Owning a home is a big financial commitment. And, over years of ownership, every mortgage payment you make allows you to own increasingly more of your home’s value. But in that time, the housing market can change – and so can your home’s worth.
Over time, your home can increase or decrease in value. If you aren’t closely keeping up with home values in your local neighborhood, you might not know whether your home is worth more or less than when you purchased it. And this information could affect important decisions like your ability to sell your home or get money out of its total value.
If you’re wondering how you can determine the financial value of your home, here are a few steps you can take.
Hire a Professional Appraiser
One of the easiest ways to determine how much your home is worth is to get a professional estimate. And you can do this by hiring a professional appraiser to do an appraisal of your home.
Appraisals are typically required when you take out a mortgage to buy a home¹. Once you become a property owner, you can get another appraisal at any time. You’ll just need to hire an appraiser to assess your home.
Appraisers are able to give you the current market value of your home. According to NerdWallet, they visit your home and assess all of the factors that affect its financial worth, including²:
- The market your home is in – region, city, and neighborhood.
- The property’s features, including any improvements or additions you’ve made.
- Comparable properties that are for sale, vacant, or otherwise available.
Once this appraisal is complete, the appraiser will give you a total value for the home in an official report.
Get a Comparative Market Analysis
If you want a more in-depth assessment of what your home is worth, you can choose to get a Competitive Market Analysis (CMA). Local real estate agents can perform a CMA for any homeowner.
Like an appraisal, a CMA requires having a professional evaluate and assess your home. Factors that are used in a Competitive Market Analysis include a market comparison, a value estimate, the details of your home and land, and comparable homes that have – or haven’t – sold recently³.
Any real estate agent can provide a CMA. Some will offer a CMA for free, but others may charge a small fee. Often, real estate agents will give homeowners CMAs in hopes that you’ll hire them to list and sell your home.
Use the House Price Index Calculator
There is a way to get a fast estimate of your home’s value online: you can use the Federal Housing Financing Agency (FHFA) house price index (HPI) calculator.
The FHFA’s HPI calculator is a handy tool that will help you get a better idea of what your home might sell for, should you choose to sell it. According to the FHFA, the HPI calculator uses what’s called the repeat sales method to determine a home’s worth⁴.
This means that your home’s estimated value is based on years of previous mortgage transactions and home sales. The HPI calculator will use FHFA data about how much your home was worth when it was previously sold, then will take into account the current housing market.
There are a few flaws in the HPI calculator, so keep in mind that it might not offer the most accurate value for your home. It only looks at certain mortgages, and it doesn’t adjust for inflation. But it can give you a quick estimate in seconds, and it can also show you trends in your home’s appreciation and value.
Get an Estimate Online
Going online gives you another quick and easy estimate of your home’s worth. Just one search online will show you countless home value estimators and calculators. And these online options are becoming very popular with homeowners. NerdWallet reports that 22 percent of homeowners use an online estimator to determine their home’s value⁵.
Online home value calculators or estimators, which are also known as automated valuation models (AVM), can predict your home value. They use public records, like property transfers, tax assessments, and recent home sales or listings in your local area. They also rely on mathematical assessment tools to make estimates that are accurate as possible based on all of the available information.
And you can find an AVM or online calculator easily. Many real estate sites offer them, such as Zillow and Redfin. You can also find other options via an online search. You can consider options like WeBuyHouses.com, FastHomeOffer.com, and Homevestors.com.
It’s important to keep in mind that home value can change regularly. As local markets change and comparable homes sell, you might find your home’s value increases. And if you’re planning to sell or refinance, you’ll want to stay on top of your home’s value. It’s the best way to make an informed decision about the cash value your house could be holding.