There are a handful of ways you can find home value. Learn the potential benefits and drawbacks of each option.
Why Your Home’s Value Matters
The value of your home changes constantly depending on market conditions and buyer demand. If it’s been a while since you’ve done a home value estimate, it may be time to do one. Depending on what you want to do with your home or your mortgage loan, there are several good reasons to figure out how much your home is worth.
Dropping private mortgage insurance: Mortgage lenders are required to drop PMI on conventional loans once your loan amount reaches 78% of the original value of your home. But if your home value has increased, you can ask the lender to remove the monthly charge if your mortgage balance is 80% or less than the current value of the property. Refinancing your loan: If your home value has increased, you may be able to qualify for a lower interest rate on a mortgage refinance because the lower loan-to-value ratio presents less of a risk to the lender. It can also help determine how much money you can get from your equity in a cash-out refinance. Applying for a home equity loan or line of credit (HELOC): If you’re hoping to tap some of your equity with a home equity loan or home equity line of credit, a new home-value estimate can help maximize the amount you can borrow. Listing the home: If you plan to sell your home, an estimate will help you list your home at an appropriate price. If the price is too high, you could have a hard time selling, and if it’s too low, you could end up leaving money on the table. Determining how much you can afford: By subtracting your mortgage balance from the market value of your home, you can gauge how much equity you have in the house, which tells you how much cash you’d have to make a down payment on a new home.
How To Find Your Home’s Value
Depending on your reason for finding your home value, there are a few different approaches you can take. Here’s what to know and how to weigh the advantages and disadvantages of each.
Online Valuation Tools
Online valuation tools like the Zillow Zestimate and the Federal Housing Finance Agency (FHFA) house price index can give you a general idea of what your home might be worth based on a few assumptions. Zillow comes up with an estimate based on a proprietary formula that uses public and user-submitted data. The FHFA, on the other hand, provides an estimate based on when you purchased the home and the average appreciation rate in your area between then and now.
Use Comparable Homes
A common way to estimate the market value of a home is using “comps,” or the recent sales prices of comparable homes in the area. For example, it may be reasonable that two homes with roughly the same square footage, the same number of bedrooms and bathrooms, and other similar features would sell for about the same price. To perform a comp analysis, you can check out recent sales using a real estate website that shows multiple listing service (MLS) listings. It’s generally best to use at least three valid comps to get a good estimate.
Request a Comparative Market Analysis (CMA)
A comparative market analysis is similar to a DIY comp analysis, but instead doing it on your own, a real estate agent performs the analysis using multiple data points to pin down an accurate estimate.
Get an Appraisal
An appraiser is a professional who will come to your home and provide a value based not only on comps but also the condition, features, upgrades, and other factors specific to your home. Lenders typically require an appraisal when you’re purchasing a home or requesting PMI removal.
