5 Ways to Determine the Current Value of a Home
Updated on April 22, 2024 / 4 min read
Selling one’s home is a rather emotional task. Given the memories associated with one’s living space, it becomes difficult to accord it an appropriate market value. There are two terms to consider when calculating the home’s current value. The first is the fair market value (the property price that the buyer and seller think is fair), and the other is the appraised market value (how much the mortgage lender thinks the home is worth).
Finding a home’s market value is a long-drawn process and there are various ways to do so.
1. Learn about the house and the local market
One must start by considering certain important facts about the home and the neighborhood, as these can significantly impact the value of real estate.
About the home
Location: Check whether the house is located in the “good part” of town and determine its connectivity to amenities like schools, shopping centers, grocery stores, etc.
Safety: Factor in safety features like sidewalks, underground electrical lines, local crime rates, etc.
Appeal: How one’s house looks from the outside also plays a major role in determining its price.
Square footage: The size and layout of the home, as well as the number of bedrooms and bathrooms, are considered essential factors in deciding its market value.
Updated appliances: Homes that need new appliances tend to be valued lower than those with updated models.
About the market
The state of the national market also impacts the overall valuation of a home.
Mortgage interest rates: When mortgage interest rates are soaring, buyers may be less likely to pay a higher value for the home.
Time of year: Home sales are generally concentrated in certain parts of the year. Most homeowners prefer to stay put when school is in session or during the winter/holiday months. This pattern can significantly impact the price of the home. Keep this in mind when putting the house up for sale.
Supply and demand: If several other houses in the neighborhood are up for sale, it can be difficult for sellers to negotiate a higher price. On the other hand, if there are more buyers than sellers, one may get a better value for their home.
Comparable properties: Popularly referred to as “comps,” comparable properties can be a great way of finding the estimated market value of homes. One must look for homes with similar size, location, condition, and upgrades, and check how they are priced. Then, make adjustments based on one’s own home to reach an estimate.
2. Use an online home value estimator
One could turn to a home value estimator to get a quick estimate of the home’s current market value. Several lenders and real estate sites offer these automated valuation models (AVMs). Their estimates are based on publicly available records such as title transfers, type of home, year the home was built, square footage of the home and lot, heating and cooling systems, number of parking spots, deeds of ownership, tax assessments, and the rates of similar properties in the area. While this is a good jumping-off point when beginning the valuation process, one must note that the price offered by these sites is not final or binding.
To get started with an online home valuation, simply search “find the current value of my home” online. This straightforward process will bring up many responses for home value estimators.
3. Turn to the FHFA House Price Index Calculator
Another quick way to find the home’s current value is by heading to the Federal Housing Finance Agency’s (FHFA) house price index (HPI) calculator. This tool uses the “repeat sales” technique, where it keeps track of the house’s change in value from one sale to the next, and uses this information to determine the fluctuations in the market. Please note that this estimator is not adjusted for seasonal changes or inflation.
4. Conduct a Comparative Market Analysis (CMA)
To get insights into the housing market and the value of one’s home, one can approach a real estate agent to conduct a comparative market analysis. While this is not as thorough as a professional appraisal, it provides a pretty good assessment of the home and the market to create a listing. Some real estate agents may even be willing to offer these services for free.
5. Hire a professional appraiser
Mortgage lenders generally require a home appraisal before approving any home loans. Consider speaking with a third-party professional appraiser to carry out a home appraisal to get an unbiased opinion of the home’s value. They will take into consideration the location, property characteristics, and the selling price of comparable homes to create a final, official home appraisal report. If one thinks there were mistakes made at this stage, they can always apply for a reconsideration of value with the lender.
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