Mortgage

How To Estimate Your Home’s Value

How To Estimate Your Home’s Value, When you decide to sell your property, the valuation is a crucial factor to take into account. Even if you aren’t planning to sell, a reliable home value estimate may enable you to cancel your private mortgage insurance (PMI) or submit an application for a refinance or home equity loan.

There are several methods for determining a home’s worth. Learn about the advantages and disadvantages of each choice.

Why Your Home’s Value Matters

Your home’s worth fluctuates frequently based on the market and buyer demand. It could be time to perform a home value estimate if you haven’t in a while. There are a number of valid reasons to determine your home’s value, depending on your goals for it or your mortgage loan.

Why Your Home’s Value Matters
Why Your Home’s Value Matters
  • Dropping private mortgage insurance: When your loan amount reaches 78% of the initial value of your house, mortgage lenders are required to stop providing private mortgage insurance (PMI) for conventional loans. But if the value of your home has grown, you can ask the lender to stop charging you if your mortgage balance is 80% or less than the property’s current market value.
  • Refinancing your loan: If the value of your house has grown, you can be eligible for a mortgage refinance with a lower interest rate because the lender will be less risky due to the lower loan-to-value ratio. Additionally, it might assist in figuring out how much cash you can obtain from your equity in a cash-out refinance.
  • Applying for a HELOC or home equity loan: A new home-value assessment can help you borrow as much as possible if you want to use a home equity loan or home equity line of credit to access some of your equity.
  • Listing the house: An estimate will assist you in pricing your home appropriately if you intend to sell it. If the price is too high, it could be difficult to sell, and if it’s too low, you might lose money.
  • Finding out how much you can afford: You may find out how much you can afford by calculating your equity in your property by deducting your mortgage balance from the market value of your home much cash you’d have to make a down payment on a new home.

How To Find Your Home’s Value

There are a few different methods you can use, depending on the reason you want to determine the worth of your house. Here’s what to consider and how to balance each option’s benefits and drawbacks.

Online Valuation Tools

You may get an idea of the potential value of your home by utilizing online resources like the Zillow Zestimate and the Federal Housing Finance Agency (FHFA) house price index.

Zillow generates an estimate using user- and publicly-submitted data and a proprietary formula. The FHFA, on the other hand, offers an estimation based on the date of purchase of the property and the region’s average annual rate of appreciation between that time and the present.

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

Using “comps,” or the most recent sales prices of nearby comparable homes, is a standard method for determining a home’s market value. For instance, it might be appropriate for two homes to sell for nearly the same price if they had roughly the same square footage, the same number of bedrooms and bathrooms, and other comparable amenities.

You can look up recent sales utilizing a real estate website that displays multiple listing service (MLS) listings to conduct a comp study. To achieve a reliable estimate, it’s usually best to use at least three reliable comps.

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 online tools.
Cons

  • No two properties are precisely the same, so you may need to make adjustments based on the differences in upgrades, conditions, 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 do-it-yourself comp study, but a real estate agent uses several data points to determine an appropriate estimate rather than doing it themselves.

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.
  • Comps are still based mostly on external information and typically aren’t acceptable on their own for lending decisions.
Get an Appraisal
Get an Appraisal
Get an Appraisal

An appraiser is a specialist who will visit your house and offer a value-based not just on comparable properties but also on its features, upgrades, and other unique characteristics. When you buy a house or ask the lender to remove PMI, they typically require an appraisal.

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 estimations are as accurate as the information they use to determine the worth of your home. They’re best used to get a general sense of how much your house is worth because there are some elements they don’t take into account. In spite of this, getting an online home estimate early on in the process could be worthwhile because it will let you know if you need to get an appraisal.

What’s the most accurate home valuation website?

The Balance identified Redfin as the most precise house valuation website after analyzing the top home valuation websites. Redfin’s estimations update data daily compared to Zillow’s “several times per week,” even if their margin of error for off-market properties is slightly bigger (7.61% vs. 7.5%).

How do you find the value of your land?

You can start by going to the county assessor’s office to see how your house and land are valued individually. Nevertheless, if you’ve just made modifications, that might not offer you the most current worth. To determine the value of your land, think about enlisting the aid of a real estate agent or an assessor.

Check Also:

What Is a No-Cash-Out Refinance? Latest Update 2023

What Is a Mortgage Forbearance Agreement? Latest Update

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