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  • Hector Curiel

7 Reasons to Check Your House Value (and Where to Get an Estimate)

It's important to keep abreast of your home’s value — and, according to the sixth annual LightStream Home Improvement Survey conducted by The Harris Poll, 73% of Americans plan to spend more on home improvements than any time since 2014, with at least 14% of them motivated to increase their home’s value.

They may be onto something. If your home’s value increases beyond what you paid for it, you can potentially leverage that equity. Perhaps you’d like to refinance your mortgage at a lower interest rate. If your property value has decreased, on the other hand, you may be able to get your property taxes lowered. At the very least, knowing this information will provide a picture of your financial health, so you should check your house’s value periodically.

Housing shortages and increased demand driven by COVID have resulted in higher home prices. This increases the chances that your home is worth more now than when you bought it. But if you’re not sure how to check house value – and if you don’t even know where to find out – we’ll help you understand how to find out, why you need to know, and when you need to know what your home is worth.

We’ll start by providing a Home Value Estimator (HVE) tool that can give you a rough idea, but we’ll also explain why these Automated Valuation Models (AVMs) are merely a starting point and shouldn’t be relied on for conclusive numbers.

Next, we’ll share our research results with you and introduce experts Kevin Yoder, a top-selling agent in Grand Rapids, Michigan; Mike Ford, a Southern California-based general certified real estate appraiser since 1986; Warren Boizot III, SRA, a state-licensed appraiser with 24 years of experience in Denver, Los Angeles, and Las Vegas; and Megan Toll, a top agent with The Kevin Toll Group, all of whom can guide you through the process of finding out if your home is worth more than you paid for it.

7 Good reasons to check up on your home’s value today

What exactly is your home worth today, and is it worth more than you paid for it? “Most homeowners do nothing with that information,” Yoder says. “I bought my house for X, and now it’s worth Y. Yay!”

If homeowners don’t do anything with that information, they might be missing out. Knowing your home’s value empowers you to make important decisions, not only about your home, but about your life. Check out some of the reasons you should check up on your home’s value:

1. See if you can ditch private mortgage insurance and save money

If you paid less than 20% down payment when you bought your house and used a conventional loan, the lender probably required you to purchase private mortgage insurance (PMI). PMI protects the lender if you default on your mortgage and the home goes into foreclosure.

PMI usually costs about 0.5%-1% of the loan amount annually. For example, on a $200,000 mortgage, your PMI would be about $1,000 to $2,000 per year. The cost is typically split up and added to your monthly mortgage payment, along with the principal, interest, and property taxes.

However, as soon as the principal balance hits 80% of the original loan amount (when you have built up 20% equity), you have the right to request that your servicer cancel PMI. When the principal balance reaches 78% of the original loan amount, the lender is required to terminate PMI automatically, according to the Consumer Financial Protection Bureau (CFPB).

You may be able to get PMI canceled with equity appreciation even earlier, but you’ll likely have to provide evidence of your home’s current value, perhaps by getting a home appraisal. Because a home appraisal typically costs between $450 and $550, it’s often worthwhile considering PMI typically costs between 0.05% and 1% of the loan amount annually.

Toll advises clients to do their “homeowner work” and talk to the mortgage company about dropping PMI, especially if the home’s current value has increased.

“PMI is huge,” Toll says. “You can save $100, $200, $300 a month [by dropping the PMI]. It’s a huge savings.”

2. Know if your property’s full value is really covered by homeowners insurance.

Homeowners insurance (also known as home insurance) is required by most lenders to cover damage to the interior and exterior due to fire, hurricanes, tornadoes, lightning, vandalism, or other covered disasters. Your policy may also cover the contents of your home – including furnishings and clothing – as well as additional living expenses you must incur while your home is being repaired or rebuilt.

If you discover your home’s value has significantly increased, it might be time to reevaluate your homeowners insurance policy. Your insurance coverage should match your home’s value; if the value has increased, your policy may lag behind. That could mean you’re not covered for the cost of its full value if something happens.

