Property prices fluctuate depending on factors like market interest rates, demand and supply, age, depreciation, neighborhood development, and more. Knowing the current market value of any given property empowers one to tap into its equity, negotiate lower property taxes, and explore refinancing options. While searching online for “value of my home” will yield useful results, understanding the types of home value in detail will help one make informed decisions before selling one’s house.
Types of home value
Understanding the different definitions and types of home value helps homeowners with greater accuracy in their property rates.
1. Fair market value
This is a price that both a buyer and a seller agree upon, reflecting the value that a particular home will likely fetch once it is on the open market. Homeowners can consult a real estate professional to analyze and compile information on similar property prices through comparative market analysis (CMA). This way, homeowners and potential home buyers can land on a market value that seems “fair” to both parties.
2. Appraised value
Lenders often use this value to determine how much money can be provided to a potential buyer as a loan. This value is assigned by a state-licensed appraiser who conducts an appraisal of a home for lending agencies. This process is done to determine an unbiased and precise value of a given property at a particular point in time. This value can be lower or higher than a fair market value and is often considered final by lending companies.
3. Assessed value
This value is used to determine the amount a homeowner will pay as property tax. To understand this value, one can look at their property tax statement or consult their local property tax assessor.
While one can expect these three home values to vary, they often provide the closest estimate to the real-time value of any given home.
Tips to find the value of one’s home
When it comes to home value, getting an accurate estimate becomes crucial, and there are several methods to achieve this.
1. Using online valuation tools
The most straightforward way to discover the value of one’s home is through online home value calculators. These tools ask users to input information about their homes and use specific data taken from public records to compute an estimated value of the property. These tools provide an easy and convenient way to get a range of value that a house may be worth.
An example of an online home value calculator is PennyMac’s value estimator. This tool takes a user’s home address and calculates a rough estimate of price per square foot, sales history, value history, a ballpark figure of the overall value, and similar other property details.
The biggest advantages of such online tools are that they are easy and free to use and provide accurate results without users having to provide much information about their homes. Furthermore, such online tools often undergo periodic updates, ensuring they remain on track with existing market trends to provide users with real-time values.
2. Getting a comparative market analysis
One can get in touch with a comparative market analyst or a reputed real estate professional to get an in-depth analysis of one’s home value. A complete market analysis helps people calculate the estimated value of their homes, typically for listing purposes. Local real estate agents offer a full-fledged CMA to homeowners for little to no expenses. While that is useful for homeowners, they must remember that agents usually do so in the hopes of getting hired as their selling agent.
3. Hiring a professional appraiser
Professional appraisers are highly skilled individuals with experience in property value deduction. Lenders often consult such professionals to conduct a home appraisal before they approve a mortgage.
To calculate the value of a home, appraisers consider key parameters such as the location, square footage, lot size, number of bedrooms and bathrooms, interior and exterior condition, age of the home, heating and cooling systems, updates and renovations, home design, current market conditions, and properties in the neighborhood. The appraiser considers all these details to determine the final estimate of the value of a given home, which is delivered to homeowners in an official report.
Appraiser values are often more accurate than online tools, but if a homeowner thinks that the professional has made a mistake with the valuation, then they can request a “reconsideration of value” with the lending institution.
4. Learning key facts about one’s house and the local market
In-depth research is another great and proven way for homeowners to determine the value of their homes. This process entails a thorough understanding of the real estate market in one’s area and how one’s home compares to other properties in the neighborhood. Potential home buyers often consider factors such as the home’s location, the curb appeal of the house, safety amenities, square footage, number of rooms, updated appliances, and the rating of the schools and colleges in a given area before choosing a home. Hiring a professional is a surefire way for people to ascertain the price of their homes quickly and reliably. By considering all these factors, homeowners can better estimate the value of their homes without relying completely on external sources.