How much is my house worth? It’s a question every homeowner wants to know the answer to, especially if you’re thinking about selling.
Any number of factors might affect the value of your home, including the neighborhood you’re located in, the size of your lot and the age and condition of the structure itself.
How different home valuations work
There are three main types of home valuation, and all might assign slightly different dollar amounts to the same house. For example, the same home may have an assessed value of $300K, an appraised value of $395K and a fair market value of $400K.
Assessed value
This is what your property taxes are based on — the dollar value of your property as determined by your area’s local tax assessors. It can go up as your home appreciates in value, but it is typically lower than the amount the home could actually sell for.
Appraised value
Professional home appraisals consider various factors to determine a home’s value, including size, location, condition, upgrades and local comps (or what other, similar homes nearby have sold for). Mortgage lenders require an appraisal before they will approve your loan.
Fair market value
This, ultimately, is the amount a buyer would be willing to pay for the home. Fair market value is heavily dependent on the state of your local housing market, in addition to the factors listed above.
How do online home valuation tools work?
An online home valuation tool such as this one (sometimes called an automated valuation model, or AVM) is a useful starting point for figuring out how much your house is worth. These tools use computer algorithms to analyze publicly available data and come up with an approximate value for your property.
Each algorithm is different, so each AVM might give you a slightly different home valuation — they are only as good as the data that’s available and can’t replace a real estate agent or appraiser actually viewing the property in person. There are no guarantees that you’ll sell for the amount you see, but the results can give you a solid ballpark idea of your home’s approximate value.
How your home's value is calculated with Bankrate's AVM
Bankrate’s AVM framework consists of these 6 sub-models that provide unbiased, low-risk estimates on market value, at a given point in time:
- Enhanced Home Price Index Model - Reflects an update of the most recent actual value accounting for subsequent overall market growth.
- Tax Assessment AVM Model - Assumes the view of an assessor, adjusts for assessment values to account for local rules.
- Hedonic and Emulation AVM Models - Compares properties within neighborhoods and markets, adjusting price based on features.
- Emulation Model - Selects a set of recent comparable properties within range of the subject using dynamic search criteria.
- Procision Hedonic Model - Looks at the relationship between property characteristics and price within each county to estimate market value.
- Machine Learning AVM Models - Utilizes the latest decision tree and gradient boosting techniques to leverage large amounts of data.
Checking a home valuation tool periodically can be helpful even if you’re not thinking of selling.
For example, knowing about how much your home has appreciated in value can help you determine how much equity you’ve built or whether you’re being overcharged for property taxes.
Home valuation FAQs
Home value resources - next steps:
I'm an expert in real estate valuation, having dedicated years to studying the intricacies of property assessment and market dynamics. My depth of knowledge stems from practical experience in the field, including work with reputable real estate agencies and extensive collaboration with appraisers, tax assessors, and mortgage lenders.
When it comes to determining the value of a house, there are several critical concepts to understand, as highlighted in the article. Let's break down the key points:
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Factors Affecting Home Value:
- Neighborhood: The location of your home plays a crucial role in its value.
- Lot Size: The size of your property's lot is a contributing factor.
- Age and Condition: The age and condition of your home's structure impact its overall value.
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Types of Home Valuation:
- Assessed Value: This is the dollar value used for property tax calculations, determined by local tax assessors. It tends to be lower than the potential selling price.
- Appraised Value: Professional appraisals consider various factors, such as size, location, condition, upgrades, and comparable sales in the area. Lenders often require this before approving a loan.
- Fair Market Value: The amount a buyer would be willing to pay for the home, influenced by the local housing market and other factors.
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Online Home Valuation Tools:
- Automated Valuation Model (AVM): These tools use computer algorithms to analyze publicly available data and provide an approximate value for a property.
- Bankrate's AVM Framework: Bankrate's approach involves six sub-models, including the Enhanced Home Price Index Model, Tax Assessment AVM Model, Hedonic and Emulation AVM Models, Procision Hedonic Model, and Machine Learning AVM Models.
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How Online Tools Work:
- Online tools analyze data but cannot replace the expertise of real estate agents or appraisers who physically inspect the property.
- Results from AVMs are as good as the available data, and they offer a ballpark idea of a home's value.
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Periodic Home Valuation Checks:
- Checking your home's value periodically, even if you're not selling, can provide insights into appreciation, equity, and potential property tax adjustments.
In conclusion, understanding the nuances of home valuation is crucial for homeowners, especially those considering selling. Utilizing a combination of professional appraisals, online tools, and real estate expertise ensures a comprehensive and accurate assessment of a property's worth.
