How to Estimate Home Value
The value of your home isn’t static. Hopefully, it will increase over time, but this isn’t guaranteed. It depends on a multitude of factors that include market conditions, buyer demand, and the condition of the property. There are a number of reasons why a homeowner might want to know their home’s current value. Some reasons require more accuracy than others, so pinpointing your reason can help you select your strategy as you explore methods for how to estimate home value.
Why Do Homeowners Ask About Home Value?
As The Balance reports, there are several reasons why a homeowner might want to know the current value of their home:
- Selling a home. When you want to list a home, you need to price it appropriately. Set it too high, and you may struggle to sell. Set it too low, and you risk losing out on profit.
- Applying for credit. Knowing your home’s value is vital if you need to determine whether you have enough equity to make it worth the effort of pursuing a home equity loan or a home equity line of credit.
- Refinancing. A higher home value may allow you to qualify for a lower interest rate when you refinance. It could also mean that you have access to more cash if you opt for a cash-out refinance.
- Gauging your budget. If you know the current market value of your home, then you subtract your mortgage balance from that figure to determine how much you’ll likely have left after a sale. That can help you assess what your budget will be if you want to buy a new house or pursue other options.
- Ending private mortgage insurance. Private mortgage insurance, or PMI, only protects your lender, but you’re the one who pays for it. When your mortgage balance is 80 percent or less, you can ask your lender to remove it. If your property’s value has increased, taking the necessary documentation to your lender may save you thousands of dollars by ending your PMI payments.
How Do You Estimate Home Value with an Online Estimator?
People looking for help estimating their home value will find online tools for that purpose. HomeLight suggests searching for automated valuation models. It also offers a reminder that the quality of these tools varies, and even the best of them are limited by the information available. The results that you get can range from “reasonably reliable” to “wildly inaccurate,” so it’s best to proceed with caution.
How Do You Estimate Home Value with Comps?
When realtors or appraisers determine a property’s value, they consider the market value of comparable properties, or comps. With a little detective work, you can do this yourself. NerdWallet suggests going online to websites that offer real estate listings. Look for properties in your area that are similar to yours in size, location, age, and condition. Ideally, use properties that have already been sold. After all, listing prices are the prices that sellers are hoping to get. They may not be accurate. You’ll need at least three comps to get a reasonable estimate. However, more comps may help you form a better picture. How accurate is this method? It depends on how carefully you select and analyze the comps.
How Do You Estimate Home Value with a Professional Appraisal?
When accuracy is really important, it’s best to hire a professional. In some situations, like refinancing, it may even be required. As Open Door explains, if you choose to get an estimate of your home’s value via professional appraisal, you’ll need to hire an appraiser. You’ll have to pay for their services. There will also be a specific date tied to the information that they provide. However, that information will carry more weight than many other forms of estimating home value.