Your insurance company probably has policies in place for general inflation, but if you find your home has significantly increased in value, or you’ve added on or made updates, it’s time to reexamine your home insurance company.

Particularly if you’ve updated or expanded your home, you’ll want to take a look at your insurance dwelling limit, or estimated cost to rebuild the home as it stands now, to ensure full replacement coverage. It’s also worth considering your policy’s stance on cash value, or replacement cost, which can be negotiated as part of the policy. Cash value means the insurance company will pay the depreciated value of an item at the time it was damaged or lost.

3. Reveal tax implications: Are you paying too much or too little?

A good reason to know how much your home is worth relates to property taxes. If your home increases in value, whether as a result of upgrades, additions, or other improvements you made to it or simply because over time, the neighborhood has appreciated, you will probably owe more. Assessments determine the value of your home. Property taxes are based on this value. Therefore, a higher assessment could result in a higher tax bill.

Conversely, if your home is valued lower than when you bought it, you can appeal to your county or municipality and ask for a lower payment. It’s not unusual. According to the National Taxpayers Union, 60% of properties are overvalued.

In most cases, you’ll need to provide some proof that your home has been over-assessed. An appraisal is strong evidence, but some counties may be placated with recent comps or comparisons of the tax assessment on your neighbors’ homes.

“Tax planning or compliance are fairly common reasons,” to check in on your home’s value, Ford says.

4. Understand your home’s value according to online listing sites in case you decide to sell.

If you’re beginning to think about a move, knowing the value of your property could lead to an accelerated sale timeline. With so many people beginning their home searches online, it’s wise to check your home’s history and value online to ensure accuracy.

“Listing sites use algorithms,” Toll points out. Those algorithms take into account the character of the property, square footage, acreage, number of bedrooms… “But they don’t know about upgrades.”

If your home’s value isn’t accurately represented by listing sites, you can work with an agent to update the details on the MLS (multiple listing service) or through your county’s assessment and taxation office, depending on the source of the incorrect information. Otherwise, you can make a list of any improvements you’ve made to the property to review with your agent once the time comes to sell.

5. Learn how much equity and borrowing power you’ve built up.

If your home has increased in value, you may have accrued equity. That can benefit a homeowner in many ways. For one, it provides a better understanding of your overall financial situation, enabling you to make smart decisions. For another, it could contribute to an accelerated timeline and more money in your pocket if you intend to sell your home, being careful to factor in the difference between home equity and your home sale proceeds. HomeLight’s comprehensive guide to understanding home equity provides a guide.

If you don’t plan to sell your home, you can put equity to use in other ways, such as borrowing against it by taking out a Home Equity Line of Credit (HELOC).

This can help you access the financing you need to add value to your property with a strategic home renovation or improvement (check out HomeLight’s latest Top Agent Insights to see which common home renovations have the best ROI), or even use the HELOC to invest in additional property.

Be careful with those home improvement projects, Boizot advises. “People can spend $100,000 and more to refurbish their home, including a kitchen/bathroom remodel or basement finish project.” But, too often, homeowners “over-improve” their home for their market.

“[Sellers] are shocked that their $150,000 remodel only yielded $60,000 when they went to sell the property,” Boizot shares. “I see this often with basement projects where a homeowner will spend $100,000 to build their beautiful dream ‘man cave’ with the elaborate wet bar, wine cellar with tasting room, and tiered theatre room, only to find that their market simply doesn’t recognize below-grade (basement levels) of a home in the same way they do the above-grade levels of a home.”

How does a homeowner learn how much equity they’ve built? Boizot says, “Get an appraisal! Get a local appraiser familiar with your neighborhood [or] market to show you actual sales data in the form of an appraisal report … and show you what potential profit a sale will bring.”

6. Consider refinancing your home.

You may opt for a cash-out refinance, which allows you to tap into your equity at a fixed rate. As opposed to a HELOC or a home equity loan that essentially adds a second mortgage, a cash-out refi is a brand-new mortgage with a higher loan amount than what you currently owe that provides a payout (that payout comes from the equity you’ve accrued). Some homeowners may be able to borrow up to 80% of the loan-to-value ratio, leaving 20% equity in their home.

