Banking & Savings

4 Ways to Determine House Value

Whether you’re thinking of buying, selling, or refinancing — or you’re just curious — you might want to know how to determine a house’s value. Fortunately, there are several ways to find out how much a house is worth, and you might get different results from each one.

Here are some options for finding the value of a home:

Online home value calculatorsComparative market analysis from a real estate agentFHFA House Price Index CalculatorProfessional appraisal

How to find the value of your home

To determine your home’s value, try one or more of these methods.

1. Online home value calculators

Online home value calculators use automated valuation models, or AVMs, to estimate how much your home is worth. These estimates are based on a wide range of property and local market data, including your home’s square footage, number of bedrooms and bathrooms, recent comparable sales, local market trends, and more.

Online valuation tools don’t account for unique features of your home that might increase or decrease its value, such as how old your roof is or when you last remodeled your kitchen. For that, you’ll need a professional appraisal.

Tip: You’ll also get different home values from different calculators because they use proprietary formulas.

Here are two home value calculators we like:

PennyMac Home Value EstimatorRedfin Home Value Estimator

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2. Comparative market analysis from a real estate agent

If you’re planning to hire a real estate agent to help you sell your home, you can ask them for a comparative market analysis, or CMA. They’ll look at similar, recently sold properties in your area and analyze how they compare to yours. After that, they’ll arrive at a fair market value and help you set a strategic listing price for your home.

A CMA requires a knowledgeable local agent who can assess how other homes’ characteristics contributed to their selling price, along with how your home compares and how to estimate its value accordingly.

Your agent will also need to understand nuances such as how much buyers in your area will devalue a property that backs up to a major road or how much value a screened-in patio adds.

See: How to Increase Your Home Value: Complete Guide

3. FHFA House Price Index Calculator

The Federal Housing Finance Agency’s (FHFA) House Price Index (HPI) Calculator is an online tool that can tell you how the estimated value of a home in a given metropolitan statistical area (MSA) may have changed since you purchased it. Its calculations are based on the percentage change in home values in the MSA during that time span.

The FHFA’s HPI calculator is not likely to be useful to an individual who is buying or selling a home. That’s because the values it provides are based on averages, and it can’t tell you the actual value of a specific house. Homes within the same MSA can have wildly different values because an MSA encompasses such a large area. The HPI doesn’t account for neighborhood conditions or a specific home’s attributes.

This tool, and all the data behind the HPI, might help you out if you’re a researcher or an economist, or if you simply want a quick overview of how property values have trended in the area over the years. But if you’re looking for a more accurate valuation of your home, we’d recommend going with a professional appraisal.

4. Professional appraisal

Hiring a professional appraiser costs several hundred dollars but is often the best way to get the most accurate value for your home. That’s why mortgage lenders often require a home appraisal before they’ll approve your mortgage application.

Good to know: Lenders do sometimes rely on AVMs to save time and money or even waive the appraisal for a refinance or second mortgage.

Here are some of the factors appraisers take into account when establishing a value for your home:

LocationSquare footageInterior and exterior conditionNumber of bedrooms and bathroomsLot sizeAge of the homeHeating and coolingUpdates and renovations (such as a new garage door or hardwood floors)Neighborhood and surrounding propertiesHome designCurrent market conditions

What is home value?

There’s more than one way to determine a home’s value. Here are three valuation methods for residential real estate and the different purposes they serve.

Fair market value

Fair market value is how much someone is willing to pay for your home. It’s based on supply and demand and explains why old mansions in Midwestern cities with major population losses can cost less than starter homes in bustling West Coast cities.

Fair market value assumes that the seller isn’t giving the buyer any breaks on the price, and that the buyer has a solid understanding of the property’s characteristics.

ppraised value

Appraised value is how much your home is worth for lending purposes. It’s determined by a state-licensed appraiser.

The appraised value may be higher or lower than fair market value. If it’s lower, the seller will need to lower the price. Otherwise the borrower will need to increase their down payment to gain mortgage approval and close the deal.

Tip: Appraisers try to be objective, but can make mistakes or be biased. You can challenge a low home appraisal with solid data.

ssessed value

Assessed value is how much your home is worth for property tax purposes. To find the assessed value of your home, you can look at your property tax statement or contact your local property tax assessor.

Some jurisdictions even have websites where anyone can look up a property’s assessed value. Assessed value may be less than the property’s current fair market value. Common reasons for this include homeowners exemptions and statutory limits on annual property tax increases.

Keep Reading: Property Tax Assessment: What It Is and What It Means

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