RACHEL DAVIES, JANUARY 31, 2024

 

Whether you’re unsure what your asking price might be, or wanting to refinance your house, AD’s here to help with expert advice.

If there’s one question most homeowners have asked themselves at least once it’s, “How much is my house worth?” Whether you’re aiming to figure out what your asking price might be, looking to refinance your house, or you’re just trying to better understand the real estate market in your area, it’s a good idea to figure out the answer. Below, we break it all down with the help of experienced real estate professionals from across the country.

How it’s calculated

There are a variety of different home valuation types and different calculations for each. The assessed value of your home is determined by a government assessor for your property taxes, though the methodologies vary depending on your location. A professional appraiser’s figure is known as the appraised value and is required by mortgage lenders. The appraised value can relate to the home’s curb appeal, square footage, the condition it’s in, and comparable homes (or “comps”) in your area. The appraised value may or may not align with the market value, depending on the state of the market at the time of listing.

The fair market value of your home is the price a home would sell for on the open market. When figuring out your home’s value for the purposes of listing it for sale, a range of elements are factored in, including its location, finishes, and square footage, along with more nuanced details like trends in your area and the market overall.

First steps online

You can’t be the only one asking yourself, How much is my house worth? So, if you’re simply curious about what the value, but not quite ready to sell, or if you are hoping to sell but not prepared to get in touch with an agent, looking into your home value online can be a great starting point. There have never been more tools available to find an estimate of your home value quickly and at no cost. Zillow and Redfin each have their own online home valuation tools, as does Realtor.com and many major banks.

“When sellers are trying to estimate how much their home could sell for, or how much equity they have in their home, the Redfin estimate is a useful tool,” says Redfin Chief Economist, Daryl Fairweather. Fairweather shares that the website also has tools that show you how much home values in your city or neighborhood have changed and how competitive the market is in in your area. Online tools are not without their drawbacks, though. “The Redfin estimate may not account for specific factors, like how well the home has been maintained,” Fairweather explains.

“[The utility of online tools] depends where you’re looking,” says real estate professional Bill Murray, the managing director of Compass Greater Atlanta. “If you’re looking at establishing values in a subdivision, where pretty much all the houses in the subdivisions are the same, then you can pretty much predict the appreciation in the value. When you’re in older neighborhoods, you can’t take a 3,500-square-foot house and a 3,500-square-foot house a block away and assume they’re the same value.” Given the drawbacks of online tools, it’s best to take their estimations with a grain of salt.

Calling in the professionals

For a valuation of your house that is personalized and takes local market trends into consideration, a real estate agent can help you find a price much more realistic than an online tool. Especially if you live in a fast-changing area—whether it be because of rezoning, new infrastructure, or any other change—this specificity is very important.

“There are many ways we determine a home’s value, but our initial step is called a Comparative Market Analysis. The process of conducting a CMA includes comparing the property to other similar homes that have recently sold in the area or neighborhood the home is located in,” says Carole Smith, Compass vice president of realtor and director of agent strategy in Miami. “Sometimes real estate agents work with a licensed appraiser to get an in-depth assessment of a property. At the end of the day, it’s all about giving our clients the most comprehensive and reliable information possible so they can make informed decisions.”

Since it’s likely one of your largest assets and you likely have your own opinions on the value, accepting the current value of your home can be an emotional process. Because of this, it’s crucial that you trust the agent you’re working with and the reasoning behind the number they arrived at. “It is important to understand that what someone paid for the property or what they upgraded to the home does not always indicate what the property is worth,” says Lindsey Harn, a real estate agent in California with over a decade of experience. “Some home improvements increase the value beyond the hard costs, and some improvements may be costly but not be recaptured when someone goes to sell.”

The information that a real estate agent takes into account is different than what a professional appraiser considers. “A real estate agent looks at more of the housing market conditions and looks more at trends, whereas an appraiser has to look at factual data,” says Murray. “An appraiser can be in a neighborhood and say that the prices are rising, but they can’t really give you their opinion as to ‘This neighborhood is really hot, and it’s going to probably appreciate a lot quicker than these two other neighborhoods around here.’ A real estate agent can tell you that.”

FAQ: Why do I need to know my home’s value?

There are a variety of reasons to know your home’s value, including to prepare listing it for sale, to calculate your home equity, or to simply stay informed about the state of one of your biggest assets. “There is immense value in knowing your home’s value whether you are planning on selling or holding on to the property for decades to come,” Smith says. “This information is also crucial when making decisions such as refinancing or leveraging equity. Understanding how market trends impact your property’s worth can empower you to make informed decisions about your housing situation and future real estate endeavors.”

What is a home valuation tool?

Home valuation tools are online calculators that use data to estimate the value of your property. A range of companies offer these tools, including Zillow, Redfin, and RE/MAX, along with major banks like Chase. Online home value estimators can be helpful in getting a sense of your home’s value, though the information they pull from is limited so it’s important to take them as estimates, not guarantees of your property’s value.