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4 Ways You Can Calculate A Home’s Worth

Your home, or future home, is an important part of your financial plan.

Whether you’re looking to buy or sell a home, or are just curious about your current residence, understanding a home’s worth can impact your life more than you’d think. Not only is a home an investment that should theoretically increase in value over time, but it is also a large factor in determining your net worth, and therefore your tax bill. Keeping tabs on your home’s value is important so that you’re not paying tax on an inflated property value by mistake, or vice versa, and also so you can put your home on the market while the time is right.

With the help of online tools and trained professionals, calculating a home’s value has never been easier. Here are four ways you can determine a home’s worth.

1. Use Online Tools

An automated valuation model, or AVM, is an online calculator that uses public records (property transfers, deeds of ownership and tax assessments) and mathematical modeling to predict your home’s value based on recent sales and listing prices in the area.

A simple Google search of “What is My Home Worth” will pull endless results for home value estimators, but these six are the most accurate, according to top financial advisors.

2. Use the FHFA House Price Index (HPI)

The Federal Housing Finance Agency Price Index is a broad measure of the movement of single-family house prices. According to their website, “The HPI is a weighted, repeat-sales index, meaning that it measures average price changes in repeat sales or refinancings on the same properties.” It continues, “The HPI serves as an accurate indicator of house price trends at various geographic levels. Because of the breadth of the sample, it provides more information than is available in other house price indexes.”

Just keep in mind that the HPI calculator looks at conforming home mortgages (loans less than $484,350 and up to $726,525 in high-cost areas) and isn’t adjusted seasonally or for inflation.

Federal Housing Finance Agency

3. Get a Broker Price Opinion or Competitive Market Analysis

If you’re serious about finding your home’s true value, you can ask a local real estate agent for a broker price opinion, or BPO. A BPO is the estimated value of a property as determined by a real estate broker or other qualified individual or firm. A broker price opinion is based on the characteristics of the property being considered, typically for listing purposes.

A broker will consider the value of similar surrounding properties and sales trends in the neighborhood, the location of the property, comparable listings and any of the costs associated with getting the property ready for sale. Broker price opinions are not the same or as thorough a home appraisal and are not used or allowed in every state.

Similar to a BPO, a competitive market analysis, or CMA, includes an agent’s estimate of value but relies more heavily on the recent sale value of similar properties in your neighborhood. Real estate agents typically perform a comparative market analysis for their clients to help them determine a price to list when selling a home or a price to offer when buying a home. While a CMA is not an official appraisal, the real estate agent uses a lot of similar practices and methods that an appraiser would.

Competitive Market Analysis

4. Hire a Professional Home Appraiser

Appraisals are the most comprehensive home price estimates because they consider a wide range of value-affecting factors. While a home appraisal is primarily based on recent sales prices of comparable properties, appraisers also take into account interior and exterior property characteristics; region, city, and neighborhood location; and how your home matches up to current market trends.

Lenders require an appraisal before they’ll approve a mortgage, but as a property owner, you can hire an appraiser to estimate the home value at any time. Just be sure to find a licensed or certified appraiser who knows your local market well.  

Home Appraiser

When it comes down to it, your home’s true value is really a combination of real and perceived variables and is only worth as much as someone is willing to pay for it. However, using a combination of these four tools, you can better understand the price of your house or a house you’re looking to buy.

For more information on calculating a home’s worth or pricing your house for market, contact a seller’s agent prequalified by AdvantageU.

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