After several years of healthy increases in U.S. home prices, you may be wondering what your home is worth. Here are three ways to find out.
Use Online Estimators
With websites such as Zillow, Redfin, Trulia, and Bank of America Real Estate Center, you can enter your home address and the site will show you an estimated value. These online estimators use publicly available data and proprietary algorithms to determine the value of your home based on recent nearby sales.
Different online estimators will often give varied results for your home’s value. A best practice is to average the result of at least three sites. For example, add up the values given by Zillow, Redfin, and Bank of America, divide by three, and you will arrive at an average estimate.
Keep in mind that home valuation websites describe their accuracy using a measure called median error rate, expressed as a percentage of the home’s value. Half the properties on Zillow, for example, will be off by 4.6% or less, and half the properties will be off by 4.6% or more—which can add up to a lot. A home valued at $850,000 could be off by $39,100 at the median error rate of 4.6%. Redfin says it commissioned a study that shows it has the highest accuracy among home valuation sites with a median error rate of 2.1%.
As with all things real estate, location is important. The accuracy of your online estimate depends on the quality of data about your property and neighborhood. Some sites allow you to edit data about your property such as square footage and the number of bedrooms and bathrooms, which can lead to better results.
Ask Your Friendly Real Estate Agent
Cultivating a relationship with a knowledgeable real estate professional can be helpful with many aspects of owning property. While best known for transactional expertise in buying or selling a property, an experienced professional can provide an estimate of your home’s value as well.
Your agent can also guide you on the best improvements to make to your home or another property to increase its value. Not all remodels are equal; some add more value than others. Experienced real estate professionals know which room configurations and floor plans sell best, and which upgrades have the highest resale value. For example, your remodel dollars may be better spent adding square footage or reconfiguring existing interior space to make it more usable than spending money on fancy finishes.
That same expertise and market knowledge can help your real estate professional accurately assess the value of your property. Ask your agent to run a comparable sales analysis to see what nearby properties have sold for recently. By comparing your property with others that have recently sold or are listed for sale, your agent can estimate what your home is worth.
Your agent’s detailed knowledge of your area and buying trends can result in better estimates of value than online valuation websites, which use relatively coarse data about your home (like square footage and number of beds and baths) to estimate value. Your agent will use online information, along with a comparable sales analysis, and then adjust up or down based on the desirable or undesirable features of your property. An agent adds a qualitative assessment to the online estimator’s quantitative analysis.
Many real estate professionals will do this type of analysis for their best and long-term clients. If you don’t have a relationship with a real estate agent, consider an appraisal.
Pay for an Appraisal
While the first two methods of finding your home value are free, you can also pay for a formal appraisal of your property’s value. Formal appraisals cost anywhere from a few hundred dollars for a “drive-by” appraisal to thousands of dollars for a comprehensive appraisal that includes a detailed report about your property.
With a drive-by appraisal, the appraiser reviews comparable sales in your area and inspects the exterior of your home and lot to determine an estimated value. A full appraisal costs more and involves a detailed inspection of the exterior and interior of your home, including measuring the square footage of each room and comparing your property to similar properties recently sold in your area. Since appraisals are considered more accurate than the informal methods above, banks and courts rely on them for making lending decisions and settling estates.
All of these methods are helpful in estimating the value of your home. But of course, value is really determined by what people will pay. The only true way to find the value of your home is to sell it to a willing buyer. Short of that, you will rely on one of these methods, knowing each will produce an estimate of your property’s value but your actual sale price will likely be different.