so homes with very high property taxes can be out of reach for some buyers. However, property taxes help pay for public services that benefit the local community. As a buyer, you’ll have to determine the value of savings versus local benefits.
Buyer demand tends to be higher when long-term interest rates are lower, as low interest rates give buyers more purchasing power. Conversely, when interest rates are high, buyers may have a harder time paying off other debt, which can impact their ability to buy a home. When demand is lower, housing prices follow suit.
While not directly related to a home’s value, buyers may also want to consider any maintenance needs they’ll have to pay, especially in the first year of ownership. For example, will they have to replace the water heater or service the HVAC system?
5 ways to find out what your house is worth
2. Ask a real estate agent for a free comparative market analysis
- Best for: Those who are selling or considering selling a home
Real estate agents typically offer a comparative market analysis (CMA) for free in hopes of winning your business if you’re selling your house. 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 you want 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.”
- Pros: It’s a plus to have an expert identify comps, answer questions and give guidance.
- Cons: 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 auditor’s 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 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.
- Pros: This objective data is easily accessible and provides another point of comparison.
- Cons: This estimate is for the taxable value of your home and may not reflect some of the market factors that affect the sales price, such as time of year, competitiveness or curb appeal. In some localities, assessed values may be far off from market values, and it can take some research to find them.
4. Identify trends with the FHFA House Price Index calculator
- Best for: Those who want to understand property price trends in their area over the time they’ve owned their home or another period
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.
- Pros: 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.
- Cons: 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 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.
- Pros: 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.
- Cons: If you’re seeking a mortgage, you’ll have to pay for the appraisal the lender orders. An appraisal costs an average of about $340, but can be anywhere from roughly $300 to $420, according to HomeAdvisor.
What Determines the Assessed Value of a Home?
An assessor looks at information about your property and neighborhood, while comparing it to other properties in your area, to determine the assessed value. The assessor uses the market approach, which is a method to estimate the value based on the selling price of similar homes. This approach is used to find the market value of the property and determine the assessment rate. The market value and assessment rate are then multiplied to get the assessed value, as demonstrated below.
The assessment rate is a percentage of up to 100% that takes into account factors that could raise or lower the value of homes in a given area. These factors include current market conditions, other home values, maintenance cost, depreciation, home improvements, neighborhood, size, amenities and any other factors that the assessor deems important for an accurate valuation. The assessment rate is generally the same for every property in a given tax jurisdiction.
In many cases, assessors use an algorithm to determine the assessment rate and market value of a home by inputting general information about each property and comparing it to similar properties. This is generally used as a standard for all homes in the area, but can also lead to inaccurate valuations in individual cases.
The higher your assessed value, the more you’ll pay in taxes. Distressed areas tend to have lower assessed values due to the neighborhood quality, while areas with larger populations and more economic activity have higher assessed values. These values are public and are found in property records. When you consider buying a house, you can look up the assessed value and compare it to the asking price. However, the assessed value is only adjusted annually, and may not accurately reflect what a homeowner would sell at or what a buyer would pay for a home.
Step 5: Look at some comps from your neighborhood
If you know of some homes in your neighborhood that recently sold, you can see what the asking price was, and once the house sale has closed, you’ll be able to look online at the sales price.
Home values can be different from neighborhood to neighborhood, or even from block to block, so reviewing recent sales of comparable homes (known as “comps” in the real estate industry) in your area can help you assess your own home’s value.
Finding and analyzing comps on your own isn’t going to give you a fully accurate picture, nor will it provide information on current housing market trends, but it can be a good tool for determining a home’s value.
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What Is Fair Market Value (FMV) In Real Estate And How Is It Determined? Mortgage Basics – 4-minute read Lauren Bowling – February 26, 2022 Fair market value (FMV) in real estate is an assessment of a property’s worth in an open market. Learn how FMV is determined and what it’s used for. Read More
Should I Remodel Or Move? Home Buying – 8-minute read Miranda Crace – February 26, 2022 Wondering if you should buy a new home instead of remodeling? Explore statistics on costs and learn the pros and cons. Read More
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What are comps in real estate?
Comps (short for comparables) are similar, recently sold properties that agents and appraisers use to help determine the value of a home. Comps are used for multiple purposes: to determine the listing price of a home about to list on the market, to help buyers determine a fair offer price and to help an existing homeowner find out the current value of their property and potential equity.
Comps usually consider five key criteria when calculating a home’s value:
Timeline: In a typical market, comps include homes sold in the past three to six months.
Location: Comps should be pulled from the same neighborhood, and in close proximity to the home in question. In an urban area, comps are usually within a mile or so. In rural areas, the radius comps are pulled from will be larger.
Home size: Comps should have the same number of bedrooms and bathrooms, same number of stories and a similar square footage. The lot size and presence of a garage or basement should be similar, too.
Features: Comparable homes should have similar amenities and level of finishes and updates.
Age: The homes being compared should be roughly the same age. Newer homes have newer designs, layouts, systems and appliances, which can increase value.
What’s the most accurate home valuation website?
In its analysis of the top home valuation sites, The Balance selected Redfin as the most accurate home valuation website. While its margin of error for off-market properties is slightly higher than Zillow's (7.61% vs. 7.5%), Redfin’s estimates update data every day compared to Zillow’s “multiple times per week.”
Tracking Your Homes Value
We’ve watched home values go up most of our lifetimes. Rising home prices have a significant effect on our wealth, and ability to borrow. Even if you don’t plan to sell your home, watching your home’s value increase over time can be a lot of fun. Many people have used their home equity smartly to consolidate personal debt or to invest in building a business from their home. While it’s important to always understand your asset values, try not to get attached to the ups and downs too much.
Remember, these websites and others let you watch your home’s value grow aren’t exact, and the only time you’ll get a true answer to the question “how much is my home worth?” will be when you go to sell or borrow against the home.
If you want “the real thing” – as in, a price that reflects every factor that goes into a home’s sales price – you should meet with at least 2 or 3 realtors or mortgage lenders to get price suggestions. Chances are, a realtor will be able to offer more insight into your local market than any online real estate tool ever could.
What is your favorite website for checking your home’s value? Why is it your favorite?