How To Determine the Value of a Home and Get the Most Money for It


The U.S. housing market boom has been strong over the last few years. Buoyed by low-interest rates and government stimulus packages, home values have increased across the United States. Limited inventory across the country has also helped to drum up more demand, resulting in skyrocketing home prices in many cities.

While recent news suggests that home prices may begin a backslide as a result of recent Fed rate increases, many high-value areas have plateaued high. Whether you plan to sell your property or upgrade it, you should know how much it’s worth. Knowing your home’s value will help you understand how to price it and negotiate with potential buyers.

This article will provide a step-by-step guide to assessing your home’s value and explain how you can increase it with a few simple steps. 

Three major home value types

Fair market value

Fair market value is the price that a property sells for in an open competitive market.

Both buyer and seller have a perspective on what is a fair market value for a home. Buyers typically consider the same buying price for homes similar to yours. For example, if your property has three bedrooms, two bathrooms, and one garage, its fair market value could be about the same as other properties in your neighborhood.

From a seller’s perspective, fair market value also has to take into account how much inventory is in your area and how desirable the neighborhood is.

Determining the fair market value of your property is more complex than counting the number of bedrooms and bathrooms. To calculate a fair market value of your home, you need to have an appraisal, know the recent market trends and conduct an analysis of comparable properties in your neighborhood.

Appraisal house value

The appraised value differs from fair market value as you will need a certified appraiser to determine it. The appraised value is what mortgage lenders look at when a buyer borrows the money to buy their house. Although an appraisal is not the final word on the fair market value, it can be enough if you need to find out your property’s fair market value. 

An appraisal also determines how much a consumer can borrow from a lender. Banks don’t lend more than the home is worth, which is determined through an assessment. Most banks loan 80 or 90 percent of a home’s appraised value.

Assessed value

The assessed value is all about taxes. The local county assessor will assign your home a specific value depending on a mix of criteria to determine your home’s property tax.

A county tax assessor determines your home’s value, and local officials calculate the property taxes based on the assessed value. The higher your home’s assessed value, the higher your property taxes are.

An assessment considers sales of similar homes and home inspection findings, among other things. When it comes to selling a home, the assessed value is one of the most critical assessments of your property, as it determines how much your house is worth. 

How to determine your home’s value

There are different ways to find out your home’s value. While some can be done independently, others involve costs and hiring a third party. Each method mentioned below depends on your end goal and how precise you want the results to be. 

Let’s look at some of the most popular ways you can use to find out your home’s value:

Enter your address into a home value estimator 

You can use many online home value estimator tools. These tools are called automated valuation models (AVMs). They use algorithms that allow you to assess your home’s value quickly and often with no cost. However, these results might not be as personalized and precise as you expected. While these tools are great for determining your property’s approximate value, they don’t provide the most accurate result.

Ask your real estate agent for a comparative market analysis

If you consider selling your property, consulting a real estate agent will help you to produce a more accurate result. The agent will use comparative market analysis and pull together different data to give you the value of your property. But remember that real estate agents use other comps and might have conflicting opinions about your home’s value.

Check your county or municipal auditor’s website

To understand your home’s value from a tax perspective, check your county or municipal auditor’s website. County auditors assess each property’s value for tax purposes periodically, and this information is a public record that is available online. You can see how your property’s value has changed over the years and see whether it has appreciated or depreciated recently. 

Identify trends with the FHFA House Price Index calculator

To understand property value trends in your area over time, check the FHFA House Price Index. The Federal Housing Finance Agency offers another view of your home’s value. This estimator provides overall results rather than specific consequences for your house. 

Hire a professional home appraiser

A professional home appraiser typically provides the most accurate estimate of your home appraisal. Home appraisers are licensed and certified experts, and mortgage lenders require a home appraisal before giving you a loan. A home appraiser charges between $300-450. The price also depends on several factors, like the size and location of your home, its condition, and property value. 

