If you’re a homeowner, at some point you’ve wondered “What is my home worth?” Knowing your home’s value is important for many reasons. Perhaps you’re thinking of selling and want to know how much equity you have in your home. Maybe you’re refinancing your mortgage and need to know how much your home has increased in value since you purchased it. Or maybe you just want to keep tabs on your biggest asset!
Whatever the reason, calculating your home’s value doesn’t have to be complicated. In this beginner’s guide, we’ll show you how to calculate a home value estimate in three simple steps.
1. Establish a Baseline
The first step is to establish a general benchmark for your home value. (Don’t worry — you’ll refine it later in the process). To do this, you need to find comparable homes in your area that have recently sold. Local market conditions can change fairly quickly, so the more recent the sale the more relevant it will be.
NOTE: While homes sold within the last three months are the best guides, we also recommend reviewing sales that occurred in the last 6/12/24 months to get a general sense of what direction values are trending over time.
Restrict your pool to home sales within your neighborhood or zip code. The closer the proximity to your home (like your street or block), the better the greater accuracy. Location is a huge factor in home value, so be honest about which “nearby” homes to include in your assessment.
For your comparative market analysis, you must also take into account a couple basic details about comparable properties. The year a home is built, the square footage, and the number of bedrooms/bathrooms are the most obvious components. Often, a price-per-square-foot calculation can be a handy tool. You may also confer with tax assessor records (or other public records).
Besides finding comparable sales yourself, you can also use an online home value estimator (there are many). Myriad companies offer valuation tools (like Zillow or Chase) that will automate the process for you. Taking advantage of modern technologies is always a wise move, given all the calculus that goes into an accurate estimate!
2. Adjust for Nuances
Once you have a baseline value (or range) you’re ready to dial it further. Your home is naturally going to have differences from every other home in your neighborhood; you need to take those into consideration now.
The main element to assess is the condition of your home. Things like damage, pests, mold, electrical or plumbing issues, and similar can all negatively impact your potential home value. If you don’t want that, you must immediately seek to address those and make any necessary repairs to restore the overall condition.
On the other hand, if you have previously made any substantial improvements to your property then those will likely increase the valuation of your home.
Other considerations are often missed by the baseline number derived from comparable sales and market trends. Does your home have a killer view, or are there telephone wires blocking your backyard? Are there nearby highways or train tracks that provide an undesirable amount of ambient noise -- a home value estimator might miss those? Does your home have direct access to something extraordinary (e.g. a hiking trail or golf course)? These are all factors you ought to take into account now; a potential buyer sure will later.
3. Validate with Experts
The third and final step is to take your refined valuation and put it to the test. You need expert analysis to validate your calculation with real world experience. You need to consult with real estate professionals.
Luckily, almost every legitimate real estate agent is happy to provide you with a free consultation. If you seek one — or multiple — out they can quickly run their own valuation model on your specific property. They can also provide you with additional insight on where the market might be heading, which is another useful piece of knowledge for homeowners.
Furthermore, real estate agents might have information about off market homes that will help paint a more accurate picture of your home's true value.
What do they get out of it? A chance to impress you with their professionalism and knowledge; so you’d want to award them your listing should you decide to sell. (At TrueParity elite listing agents from each real estate brokerage provide this assessment up front for homeowners, for free). This is a small “price” to pay for confirmation of what your home is worth.
Summary
By following these three simple steps — establishing a baseline valuation through comparable market analysis, adjusting for the specifics of your property, and fact checking against the insight of an actual real estate agent — you can get a clear idea of what your home is worth. So whether you’re thinking about selling, refinancing, or just curious, now you know how to accurately calculate your home value.
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