Home Value Estimate – How Much Is Your House Worth?

Home Value Estimate - How Much Is Your House Worth?

Whether you’re looking to sell your home or buy one, home value estimate is a term that might concern you. Your realtor is using it, your financial institution and probably even the neighbor next door has mentioned it once or twice.

But why? What does it mean? If you want to find out how much your home is worth and how to calculate your home value estimate, read on.

What Is Home Value Estimate?

Home value estimate is the amount of money for which a house will likely sell. The number, also referred to as current market value, helps buyers, sellers, and mortgage lenders understand how much to pay, ask, or lend.

Put this way, home value estimate is an important figure to consider, whether you’re a seller or a buyer. In the first case, knowing how much your house is worth can help you ask for a fair price. In the latter, you’ll be able to determine whether the property you like is truly a bargain or if the buyer is supra-evaluating their house.

But this figure is also important if you already own the home and don’t plan to sell it. If you’re aiming to access home equity financing, the home value estimate could determine how much money the company will lend you. The same goes for mortgage lenders.

How Is Home Value Estimate Determined?

Knowing how much your house is worth is crucial, but how to determine it? Homeowners, tax assessors, and appraisers evaluate a home value estimate in slightly different ways, but in most cases, there aren’t important gaps between the figures.

Home value estimate is determined by considering a number of factors, including square footage of the property and the neighborhood. But there are many other factors that dictate how much your home is worth.

Most of the times, the estimated value of a house appreciates over time thanks to the demand. However, in some cases the value, thus the price, could go down if the demand drops for one reason or another. But what do agents consider when establishing the value of a property?

Recent Sales History

Recent sales history help agents and yourself understand whether the value of a home has raised or dropped since the last purchase. By simply comparing the last price of the home with the current market price you can figure out how the home value estimate goes.

If you want to sell the house, a positive value means you’ll make a profit by selling the property. If the value is negative, your home is worth less than what you’ve paid for it. This figure is also important if you want to buy, but in this case, things are more complex.

If the home value estimate has grown in time, it means that it might follow the same trend and the house could be a good investment. But if the value has dropped, don’t think you’re getting something at a bargain.

Check what determined a negative trend and whether this trend is temporary or permanent. If the house value has dropped because inflation and a lack of demand, things might change in future and your investment might be worth it. But if the negative value is determined by a decline of the neighborhood or issues with the property, its value might drop even more and you might never be able to recuperate your investment should you want to.

Comparative Market Analysis

Another thing that determines the home value estimate is a comparative market analysis. This means looking at sales records for other properties in the same neighborhood to determine how much your home is worth.

Certainly, things are much more complex than this, but a comparative market analysis can give you a rough idea of whether the home’s value has dropped or raised in time.

For an accurate result, look at similar properties. The market price of a five-bedroom apartment in Manhattan is not comparable with the market price of a studio apartment in the same area.

Publicly Available Data

Tax records and assessments can also provide a good insight into this matter. Tax is usually assessed based on the value of the property, so knowing how much tax a homeowner pays can help you deduct the home value estimate of the property.

Many online sources allow you to access tax records or calculate tax assessments based on the address of a property.

Characteristics Of Property

How big your house is, how old, or how new, matters. One of the most important characteristics that determine the home value estimate is the size. By knowing the square footage of a home you can also compare it with similar properties on the market.

The internal layout of the home is another thing to consider. There might be important price differences between two houses of the same size and in the same neighborhood if one of them is more functional than the other.

The energetic value of the house is another thing that influences the home value estimate.

Conditions Of Property

A house kept in poor conditions might not be worth its true value, therefore that’s another thing to consider. If you’re selling, try to adjust the interior as much as you can, conducting any repair works that could boost the home’s value.

If you’re buying, inspect the property before taking the agent’s or owner’s word for granted. Even if the house is in a good neighborhood and has a good value estimate, the lack of utilities or the poor condition of the building might drop its price considerably.

