How Much Is My House Worth? A Beginner’s Guide

While the past year or more has been a roller coaster ride on many fronts, there was a silver lining for homeowners: Home prices have risen considerably. You might be wondering if you should take advantage of the climb in values and sell your home or tap its newfound equity. As you consider your options, a good starting point is to ask yourself: exactly how much is my house worth?

How much is my house worth?

When getting a home value estimate, consider the three main types of valuation:

• Fair market value: Fair market value encompasses what your home looks like to prospective buyers compared to other homes in the area. Consider the sale price of a home that’s similar to yours (same number of bedrooms and bathrooms, square footage or outdoor space, say). If you work with a real estate agent to help you sell your home, this is where your agent will start: by looking at comps to gauge what buyers have been willing to pay for a property comparable to yours.
• Appraised value: While the appraised value of your home factors in comps, it differs from fair market value. To calculate appraised value, a licensed appraiser considers the location, size and condition of your home, and any renovations you’ve completed. The appraised value is what mortgage lenders look at when a borrower buys a home or refinances their mortgage.
• Assessed value: The assessed value is the assigned dollar value of your home used by local county tax assessors to determine property taxes. “Tax assessors calculate assessed value based on various factors, which may include the appraised value and the fair market value, as well as any home improvements, whether you generate income from the property, and any tax exemptions,” explains Jade Duffy, a Realtor with TXR Homes based in Carlsbad, California. Usually, the assessed value is lower than fair market value and doesn’t actually represent how much a property could sell for, Duffy says.

Bankrate insight

While an online home value estimator can be helpful in getting a sense of what your house is worth, the number you see is only a starting point, not the final word.

5 ways to find out what your house is worth

1. Enter your address into a home value estimator

• Best for: Sellers, buyers or anyone curious about the ballpark value of a home

There are loads of online tools that offer a quick home value estimate. These online tools — sometimes called automated valuation models, or AVMs — use algorithms and publicly available data, such as recent sales, tax assessments and other public records, to generate an estimate.

There are many home value estimators out there, each using a different methodology, so your estimate can vary. These include:

“Home value estimators are good starting points to assess the value of your home very quickly,” Duffy says. “However, this value is based on an algorithm that usually takes into account the number of bedrooms, square footage, location and market activity…it doesn’t take into consideration factors such as recent upgrades, condition of the house, curb appeal and external factors, such as traffic noise.”

In addition to an online estimator tool, you might choose to obtain a cash offer from an iBuyer.

“Both a home value estimator and an iBuyer company provide sellers with some idea of what their home is worth,” explains Arlene Reed, an associate broker with Warburg Realty in New York City, but “the information from both is frequently inaccurate. The home value estimator tells you what your home is worth, while the iBuyer company offers to buy your home at what they estimate it’s worth.”

• Pros: The algorithms that power home value estimators and iBuyer offers have come a long way. Now used by millions, they can be simple ways to get a fast estimate (or offer) just by typing in an address.
• Cons: Take these computer-generated home value estimates with a grain of salt. They may sometimes be based on incomplete or erroneous data, or may not take into consideration a recent high-end kitchen renovation or bathroom addition, for example. If you obtained an offer from Offerpad, Opendoor, Zillow Offers or another iBuyer, here’s how to tell if the offer is fair.

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.

My home’s value went up. What should I do?

Your home’s value can rise due to a range of factors. Right now, home prices have increased in many places due to a shortage of supply mixed with the lowest mortgage rates in history. If your home value has increased, you have a few options and considerations to make:

1. You might be able to save money by eliminating private mortgage insurance. If you’re paying for private mortgage insurance (PMI) and your home’s value has gone up to the point where you now have at least 20 percent equity, you can ask your lender to cancel your PMI premiums.
2. You might need to adjust your homeowners insurance policy. Your homeowners insurance cost and coverage are typically based on your home’s value. If it’s increased, you’ll want to make sure you’re fully protected. “It’s important to review your property’s value with your insurance agent yearly to make sure your residence has the proper insurance coverage,” explains Kimberly Smith, owner of Garnet Property Group in Bristol, Connecticut.
3. You might be in a better position to improve your home. With more equity in the property, you can take advantage of a home equity loan or cash-out refinance and invest in a renovation or remodeling project. “Determining a home’s valuation is useful if you’re considering tapping into your home’s equity in the form of a home equity loan, home equity line of credit or cash-out refinance so that you know how much equity you’ve accrued,” Smith says.
4. You might consider selling your home. You could stand to profit if your home’s value has gone up considerably, but before putting it on the market, carefully evaluate whether it really is the right time to move for you or your family, whether you’ll be able to find a new home quickly and how you’ll pay for it. “If it is a good time, making minor repairs and decluttering your property is always going to help increase the final sales price,” Duffy says.

My home’s value went down. What should I do?

While home values across the board have increased, there could be factors beyond the homeowner’s control that can cause prices to decline.

“Local political issues, climate changes, transportation and employment opportunities — or lack of these last two things — can influence home values,” says Gerard Splendore, an associate broker with Warburg Realty in New York City. “Selling may not be a good idea, unless it is apparent that values will continue to decrease.”

If you can wait out a downturn rather than making a rash decision, that may often be best.

“Home property values are typically influenced by the current economic climate, as well as the supply of houses on the market, which will change over time,” Duffy says. “If you can prolong moving, housing prices will eventually start to rebound.”

What factors affect home value?

A number of factors can affect the value of your home, including:

• The neighborhood
• Its age
• Its condition
• Its size
• Any home improvements or upgrades

There are other factors that impact property values overall, too. These include the local housing market, economy, interest rates and tax rates, Reed says.

How often should I check my home’s value?

While you don’t need to revisit your home’s value too often, checking on it periodically, such as once a year, is a smart move for several reasons. Knowing the current value of your home allows you to determine, for example, whether your homeowners insurance policy still adequately covers the property.

“The value of your home also affects your taxes,” Reed says. “You might be able to lower your assessment.”

It can also be helpful to know the value of your home so you know how much equity you’ve accumulated, which could allow you to qualify for a home equity loan or line of credit, or cash-out refinance.

Of course, knowing the value of your home is very important if you’re considering selling. You’ll know where you stand with buyers, and what you could potentially take home after the costs of the transaction and taxes.

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.”

Bottom line

No single home valuation method is guaranteed to be 100-percent accurate. That’s why using a combination of resources can help give you a more informed perspective of what your home is worth.

For example, you might get a free CMA and conduct your own research using an online home value estimator, as well as the FHFA calculator and county auditor’s website. Additionally or alternatively, you could pay for a professional appraisal. Averaging together all the final values you gather could give you a more accurate picture of your home’s value.

Ultimately, however, the most reliable home value estimates come from professionals who take the time to carefully assess your property based on a variety of factors.

“All of the evaluation tools are useful in giving an idea of the worth of your home, but an appraiser and/or an experienced agent will be the most accurate sources for determining value,” Krasow says. “A trained professional will have an advantage, as a computer cannot determine intrinsic value or consider the condition and improvements you’ve made to your home.”

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