How much is my house worth?

 

While the past year or more has been a roller-coaster ride on many fronts, there was a silver lining for homeowners: Home prices have risen considerably. You might be wondering if you should take advantage of the climb in values and sell your home or tap its newfound equity. As you consider your 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 (the 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 the 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 then assigned dollar value of your home used by local county tax assessors to determine property taxes. “Tax assessors calculate an 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,” explains Jade Duffy, a Realtor with TXR Homes based in Carlsbad, California. Usually, the assessed value is lower than fair market value and doesn’t actually represent how much a property could sell for, Duffy says.

My home’s value went up. What should I do?

Your home’s value can rise due to a range of factors. Right now, home prices have increased in many places due to a shortage of supply mixed with the lowest mortgage rates in history. 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’s 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,” explains Kimberly Smith, owner of Garnet Property Group in Bristol, Connecticut.

• You might be in a better position to improve your home. 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 sales price,” Duffy says.

What factors affect home value?

A number of factors can affect the value of your home, including:

• The neighborhood
• Its age
• Its condition
• Its size
• Any home improvements or upgrades

There are other factors that impact property values overall, too. These include the local housing market, economy, interest rates, and tax rates, Reed 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 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.”

Bottom line

No single home valuation method is guaranteed to be 100-percent accurate. That’s why using a combination of resources can help give you a more informed perspective of what your home is worth.

For example, you might get a free CMA and conduct your own research using an online home value estimator, as well as the FHFA calculator and county auditor’s website. Additionally or alternatively, you could pay for a professional appraisal. Averaging together all the final values you gather could give you a more accurate picture of your home’s value.

Ultimately, however, the most reliable home value estimates come from professionals who take the time to carefully assess your property based on a variety of factors.

“All of the evaluation tools are useful in giving an idea of the worth of your home, but an appraiser and/or an experienced agent will be the most accurate sources for determining value,” Krasnow says. “A trained professional will have an advantage, as a computer cannot determine the intrinsic value or consider the condition and improvements you’ve made to your home.”