How To Estimate Your Home’s Value?

The value of your home is a key consideration when you’re making plans to sell. Even if you’re not selling, a good home value estimate could help you get rid of private mortgage insurance (PMI) or apply for a refinance or home equity product.

There are a handful of ways you can find home value. Learn the potential benefits and drawbacks of each option.

Key Takeaways

• Estimating your home value is a key step for listing your home, dropping private mortgage insurance, and acquiring new financing for your mortgage.
• Different valuation methods are good for different purposes, as well as for different stages in the selling process.
• Be sure to compare the benefits and drawbacks of each option, and consider consulting with a real estate professional before you proceed.

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.

Note

In some cases, it can be worth figuring out what your home is worth for your peace of mind. Maybe you’re casually thinking about one of the above actions but aren’t sure. Or you’re updating your net worth and want to get an idea of how much equity you have in the 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.

Pros

• These tools are easy to use and free.
• They can give you a good ballpark figure in a few seconds.
• It can be a great place to start if you’re considering selling, refinancing, or taking out a home equity product.

Cons

• According to Zillow, its estimate has a median error rate of 7.5% for off-market homes.
• Average appreciation rates don’t take into account home improvements, demand, and other factors that might influence the market value.
• Lenders and real estate agents don’t use these tools as an official way to value a home.

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.

Pros

• Like online valuation tools, DIY comps are free.
• It provides a value range based on recent sales data, which incorporates current market factors.
• It’s a common practice in the real estate industry, making it more legitimate than using online tools.

Cons

• No two properties are exactly the same, so you may need to make adjustments based on the differences in upgrades, condition, and other features.
• Recent sales prices can vary based on several factors, so the estimates aren’t precise.
• The process can take time, especially if you’re doing it yourself without much experience.

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. 

Pros

• You’re likely to get a more accurate estimate than what you could do on your own.
• It’s usually free.
• It can be a good way to set a listing price, especially if there aren’t many differences between your property and the comps.

Cons

• Some agents may charge you for a CMA.

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. 

Note

You’ll usually need an appraisal to refinance your mortgage. You may be able to waive an appraisal, however, if you have qualifying Federal Housing Administration (FHA), Veterans Administration (VA), or U.S. Department of Agriculture (USDA) loans.¹

Pros

• An appraisal gives you the most accurate value of all of the above methods.
• The appraiser combines all of the factors the other methods use with a comprehensive look at your property.
• Appraisals are more credible than other options.

Cons

• An appraisal is the most expensive way to estimate home value. Appraisal fees can vary depending on where you live, but expect to pay around $310 to $400, according to data from HomeAdvisor.²
• If you’re hoping to end your PMI, an appraisal won’t guarantee the result you want.

Frequently Asked Questions (FAQs)

Is an online home estimate accurate?

Online home estimates are as accurate as the data they use to calculate your home value. Because there are factors they don’t consider, they’re best used to get a ballpark idea of what your home is worth. That said, an online home estimate could be worth it at the beginning stages of a process, as it could help you know if you should move forward to an appraisal.

What’s the most accurate home valuation website?

In its analysis of the top home valuation sites, The Balance selected Redfin as the most accurate home valuation website. While its margin of error for off-market properties is slightly higher than Zillow’s (7.61% vs. 7.5%), Redfin’s estimates update data every day compared to Zillow’s “multiple times per week.”

How do you find the value of your land?

You can start by visiting the county assessor to view the assessment of your home and land separately. That won’t necessarily give you the most up-to-date value, though, especially if you’ve recently made improvements. Consider seeking the assistance of a real estate agent or an appraiser to get an idea of what your land is worth.

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