Home Valuation Basics: How Can I Tell What My Property’s Worth?

Maybe selling your home is part of your five-year plan. Or perhaps you need to know how much equity you can draw from to cover a kid’s college tuition or an unexpected medical expense. It’s natural for homeowners to be curious about their property’s value and how home prices in their area are performing.

But getting an accurate valuation is a complex process with a lot of little details impacting how much your house is worth over the years.

Our top 10 FAQ sheet is here to help clear up some of the confusion about home valuation. We’ll focus on providing transparency around online valuation tools, the different ways you can get an accurate home value estimate, and what makes property values go up or down in any given time period.

A neighborhood as seen from above to demonstrate home valuation.
Source: (Jimmy Conover / Unsplash)

1. How can I estimate the value of my home?

When a house on the block sells, homeowners naturally assume their home could sell for the same amount. However, you need to consider a ton of factors to determine if your home will sell for more, less, or the same amount of money as your neighbor’s. Even so-called “cookie cutter” homes may sell at widely different price points.

“I tell my sellers that just using square footage as a pricing guide isn’t effective, because if you compare two different houses that have the exact same features, four bedrooms, three baths, and the same square footage, one might be an abandoned mess, and the other might be a Taj Mahal,” advises Brent Dalley, a top-selling real estate agent in Dallas.

Homeowners who are serious about getting an accurate home valuation for their property have three options:

All three of these options are useful depending on why you’re checking up on your home value. If you’re simply curious, an online valuation tool is all you need to get a free home appraisal.

If you’re looking to take equity out of your house with a line of credit, your lender will require that you get a professional appraisal. However, if you need an accurate valuation to formulate your future sale plans, then consulting a real estate agent is the way to go. Appraisals will cost several hundred dollars whereas an agent will price your home as part of their listing services. And online home valuation tools — though a great starting point — don’t always have enough data or information to be fully accurate.

2. Is Zillow’s Home Value accurate?

For the simply curious, using an online home value estimator is the quickest and easiest way to go to get a home value estimate — and Zillow’s Zestimate is probably one you’re familiar with. Zillow has recently decreased their median estimate error to 1.9% for on-market, active listings.

Keep in mind that online estimators rely on public records, recently sold comps, and user-generated insights to estimate home values. Unfortunately, that data isn’t always accurate, and in some areas it’s not even available to the estimators.

“Home valuation tools aren’t as effective in our marketplace. In Texas, we cannot release the sold data information without the seller’s express permission. Without access to sold price data, online valuation tools can only come up with broad-ranging numbers based on list prices rather than sold prices,” explains Dalley.

“Plus, our market is so fast and furious right now that agents need to look up valuations day by day, almost hour by hour to keep on top of what the market’s doing. So there’s no way that the data banks for online valuation tools can keep up with that in our area.”

Find out more about how living in a “non-disclosure” state for real estate can potentially impact the accuracy of home valuation tools for local properties.

3. How does HomeLight’s home value estimator stack up against the competition?

HomeLight’s Home Value Estimator also relies on the accuracy and availability of local real estate data, however ours has unique strengths.

While some algorithms rely solely on public data, ours includes a short questionnaire to gather specific information about your home’s property type and condition to give a more personalized valuation.

We also include a list of top local agents who have a verifiable track record of selling homes for the most amount of money.

Plus, our valuation also includes your Simple Sale offer, which is a real, all-cash offer for your home that, if you accept, lets you pick the move date and get your home sold fast without the hassle of buyers coming into your home. We estimate a home’s Simple Sale price to be around 90%-95% of market value.

A man on his computer looking at a home valuation.
Source: (Hedgehog Digital / Unsplash)

4. Should I pay for a professional appraisal?

An online value estimate is free but it does have its limitations. Most do not take your home’s conditions and upgrades under consideration, and their accuracy depends on the availability of hard data.

