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.”

Home equity is at an all-time high

Thanks to rapidly rising home values, many Americans are now equity rich.

In fact, a recent report from data firm Black Knight found that the average U.S. homeowner has $153,000 in “tappable” home equity — an all-time high.

That pent-up wealth can be put to work making home renovations, paying off debts, buying new properties, investing, and more.

But how do you actually take equity out of your home? And when is it a good idea to do so?

What does it mean to have equity in your home?

Having equity means you have cash value built up in your home. Your equity will grow year by year as you pay off your mortgage and as your home (likely) increases in value.

Of course, equity isn’t liquid cash. The wealth built up via home equity is tied into your property’s value.

That means you can’t just spend your home equity. To put the money to work, you first have to convert home equity into liquid cash. This is typically done via a cash-out refinance loan or a second mortgage.

But first, here’s how you can determine whether you have equity available to cash out.

How to calculate your home equity

Calculating home equity is simple. Just take the current value of your home minus your mortgage balance today.

FIND OUT THE CURRENT VALUE OF YOUR HOME

What is ‘tappable’ home equity?

Tappable home equity is the amount of money you can actually withdraw from your home’s value via a cash-out refinance or second mortgage. Your tappable home equity is typically equal to your total amount of equity minus 20% of your home’s value.

The reason your tappable equity is lower than your total home equity is that mortgage lenders want you to leave 20% of your home’s value untouched. That way, if you were to default on the loan, the lender would be protected financially.

There are exceptions to this rule, mostly for VA loans which may allow up to 100% loan-to-value (LTV). And a few lenders let you retain less than 20 percent.

But for the most part, borrowers should expect to need significantly more than 20% equity to be able to cash out.

Remember that Black Knight estimates homeowners currently have $153,000 in tappable equity on average — even after accounting for that 20% buffer.

Are Home Updates Actually Worth It Right Now?

Should you update your home before putting it on the market? Three in four homeowners say they’d rather replace their appliances than accept a low offer on their home.

Cinch Home Services surveyed over 1,000 homeowners and renters to figure out how important updates are in the homebuying process. And they discovered that a majority of homeowners think upgrading their appliances will increase their value by almost $14,000.

Due to this ideology, over half of homeowners plan to upgrade their appliances before putting their homes on the market. Almost 60% will repair or replace their air conditioner, almost 46% will prioritize their dishwasher and about 40% will take a close look at their water heater.

Examine Return On Investment 

Unfortunately, upgrading your appliances won’t necessarily allow for a huge return on investment. While upgrades can make your home more desirable, you may not completely recoup the cost of what you spend.

Take major kitchen remodels, for example. According to 2021 research, the average cost to remodel a kitchen was around $75,000. This included upgrades like a built-in microwave, dishwasher, custom lighting, etc. But even with these changes, that only added $43,000 to the resale value and the cost recouped was about 57%.

On the other hand, a simple garage replacement costs on average about $4,000 and adds about $3,000 to the resale value, bringing the cost recouped at $94%.

Here are a few other updates with the highest return on investment:

Stone Veneer

• Average cost: $10,386
• Average resale value: $9,571
• Cost recouped: 92.1%

Minor Kitchen Remodel 

• Average cost: $26,214
• Average resale value: $18,927
• Cost recouped: 72.2%

Sliding Replacement

• Average cost: $19,626
• Average resale value: $13,618
• Cost recouped: 69. 4%

Renovations Can Be Beneficial

Certain home improvements are considered “capital improvements.” For example, if you replace your flooring, upgrade kitchen appliances, etc. that fall under “capital improvements.” While not every upgrade will increase your home’s value, when you sell your house, you can write off your capital improvements.

If you refinance your home after you’ve made upgrades, your home will most likely appraise higher than when you bought it. This means you can potentially increase your home’s equity and lower your loan-to-value ratio.

Bottom Line

Renovations might make you feel better about putting your home on the market one day. While we’re currently living in a seller’s market, people looking to sell their homes may not need to put in the effort right now. But having an upgraded home wouldn’t hurt.

It’s a good time to be a home seller — homes are selling fast and for a premium — but that doesn’t mean you can jump into the market ill-prepared. Knowing what to expect can position you to make the most of this seller’s market.

Roughly 1 in 6 (17%) homeowners plan on selling their home in the next 18 months, according to a new NerdWallet survey conducted online by The Harris Poll among 2,127 homeowners. Those listings will be a welcome sight to buyers currently competing for a limited number of homes commanding top dollar.

The March survey found that this current market is playing a role in many of these home sellers’ motivations. In fact, 45% of those planning to sell in the next 18 months say recent changes to the housing market, including higher asking prices and lower inventory, have spurred them to sell earlier than initially planned. If you’re among the homeowners preparing to be on the favored side of this strong seller’s market, here’s what you need to know.

