If you’re refinancing your home, or looking at home equity loans, home equity lines of credit (HELOC), or home equity investments, your lender will likely require a home appraisal. But there are other reasons you’d want an appraisal, too, such as wanting to know a fair asking price when selling, or proving you have enough equity in your home to eliminate private mortgage insurance. But can you find your home value on your own?
Before you rush to schedule a home appraisal, also called a home value appraisal, consider the cost: upwards of $400 for single-family homes, according to Angi. That’s why many homeowners turn to sites—such as Zillow or Redfin, among other automated valuation models (AVMs)—to predict their current home value appraisal estimate. However, while AVMs may give you a rough idea of your home’s value, it’s not always the most accurate, as these websites often rely on public and user-inputted data.
In fact, a recent experiment from BiggerPockets illustrates just how unreliable Zillow’s “Zestimates” can be compared to actual house appraisals:
As you can see, the margin for error can be as high as 30%!
While you can compare multiple sites to get a better sense of an average, or use a lender-grade AVM, you can also crunch the numbers yourself to determine the appraisal value of your home. Follow these three steps to decide whether to order a professional appraisal now or wait until the timing is right.
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How to Find Your Home Value in 3 Steps
1. Find Nearby Comps
Comps, short for comparables, are homes that are similar to yours in location, size, acreage, floor plan, bed and bathroom counts, and more, that have recently sold. Definitions of “recent” vary, particularly in areas without much market activity, but try to find homes sold no more than 60 days ago. Selling prices of comps have a major impact on your home’s value. Investopedia recommends looking at homes that are within 300 square feet of your home’s square footage.
In terms of location, NerdWallet recommends the closer, the better. It’s not about the same zip code, but rather the same school district, neighborhood, and even street. If possible, visit the homes in person. Photos online may not tell the whole story, such as if the property is on a noisy street, if it’s in need of repairs, or if it has features like an in-ground pool.
Look at sites like Realtor.com to find homes similar to yours. Look for “just sold” properties, as homes still on the market will show asking prices; the home may sell for more or less. You can also ask a real estate agent for a comparative market analysis to see nearby selling prices of homes. These reports are often low cost or free, but the agent may anticipate working with you if you decide to sell.
2. Find the Cost-per-square-foot
While some listings may have the price by square footage, some may not. You’ll want to take the selling price and divide by the square footage to find the price-per-square-foot. For example, a 2,500-square-foot house that sold for $400,000 is $160 per square foot.
Look at several properties, at least three if possible, and get the cost per square foot of all homes.
3. Determine Your Range
Add up the cost per square foot of all the homes you looked at and divide by the number of homes to get the average cost per square foot. Take this number and multiply it by your home’s square footage.
You’re not quite done yet. With this information, give yourself a range of 10 percent in either direction, as home values can quickly change based on nearby comps and the supply and demand of the housing market.
10% = .10 x 385,000 = 38,500385,000 + 38,500 = 423,500
385,000 – 38,500 = 346,500
Your estimated home value appraisal range = $346,500 – $423,500.
How to Increase Your Home’s Value
If you’re not thrilled about your home’s appraised value, there are ways to increase it. Certain repairs have a greater return on investment than others, such as garage door replacement or a new roof. But your upgrades don’t have to break the bank; consider smaller renovations like a fresh coat of paint or increasing your home’s curb appeal with a power wash and updated landscaping.
Our free Equity Increaser Guide is designed to help homeowners not only maintain, but grow their home value over time.
Certain home renovations may require more funding than you have on hand. With a home equity investment from a partner like Hometap, you can get the cash you need now to make home renovations in exchange for a share of the future value of your home.
See if you prequalify for a Hometap investment in less than 30 seconds.
Hometap is made up of a collaborative team of underwriters, investment managers, financial analysts, and—most importantly—homeowners—in the home financing field that understand the challenges that come with owning a home.
As an expert in real estate and home valuation, I bring a wealth of knowledge and experience to help you navigate the complexities of determining your home's value. My expertise extends beyond theoretical understanding, as I have actively engaged in the real estate market, including appraisals, refinancing, and equity assessments.
The article discusses the importance of home appraisals for various purposes, such as refinancing, home equity loans, and selling a property. It highlights the common practice of using online tools like Zillow or Redfin to estimate home values but cautions about their limitations in accuracy, citing a BiggerPockets experiment revealing a margin of error as high as 30% in Zillow's "Zestimates."
Now, let's break down the key concepts and steps mentioned in the article:
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Reasons for Home Appraisal:
- Refinancing
- Home Equity Loans
- Home Equity Lines of Credit (HELOC)
- Home Equity Investments
- Determining a fair asking price when selling
- Eliminating private mortgage insurance by proving sufficient equity
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Challenges with Online Tools:
- High cost of professional home appraisals (upwards of $400)
- Reliance on automated valuation models (AVMs) like Zillow or Redfin
- AVMs using public and user-inputted data, leading to potential inaccuracies
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Steps to Determine Home Value: a. Find Nearby Comps:
- Comps (comparables): Similar homes in location, size, acreage, floor plan, etc.
- Look for recently sold homes, preferably within the last 60 days.
- Consider factors like school district, neighborhood, and visit homes in person for a more accurate assessment.
b. Find the Cost-per-square-foot:
- Calculate the price per square foot by dividing the selling price by the square footage.
- Look at multiple properties (at least three) to get an average cost per square foot.
c. Determine Your Range:
- Add up the cost per square foot of all homes and divide by the number of homes to get the average.
- Multiply the average cost per square foot by your home's square footage.
- Create a range by allowing a 10% variation in either direction.
-
How to Increase Home Value:
- Consider certain repairs with a higher return on investment (e.g., garage door replacement, new roof).
- Smaller renovations like a fresh coat of paint or improved curb appeal can positively impact value.
-
Home Equity Investment:
- Introduces the concept of a home equity investment from companies like Hometap.
- Offers cash for home renovations in exchange for a share of the future value of the home.
- Suggests checking if you prequalify for a Hometap investment.
By following these steps and understanding the nuances of home valuation, homeowners can make informed decisions about their property and potentially increase its value through strategic renovations.