There are advantages to this option, which often comes with a lower interest rate than an equity loan or HELOC. A lower interest rate could save you money in the long term.

7. Determine the best time to sell your house.

Finding out the value of your home “is the number one factor in deciding when to sell,” Toll says, whether you’re considering relocating, “right-sizing,” or cashing out.

Is this the year you plan to sell your home? If you check your home’s value regularly, it just might be. According to the Wall Street Journal, more than seven million people moved to a different county during the COVID-19 pandemic in 2020 – nearly half a million more than in 2019 – due in part to the increased ability to work remotely.

Toll says she’s encouraging sellers: “Now is the right time to sell. Prices are up. The interest rate is low.”

Home prices are higher across the board and competition is fierce, with most homes remaining on the market less than one week. This kind of housing boom hasn’t been seen in the U.S. for almost 25 years. In addition, interest rates for 30-year mortgages have been at record lows (though they’ll likely go steadily up in 2022), making home buying even more alluring.

However, if you’re unsure, listen to your gut, even if you’ve seen a huge upswing in value. “I find myself talking people out of selling because they’re just doing it for weird reasons,” Yoder explains. “I think the biggest thing is don’t sell just because your home has value on it. Unless there’s something strategic in that.”

If you don’t have a reason to move, whether it’s downsizing or relocating to a new neighborhood or city, don’t just sell to sell. And remember, with home prices on the rise, your next home may cost more too, so if you do move, be prepared to pay more.

That being said, if you’re ready to put up a “For Sale” sign, it’s wise to get an idea of the value of your home as the first step in your process. Keeping up with your home’s value, and researching the best time to sell in your area, will give you an idea of trends in your area and how your property stacks up.

How to determine your home’s value

There are several ways to find out your home’s value – on your own or with some assistance. HomeLight investigated some of the best ways to determine the value of your home.

Consult Home Value Estimator (HVE) or Automated Valuation Model (AVM) tools.

Start with a simple online tool like HomeLight’s free Home Value Estimator, which pulls information from multiple sources to create a real-time home value estimate based on current market trends. We also use a seven-question quiz to learn more about your property and enhance the accuracy of our estimate.

Remember that AVMs can give only a ballpark estimate of your home’s value, and are only a starting point. There are also concerns that AVMs can be less accurate in rural settings where there are fewer comps, and that some racial disparities may remain.

“No AVM is consistently credibly reliable,” Ford insists. “Not one.” He observes that the parameters must be very narrowly defined to get a realistic value and insists that it “takes further human analysis to determine if those prices are also consistent with market value.”

Partner with a top agent to conduct a comparative market analysis.

“The best way to find the value of your home,” Ford continues, is to partner with a knowledgeable top agent in your area to conduct a comparative market analysis (CMA). “A CMA is a more specific method. It’s not an appraisal, but it’s a pretty good substitute if it was prepared by the agent themselves, based on relevant information.”

Toll concurs. “The best place to start is with an agent who understands the comps and the area.”

More than an estimate, a CMA will use data from recent sales in your area to break down the home’s value by calculating a dollar value per square foot. Creating a CMA is often part of the beginning stages of a listing consultation, meaning you’re ready to start the home sale process.

In addition, a real estate agent will know not only what the housing market is doing in general, but what it looks like in your area. Good agents keep on top of the current mortgage interest rates. They’ll know if the improvements you’ve done have added to your home’s value. And they should have a pool of buyers who might be interested in buying your home.

Get a pre-listing appraisal

Depending on your goal, Toll says getting a home appraisal may be the way to go. “If you plan to get a HELOC, you’ll need an appraisal. If you want to know what your listing price should be now, talk to an agent.”

