What Will My Home Appraise For? Here’s How to Check Your Home’s Value
If you’re thinking about selling your house, you’re probably wondering — what will my house appraise for? Your home’s value determines how much you could net when you sell it, and thus, how much you have to put down on the next place.
Even if you’re not thinking of selling in the next few months, there are other reasons you might want to keep an eye on how much your home is worth. It can impact tax and estate planning, decisions about remodeling, and more. If you’re curious about your home’s worth, here are some tips on getting an initial home price estimate, and then how to narrow it down.
Why is it important to know my home’s value?
For many homeowners, knowing their home’s worth impacts a wide range of life-navigating decisions.
“For one, they want to make sure they get the proceeds they want if there’s an offer that’s put on the house,” says John Swartz, a top agent in Williamstown, Pennsylvania, who sells properties 62% faster than other agents in his area. But potential profit is just one of many important reasons to find out your home’s value.
Here are some common reasons you might want to know your home’s value:
Assists sellers to determine an asking price
How much you could get for your home will likely impact your decision to sell. If you’ve been on the fence about selling, but the appraisal comes back and you realize you’ll make a large profit, it could help you hop off the fence and into the market.
It will also set your asking price and target resale value. The asking price sets your budget to purchase a new house. Any gains from your sale, combined with savings, helps determine your home shopping budget for the next house. With a $50,000 gain on the sale in your pocket, that larger home with a swimming pool or three-car garage could now be within your reach.
The asking price also can determine how quickly your home sells. Tom Cullen, a licensed real estate appraiser certified by the National Appraisal Institute, and he has been appraising homes for more than 30 years, points out that today’s buyers are savvy. “A property priced too low will sell too fast and you will leave money on the table,” he says. “A property priced too high will sit for an extended period of time with little to no activity, and you may miss your window of opportunity to sell.”
Provides insights whether sellers should make repairs or updates
Knowing your home’s value could impact remodeling decisions. If your home is already at the top of the market for your area, you might not want to put more money into it. Or, if painting the interior would only cost $5,000 but could increase your home’s value by $15,000, you might decide to have this or other repairs done before listing for sale.
In his market, Swartz says that “People have been taking the time to upgrade their house
Comps, also called comparables, are recently-sold homes in your market that are similar to your home in size, condition, location, and features.
Helps you determine your borrowing power
It’s time for a kitchen remodel, but you don’t have the cash to pay for it out of pocket. Home equity loans are a great tool that many homeowners use to fund larger remodeling projects. But before you apply for one, you need to know how much equity you have in your home.
A home appraisal tells you how much equity is in your home as measured by the difference between your current mortgage balance and your home’s value. If you’ve lived there several years, the combination of paying down the mortgage and market appreciation could have raised its value enough to afford that new kitchen.
Gives you a clearer investment value
For many American families, their home is often their largest financial asset. Home equity remains a primary driver to build wealth, and some families count on that equity to fund part of their retirement. If you plan on cashing out equity, or selling, in retirement, and want to know if you’re on track, a home appraisal would give you that information.
Focuses your tax estimates and impacts
Homeownership has tax implications — from the mortgage interest deduction to capital gains tax. Selling a home less than two years after the purchase date could lead to owing capital gains taxes. Perhaps taking out a home equity loan to fund a remodel would help you come tax time, since you can typically deduct the interest paid.
Knowing your home’s appraised value could be helpful when tax planning.
Assist with arranging homeowners insurance
If you have a mortgage on your house, the lender requires you to carry homeowners insurance. Even if your home is paid in full, homeowners insurance protects your investment. But how much should you carry?
Homeowners insurance policies can cover the full replacement value — the cost to rebuild from the ground up — or the actual cash value — your home’s value less depreciation. Having your home appraised could help your insurance agent determine the amount of coverage you need.
Aids in estate planning
Whether you’re writing a will or putting your home into a trust, knowing its appraised value helps with estate planning. If one of your children wants the home, but another would prefer a different asset, having a dollar figure for the home’s value can help you balance the distribution of your estate’s assets fairly.
