How To Gauge Your House’s Value? 7 Things You Need To Know

Whether you decide to sell your house, buy a new one, or refinance, knowing your house’s value can help you make realistic expectations regarding its price.

The value or worth of a house is not static – it can change with time depending on several factors. So, it is necessary to measure your house’s value periodically, such as once a year, lest you don’t fall victim to any economic loss or don’t miss any opportunity to improve your financial status.

To know how much your house is worth, visit Alpine Credits to read more. This article will tell you how you can gauge your house’s value.

How do you know the worth of your house?

There are three established methods to estimate the value of your house. However, these methods are based upon different aspects, providing you with three facets of your house’s value. 

Fair market value

To assess the worth of a house, real estate agents measure its market value. The property’s market value indicates the prospective buying or selling prices when compared to similar ones in the locality. 

The fair market value method is primarily based on a comparison process. First off, to do this, you compare your house with similar ones in your area that previously initiated any sale. 

Some factors affecting the comparison of your home to comps (comparable homes) may include special features like its internal condition, number of bedrooms or bathrooms, square footage or outdoor space, etc.

Appraised value

A licensed appraiser measures the appraised value of your house by comparing your house and its internal and external conditions to comps. Although it seems to be similar to fair market value, in reality, it is not the same. 

It needs the appraiser to take measurements and notes. A mortgage lender is often very conscious about the appraised value of a house. To calculate this value, the appraiser considers factors like the size, location, and condition of any renovation done to a house.

Assessed value

Typically, the assessed value is calculated for tax purposes. It is usually lower than the fair market value of your house. So, it doesn’t represent its prospective selling price.

To gauge your house’s assessed value, your assessor considers different parameters, including fair market value and the appraised value. The other factors are –

• Renovations
• Income generated from it
• Applicable tax exemptions

Factors that affect the value of your home

Various internal and external factors can affect the value of your home, including:

• The size of your house
• Its age
• Its location
• The local market conditions
• The house’s internal and external conditions
• Any improvements or renovations
• Economic conditions like interest rates or tax rates
• Comps that are sold recently

Apart from these factors, matters like local political issues, transportation, employment opportunities, and climate changes also have the potential to affect the value of your house.

7 Things to know when calculating your home value

Whether there’s an increment or reduction in your home value, it will undoubtedly affect your financial condition or income or expenditures directly or indirectly. Hence, keeping yourself updated about the ways of such prospective impacts will prove to be beneficial. Let’s dive further to know what to consider when calculating your home value.

#1 You might save money by avoiding private mortgage insurance

A lender will require you to purchase private mortgage insurance (PMI) if your downpayment is less than 20% of the house’s cost. It is generally applicable to conventional loans only. 

However, when you build at least 20% equity on your house, you can request the lender cancel the PMI. Moreover, when the equity reaches 22% of the original loan amount, the lender must terminate the PMI automatically.

#2 Check to see if your homeowner’s insurance covers the entire worth of your home

Ideally, your homeowner’s insurance cost and coverage depend upon your home value. So, if it goes up, you must check whether your policy fully protects you. Make sure that you review your house’s value at least once a year to avoid any financial loss considering your homeowner’s insurance policy.

#3 Tax implications

Your home’s value directly impacts the annual tax implications on your property. The higher the assessed value of your house, the more taxes you have to pay. So, it is always beneficial to review your house’s value every year, as it might prove to be profitable in terms of paying lower annual taxes (in case your home’s value has declined).

#4 Your home’s value according to online listing sites

When it comes to evaluating your house, there are numerous online listing sites or tools called automated valuation models or AVM. These tools can help you calculate the approximate worth of your house with a single click. 

However, since they are technology-based tools, you can’t entirely rely upon them. Nonetheless, they may come in really handy to give you a brief understanding of your home’s value.

#5 Know your equity and borrowing power

Estimating the value of your house allows you to know the updated data about your available equity and borrowing power. If your equity ratio increases, you can utilize the opportunity to get approved for a home equity loan. 

#6 Refinancing

When you know your home’s worth and your current equity ratio, you can consider calculative investments to improve your home. If your equity ratio has increased, you can opt for refinancing and use the funds to improve or remodel your home, which will further increase your house’s value.

#7 If you should sell your house

Increment in your home’s value might entice you to put your home on the market. But before doing that, it is always wise to calculate whether it is the right time for you and your family to move out. If it is, then making minor repairs to your property will prove to be even more profitable.

Endnote

It is always worthwhile to evaluate your property value regularly to boost your financial decision-making abilities. 

However, it is essential to remember that whatever method you choose, it can’t be taken for granted. Hence, for a better experience, it is recommendable to do further research and combine resources and hire a professional if needed.