Whether you’re thinking of selling or you’re weighing out the pros and cons of a home remodel, knowing how to determine the value of your home can be an important skill set. There are a variety of competing factors that play into what a home is worth. Even the term “value” can vary depending on what angle you define it from. But there are certain ways to determine your home’s worth and discover what value matters most to you.
Value can be fairly subjective. There are multiple strategies and parameters that will determine what a home is worth. If you ask a homeowner, appraiser, or tax assessor to assess a home’s worth, they may all offer completely different perspectives.
When we talk about home value, most people are talking about the current market value. But this isn’t the only factor one should consider when trying to get a general sense of a home’s worth. A homeowner might also consider what is valuable to them that might not necessarily hold the same value to another individual. For example, a wine connoisseur may rejoice in diving into a home remodel project to add an expensive wine cabinet while someone who doesn’t enjoy wine might find it to be a waste of space.
Of course, knowing your home’s worth will be important for anyone looking to put their home on the market. But determining your home’s worth will serve as an important asset for those not selling any time soon too. The current market value might not seem relevant to someone who wants to stay in their home for the unforeseeable future, but even still, maintaining that worth will pay off in the long run.
Knowing what your home is worth can also help you discern your current financial health. It will give you a snapshot of your home’s equity and can help you to negotiate a lower property tax, refinance, open a home equity line of credit, reduce insurance premiums, and much, much more.
There are a few different ways to assign a number value to your home. The following are some of the most popular ways to do so.
There are plenty of online tools that can get you started when looking for a general idea of your home value. These tools are called automated valuation models. Nerd Wallet, Chase, and PennyMac are all great options. Using mathematical modeling as well as public records like property transfers, deeds of ownership, and tax assessments, these tools can determine a rough estimate of your home value.
If you want a deeper understanding of your home value, the next step is to get a comparative market analysis or CMA. While it’s not as detailed as a professional appraisal, it will give you a decent look at a home’s value. Real estate agents usually provide a CMA free of charge but they will typically do so hoping you’ll hire them as a selling agent.
Another way you can get an idea of your home’s worth is by using the Federal Housing Financing Agency’s house price index (HPI) calculator. Using the “repeat sales method”, the HPI calculator will track a given home’s value by factoring in the change in its value from one sale to the next and using that information to understand how its value fluctuates. This will only be a rough estimate because the calculator doesn’t factor in conforming home mortgages or seasonal changes and inflation.
Hiring an appraiser will give you the most accurate look at your current market value. This will be a necessary step when approving a mortgage but homeowners can pursue an appraisal whenever they want to.
During an appraisal, the assessor will review your local market, the characteristics of the property and the land it sits on, and comparable properties. While taking a look at comparable properties, the appraiser will factor in sale prices, listing prices, and depreciation among other factors.
After pulling together all of this information, the evaluator will piece together a value and deliver an official report to whoever requested the appraisal.
Note that the appraisal is only going to compare sales that show up on the MLS. Furthermore, they often only base their value off of four to five homes. This can sometimes be an incomplete or conservative outlook. While an appraisal can be useful, just remember it does not always take all details of a home into account and your home might end up selling for a different price.
If you want another fairly reliable value estimate without the help of an appraiser, consider evaluating comparable properties. This method takes a look at the value of homes featuring a similar size, condition, and location. Your home value will be an average of the highest and lowest property values.
The first step in evaluating comparable properties is to pull up MLS listings. Next, gather the sales prices of similar homes in your area. You need at least three but you can select more. If there aren’t enough recent sales, try current listing prices but keep in mind that this will not yield as accurate of an estimate.
Once you have a solid list of comps, account for differences. For example, add value to the comp price if a home has more bedrooms than your house or subtract value if its interior is outdated. Now, look at the highest and lowest comp. Your home should be valued somewhere in the middle of these ranges.
This process can be arduous and complicated. Luckily, online tools such as Realtor.com’s Just Sold tool, Homesnap, and Neighborhood Scout can help you evaluate comps.
Yes, there are many ways to increase your home’s value. For example, you can update your landscape and/or service your HVAC system. Home remodeling though, is a particularly popular way homeowners attempt to increase their home value.
If you’re considering a home remodel, try not to get too hung up on value. The value of remodeling projects is often in the eye of the beholder and tends to capture personal value rather than market value. If you plan on being in your house for the foreseeable future, a home remodel can be a worthwhile investment.
If you’re looking for guidance for your next home remodel project, don’t hesitate to reach out. Forge & Bow specializes in honoring your home’s original architecture while infusing the space with your own personal style. We collaborate with our clients from start to finish so they feel supported and confident throughout the entire home remodel process.