Helps with divorce settlements
When you’re getting a divorce and dividing up assets, you’ll need to know your home’s value. One partner might want to buy out the other partner and keep the home.
The home’s current value determines how much each person is entitled to from the house. It also could help them decide if they want to sell and split the gain on sale, or if one person wants to buy out the other person’s interest in the house. They can do this through paying cash, or taking out a home equity loan.
Use online value estimator tools to get an estimate
Today’s array of online home price valuation tools make it easy to get a quick ballpark figure of your home’s worth. Simply input a few details about your home, push a button, and the website provides an estimation of value.
With HomeLight’s Home Value Estimator you can get a real-world home value estimate in less than two minutes. Our online tool pulls information from multiple sources to create a real-time home value estimate based on current market trends. Other online tools build their estimates off historical data, which can lag the market.
The algorithms driving these estimators can’t always measure every little detail that impacts your property’s worth. The results could be skewed by incomplete data or fail to account for factors like your home’s positioning on a busy street or its closed-off layout, ultimately providing you with an inflated estimate. There is significant added value in an experienced, local real estate agent’s knowledge of pricing a home as well.
What online home value estimators can’t do
Like all tools, online home value estimators have their limits. They could have incomplete data, or data that lags the market. But they also can’t account for differences in homes that impact their values which can’t be measured by raw numbers.
Cullen points out that these tools, “aren’t taking factors into account such as quality, condition, and a mixture of property types.” He appraises homes in New England, where the same neighborhood can have a large mixture of property types.
“We may have a colonial style home, next to a ranch style home, a clam shack down the street and also some commercial influence mixed in,” he says. Each of them would have a different value, but an online tool may treat them all the same.
Some other examples of factors that impact a home’s value but an online tool can’t see include:
A home’s positioning on a busy street
A home’s location near public transportation
Its closed-off layout
Recent upgrades or improvements — like a new kitchen, roof, or bathroom
Major changes in the community
New amenities being built nearby — a swimming pool or new school
Large employers that recently announced coming to the area
Online home estimates can give you a great starting point. And if you know your home is standard for the area, their estimate could be extremely accurate.
Fine tune your estimate with a comparative market analysis
Before you first meet, your agent will prepare a comparative market analysis (CMA). When putting together this report, the agent evaluates nearby recently sold properties (aka “comps”) that are similar to your own house in size, age, and characteristics to determine your home’s value. It’s the closest thing you can do to mimic the home appraisal process without being a professional licensed appraiser.
It’s also helpful to have them walk through your home and tweak their estimate after they’ve seen it first hand. “All floor plans aren’t equal,” said Julie Kaczor, a top-selling agent in Naperville, Illinois. “Two and a half bathrooms could mean that there is only one bathroom upstairs for four bedrooms. The truth is the floor plan and the function of the home is a very big part of an appraisal, and there is an adjustment for that.”
Once they’ve pulled comps and seen your home, the agent could adjust your CMA. It will tell you:
How your home stacks up against recently sold homes in your area – the number of bedrooms and bathrooms, square footage, garage or other amenities
What homes in your area have sold for recently – with adjustments for differences in size and other features
If sold homes had updates or other factors that indicated they might be worth more or less than your home
How quickly homes have been selling in your area
If homes are selling for above or below list price
The CMA won’t just help you set your home’s list price, it’ll give you a rough idea of how the home sale process might go — everything from potential interest in your home to how quickly it could sell.
Factor in your home improvements and upgrades
An appraiser will factor home improvements and upgrades into your home’s appraised value, so you should, too. Provide your agent with a list of improvements, or point them out when they see your home for the first time. But don’t expect to see a dollar-for-dollar return on investment.
While James Gargano, an appraiser who has been in the business for 35 years says that, “Bathrooms and kitchens, if done well, will always help a house sell and achieve profitability (or return),” other home improvements might not put the same amount of money back in your pocket.