When you need a more accurate valuation for your specific home, it may make sense to pay for a professional appraisal. Depending on your area and home size, a professional appraisal will cost you anywhere from $550 for a basic appraisal to as high as $1,500 for a more complex appraisal.

This option makes the most sense when you need a detailed and accurate appraisal for financial reasons like refinancing, but you’re not actually planning to sell your home anytime soon.

If you are planning to sell within the next few years, it doesn’t make sense to waste money on an appraisal, according to Dalley:

“Professional appraisals are good, but they’re not unlike what a good agent can do for you. You’re paying several hundred dollars for an appraisal to get the same information that an agent provides for free.

“And keep in mind that the appraisal you pay for will have no bearing on your buyer’s appraisal. The bank will hire an independent appraiser to evaluate your home according to the lender’s specifications. And different loan types, like FHA, VA, and traditional, will have different appraisal requirements.”

5. Can I get a home valuation from an agent if I’m not selling my home right now?

All real estate agents provide you with a comparative market analysis (CMA) as part of their listing services. That CMA contains all of the data an agent uses to calculate your list price, so you can rest assured that it will give you a rock-solid home valuation.

But can you ask for that information if you’re not actually planning on selling right now? Yes, you can – if you’ve developed and maintained a solid relationship with your agent.

“You check your investment portfolio or even just your bank account regularly, so you should be doing the same thing with your home because it’s your largest asset,” advises Dalley.

“Although it may be uncomfortable if you’re not currently planning to sell, the best way to get a solid valuation for your home is through an experienced agent who’s up to date on today’s marketplace. When you work with an agent, it shouldn’t be a one-and-done situation. You should have a relationship with your Realtor® the way that you have a relationship with your physician or your attorney.”

6. What factors impact a home appraisal?

Whether you consult an agent or hire a professional appraiser, they’re going to generate their report using more specifics that may either have a positive or negative impact on your home’s value. Some of these specifics you can’t change — but some you can improve on if you want to increase your home’s valuation.

Factors that you cannot change

Your home is where it is, on your lot, on your street, and in your neighborhood. Unless you’re a billionaire, there’s not much you can do to change these external factors that impact your home’s valuation.

Location: A home’s location on a busy street vs. a quiet cul-de-sac; the quality of the school district; proximity to a thriving or failing business community — location factors make an impact to your home’s desirability.

Supply & demand: The economic law of supply & demand says that when you have lots of buyers and few houses in a market, home values increase. If you have lots of homes listed for sale and few buyers, your home value will stay stagnant or decrease.

Comparable sales: The reason that online valuators pull sold price data for their valuations is because these comps are a clear indicator of the value range for your home Basically, when nearby homes comparable to yours are selling at $350,000, there’s little you can do to push your home’s value up to $400,000.

Factors that you can change

While there’s little you can do to alter the value impact of your location or current real estate market trends, there’s a lot you can do value-wise to the house itself to increase its valuation.

Condition: Peeling paint, foundation cracks, leaky faucets, overgrown lawns — all of the deferred maintenance on your “to do” list puts a big dent in your home’s valuation. A well-maintained home sells for more money.

Upgrades and finishes: Replacing your outdated appliances, countertops, HVAC, and flooring goes a long way toward improving your home’s valuation. Upgrades made for your own enjoyment will pay off in increased value in the long run if you pick the right projects that offer a high return on investment (ROI).

Livable square footage: Bigger houses come with bigger prices, so it makes sense that increasing the livable square footage will increase your home’s value. You can do this by building an addition or refinishing your basement or attic. Just keep in mind that basement square footage doesn’t add as much value as above ground spaces.

A clean kitchen, which may impact the home valuation process.
Source: (Daniel Irwin / Unsplash)

7. Does a messy house affect an appraisal?

The good news is that an online home valuation estimator won’t have any idea whether or not you keep a clean house when calculating your home’s value. But that’s bad news, too.

Let’s say your online valuation inspires you to get your house on the market. But then the agent comes in, sees the deferred maintenance and messiness and gives you a home value that’s $20,000 or $30,000 below what you expected to get. Yes, cleanliness and maintenance can have that big of an impact on your home’s value.

