“How much is my house worth?”

It’s a major question on sellers’ minds, though current homeowners may wonder the same thing, especially if they’re curious about their home’s assessed value for tax purposes.

Do you remember plunking down money for closing costs when closing on your mortgage? Back then, you might not have had a comprehensive understanding of your current home’s worth. You might have even thought “price” and “value” referred to the same thing, but they’re not quite the same.

Let’s dive into what home values mean. It’ll give you a starting point to determine how much your home is worth, especially before you sell your home.

What Does Home Value Mean? 

Home value refers to the value of a property. But it doesn’t necessarily refer to the price of a home. For example, let’s say you find out that the asking price of a home is $200,000. However, the home has a hole in the roof and water damage throughout. This damage would lower the value of the home.  

Professionals use several methods to calculate home value, including the asking price, assessed value, appraised value and market value for a property. These amounts might all look slightly different. (Confusing, huh?)

However, you can point to several cohesive factors that influence home value, including (but not limited to) the following: 

  • Home size and age
  • Renovations, add-ons and repairs
  • Location 
  • Market conditions
  • Comparables (homes in the area that have recently sold), also called “comps”
  • Economic factors, such as interest rates

How Are Houses Valued? 

Let’s look into the various ways certain professionals value a home, including asking price, appraisal, market value and assessed value.

  • Asking price: The asking price refers to the amount of money a seller wants a buyer to pay for a home. (Note that this is different from the sale price, which could be the same or higher or lower than the asking price.)
  • Home appraisal: A state-licensed appraiser will take a look at a home and compare it to local, recent and similar home sales to determine the appraised value. Lenders hire appraisers because they want to make sure they don’t lend too much for a home (beyond what the home is worth). It’s a requirement for conventional and government loans.
  • Market value: The market value refers to the amount buyers determine they will pay for a home and ultimately where a home sells. Public trends actually determine the value of a home based on the amount they’re willing to pay for it. 
  • Assessed value: The assessed value is different from all the other valuations above, partially because the assessed value doesn’t use market trends to determine valuation. Property assessments come from the local tax assessor’s office at local levels of government. 

Even though it may seem confusing, the most important thing to remember is that all of these types of valuations serve different purposes at different points in time during the home buying and selling process. 

How to Find Out What Your House is Worth

Enter your address into an online home value estimator for one of the fastest ways to get a home value estimate. Zillow, Trulia, Redfin, Realtor.com, Real Estate ABC and other sites can help you determine how much your home is worth in just a few button clicks. 

However, you should remember that you can get incomplete or erroneous data from a home value estimator, so remember to use professional channels to help you as well. 

You can get a professional involved by asking a real estate agent for an accurate estimate using a free comparative market analysis (CMA). Real estate professionals estimate the value of a specific property by comparing your home to similar homes that have sold in the same area. They also use the multiple listing service (MLS) to give you a great read on area buys your home might compare to. Due to the nature of the housing market, quick increases in home prices and highly competitive markets typically make these valuation methods less accurate.

You can also check your county or municipal auditor’s website for information, but again, this type of data refers to assessed value and might not reflect some of the market factors that affect the sales price.

Consider identifying trends with the FHFA House Price Index calculator, which refers to a collection of public and freely available house price indexes based on U.S. data and over 400 U.S. cities. It allows you to compare the affordability of neighborhoods over time. 

Finally, you can hire a licensed and certified professional appraiser who can provide an objective opinion using automated valuation models. However, it’s important to note that most lenders have strict requirements regarding when and how the appraisal is completed. Not all lenders accept previously ordered appraisals, and this may not be used for actually getting a mortgage.

What Makes Property Values Increase? 

Supply and demand remains one of the main reasons that property values increase. When a high demand for properties meets a lack of supply, house prices tend to rise. When a weak economy and an oversupply of properties leads to a low demand for houses, home prices usually fall.

Property values increase for a number of other reasons, including: 

  • Local infrastructure improvements
  • Upcoming or available amenities
  • Neighborhood developments
  • Policy and economic changes

What to Do if Your Home’s Value Went Up

When your home’s assessed value goes up, you may owe more on your property taxes than you did last year. Never fear — you can still save money in a few other ways if that happens to you. Use the following tactics:

  • Save money by eliminating private mortgage insurance
  • Adjust your homeowners insurance policy.
  • You might want to try working to improve your home.

Understand Home Value

Before you sell your home (or even if you wouldn’t dream of selling) it’s important to understand home value. Value isn’t the same as “cost” or “price,” and professionals can use home valuation in various ways. 

They may use various terms, such as “asking price,” “appraisal,” “market value” and “assessed value” to determine various home values. 
Get to know these terms and how they apply in different situations regarding your home worth. Morty can help educate you through the process.