What to do if your home’s value goes up

Your home’s value can rise due to many different factors. One of the most common factors is the real estate market favors the seller. This is when the number of people looking for homes outweighs the supply in the market. Mortgage rates are also a key indicator that can affect home value. 

If your home value has increased, here are some of the steps that you can take:

Eliminate private mortgage insurance 

To buy a home, you generally need a 20 percent down payment. If you don’t have it, a lender will likely require private mortgage insurance (PMI) if you’re applying for a conventional mortgage. PMI protects the mortgage company if you default on your payments and your home price drops. Otherwise, they wouldn’t be able to recover the mortgage they lent you if the home is no longer sellable at that price.

PMI is typically required if your loan-to-value ratio (LTV) is 80% or more. Your LTV is the amount of your mortgage divided by the home’s value. By putting 20% down, you are only borrowing 80% of the home’s value.

This means that if your remaining mortgage stays the same but your home value increases, your LTV improves. It could improve so much that you are now below 80%, at which point you no longer need PMI. Your mortgage company will not contact you if this has happened, rather, you need to do your homework to make a case for canceling it. Cancelling PMI typically requires you to pay for another home appraisal to confirm the current market value before your lender.

Adjust your home insurance policy 

Most homeowners take out a home insurance policy when buying a home, but not many adjust it. Your homeowners insurance protects you if your house gets damaged by covered incidents. This includes certain weather events, wildlife damage, and theft.

Few people know that they should adjust home insurance as their home’s value grows. This also applies when you do remodeling projects, which creates additional value and space in your home.

Home insurance tends to be based on how much it would cost to repair or replace it if something is damaged. A hot real estate market may put your home value much higher than it was prior, requiring increased coverage. This isn’t all that common, as a hot market doesn’t necessarily increase how much the home would cost to repair. That said, if you are making major renovations, it is critical to talk to your insurer so that those improvements are covered.

When your homeowner insurance policy isn’t adjusted, your home could be without adequate protection.

Make home improvements 

Renovations and improvements are one of the most popular ways to boost your home’s value. Keep in mind that not all home improvements have equal value. For example, a pool could yield a meager return on investment, especially if you live in a cold climate. On the other hand, planting trees and improving your garden could significantly increase the value of your property.

Most homeowners think that only expensive improvements can help them net more money. However, it’s not true. While a modern kitchen can attract some buyers, not everyone wants to spend more money on the house because of expensive upgrades. Simple fixes like new door handles, light switches, and a fresh coat of paint can breathe new life into your home and make it more attractive to potential buyers.

Consider selling your house

If your home’s value increases considerably, putting it on the market might be tempting. It’s a great option if you want to move to another area or use the opportunity to get the most out of your property while having favorable market conditions.

Before you put your house on the market, conduct careful research and consult a real estate professional to make sure you make the right choice. 

What to do if your home’s value goes down

Your property’s value can go up or down depending on many factors. More often than not, the value of your home might go down due to reasons out of your control. The most common reasons for the decrease in property value are climate changes, natural disasters, and lack of proper infrastructure and quick access to amenities and public transportation.

Additionally, a poor economic outlook can also impact your property’s worth. It’s particularly true for areas affected by issues such as low job opportunities, crime, and homelessness. If your property takes a hit due to the financial downturn, do not make rushed decisions; instead, wait out the downturn if you can.

Don’t panic

Real estate prices are prone to fluctuation. If you’re a newer homeowner, remember that a backside in an otherwise increasing home value isn’t a reason to panic. It’s best to keep a cool head and remember that your home is an investment — most folks lose money if they try to bail at the first sign of trouble.

If your home’s value drops dramatically and your mortgage is underwater, you may qualify for financing options like HARP. These options have strict requirements to ensure they’re used responsibly, so reach out to a mortgage professional for guidance.