According to a 2019 survey by the National Association of Realtors, here’s the benefit you might see from common upgrades:
Fresh interior paint – 107% ROI
New roof – 107% ROI
New wood floors – 106% ROI
A new garage door – 95%
HVAC replacement – 85%
Converting a basement to livable space – 64% ROI
Bathroom renovation – 57% ROI
Converting an attic to livable space – 56%
Fresh paint on the home exterior – 55% ROI
Kitchen upgrade – 52% ROI
The value you’ll really get from an upgrade can depend on your area’s climate — a new air conditioning unit matters more in hot climates — and the beginning age and condition of what you’re replacing or sprucing up.
If you’re unsure of the value a repair will add to your home, you can get an appraisal from someone with their finger on the pulse of the market. “Appraisers can, and we often do cost benefit analysis, which is an analysis of your proposed improvements and the likely yield associated with the completion of those improvements,” says Cullen.
Order a pre-listing appraisal
If you have a unique property, or a limited number of comps, consider getting a pre-listing appraisal. Independent appraisers will evaluate your property — for an average fee of $300 to $450. How much you’ll pay depends on the property’s size, number of bedrooms and baths, and other unique features.
Cullen says that pre-listing appraisals have become more common in his business. Fees range from $500 and scale up, depending on the complexity of the appraisal. “Complex properties (multiple buildings on one site, waterfront, extra lots of land) represent the higher end of the fee structure,” he explains.
While Swartz doesn’t commonly suggest a pre-appraisal, he will in rural areas where one property could have 50 acres but the property next door has 2-3 acres. “In that case, I might ask the seller to get an appraisal upfront to give us a guideline to go for, see how the appraiser would adjust for those differences,” he says.
A pre-listing appraisal could help set a pricing strategy, and justify that price to buyers worried about getting a loan on a unique property.
What to do before the appraiser arrives
Let’s be honest, a clean house will make a better first impression on anyone — and that includes an appraiser.
“When I drive up, I can tell right away if someone takes care of their house or not,” says Gargano. “It’s just that feeling that you get.” If you want to make sure your home appraises for top dollar, take the time to prep for the appraiser’s arrival and do any of all of the following:
Clear away clutter
Tidy up the house inside and out
Make sure your property is accessible
Put together a home fact sheet with your agent
Make minor repairs
Secure any pets
Plan to be away yourself, or be patient and don’t rush the appraiser
My appraisal came in low, now what?
If the bank appraisal comes in lower than the buyer’s offer price, don’t panic. Try one of these options:
Look for errors in the home appraisal report. Request a copy of the appraisal report — as the seller, you won’t get it automatically. The lender or buyer may be willing to provide it to you, particularly if it came in low. Look for errors — did the appraiser forget the garage? Is the square footage incorrect? — that you can challenge.
Challenge the appraisal with a Reconsideration of Value. Work with your agent on the appeals procedure. Call out issues such as poor analysis of comparable properties or square feet miscalculations.
Negotiate with the buyer without getting a new appraisal. You can lower your price to the appraised value or ask the buyer to make up the difference. Or, you can compromise by meeting in the middle.
Hold off on the sale. Because appraisers use closed sales as comparables they can lag the market. In March 2021, values in Swartz’s area were increasing faster than comps could keep up. The appraisers were pulling comps from January or February, and one of his sales came in low.“I could see there were 15 sales pending,” Swartz says. “I told my seller he might want to push back here and wait.” Two months later, those sales had closed for more money and his seller’s home appraised.
Request another appraisal. Ask the lender to have another appraisal done, or bring in an independent appraiser. However, you’ll likely have to pay for it yourself and you have no assurance it will come in higher.
Reduce your asking price. If the home sale falls through due to an appraisal you can expect other buyers to have the same issue. Keeping your asking price the same would force you to wait for a buyer who has the cash — and the willingness — to make up the difference. Consider reducing your asking price.
You can start now. Find your ballpark estimate and a top agent near you
HomeLight’s tools take a lot of the guesswork out of selling a house.
Whether you’re trying to decide if it’s time to sell, or know that you need more space, it’s easy to get started with HomeLight’s Home Value Estimator.
Once you’re ready to sell, HomeLight’s Top Agent Match tool will match you with the best top-rated real estate agents in your area who will have the connections, experience, and insights to help determine your home’s estimated value and set the best listing price.