1. You may be able to skip presale home improvements

In addition to cleaning your house for showings, preparing to sell your home often means doing minor (or major) repairs and upgrades. But home buyers are stalking real estate listings and jumping on those that even get close to checking all the boxes, so sellers could likely save some money by limiting or forgoing expensive projects altogether.

More than 4 in 5 (81%) homeowners planning to sell in the next 18 months say they plan to spend money on major repairs or renovations to make their home more appealing to potential buyers prior to selling, typically planning to spend $2,000. But 17% of those planning to sell in the next 18 months who will spend money on repairs and renovations prior to selling say they’ll spend $15,000 or more.

“You really can get away without doing renovations and minor repairs,” says Holden Lewis, NerdWallet mortgages expert. “Unless the house has a major problem like a leaky roof, you’re probably better off selling as-is. Make it a priority to declutter and depersonalize the home so it’s easy for buyers to imagine themselves living there. The buyers can fix it up and renovate it on their own dime and schedule.”

2. It will all move very quickly

If you list your home in this market, there’s little question of the outcome. Barring any significant defaults or dramatic overpricing, you’ll sell your home. It will happen quickly, and you could receive multiple offers over the listing price.

Nearly half (45%) of homeowners planning to sell in the next 18 months say recent changes to the housing market have spurred them to sell earlier than initially planned, according to the survey. Single-family homes are in high demand, so selling now means you’ll sell faster and for a higher price than you would under other conditions.

Existing homes are only on the market for an average of 20 days, according to the most recent data from the National Association of Realtors — that’s listed and under contract in less than three weeks. So be prepared to sell the moment you hang that “For Sale” sign. It’s ideal to have your next home already lined up, but that may be easier said than done.

3. You’ll face stiff competition shopping for a replacement home

The very things that make it a good time to sell make it a tough time to buy a house. Just 10% of those planning to sell in the next 18 months say one of their primary motivations for selling is that they no longer want to be a homeowner, according to the survey. For the rest of these sellers, entering the crowded pool of home buyers will present challenges.

Whether it’s the location — such as moving closer to family, outside of the city, or for a new job — or the home features, every item on your list of must-haves will make finding your next home a greater challenge.

Given the likely ease with which you’ll sell and the difficulty you might have found a replacement home, it may make sense to be under contract on a purchase when or soon after your home hits the market.

“The trickiest part of navigating today’s market is finding a home to replace the one you’re selling,” Lewis says. “You can make the buyer’s purchase contingent on your finding suitable housing. In other words, you can make your buyer wait. Normally, buyers are reluctant to accept that condition, but we’re in a seller’s market and sellers make the rules.”

Methodology

This survey was conducted online within the United States by The Harris Poll on behalf of NerdWallet from March 9-11, 2021, among 2,127 U.S. adults ages 18 and older who are homeowners, among whom 391 plan to sell their home in the next 18 months. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. For complete survey methodology, including weighting variables and subgroup sample sizes, please contact Anna Palagi at apalagi@nerdwallet.com.

When selling a house, most homeowners hope for a quick and profitable transaction that puts them in a position to make a great move. If you’re waiting for the best time to win as a seller, the market is calling your name this spring. Here are five reasons why this is the perfect time to sell your house if you’re ready.

1. There’s high demand from homebuyers.

Buyer demand is strong right now, and buyers are active in the market. ShowingTime, which tracks the average number of buyer showings on residential properties, recently announced that buyer showings are up 51.5% compared to this time last year. Daniil Cherkasskiy, Chief Analytics Officer at ShowingTime, notes:

“As anticipated, demand for real estate remains elevated and continues to be affected by low levels of inventory…On average, each home is getting 50 percent or more requests this year compared to January of last year. As we head into the busy season, it’s likely we’ll push into even more extreme territory until the supply starts catching up with demand.”

When your house is positioned to get a ton of attention from competitive buyers, you’re in the best spot possible as the seller.

2. There aren’t enough houses for sale.

Purchaser demand is so high, the market is running out of available houses for sale. Recently, realtor.com reported:

“Nationally, the inventory of homes for sale in February decreased by 48.6% over the past year, a higher rate of decline compared to the 42.6% drop in January. This amounted to 496,000 fewer homes for sale compared to February of last year.”

The National Association of Realtors (NAR) also reveals that, while home sales are skyrocketing, the inventory of existing homes for sale is continuing to drop dramatically. Houses are essentially selling as fast as they’re hitting the market – in fact, NAR reports that the average house is on the market for only 21 days.

It’s this imbalance between high buyer demand and a low supply of houses for sale that gives sellers such an advantage. A seller will always negotiate the best deal when demand is high and supply is low. That’s exactly what’s happening in the real estate market today.

3. You have a lot of leverage in today’s market.

Clearly, many more people are interested in buying than selling this spring, creating the ultimate sellers’ market. When this happens, homeowners in a position to sell have the upper hand in negotiations.

According to NAR, agents are reporting an average of 3.7 offers per house and an increase in bidding wars. As a seller, this means the ball is in your court – so much so that you can use your leverage to negotiate the best possible contract. Demand is there, and now is the perfect time to sell for the most favorable terms.

