How to Determine Home Value

Are you considering buying, selling, or refinancing your home and want to know how to determine home value? Keep reading to learn more about determining home value. 

Selling and buying a home can be scary as well as exciting. One of the first things you will probably think of is how much this house is worth. There are many ways to figure out how much a home is worth, and it is important to find the accurate value. 

One of the challenges of determining your home value is that value is seen differently by everyone, and one buyer may be willing to pay more than another. Several factors influence the value of a home, making it easier to establish a realistic listing price. 

For a better understanding of what home value means, how it may change over time, and what the impact may be if the housing market shifts significantly in your neighborhood, city, or even the whole country, keep reading to learn more about how to determine the value. 

Here is how to determine your home value.

1. What is Home Value?

There are many ways to determine home value, and all serve different purposes. Home value is the price another buyer is willing to pay to purchase your home, as well as someone's home's current market value. There are several factors that go into determining the value of a home.

• The location: The value of a home will be higher if your home is located in a neighborhood with a good amount of curb appeal, access to highways, shopping centers, and restaurants nearby, and many other things will raise its value. 
• The size and condition: Your home's size and layout will affect the market value. If you just had your house painted or added updated appliances, these simple things will raise your home value. 
• School district: A lot of home buyers may look for homes that are in a good school district and that will significantly raise the value of a home. 
• Comparable homes: Home buyers may look at houses that are similar to yours to see what they sold for in the past couple of months. 
• Current market conditions: The current market conditions will affect the value of your home. If there are more buyers than houses, the values of homes tend to be higher, as well as if mortgage rates are high. 

2. Online Home Value Calculators

Online home value calculators are automated valuation models to estimate how much your home is worth. The estimations are based on a lot of different things like property and local market data, your home square footage, number of bedrooms and bathrooms, recent comparable sales, local market trends, and many other things. 

However, online valuation tools do not account for unique features of your home that may increase or decrease the value, like the newly updated features, when you remolded, and other things. 

Pros:

• Most are free and easy to use
• Give you a quick estimate of home value
• Many tools are updated regularly

Cons:

• Do not take into account unique aspects that may appeal to buyers and increase value
• Valuations can vary from tool to tool depending on the factors you use
• These tools do not take into account for any renovations or repairs done

3. Comparative Market Analysis

If you are planning on hiring a real estate agent to help you sell your home, you can ask them for a comparative market analysis or CMA. Agents will look at similar, recently sold properties in your area and analyze how they compare to yours. They will find a fair market value and help you set a reasonable listing price for your home. 

CMA requires a knowledgeable local agent who can assess how other homes' characteristics contributed to their selling price as well as how your home compares to estimate the value. If you are looking for a comparative market analysis, get in touch with one of our trustworthy local agents for help. 

Realtors have their own techniques to determine the value, and it is helpful to use it as help to find. The best listing price for your home. Realtors often look at data from the local MLS database of properties to help get the best estimation.

The trustworthiness of a CMA depends on the local broker or agent who is creating the report and examining the properties. The agent will use additional features and conditions to help decide what the property value is, and it is a trustworthy way to get the best estimate for your home. 

4. Professional Appraisal

Lenders require a home appraisal before they will approve a mortgage, but as a property owner, you can also hire an appraiser to estimate home value whenever necessary. Appraisers will evaluate:

• Property: Home characteristics, like improvements and the land it is on. 
• Location: The region, city, and neighborhood the home is in. 
• Comparable properties: Sales, listing, cost, depreciation, and other factors for similar houses in the same market. 

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

It is the appraiser's job to provide an impartial, thorough reached estimate of home value while using many things. At some point, when buying a home, you will need to get an appraisal at some point so many people usually do it ahead of time. 

