Whether you’re selling your home, buying a new house across town, or refinancing, knowing the value of a home is critical. Current market value is the fair resale value of a home based on factors like a home’s condition, recent sales, or buyer demand in the current market.
Here are some things to know about why the current market value of your home is so important, how to find the value of your home, and some ways to increase your home’s value.
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- Why it’s important to know the value of your home
- How to find the value of your home
- Factors that affect your home’s value
- How to increase the value of your home
Buyers, sellers, mortgage lenders, and insurance companies can all have different perceptions of the value of a home. These are a few common types of home valuation:
- Appraised value — A professional licensed appraiser determines the appraised value of a home based on the price of homes that have sold recently in your area. Appraisals are done so that lenders don’t loan a borrower more money than the home is worth.
- Assessed value — The assessed value of a home measures a home’s value to determine the amount of property taxes that will be levied on the home. Local tax authorities typically assign this value.
- Fair market value — The fair market value of a home is what someone would be willing to pay for it in an open market, regardless of the appraised or assessed value.
Many factors determine the worth of a particular property, so it can be difficult to pinpoint the actual value of a home. Whether you’re selling, refinancing, or buying, here are some things you can do to help you find the value of a home.
Use online home valuation tools
Automated valuation models, or AVMs, search through millions of transactions to estimate a property’s worth. They’re convenient and easy to use, and save time over appraisals and property assessments. A few common examples of AVMs include Realtor.com, Trulia, and Zillow.
AVMs are a good starting point, but it can be difficult to get an accurate assessment of what a property is actually worth because online tools can miss data, such as home improvements, the overall condition of the property, and recent contingent or pending status changes.
Work with a local real estate agent
Nearly 90% of all sellers use a real estate agent to list their home, according to the Zillow Group 2017 Consumer Housing Trends Report. Real estate agents and brokers are trained professionals who can take the stress out of buying or selling a home.
Agents know the local area, market conditions, and can host open houses and showings. They can also create comparative market analysis reports — an estimate of a home’s value that helps determine the listing price — usually at no cost. A CMA report shows a home’s size, condition, style, and other factors.
Get an appraisal
An appraisal is an unbiased opinion of the value of a home by a licensed appraiser. They look at a property’s location, any improvements or upgrades, square footage, and more. Appraisals can also uncover problems with a property, like structural issues.
Your lender may require an appraisal when you apply for a loan or refinance your mortgage. As a buyer, you might order an appraisal simply because you don’t want to overpay for a property. And as an owner, you might want an appraisal to get an idea of how much equity you have — even if your lender doesn’t require one to refinance.
Keep in mind that lenders don’t pay for appraisals — this responsibility typically falls on the buyer. Appraisals can cost anywhere from $300 to $600 on average.
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Research comps in your neighborhood
Comparable sales, or "comps," are recently sold properties in a local market that are similar in size, condition, and features to homes you’re trying to buy. Comps are used to determine the fair market value of a home. But to compare properties side by side, comps should have sold within the past three to six months.
The best way to find comps is to consult with a real estate agent who can guide you to the multiple listing service, or MLS. The MLS is a database that agents use to list properties for sale. Another way to find comps is through public property records, which you may be able to access online.
You can also find comps for free on a number of websites, such as Realtor.com, Zillow, Redfin, and others. Keep in mind that the information on these websites can be out of date or inaccurate, but it can be a good place to start when searching for the value of a home.
Whether you’re ready to make an offer or preparing to sell your home, understanding what goes into determining the value of your home can help you make a more informed decision. These are some common factors that affect the value of your home:
- Age and size of your home — The square footage of a home can influence your home’s value. Unless they’re downsizing, many buyers find more bedrooms and bathrooms appealing. A home’s age also matters. If a home has been well-maintained, it can be older and have the same or nearly the same appraised value. But if it shows signs of wear and tear or needs updating, it can lower your home’s value.
- Location of your home — If a property is close to schools, a park, or a hospital, it may score higher than one that’s close to a railroad track or busy highway. How a home sits on a lot, crime rates, and the upkeep of nearby homes can also affect the value of a property.
- Home improvements or upgrades — Unless you get a thrill out of tearing down walls and installing new fixtures, you’d probably rather buy a home that’s move-in ready. Upgrades and renovations, especially to bathrooms and kitchens, can greatly increase the value of a property.
- Current economic conditions — Unemployment, interest rates, inflation, tax incentives, and more can have a big impact on the current value of a home.
- Comparable homes recently sold in your area — Comps are one of the best ways to determine the value of your home. Recently sold homes can raise the valuation or devalue a property. As first impressions count, even the curb appeal of a property and surrounding properties can play a part in determining the value of your home.
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Not all upgrades come at a high cost. Sometimes simply planting a few bushes out front or painting the main living area a neutral color is all it takes to increase the value of your home. But you can make other improvements to increase the value of your home to help you fetch a higher price if you put it on the market:
- Upgrade the kitchen. A kitchen that has been recently upgraded with all the modern amenities can breathe new life into a home.
- Add square footage. Finishing a basement or attic or adding a home office to increase the usable square footage of a home can appeal to a wide range of buyers, especially those with large families or who like to entertain.
- Update roofing and siding. It can cost between $8,000 and $15,000 on average to replace the roof on a 2,100-square-foot single-family home. That’s a huge cost to add into your budget when buying a home. High-efficiency windows and new siding can also raise the value substantially.
- Make bathroom updates. Second to kitchens, bathroom updates are the most popular must-haves on buyers’ lists. Adding new fixtures, a new bathroom suite, or increasing the square footage of a small bathroom can all raise the asking price.
- Replace worn-out carpet or add new flooring. Updating your flooring with new carpet, vinyl, hardwood, or laminate are all options to raise the value of your home.