Many times, people think an appraisal is only done for mortgage lending purposes (refinance of an existing mortgage or purchase of a property), Boizot says, but there are other reasons to do one. In the U.S., 28% of homeowners determine their home’s value by getting a home appraisal.

An appraisal for valuation purposes can be particularly beneficial if there aren’t many comps for a CMA in your area.

A credible home appraisal can cost between $450-$550, but it can help you price your home for a quick sale, eliminate your PMI, or give you ammunition to dispute the assessed value of your home in the hope of lowering your property taxes.

Because an appraisal is performed by a licensed or certified third party, who must adhere to the Uniform Standards of Professional Appraisal Practice (USPAP), it is considered a reliable, professional valuation.

Good news: Boizot says that starting in April 2022, all residential appraisers and real estate practitioners will be required by Fannie Mae to use a standard and uniform method of measurement known as the ANSI standard, (American National Standards Institute).

Considering his estimate that 75% of Realtors® use the public record square footage when listing properties – and his subsequent estimate that the same percentage of homes differ in square footage from what the local assessor records document when actually measured by a certified residential appraiser – he thinks it is beneficial that an agent get their new listing measured professionally. “Realtors provide ‘sales;’ an appraiser determines which of those ‘sales’ are ‘comparables.’”

You don’t need an appraisal every year, but appraisals expire after 90 days due to real estate market fluctuations that impact your home’s value. Nevertheless, if you are looking for an official number, working with a well-recommended appraiser might be the way to go.

Evaluate the comps

Do the homework yourself. While the average homeowner won’t have access to the industry’s MLS, it’s still possible to get some details on what homes in the area sold for. You can ask a real estate agent to check the MLS for you. The MLS contains information about the property, including listing price, sale price, size, location, and days on market (DOM), which is the number of days a property has been listed before the home goes under contract.

You may be able to get house comps from an appraiser, who puts comparable sales data and statistical information about the appraised property, as well as sold house comps into a Uniform Residential Appraisal Report, or a title representative, who has access to the title database, which contains records of all sold properties – including FSBOs (For Sale By Owner).

If nothing else works, check public records. The sales price of homes is typically recorded at the county level. The information may not be as complete as the MLS, but you should be able to get a general idea of your house value.

The caveat, according to Toll, is when the homeowner’s emotions get involved. Some homeowners have an inflated idea of their home’s worth. “I always ask how they found the value,” she says.

According to Boizot, however, public information also may not be accurate. “I can tell you that many times over the years, I have appraised a property where the [agent] clearly used the public record documented square footage, and then when I measure the property, found it to be, for example, 200 square feet larger!”

Use the FHFA House Price Index Calculator

The Federal Housing Financing Agency’s house price index (HPI) calculator compares millions of mortgage transactions gathered since the 1970s to track average changes in home value from one sale to the next. Based on historical data, the FHFA then estimates value fluctuations in any given market. However, it does not adjust for seasonality or inflation, and only considers conventional loans.

Conclusion: Taking the next steps is easy

Homeowners want to know the value of their home “all the time,” Toll says. “They’re curious. Maybe they bought it three to five years ago when they got married. Now they’re expecting a baby and want to upsize – or they want to relocate to be closer to family.” They need to know if the equity they have in their home will provide the necessary funding to do whatever it is they want to do.

Whether you want to adjust your homeowner’s insurance or your property taxes, ditch the PMI, take out some equity for home improvement or other expenses, or you’re considering listing your home for sale, it’s important to know where to go to get the best information about your home’s value.

Homeowners can start by getting a real-world home value estimate in less than two minutes with HomeLight’s Home Value Estimator. Keep in mind that our HVE provides a ballpark estimate of value to give you a general idea of your home’s current market value.

If you want to go deeper into the details, you can partner with an experienced real estate agent, who can provide a comparative market analysis. “Work with an agent with a good track record,” Toll advises. “Someone who understands the market, sells a lot of homes, and has the necessary tools.”

If you don’t have a relationship with such an agent, you can find top-rated, experienced real estate agents in your area with HomeLight’s Agent Match Tool.

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