4. It’s a great way to use your home equity.

According to the latest data from CoreLogic, as of the third quarter of 2020, the average homeowner gained $17,000 in equity over the past year, and that number continues to grow as home values appreciate. Equity is a type of forced savings that grows during your time as a homeowner and can be put toward bigger goals like buying your next dream home.

Mark Fleming, Chief Economist at First American, notes:

“As homeowners gain equity in their homes, they are more likely to consider using that equity to purchase a larger or more attractive home – the wealth effect of rising equity. In today’s housing market, fast rising demand against the limited supply of homes for sale has resulted in continued house price appreciation.”

5. It’s a chance to find a home that meets your needs.

So much has changed over the past year, including what many of us need in a home. Spending extra time where we currently live is enabling many of us to re-evaluate homeownership and what we find most important in a home.

Whether it’s a house that has the features suited to working remotely, space for virtual or hybrid schooling, a home gym or theater, or something else, selling this spring gives you a chance to make a move and find the home of your dreams.

Bottom Line

Today’s housing market belongs to the sellers. If you’ve considered making a move but have been waiting for the right market conditions, your wait may be over. Give me a call at 678-744-8070, so you’ll be positioned to win when you sell your house this spring!

An old rule of thumb in real estate is to wait until the flowers start blooming to put a house on the market.

There are sound reasons behind that. Spring is the time of the year when people are getting their tax refunds, the weather is ideal for going out to look at properties, and summer break is coming up for the kids, making a move easier.

But that’s not what has happened this year: the uptick in home sales is defying normal seasonality trends.

Spurred by interest rates at record lows, home sales this fall far outpaced last year’s numbers, according to data from the National Association of Realtors showing that contract signings rose 20.2% in October over the past year.

Homes for sale are scarce, and with demand so strong, prices are high. That’s good news for sellers.

“In 2020, because we have such a low inventory, we never really had a rush for spring, and houses have been slow to come on the market,” says Miranda Biedenharn, a real estate agent with RE/MAX Alliance Realty in Dayton, Ohio.

That means you don’t need to wait for the “best” time to sell your house. If you’re thinking about selling your home, go ahead and list it, says Biedenharn.

In the current market, you can expect your home to sell fairly quickly for the asking price, possibly above, and you’re more likely to receive multiple offers.

“We have way more buyers than we have sellers at the moment,” says Carol Ann Reed, a real estate agent with Realty Group in Minnesota. “I have seen the traffic tick down a little bit in October and November, but not a lot. Right now, I would say to a seller, ‘put your house on the market,’ even with winter approaching.”

When Is the Best Time to Sell?

“Spring and summer are always hot times to sell,” Biedenharn says, but where you live and local market conditions also heavily influence the best time to list your house. Factors out of your control include local job growth, mortgage interest rates, tax incentives, and neighborhood inventory.

All in all, the ideal time to put your house on the market can be really specific to your location. For example, winter tends to be the slowest season for home sales, but if your climate is warm year-round, your window for selling may extend to off-season months.

“I’m from Minnesota, so moving in February is not a good idea. The spring is really when the market gets moving, especially in the north,” says Reed. “But it’s not the same in every market.”

That’s why it’s helpful to work with a real estate agent who’s an expert in your local area and can help market your home to potential buyers, as well as price your home competitively. Almost nine out of 10 sellers work with an agent to sell their homes, according to recent NAR data.

“There’s always motivated buyers out there, so whenever you’re ready is the best time,” says Biedenharn.

Why Covid-19 Hasn’t Tanked the Housing Market

Seasonality isn’t the only element to keep in mind when deciding when’s the right time to sell your house. It’s also important to consider the current conditions of the market.

Experts including Danielle DiMartino Booth, a former adviser to the president of the Dallas Fed, predicted a housing crash earlier this year because of the recession caused by the coronavirus pandemic and massive job losses across the nation. But the opposite happened.

U.S. home prices rose 7.8% from the third quarter of 2019 to the third quarter of 2020, the fastest year-over-year climb since 2006, according to a report from the Federal Housing Finance Agency.

The increase has been spurred by several factors. People working at home due to the pandemic, foreseeing they would not return to offices, have sought larger home-office spaces, often by moving to bigger houses. Low mortgage rates have enticed people to buy, while the inventory of homes for sale has remained low.

And this will likely be the case through 2021 as well, says Reed.

That means people looking to sell their house are going to have it good for some time if the current conditions hold. According to a 2020 National Association of Realtors study, homes sold for an average of $66,000 more than the purchase price, up from $60,000 last year.

“There are lots of buyers out there eagerly seeking a house that they haven’t been able to find one yet. At this point, sellers can sell all the way through the winter,” says Reed, “and the Federal Reserve has said they’re going to keep interest rates low, so I think the market is going to keep cooking like this for a while, at least for the next year.”