Focus on building equity

If your home value decreases and continues to slide, another solid option (before looking into a short sale or foreclosure) is to hyper-focus your finances on building equity. This means making an aggressive plan to put discretionary income toward your mortgage. Building equity is incredibly hard work, especially in tight financial times. However, it’s the best strategy if you’re worried about losing your home.

What are the most critical factors that affect home value?

Regardless of what the economy might look like, there are essential factors that will always influence your home’s value. Although you can’t control what happens to the area you live in or how it will be affected by the changing climate, you should find out as much as possible about a home’s condition and the surrounding area before buying it. 

The neighborhood

The neighborhood of your home plays a significant role in its price. Most house hunters rely on their observations instead of realtors’ advice when assessing the area. 

According to a study by Nabewise.com, 54 percent of Gen X homeowners reported that the house and the neighborhood were equally important in their decision-making. The study said that 79 percent of house hunters check out communities in person, 64 percent research online, and 62 percent ask friends and family for their opinion.

Home’s age 

A home’s age is a critical factor in determining its value. Older homes are more likely to have issues related to wear and tear and could also require more maintenance. Many realtors recommend home inspections for older homes, as they could hide problems that are not immediately obvious, like the shifting foundation or issues with insulation. 

If you live in an older home and consider putting it on the market, it’s a good idea to conduct a thorough inspection before hiring a professional home inspector. This way, you can take care of minor repairs and avoid unpleasant surprises when you get your home inspection report. 

Home’s condition

A home’s overall condition affects its value more than anything else. An older home that is well taken care of can net more money than a new property that has been in disrepair for a while. As a homeowner, you can maintain your home’s condition by doing regular check-ups and keeping an eye on critical areas such as kitchens and bathrooms. 

Most people hire a home inspector only when they get serious about selling their home. However, it would help if you didn’t wait until then to examine your home. For example, you can routinely check hard-to-reach areas like attics and crawl spaces where issues tend to crop up. The basement is another area that could hide many problems like mold or foundation problems. 

Home’s size

Your home’s size is a crucial element to consider in your home’s valuation. Bigger homes typically enjoy a higher value. However, it’s also subject to many other factors. 

The value of a property is estimated in price per square foot, and the sales price gets divided by the square footage. However, the price of a square foot varies significantly depending on location. 

In addition, not all space is created equal. Only a home’s usable space is considered in its value. Garages, attics, and crawl spaces are typically not counted in usable square footage and, therefore, don’t add value to your property. 

Improvements and renovations

Most upgrades and renovations can add value to your home, but not all home improvement projects are equal. The impact of a home project depends on your property and its location. 

For instance, Open Door estimates that a finished basement in Portland is 5x more valuable than finishing a basement in Atlanta, a roughly 13 percent increase on the median home value versus 2.5 percent.

Adding a pool will not always generate the most significant return on your investment unless you live in a warm climate. And expensive add-ons can turn off some buyers who might not be ready to foot the higher bill. 

How can you add value to your home?

Remember that you don’t get a second chance to leave a good impression on someone interested in your property. Curb appeal is what potential buyers see first when they get the first look at your property from the outside. 

If you are serious about winning your potential buyers over, make sure your home looks immaculate. According to Fortune Builders, proper curb appeal is more than what homes look like; it is an ingenious marketing tool. It helps to generate interest in your property and set expectations. 

Cut your grass, trim the bushes, plant some plants, and make your home look cozy and inviting. Putting on some fresh coat of paint and doing a minor bathroom or kitchen upgrade might pay you off tenfold. Buyers are more likely to want to take a look inside if they like the outside of your home.

How often does the home value change?

Although you do not have to check your home’s value daily, doing it often has benefits. It’s essential to check your home’s value when the economy takes a downturn or the housing market undergoes major changes.

There are some great reasons to check your home’s value. Let’s say, once a year, for example, you might determine if your homeowners’ insurance still covers your property adequately. When you check your property’s value from time to time, you will be more in the know about what it’s worth.