How to Determine the Fair Market Value of a Home

Why Your Home’s Value Matters

The value of your home changes constantly depending on market conditions and buyer demand. If it’s been a while since you’ve done a home value estimate, it may be time to do one. Depending on what you want to do with your home or your mortgage loan, there are several good reasons to figure out how much your home is worth.

  • Dropping private mortgage insurance: Mortgage lenders are required to drop PMI on conventional loans once your loan amount reaches 78% of the original value of your home. But if your home value has increased, you can ask the lender to remove the monthly charge if your mortgage balance is 80% or less than the current value of the property.
  • Refinancing your loan: If your home value has increased, you may be able to qualify for a lower interest rate on a mortgage refinance because the lower loan-to-value ratio presents less of a risk to the lender. It can also help determine how much money you can get from your equity in a cash-out refinance.
  • Applying for a home equity loan or line of credit (HELOC): If you’re hoping to tap some of your equity with a home equity loan or home equity line of credit, a new home-value estimate can help maximize the amount you can borrow. 
  • Listing the home: If you plan to sell your home, an estimate will help you list your home at an appropriate price. If the price is too high, you could have a hard time selling, and if it’s too low, you could end up leaving money on the table.
  • Determining how much you can afford: By subtracting your mortgage balance from the market value of your home, you can gauge how much equity you have in the house, which tells you how much cash you’d have to make a down payment on a new home.

In some cases, it can be worth figuring out what your home is worth for your peace of mind. Maybe you’re casually thinking about one of the above actions but aren’t sure. Or you’re updating your net worth and want to get an idea of how much equity you have in the home.

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5 ways to find out what your house is worth

2. Ask a real estate agent for a free comparative market analysis

  • Best for: Those who are selling or considering selling a home

Real estate agents typically offer a comparative market analysis (CMA) for free in hopes of winning your business if you’re selling your house. To complete the CMA, the agent pulls data about recent sales of comps in the area. They then draw on their knowledge of the neighborhood and any special characteristics of your property to estimate its value. A buyer’s agent may also provide this same service for any home you want to make an offer on.

“A good agent will have the tools necessary to drill down and find an accurate market value,” says Robert Krasow, a Realtor with Michael Saunders & Company in Sarasota, Florida. “An experienced professional follows the market, looks at home conditions and knows the neighborhood — all while making determinations using both data and their expertise.”

  • Pros: It’s a plus to have an expert identify comps, answer questions and give guidance.
  • Cons: Real estate agents may use different comps or have conflicting opinions of your home’s value. In addition, if there haven’t been many sales in the neighborhood or the comps are not that similar to your property, the estimate won’t be as accurate.

3. Check your county or municipal auditor’s website

  • Best for: Those who want to understand their home’s value from a tax perspective

County auditors periodically assess the value of residential properties for property tax purposes, and this information is searchable online. You can look up the assessed value of your house to see if it has appreciated, or compare the figures with other homes for sale.

  • Pros: This objective data is easily accessible and provides another point of comparison.
  • Cons: This estimate is for the taxable value of your home and may not reflect some of the market factors that affect the sales price, such as time of year, competitiveness or curb appeal. In some localities, assessed values may be far off from market values, and it can take some research to find them.

4. Identify trends with the FHFA House Price Index calculator

  • Best for: Those who want to understand property price trends in their area over the time they’ve owned their home or another period

The Federal Housing Finance Agency’s House Price Index (HPI) calculator offers yet another take on home value. The tool analyzes historical mortgage data to project what homes in your state or metropolitan area are likely to be worth based on the rate of appreciation of all homes in the area over a given period.

  • Pros: The calculator draws on data from tens of millions of home sales and offers insights about broad house price fluctuations, so homeowners can compare the relative affordability of neighborhoods over a period of time.
  • Cons: This calculator doesn’t estimate the market value of a particular house. Instead, it offers a look at home price appreciation or depreciation over time. While this will give you a general idea of the local market, it won’t drill down into the specifics of your property.

5. Hire a professional appraiser

  • Best for: Those who want the most professional home value estimate, and may want to use the data as they consult with a mortgage lender

Mortgage lenders hire appraisers to confirm the value of a house before approving a loan. Some home sellers choose to take the extra step of hiring an appraiser, but it’s not required. The appraiser considers the characteristics of the property, such as how many bedrooms and bathrooms it has, as well as comps, similar to a CMA prepared by a real estate agent.

  • Pros: Professional appraisers are typically licensed or certified by the state they work in and can provide an objective opinion of the value of a home.
  • Cons: If you’re seeking a mortgage, you’ll have to pay for the appraisal the lender orders. An appraisal costs an average of about $340, but can be anywhere from roughly $300 to $420, according to HomeAdvisor.

Step 6: Talk to a real estate agent

Once you’ve done your own research and estimations on what your house might be worth, it’s time to sit down with an experienced real estate professional and get their take.

A real estate agent will also look at your home and suggest ways you can improve the curb appeal and potentially increase the value of your home, as well as providing some of the most accurate information on what your home is worth.

Your real estate agent will know things like what the housing market is doing in general, what pools of buyers they might be able to tap into, how mortgage interest rates have been shifting, and whether or not any improvements you’ve done have actually added to your home’s value.

“You can do the online valuations and use computer pricing algorithms, but those calculators don’t know the current market conditions or what’s inside your house,” says Wydler.

“If you bought your home 15 years ago and have made renovations or improvements since then, those algorithms aren’t necessarily going to be accurate.”

