The value of your home is the amount someone is willing to pay for it. Typically, home values increase gradually, averaging about 2% to 3% per year. However, from 2020 to 2024, median home prices soared by 29% due to low housing inventory and low interest rates at the start of the pandemic.
Monitoring your home value over time can help you set the right asking price when you decide to sell. It can also be beneficial in other ways. Here’s how to determine your home value and the factors that can affect it.
There are several ways to determine the value of your home. Here are some methods to check out:
Online Valuation Tools
An online valuation tool uses algorithms to estimate your home’s value based on housing market trends, basic features of your home, and public records like tax assessments and recent sales of similar properties in the area. You can find these tools on lender and real estate websites like Zillow, Redfin, and Bank of America.
These home value estimators can give you a rough idea of what your property is worth. However, they don’t take into account the condition of your home and any improvements you’ve made, which can greatly affect its value. Therefore, it’s best to use online valuation tools as a starting point and consult a real estate expert to determine the right asking price.
Comparative Market Analysis
A comparative market analysis (CMA) estimates your home’s selling price using specific details about your property and data from similar homes in the area. It’s usually more accurate than an online valuation tool because it’s done by an experienced real estate expert.
The expert conducting the CMA will start with basic details of your home, such as lot size, square footage, and the number of bedrooms and bathrooms. They will also consider the age, location, and condition of the property, any improvements and upgrades you’ve made, special features, and other characteristics that might affect the asking price.
Next, the expert will find several comparable homes nearby—usually within a mile or so—and examine recent sales data. They’ll use all this information to determine your home’s price.
Professional Appraisal
A home appraisal is a professional evaluation of your home’s value, performed by a certified or licensed appraiser. Lenders require an appraisal when you buy a home, but you can also get one anytime to estimate your home’s value.
The main difference between a CMA and an appraisal is that a CMA determines a home’s price, while an appraisal determines its value.
To determine the value, the appraiser considers your home’s location, the property itself, and nearby comparable homes on the market. They’ll then create an official report and provide it to you shortly after the appraisal.
Comparable Properties
Online valuation tools, appraisals, and comparative market analyses all rely on someone else to estimate your home’s value. However, you can do a similar evaluation yourself by looking at comparable properties. Checking “comps” in your area can help you estimate your home’s value or set a fair selling price.
Here’s how you can do a comp search:
- Evaluate your home: Note the lot size, square footage of the living area, number of bedrooms and bathrooms, and special features like a gazebo or pool.
- Browse listings: Go to a real estate website like Zillow and find about six nearby recent or pending sales, which provide more accurate prices than listings still on the market.
- Filter your search: Look for homes within a half-mile to one-mile radius of your home. The homes should have similar square footage and the same number of bedrooms and bathrooms.
- Check price per square foot: Once you’ve narrowed down your list, calculate the average price per square foot. For example, if a home sold for $500,000 and has 1,500 square feet, the cost is $333 per square foot. Use this information to help set your home price.
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