In fact, deep cleaning and decluttering adds nearly $4k in resale value alone, according to HomeLight’s own Top Agent Insights survey from Q1 of 2019.

Cleanliness also impacts an agent’s or pro appraiser’s impression of your home.

Sure, they’re not going to dock your home’s value for an unmade bed. But agents and appraisers know that keeping a house consistently clean can prevent major home repair issues from developing, like mold, mildew, and unpleasant odors.

If your house is a mess when they evaluate your home’s value, that’s a red flag that there are deeper repair problems festering below the surface.

8. Are home appraisals public record?

Homeowners looking into how their home’s value has increased over time might first think to research past appraisals done on the property. Unfortunately, home appraisals are not public record, (although some FHA appraisals may be public record).

There are other public records that can be researched to discover your home’s valuation history — such as the number of bedrooms and baths, the square footage and recent sale prices. Although in some states, even home sale prices are not public record.

Homeowners also have access to neighborhood demographic information that can indicate how your location will impact your valuation:

“There’s a lot of demographic information available online. It’s general and non-specific to the house, but you can use sites like Nextdoor and Yelp as data sources to look at what’s going on in your particular neighborhood,” explains Dalley.

9. What will my house be worth in 5 years?

If you’re looking up your home valuation because you’re planning to sell in 5 years, examining its value in a vacuum won’t tell you much. Instead of just taking an interest in its current value, you need to look at appreciation trends for your area.

Start by taking a look at the trajectory of your home’s value over time with the FHFA HPI Calculator. This simple tool lets you plug in your purchase time and price data, then calculates how your home’s value has increased over the timeframe.

A calculator used to get a house price estimate.
Source: (FHFA)

This can give you an indication of the normal trend line for home appreciation values in your area. For example, the above home’s value has increased by around 40% over five years, which means it has increased by roughly 7% year over year.

Of course, these generalized projections are only half the story. It takes an agent who has their finger on the pulse of your neighborhood to factor in any major developments that might impact your home’s value five years in the future.

“Any agent who is worth their salt can look at past and current trends to figure out what home valuations are going to look like in five years. They factor in other variables that can impact valuations over time, such as for homes in an up-and-coming area,” explains Dalley.

“For example, on the west side of Fort Worth there were neighborhoods that could only be reached by driving down long country roads that took you an hour to reach the city. Well, we knew several years in advance that they were building a toll way to that area that would cut the commute to 30 minutes, so we knew property values were going to skyrocket in that area.”

A street view of a home in the valuation process.
Source: (I Do Nothing But Love / Unsplash)

10: What will houses be worth in 2030?

According to Dalley, the 2030 future for real estate is looking bright: “I think you could safely say that we’ll see the real estate market trend up between 12% to 15% over the next nine years.”

Although no one has a crystal ball that can guarantee you an accurate home valuation for 2030, you can look at the general trend of America’s home price history to help you gauge the potential trends 10 years in the future.

Historically, median home values have seen a steady price growth increase at a 25-year average of 3.9%, according to data from the U.S. Census Bureau on home prices that dates back to the 1960s and earlier in some areas.

However, even this extensive historical data cannot account for unexpected dips and surges in the market. For example, few people predicted the severity of the Great Recession. And the pandemic-driven housing boom also came as a massive surprise.

Your home valuation: an important number to know

Knowing your home’s current market value is a number as important as how much money you have in your bank account before you spend money. An online valuation tool is a great place to get a ballpark home valuation, although most of those tools can’t take into account any upgrades or improvements you’ve made.

Buyers will pay more for an upgraded house than one that needs to be gutted, but knowing just how much more they’ll pay for your improved house takes the experienced eye of a paid appraiser or an actively working agent who knows exactly how the real estate market is performing in your neighborhood.

Header Image Source: (Ralph Kelly / Unsplash)