Appraisals are credible because:

• Sheer numbers: Appraisers see a lot of homes, so they have a good idea of the market inventory
• Access to comps: Appraisers also look at comps to evaluate a property based on condition, features, square footage, and other variables, and they know what different features are worth it in the market. 
• Use of various approaches: The appraiser will use a sales comparison approach to evaluate a property, but there are multiple ways to evaluate. 
  • Cost approach: Determines how much it would cost you to replace your existing house with a similar one completely. 
  • Income approach: This is the ability of your property to earn an income
  • Sales comparison approach: Puts more weight on the sale price of similar properties in a designated area within a time period. 
• Unbiased opinion: Appraisers are objective and impartial in their assessments of the market value of your property. 
• Longevity: Appraisers don't technically expire, but it is up to each lender if and when they want to accept an appraisal. 

5. FHFA House Price Index Calculator

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

The FHFA's HPI calculator is not likely to be helpful to a person who is buying or selling a home because the values provide averages, and it can not tell you the specific actual value of a home. Homes within the same area can have widely different values since they use large areas and do not account for other conditions. 

This tool uses the "repeat sales" technique and uses the information to estimate how values fluctuate in the market. Also, keep in mind this calculator looks at conforming home mortgages with loans less than $726,200 and up to $1,089,300 in high-cost areas and is not adjusted for inflation or seasons. 

6. Why It Is Important?

Knowing how much your house is worth helps you sell it for the right price. Not knowing what your home value is could lead you to undersell or oversell your home. Pricing your home is too high, and buyers will pass your home, and it will be harder to make a sale. On the same idea, pricing too low will cause you to lose thousands of dollars. 

Home value is important in making a decision when it comes to handling your home insurance, property taxes, refinancing, and private mortgage insurance (PMI). Even if you are not selling your home, knowing what your home value is and what you can do to increase the value is something many homeowners do. 

7. How Often Should I Check My Home Value?

Getting an idea of your home value at least once a year could be very useful, but you do not need to get a professional's opinion every time unless you are getting ready to sell or refinance your home. 

Since the value of your home influences things like your insurance and taxes, keeping up to date on how much your house is worth on a yearly basis could help you save lots of money in the long run. 

Reassessing your home is a good way to ensure your coverage is a good fit. It helps you decide on the best coverage to avoid payment of high premiums and any possibility of loss being satisfactorily covered. 

Reassuring your home's value every year helps incorporate any recent improvements to your house into your insurance. You need to measure how much coverage you need. So, it is recommended that you check your home, and that can easily be done by using free online tools. 

Methodology

We used information and data from different sources as well as our own data to determine how to determine home values and why it is important to do so.  There were various data to use, so we put them together to determine the many ways you can find your home value. 

• The Federal Housing Finance Agency (FHFA)
• National Association of Realtors
• MLS
• PennyMac

Above are a few sources that we used to gather most of our information about how to determine home value, the reasons that impact it, and why it is important. 

FAQS

How do you determine the market value of a property?

The fair market value of a residential property can be calculated by comparing the recent sale prices of similar homes in the neighborhood. Utilizing the services of a professional home appraiser is the most accurate way of calculating the fair market value of a home. 

What will my house be worth in 5 years?

Based on averages over the years, property prices will rise a total of about 18 to 20% in 5 years. 3.5% a year for 5 years, compounding annually. 

What is the difference between appraised value and market value?

A professional real estate appraiser assigns an appraised value to a property at a specific time. In contrast, market value is a variable that is determined by larger market forces and economic conditions. 

How to Determine Home Value - The Bottom Line

One of the challenges in determining the value of a home is that the value is perceived differently by everyone, and a buyer's willingness to pay may differ from another's. However, several factors influence the value of a home, making it easier to establish a realistic listing price.

Selling and buying a home can be both exciting and scary at the same time. One of the first things that comes to your mind is probably, "How much is this house worth?" There are various ways to determine the value of a home, but it is important to find the accurate value. 

To gain a better understanding of what home value means, how it changes over time, and how it can impact your neighborhood, city, or even the whole country if the housing market significantly shifts, keep reading to learn more about how to determine the value.

If you are considering moving or selling, contact us or visit our website. Our team at Raleigh Realty is here to help you with any home buying or selling needs.