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5 Ways to Determine Home Value

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Determining the value of a home you are looking to sell will help you to know what you can afford, and will take some of the uncertainty out of the process of finding a new home. Refinances, home equity lines of credit, insurance premiums and annual property taxes are all based on home value as well. Buying a home will be one of the biggest investments a person will make in their lifetime, so understanding the value of the investment you’re making (or have already made) is empowering. For these reasons, it is crucial that you know how to determine the value of your current place, or one you intend to buy. In this article, we will outline 5 ways to figure out how much your home is worth, and how to boost that number.

A decade ago, if you wanted an opinion on the value of your home, you’d have to call a realtor and get a professional opinion. But now thanks to the Internet, this process has been streamlined and simplified as an online service. If you’re looking for a ballpark estimate, online home value estimator tools, or, automated valuation models (AMV), are an excellent resource. They’re completely free and simple to use, you just have to type in your home address and you’ll be given an estimate for your home based on a combination of public records such as property transfers, deeds of ownership, tax assessments, etc. However, these tools aren’t necessarily the best for giving a professional-grade estimate, so take them with a grain of salt. Here are some of the best home value estimation tools you can use to calculate the value of your home: Zillow Redfin Trulia RE/MAX

2. A broker’s opinion or competitive market analysis.

what is your home worth?If you are seriously considering selling your home, or simply want a more professional (and often more accurate) opinion, this might be the way to go. This method is less comprehensive than a professional appraisal however. The good thing about a broker’s opinion is that it is less expensive than a professional appraisal, and is an excellent option if you simply wish to know the value of your home. But if you are looking to buy or refinance a house, you will want the professional opinion of a certified appraiser. A broker’s opinion may include an exterior inspection as well as a comparison between your home with comparable recent home sales and current listings. This is the definition of a competitive market analysis (CMA), which are most often carried out by a real estate agent in order to figure out an appropriate listing price for a home seller or potential buyer. This provides details about the age, condition, size, etc of similar homes in the area. You can actually do your own CMA if you wish, it’s a pretty rewarding (and dare I say, fun) process. To do this, you will have to conduct research on your own. It helps to create an Excel or Google spreadsheet to input the values of each home, but you can also just use good old fashioned pen-and-paper. To start, you’ll want to gather information on:

  • Location. You can start by writing down your home’s address and then focusing on all of the other homes within a one-mile radius to determine which ones are close enough to serve as comparables. Do take into account certain factors such as a noisy freeway or busy street, or things that might boost value such as a lakefront property, as your home may not have these elements.
  • Age. Record what year your home was built and look for comparables that are one or two years within that range.
  • Condition. Take into account any recent upgrades or renovations, but also note any dated features as well. It’s helpful to have interior photos of comparables on-hand so that you can see what looks new and what looks like it hasn’t been touched since the house was first built.
  • Size. Note the square footage of the home and property. All comparables should be within 200 square feet of your home.
  • Number of Rooms. Take inventory of the number of rooms and bathrooms in your house. Typically, the higher the number of rooms and bathrooms, the higher the value, no matter the actual size of the home. If you’re the only three-bedroom home on a block of mostly two-bedroom houses, yours will be the most desirable.
  • Amenities. Swimming pool, attached laundry room, built in BBQ, patio, deck… most of the time these features will add to the value of your house. However, remember that it likely isn’t worth adding them yourself, as the return on investment won’t be worth it. But if you already have some of these, you’re in great shape!
  • Price. The last step is to write down the selling price of the homes you are using for your CMA, as well as the price per square foot. Then, add in the value of your home.

Once you have your sheet prepared, it’s time to start adding in your comparables. Find 5-10 homes in your area that have sold in the last 3-6 months, and add their information into your sheet. While doing this, remember to note any features that may raise or decrease the home’s value and adjust accordingly. The next step is figuring out each home’s cost per square foot. Take the sale price of each home and divide it by the square footage. For example, if a home sold for $340,000 and is a 2,000 square foot home, the cost per square foot would be $170. Write each amount down in the price column on your CMA sheet. Then, calculate the average of these numbers to get an average cost per square foot. Add them all up, then divide the sum by the total number of homes on your CMA sheet. Finally, you’ll want to multiply the average cost per square foot by your home’s square footage. So if your home is 1,900 square feet, multiply that number by the cost per square foot, $170, and you’ll get your price! Using the example numbers, it would be $323,000.

3. The FHFA House Price Index calculator.

Another option is to use the Federal Housing Finance Agency’s (FHFA) House Price Index (HPI) calculator. All you have to do is put in your state, purchase quarter, valuation quarter, and purchase price. Keep in mind however, as per their website, the HPI “does not project the actual value of any particular house. Rather, it projects what a given house purchased at a point in time would be worth today if it appreciated at the average appreciation rate of all homes in the area.”

4. A professional appraiser.

Appraisals will provide you with more information about the surrounding neighborhood as well as external factors that might impact a home’s value. In order to qualify for a loan for a mortgage or to refinance your home, you are required to have a professional appraisal carried out so that they can ensure they will be able to recoup the cost of the loan if you decide to default. Note that you likely won’t want to hire an appraiser unless you are refinancing your mortgage or are far along in the process of buying a new home. It isn’t the best option if you simply want to get a good idea of the value of your own home. To find out more about professional appraisals, see our article What Buyers and Sellers Need to Know About Home Appraisals.

5. Comparables.

This is essentially doing a DIY competitive market analysis (CMA) sheet, but less intensive. If you simply want to get a general idea of how much your home is worth, but don’t want to put in the time and effort to do the intensive research required for a comprehensive CMA, you can just use site like Zillow, Redfin, or any other real estate database that shows the value of recently sold or currently listed homes. Once you choose one you like, simply select a comparable square footage (within 100 to 200 square feet of your own home) and within 1 to 2 years of the age, and browse through at your leisure. Determining home value can feel like throwing darts in a dark room, but we hope this guide has provided at least a little bit of light to work with! The truth is, the value of your home is best determined by what someone else is willing to pay for it, and that will be the ultimate test of worth. Until then, you can get pretty close using the methods above.


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