Neighborhood

home value estimate

When taking into account the neighborhood, there are dozens of things that influence the home value estimate.

The first and foremost important is the standard of living. How much your home is worth depends on the level of criminality in the area, and this doesn’t mean just violent crimes. Burglary is a common phenomenon to investigate, especially if you’re buying. If you own a house in a bad area, the current market value might not coincide with the home value estimate.

Your neighbors are also part of the picture. Even if the neighborhood is perfect, if the guy next door has an aggressive pet, or if he likes spending time on the porch half-naked, this might influence the sale value of your property.

Amenities

Regardless of how good or bad the neighborhood is, realtors, financial institutions, and potential buyers will be interested in amenities. What schools are there in the neighborhood and how far away is the house located?

Are there trendy restaurants in the area? What about shops and markets? And public transportation? All these things come into play when determining the home value estimate. A potential buyer might not want to walk 5 miles to the bus station, nor carry a bag of groceries from far away.

Local Market Conditions

Lastly, the local market conditions offer a good insight into a home value estimate. This is a thing most realtors consider because it gives them an overview of the market trends. If there is demand, your home is worth more; if demand drops, the value of your home will drop with it.

Why Does Home Value Estimate Matter?

By now you’ve understood that home value estimate is not the actual value of your property, but an indicator showing you how much it could be worth. So, why does it matter?

Establishing The Sell Value

Home value estimate helps you establish the sell value of your property. By conducting a comparative market analysis you can determine how much to ask for, considering the size of your home, its conditions, the neighborhood, and other variables.

When making a comparative market analysis, try to check the real selling price of similar properties and not how much the owners are asking.

Understanding A Good Purchase

If you’re house hunting, home value estimate can help you understand the real (or close to real) value of the property you like. Most homeowners try to make a profit from selling their homes, but by knowing how much the house is worth, you can determine whether that’s too much or fair.

Knowing the home value estimate can also help you in negotiating the prices with a homeowner or estate agent.

Accessing Finance

Mortgage lenders, home equity institutions, and banks might consider your home value estimate before granting access to finance. In most cases, how much the home is worth determines how much money you can get.

How To Calculate Your Home Value Estimate

Calculating the home value estimate isn’t easy. Conducting a comparative market analysis and considering all the conditions that determine the value of a home is sometimes confusing even for the experts. But there are ways to learn how much your home is worth without hassle.

Online Valuation Tools

Online valuation tools allow pretty much anyone to check the home value estimate, regardless of the level of expertise. It’s enough to just type “how much is my house worth” in your browser and the search engine will reveal dozens of online valuation tools.

These tools try to predict the home value based on recent sales and listing prices in your area, but they are not quite accurate. However, you’ll still get a rough idea of how much your property could be worth.

For a more accurate result, you can ask a real estate agent to evaluate the property. Estate agents use similar programs to determine the home value estimate, but they use upgraded versions provided with a “confidence score” option. This option ensures that the estimates are within 10% of market value.

Broker Price Opinion

home value estimate

If you want to go one step further, ask an estate agent for a broker price opinion. In this case, the agent won’t only conduct an online research but will inspect your home and conduct a competitive market analysis.

This will include more accurate estimates of home values in your area and will include considerations related to the neighborhood.

Just beware of agents offering to provide a free opinion. While this might save you some money, they might insist on handling the sale of the property on your behalf. And their contract conditions might not be the best.

To stay out of trouble, pay for the service if you want a more accurate estimate of your home’s market value.

FHFA Price Index Calculator

If you’re not willing to pay, an estate agent and don’t really trust the online valuation tools, try FHFA’s price index calculator tool.

This tool doesn’t provide the estimated value of a particular home, so it doesn’t require you to introduce the address. It rather shows how much is worth a house at the current date by calculating the average appreciation rate of all homes in the area.

This is a great tool if you want to check whether the price of your home raised or dropped since you bought it.

The Federal Housing Financing Agency advises to consult a qualified real estate appraiser in your area should you need an accurate home value estimate.