Whether you are considering selling, refinancing or tapping into your home equity, it is essential to know how much your home is worth. Calculating home value has never been more difficult, so where do you start, and how do you know if this is the right time to sell or refinance?
The Challenges of Estimating the Value of Your Home
Unless you are in certain isolated pockets of the country which haven’t been affected by the bubble burst - or Mark Zuckerberg is bidding on your home and willing to pay a million more than it’s worth - the chances are good that your home value has taken a dive in the last few years.
Estimating the value of your home has nothing to do with how much you love it and think it is worth. It is solely based upon the sales of comparable homes in the surrounding area. Unfortunately, for homeowners this means trying to make sense of a mess of conflicting numbers, often including foreclosure sales prices and new homes that are asking far more than anything else is selling for. If someone buying your home needs a loan, the value will only be based on the value of actual closed sales of comparable homes, even if that amount is less than it would cost to rebuild your home or is based on homes which are a complete mess compared to yours.
Just be prepared for the worst, hope for the best, and face the fact that it may not be fair or make sense to anyone but the bank.
Calculating Home Value
1. Look up Comparable Home Sales Online
There are now many online tools for calculating home value and checking out how much your neighbors have sold their homes for. These can be a great starting point for estimating the value of your home.
2. Ask a Real Estate Agent
Ask a real estate agent for a comparative market analysis (CMA). They typically don’t charge for this service and it provides accurate timely information, direct from the Mulitple Listing Service (MLS) database.
3. Order an Appraisal
If getting the most accurate assessment of your home value is important, you can always contact a local appraiser and order one. The downside here is that an appraisal will cost several hundred dollars, possibly take a couple of weeks, and you will have to get another one once you decide to get a loan or a buyer makes an offer.
4. What About a Drive-By?
A drive-by appraisal or AVM (Automated Value Model) is a less expensive, fast and almost as accurate way of calculating home value and one which will normally stand up when you go to sell, refinance or take out a home equity loan.
Riding the Home Value Roller-Coaster
Property prices have taken homeowners on a white knuckled, exhilarating, stomach-twisting ride over the last 10 years, but where are they headed now? Many people may be tempted to hold off on their plans to sell if they can afford to. So how can you spot evolving trends?
If there are a large number of new foreclosure notices in your neighborhood, homes are staying on the market for years, and you haven’t been able to find a job in the last 10 months, the odds are your local home prices could continue to drop. However, for those in areas where homes are flying off the market in a day, new construction projects are busy whipping up dust, and there are at least plenty of job ads in the paper, rising prices could be just around the corner.
Do you refuse to accept a low estimate of your home’s value? Then fight back, research which home improvements can help you boost your equity the most, have great pictures taken, and provide appraisers with the most up-to-date information on local home sales you can find.