How much is my house worth? There are several reasons you might want to know this information as a homeowner. Perhaps you’re just curious. Maybe you are considering selling the home and want to know how much more it’s worth today than it was when you bought it. Or you could have college-age children, which means you may need to refinance the home to pay for their tuition and housing. Whatever the case, the question of how much your house is worth boils down to several variables and key data points. Benzinga examines them below.
What is House Value?
The answer to this question is not as simple as it may seem. Just like beauty is in the eye of the beholder, the value of a particular house depends on who is doing the valuation and why. Generally, there are 3 different measures of your home’s value.
Of all the metrics for estimating home valuations, the homeowner’s is perhaps the least scientific and the most inaccurate. There are several completely logical reasons for this. The first is that homeowners usually overvalue their property in much the same way every parent thinks their kid is the cutest. Second, for most homeowners, their house is not only their single most valuable possession, having bought the home is one of the crowning achievements of their lives. All of this leads to a natural tendency on the part of homeowners to be overly bullish on the value of their homes.
The second metric to consider when valuing a property is perhaps the most important. That is the appraised value of the home according to a licensed appraiser. Appraisers are trained professionals who approach valuing homes from a scientific, data-driven standpoint. Mortgage lenders hire them to make sure the house they will be financing is actually worth the sale price. Lenders also will call in an appraiser in cases where a homeowner wants to refinance the home. In either case, lenders won’t let a homebuyer or a homeowner borrow more money on a house than it’s worth. So, if the appraised value of the house is more than the proposed loan amount, there is no deal.
The final metric in home valuations is the assessed value. The assessed value is important because it determines the basis for the homeowner’s property taxes. Every county has a tax assessor whose job it is to assess the value of both the home and the land it sits on. After the tax assessor determines the value of both the home and the land, a property tax bill based on that determination is sent to the homeowner. Tax assessors rely on some of the same information that appraisers do such as the sale price of comparable properties but not all of it. That is why there may be some difference between a property’s assessed value and its current market value.
Information About Your House
The first step in valuing your home or estimating the value of another home you are interested in is to gather as much information about the home as possible. Examples of this information include:
- Location of subject property
- Square footage
- Number of bedrooms
- Lot size
- Number of bathrooms
- Amenities such as covered parking, air conditioning, pool or deck
All of this information adds up to determine the value of your property. With that said, location, square footage and bedroom count are the primary considerations for most homebuyers. As a general rule, the larger your property is and the more desirable the area it's in, the higher the home’s value.
Mortgage and Equity
Your home’s value on the open market is not the only number you need to be concerned about when estimating its value. You also need to know how much equity you have in your home. Equity measures the percentage of the mortgage you have paid off versus the amount you owe on the mortgage. So for example, if you have paid off $150,000 of a $450,000 mortgage, you have 33% equity in your home. Once you’ve paid off the mortgage entirely, you have 100% equity in your home.
Needless to say, the more equity you have in your home, the better off you are as a borrower. Regardless of its estimated value, your current mortgage holder will not sanction a sale for less money than you owe on the mortgage. If you’re estimating the value of your home for the purposes of getting an equity loan or line of credit, the lender will not loan you an amount that exceeds the equity you have in your home either.
Once you have gathered the important information about your house, you should begin making a market comparison by looking at what similar homes in the area have recently sold for. You can find this information on the multiple listing service (MLS) or perusing real estate websites like Zillow and Trulia.
Get an Accurate Estimate
Regardless of how much research you do, if you want the most accurate estimate of your home’s current market value, it’s best to turn to a professional. Numerous licensed real estate agents in your area are hungry for inventory to sell and can help with estimating your home’s value. Most of them will be happy to provide you with a free market analysis of your property in the hopes of securing a listing agreement with you. So, don’t hesitate to reach out to one, or better yet, several different agents. They will have the most current information on recent sales in your area and this puts them in the best position to give you the most accurate information on your home’s value.
How to Improve Your Home’s Value
While you can certainly improve your home’s value by making major upgrades such as renovating the kitchen or adding an extra bedroom, there are a lot of smaller, more cost-effective steps you can take. Making smaller repairs and minor upgrades such as changing out sconces in the bathrooms or going to recessed lighting in the living room can all improve your home’s value. The same goes for improvements on the exterior of your house like painting or upgrading the landscaping. All of these extra touches cost significantly less than major projects like a new kitchen, but they will go a long way toward improving your home’s value and its curb appeal.
Making Sense out of Home Valuations
At first blush, the answer to the question of how much is my house worth may seem simple. But it’s actually a rather complicated question, the answer to which depends on who is asking and why? Remember that there can be a significant variance between the market value, the appraised value and the assessed value of your home. The best way to answer this question is to figure out what the purpose of your evaluation is and then to seek out the advice of a professional.
Frequently Asked Questions
How do you know a house is a good deal?
This is a subjective question because there are a lot of definitions of a good deal. If, for example, your wife loves the house and it’s in a good school district but happens to cost a bit more than you want to pay, it still might be worth doing the deal — if you can afford that price. However, if your overriding concern is whether or not you are getting the most house for your money, you may be inclined to pass on that very same house. In either case, it’s a good idea to consult with a licensed real estate agent who is experienced in the market where the home you want to buy is located. An agent will be the best equipped to tell you whether it’s a good deal or not.
How do I know whether my house is worth the asking price?
Ideally, your real estate agent has done enough market research to come up with a reasonable asking price that will attract enough buyers to lead to a quick sale. However, you can also use some of the online home estimate sites to get an idea of whether or not your agent’s suggested asking price is too high. Bear in mind here that because real estate agents only get paid after selling the house, they are not well served by listing it for a price that is way over what comparable homes in the area are selling for. If you’re selling the property without an agent, the same applies to you. If you find your asking price to be much higher than comparably equipped homes in the area, you’re probably asking for too much.
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