If you’re buying, selling or refinancing your home, you’ll want to know how much it’s worth.
Your home’s value is essentially how much it would sell for under current local market conditions. It’s a vital piece of information — but determining it can be an inexact science.
We’ll go over more about how your home’s worth is determined and when you might need to know this information.
How do I calculate the value of my home?
There are several ways you can get an estimate of your home’s worth. Each method has its benefits and drawbacks in terms of speed, cost and accuracy. Depending on your situation, one method could be a better fit for you than others.
Some real estate websites may offer you an instant estimate of what your home is worth, typically based on data from public records like the square footage, sales prices in your area and local housing market trends. Examples include …
- Real estate listing sites like Zillow and Redfin
- Banks and credit unions like Bank of America and Chase
- Mortgage companies like Rocket Homes and PennyMac
When using these online tools, keep in mind that nobody is physically examining your home. These online home value estimates generally don’t take into account upgrades and improvements you have made to the home.
Federal Housing Finance Agency calculator
If you’re wary of online valuation services, you can also try the Federal Housing Finance Agency’s housing price calculator to arrive at an estimate of what your home is worth. The information you’ll get from the calculator is not based on the information about that specific home. Instead, it uses the average home valuation increase or decrease from your metro area. It won’t factor in your local real estate market, recent sales of comparable homes or home improvements you’ve made.
To use the calculator to generate an estimate of your home value, you’ll enter your state, metro area, the quarter in which you bought your home and the purchase price at the time. The calculator can then tell you what the FHFA expects the value to be based on your metro area’s housing trends.
A home appraisal is a written estimate of the value of a home typically completed by a credentialed home appraiser. The appraiser may look inside your home or simply complete the appraisal by examining the outside while considering the features of the home, the square footage and recent sales of comparable homes in the area.
If you are buying a home or refinancing, your lender will generally order a professional appraisal of the home. You can also hire a home appraiser for a variety of other reasons, such as when you’re going to list a home for sale or evaluating home renovations to complete.
In any case, you likely will be required to pay for it. Home appraisals typically cost between $300 and $450, though the cost can be as high as $900 in some areas.
You can sign up to track your home’s estimated value on Credit Karma. This data takes into account thousands of pieces of information, including recent sales prices, square footage, lot size and number of bedrooms and bathrooms.
Keep in mind that these values are only estimates.
Why do I need to know what my home is worth?
Knowing the value of your home can be a key resource in several situations. Here are some of the most common.
- Selling the home. The value of your home will help you determine a reasonable price to list it for sale and help you evaluate offers you receive from buyers. Your real estate agent may be able to help you line up an appraisal if you feel it’s necessary.
- Refinancing your mortgage. Before you refinance, it can be helpful to know how much your home is worth. You’ll want to know if your home has increased in value, making it more likely your application will be approved. The value of your home will also help determine your home equity, which you may use if you want to complete a cash-out refinance. Your lender will typically require an appraisal before home loan approval for refinancing.
- Buying home Insurance. When you’re shopping for home insurance, you’ll want to make sure the policy will fully cover the cost of rebuilding or replacing the home. Knowing how much your home is worth will help you determine what coverage limits to select.
- Evaluating property taxes. Your local government typically imposes property taxes based on the assessed value of your home. Determining the value of your home can help you prepare for your tax bill. You may appeal your property tax assessment if you believe your government has incorrectly estimated your home’s value. If it’s valued too high, your tax bill may be higher than it should be.
Factors that affect your home’s worth
Your home’s features and the overall housing market in your area will play an important role in determining how much the house is worth.
But keep in mind that you won’t get the most accurate read of your home’s worth solely based on these factors. You’ll want to compare your home to similar ones that have sold recently in your area and use the sale price to complete your analysis.
Home size and features
The overall size of the living area, the number of bedrooms and bathrooms, and the number of stories the home has contributes to its value. So do features like the condition of your appliances and the type of heating system you have. In general, bigger could mean more value, but you should also consider how your home compares to others in the area.
In some metro areas like New York City and Los Angeles, home values are notoriously high — and in general, cities have higher home prices than other areas. But even within a city itself, the location of your home can affect your home’s value. The well-worn business adage “Location, location, location” definitely applies to house valuation.
Real estate market conditions
Home values may be affected by supply and demand. If you live in a hot housing market with high demand, you may have a higher home value. That’s because homebuyers have fewer options and may initiate bidding wars that drive up a home’s price.
What’s next? Increasing the value of your home
If you’re not satisfied with the current value of your home, you could try just waiting: Home values may appreciate on their own over time, depending on housing market conditions.
But completing renovation projects like upgrading bathrooms and kitchens or adding on to the home could boost your home’s value sooner.