Find Out What Your Home Is Really Worth

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When considering your home’s value, you may think about the original price you paid for your house, the work you have put in on renovations, and its sentimental value. However, your house’s actual value is the dollar amount the property would likely sell for if it went on the market.

Therefore, when assessing its value, there are several factors to consider.

The Importance of Knowing Your Home’s Value

You may need to know the value of your home for a variety of situations. A few examples of these siturations include if you are planning to sell your house, wanting a mortgage refinance, or buying a new homeowners insurance policy. In any case, it is essential to understand what your home value means, how it changes over time and the impact of changes in your neighborhood.

Determining the Value of Your Home

The value of your house is based on what buyers would be willing to pay for the home. Therefore, homebuyers may not value the renovations you completed on the house as much as you do. For example, the retiling of your bathroom or the outdoor pool you purchased may not add as much value to the home as you think.

The real determining factor in a house’s value is the bank. Most home buyers will ultimately require a mortgage to afford their house, requiring a bank to be involved. The bank will appraise the house and, based on market conditions, will determine the value they deem appropriate for the home. Buyers will only be eligible for that amount of mortgage.

If the selling price is higher than the value, the seller will have to lower the cost, or the home buyer will need to find other financial means beyond the mortgage to pay for the house.

Banks look at various factors when conducting a property valuation, including recent sales of comparable properties in the area. Factors used to determine a similar property usually include the square footage, number of bedrooms, lot size, and several other details.

The individual appraising the property may also influence the outcome of the appraisal. Various reasons can affect the methods by which they all appraise properties. Here are several common appraisal scenarios.

Lender Appraiser

When a property is for sale, the lending bank will conduct an appraisal after the property is under contract with a buyer. The bank will ask an appraiser to estimate the home’s value and provide a report with the details of the house and the details of similar places that have closed recently.

Here are a couple of examples outlining how the appraisal may go.

Example 1

• The sales price of the house is $350,000.
• The appraiser assesses the house’s value and estimates its value to be $350,000.
• The lender provides a mortgage loan to the buyer for $350,000.

Example 2

• The sales price of the house is $350,000.
• The appraiser assesses the house’s value and estimates its value to be $340,000.
• The lender provides a mortgage loan to the buyer for $340,000, and the buyer has to find a way to come up with the additional $10,000 or negotiate a reduced sales price.

In today’s real estate market, home values are extremely high across the country. As a result, many buyers have to put in offers well above the initial seller’s asking price to be in the running to purchase the house. Often these higher selling prices are much higher than what the bank considers the house’s value. This makes it a challenge for first-time homebuyers to afford a house because they cannot get a mortgage equivalent to or near the home’s selling price and do not have the additional funds elsewhere to cover the cost.

You Hire an Appraiser When Selling Your House

If you haven’t yet put your house on the market and are trying to determine the price, hiring an appraiser is a good idea to find a realistic estimate. Usually, a real estate agent will help you choose the best price, but a third-party appraisal may be a good option if you cannot agree with your agent. Most appraisals cost around $350. If you decide to list your house independently, without a real estate agent, check out Richr.com. The company will help you determine your home’s value and support you throughout the home selling journey.

Online Home Value Estimator

Several real estate listing websites offer a free estimator or calculator to give you a general idea of your home’s value. These tools are meant to provide an estimate, not an exact value.

Here are a few of them.

• Zillow’s Zestimate
• realtor.com’s My Home toolFederal Housing Finance Agency’s House Price Calculator

These websites pull the information they find online about your house to calculate an estimate, so sometimes, they do not have all of the data to make the most accurate assessment. Also, market conditions can change quickly, and the algorithms in the calculators may not have time to calibrate to the changes.

A Tax Assessor Determines the Value

A tax assessor will appraise your house to determine how much annual property taxes you owe. As part of their consideration, they will examine the sale prices of similar homes that sold recently, the cost to build a similar house, any recent improvements, if thers is income is earned from the property and maintenance costs.

Usually, the tax assessor’s values are lower than appraised values, which means lower taxes you have to pay annually.