Related Resources

Viewing 1 – 2 of 2

What Is Fair Market Value (FMV) In Real Estate And How Is It Determined? Mortgage Basics – 4-minute read Lauren Bowling – May 23, 2022 Fair market value (FMV) in real estate is an assessment of a property’s worth in an open market. Learn how FMV is determined and what it’s used for. Read More

Should I Remodel Or Move? Home Buying – 8-minute read Miranda Crace – May 23, 2022 Wondering if you should buy a new home instead of remodeling? Explore statistics on costs and learn the pros and cons. Read More

Key takeaways

The prospect of closing the deal on a sale becomes much less intimidating when you’re heading to market with a carefully researched valuation in your back pocket. Remember, the goal is to sell your home at the right time and the right price according to your needs.

Rebecca Lake

This article is meant for informational purposes only and is not intended to be construed as financial, tax, legal, real estate, insurance, or investment advice. Opendoor always encourages you to reach out to an advisor regarding your own situation.

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What’s the most accurate home valuation website?

In its analysis of the top home valuation sites, The Balance selected Redfin as the most accurate home valuation website. While its margin of error for off-market properties is slightly higher than Zillow's (7.61% vs. 7.5%), Redfin’s estimates update data every day compared to Zillow’s “multiple times per week.”

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How can I add value to my home?

You don’t get a second chance to make a first impression, and this bit of wisdom can apply to your home and its value.

“Your property’s curb appeal does make a difference,” Duffy says. “Make your home welcoming and tidy — cut your grass, trim any shrubs and add some new plants or flowers.”

A fresh coat of paint either on the interior or exterior of the house will more than pay you back for the money spent, Duffy adds: “This is one of the most cost-effective ways to improve value.”

A minor bathroom or kitchen update (as opposed to large-scale renovations) can also help improve your home’s resale value. You can simply replace an outdated sink, old tiles or dated light fixtures to give these spaces a refresh.

“It also pays to install a new garage door,” Duffy says. “Some reports estimate a new garage door can increase home values by 4 percent — great curb appeal does matter.”

Does the Zestimate determine fair market value?

Buyers can look at the value of a house on Zillow using the Zestimate. Zillow’s estimated home value should be used as a starting point, but it shouldn’t be the only data you use in determining a home’s value. The Zestimate is based on a sophisticated and proprietary algorithm which calculates both public and user-submitted data to estimate a valuation range for homes.

The Zestimate is not a replacement for an appraisal, CMA or another home value estimator.

How to Find the Value of a Home

There are many resources homeowners can use to find out property values.

1. Online tools to calculate  the value of my home?

Homeowners can use a home value estimator tool to learn the value of their house. The digital tools use your address, data from comparable homes in your area, and specific questions about your home, such as features and renovations, to estimate your home’s worth.

2. Get a comparative market analysis

Real estate agents can provide you with a comparative market analysis. This is their estimation of your home’s value based on an evaluation of your property and market trends. This is commonly done before listing a home for sale.

3. Use a house price index calculator

The house price index (HPI) calculator uses data from mortgage transactions over time to estimate the value of a given house. This value is projected based on the purchase price of the home and the changing value of other homes in the area.

The house price index calculator is useful for seeing how much a house has appreciated over time and estimated future changes in mortgage rates.

4. Hire a professional appraiser

You can hire a professional appraiser to assess the appraised value of a house. This appraised value can be used to list the house at an accurate price, refinance, or determine the financial effects of a remodel.

5. Evaluate comparable properties

If you don’t want to pay an appraiser yet, you can research comparable properties in your area to estimate the fair market value of a home. Browse sites with MLS listings to find the prices for homes like yours. Consider square footage, age, condition, outdoor space, amenities, and the number of bedrooms and bathrooms during your research.

The consequences of valuing a home incorrectly

For buyers, the biggest risk in valuing a home incorrectly is overpaying. Other consequences include loosing financing after appraisal or not getting your offer accepted at all.

Overpaying

If you value a home too high, you may set yourself up to be underwater on your investment, especially if market conditions are volatile. Plus, the more you borrow, the more you have to repay!

Low appraisal

Even if you and the seller agree on a price, the appraiser’s valuation will determine the amount your lender will loan for the property. When you agree to pay too much, it can be hard to get financing. If the appraisal comes in too low, it’s possible you will have to come up with a larger down payment, or you risk the deal falling apart.

Missing the opportunity

There’s also some risk in valuing a home too low. If you miscalculate, the seller may not accept your low offer and you may have to move on to another home.

Frequently Asked Questions (FAQ)

Are free home value estimators online legit?

The values these sites generate are as accurate as they can be accessing public home values. Nashville realtor, Matt Bogosian, of Kerr & Co. Realty cautions on one of the downfalls of these sites:

“But the problem I have with those sites is that they don’t take into consideration things such as the homes condition, the lot the home sits on, the layout or floor plan of the home, and the finishes such as flooring and counter tops. These are all things that can greatly increase or decrease a Homes value. 

Take for example a home that has a steep sloping backyard that backs up to other homes. Well that same home located on a level lot that backs up to woods will certainly fetch more money.”

Ultimately those home valuation sites are there for one reason and one reason only: To find people that are interested in selling their homes, collect their personal data, and then somehow get a piece of the transaction when it happens. -Matt Bagosian, Nashville realtor

Do real estate agents use free online home appraisal websites?

They certainly do. Kris Dolberry, realtor based out of Brentwood,TN, of the Dolberry Group uses these sites for a myriad of reasons.

We use Zillow and Redfin at our listing consultations to get a general idea of what the automated tools believe the property’s worth. And then we look at comps and look at the property specifically and get a tour of it.

Are there other home value websites you should use?

Most real estate agents have similar property value or home value tools on their website. Matt Bogosian, adds..

Most realtors will tell you those sites are not accurate and shouldn’t be used. However most realtors like myself also have our own websites that have the very same home valuation tools. A good majority of these valuation tools get their data from the same sources so you end up with similar results. 

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