Whether you’re planning to sell your home, refinance your mortgage, borrow against the equity in your home, or just want to estimate your equity, it’s important to understand how much your home is worth.
But determining the value of your home is no easy task. You probably picked up your tax bill and thought the assessment was too low. Or maybe you used an online calculator to guess what you might get for your home if you sold it and found the range too wide.
While tax assessors, realtors, appraisers, and automated home valuers are all available options, each has a different role and will likely have a different idea of your home’s value.
“My best advice is to consider the goal you’re trying to achieve and then hire the best person to provide that information,” says Lauren Kolazas, real estate agent at RLAH Real Estate in Arlington, Virginia. “If you want to know what your house will sell for, you should definitely talk to a seasoned real estate agent who is familiar with the area where you live. “
Fair market value vs appraised value
The fair market value of a home is generally defined as the price a buyer will pay for a seller’s home. In theory, the fair market value and appraised value of a home should be the same, says Joe Buffington, broker / owner of Re / Max Realty Center in Olney, Maryland.
“However, in a rapidly changing market, either up or down, the appraised value may lag behind the market,” Buffington said. “The appraised value tends to rely heavily on what sold in the area, which could have been an active listing one to six months earlier. Real estate agents tend to look where the market is heading to help our clients decide the right price for their home.
An appraised value depends on the appraisal of a professional appraiser, usually engaged by a lender for a refinance or mortgage purchase.
Tax Assessments and Home Value Differences
A tax assessment is performed by a city, town or county to determine the value of your home for property taxes. The frequency of tax notices varies. For example, in Washington, DC, assessments are done every year, but in Maryland, assessments only take place every three years. In Virginia, homes are assessed every two to four years. In King County, Washington, residential property is assessed annually.
“Sometimes the appraiser’s value is greater than the market value, while in other cases the appraiser’s value is less than the market value,” says Rodman Schley, Founder and CEO of Commercial Valuation Consultants ( now BBG) in Denver and president of the Appraisal Institute, a professional organization of real estate appraisers. “In most situations, the tax appraisal process uses a value model to produce what’s called a ‘mass appraisal’ for many properties, which is different from an individual appraisal that focuses only on a particular property.
Since tax assessments typically don’t include home inspections the way an appraisal does, they are more likely to be based on misinformation such as incorrect square footage or number of bedrooms and bathrooms. , explains Schley. They also won’t include any interior upgrades you might have made, Kolazas points out.
Automated home valuation estimates
Many online real estate sites offer estimates of the value of your home, but their accuracy is questionable.
“Home value tools are similar to WebMD,” Buffington says. “WebMD gives you a lot of information, but I wouldn’t have my surgery based on that information alone. It is important to always consult a professional after collecting information online.
Buffington reviews Zillow’s Zestimates and the National Association of Realtors ‘Realtors’ Realtors Property Resource tools as a starting point for home value analysis.
“I realize that consumers go to Zillow for pricing advice, so watching it helps me understand the consumer’s perspective,” Buffington says. “There is a lot of data and my goal is to leverage the best resources to give my clients the best advice. “
Kolazas says online home valuation tools are similar to online mortgage valuation tools.
“They can give you initial information or a data point to start with, but they are lacking too much information to be specific,” says Kolazas. “An online tool can’t see your curb appeal or your brand new cuisine, just like a mortgage calculator can’t see your credit score. “
Use a real estate agent or appraiser
If you are buying a home, your lender will hire an appraiser. If you’re refinancing your mortgage, your lender may hire an appraiser or, in some cases, use an automated appraisal model, which Schley says relies on public records and multiple listing service data.
If you want to know the value of your home for your own purposes, you can ask a real estate agent to estimate the value of your home at any time. You will get a detailed benchmarking analysis of the market if you are considering selling the property.
“I always explain to clients that a comparative market analysis has a short shelf life, especially in this market,” says Buffington. “Once a new listing hits the market, a house contracts, a seller lowers their list price or takes their house off the market, or a house is in the process of being paid for, the price Any comparable home’s list could change for better or for worse. . “
Kolazas says looking at the numbers is the most important step in deciding whether or not to sell.
“We first look at the price your home is likely to sell for, including the low end, most likely price, and high end,” says Kolazas.
The estimated selling costs and the remaining mortgage balance are subtracted from the selling price to determine your net proceeds.
You can also hire an appraiser to get information about the value of your home.
“Typically, appraisals are initiated by a lender as part of a potential home purchase, sale or refinance,” says Schley. “Many consumers hire an appraiser directly for an appraisal or information about their home, but federal lending requirements prohibit borrower-ordered appraisals for mortgage purposes. “
Kolazas estimates that an appraisal costs $ 600 to $ 800, but says a real estate agent will provide better market information.
“For example, will a local elementary school’s online ranking increase or decrease the value of your property? An appraiser usually doesn’t look at that kind of information, ”she says.
If a homeowner chooses to have an appraisal done before listing their home, Buffington says, they’ll use that information to help justify the list price to buyers.