Market Values and My Home

Assessing the market overall is considered part of the appraisal process. You can keep up with market conditions as well, so you have an idea of the impacts they could have on your home’s actual appraised value. Several agencies and news outlets create and reference annual, quarterly, or even monthly reports in which home values are analyzed along with the rising cost of homeownership on a local, regional and national level.

Reports may be based on online estimator tools, listing prices for houses currently on the market, or property value information from local tax assessors’ offices. Focus on trends occurring in your state, city, and neighborhood if you put your house on the market. Every location is different.

Different groups are impacted by home trends depending on the stage of homeownership.

For Buyers

When you start house-hunting, keep up with real estate market trends as a way to know what you’ll be facing. If values are increasing every month and year-over-year comparisons show high growth, those are signs that many buyers are looking for houses at the same time as you.

It tells you the market is competitive.

For Investors

Many investors will purchase homes as an investment for rental income or for houses to be flipped and sold. Regardless of the strategy, market trends regionally and nationally may impact the choice of homes to purchase. Over the long-term, the house values will fluctuate, so be aware of this and the trends in rents for several years.

For Homeowners and Sellers

If you are selling your house, the trends in your immediate area and recent timeframe are the most valuable. Look at sources that provide monthly or quarterly trends on your specific ZIP code for a better idea of what is happening to your property value.

Frequently Asked Questions

How Can I Increase My Home’s Value?

Suppose you are looking to sell immediately, in a few years, or just want to update your home to maintain its value over the long term. In that case, there are several ways to increase the value with maintenance, renovations, or even additions that could appeal to homebuyers.

Immediate Sell

There are a handful reasons you may want to update your house to sell the home immediately. Sometimes small investments can go a long way. Here are a few items that make the difference when selling a house.

• Fresh paint in neutral colors
• New landscaping
• Smart thermostat
• New or refinished cabinets
• A new or well-maintained roof
• New or well-maintained furnace or air conditioning

The value of a house goes beyond the cosmetics of the home. The roof and HVAC system are essential components of any home inspection and appraisal. Leaks from the heating and cooling system or roof damage can significantly impact the value of a home. Make sure these two features are well-maintained to ensure you can sell the house quickly.

Few Years Sell

If you have the time and finances to make significant upgrades to your house, here are a few that can boost the sale price of your home and take time to complete.

• Master suite addition
• Guest bedroom add-on
• Finished basement
• Garage construction
• Complete kitchen renovation
• Bathroom addition

Anytime you add more usable square footage to a house, the value will increase. Pay attention to the existing properties in your neighborhood and what home buyers are looking for. For example, if you add a master suite and new garage to a community full of two-bedroom bungalows with street parking, the property won’t appraise much higher than the others. This is because the house no longer appeals to buyers in that neighborhood.

Long Term

Continue to pay off your mortgage to gain equity in your house. Then, you can keep the home maintained, and the value will increase over time.

What Does Home Value Mean?

Home value is what someone is willing to pay for a property and the amount the seller is willing to accept. The value changes over time and is based on several factors.

How Do I Find The Actual Value Of My Home?

You should hire an appraiser to determine the value of your house, which costs around $350.

What Factors Can Contribute To A Homes Value?

Several factors contribute to a home’s value.

Neighborhood comparables or also refered to as “comps”, are one of the best indicators of your home’s value. Comps give you sale price information of similar homes in your area that have sold recently. These comps are referenced in a home appraisal and a comparative market analysis conducted by a real estate agent.

Location is a major determining factor in your property value. For example, the proximity and quality of the local schools, employment opportunities, and proximity to shopping, entertainment, and recreational centers all contribute to a house’s value.

Home size and usable space are essential elements since a more extensive home can positively impact its valuation. Homes are valued based on the price per square foot. The total sales price is divided by the number of square feet of the house. For example, a 2,000-square-foot home sold for $200,000. Therefore, the price per square foot would be $100.

Additional factors include:

• Age and condition
• Upgrades and updates
• The local market
• Economic indicators
• Interest rates

Summary

Appraisals are conducted by lenders, appraisers you hire, and property tax appraisers. Whether you are buying, selling, or investing in a new house, knowing the house’s appraised value and surrounding comps is imperative to understand what the home should sell for in the market. As a homeowner, consider the upgrades you can do to your house to improve the value over time.