How to Determine the Value of Your Home in 8 Easy Steps

Step 1: What adds value to a home?

The first thing to consider when determining your home’s value is to consider what adds value to a home in general.

As we know, not all homes are created equal, and even within your own neighborhood, some homes might be worth more than others. There are also going to be certain features that are unique to your home that might make it more or less valuable than similar homes.

Real estate agent Hans Wydler, who is based out of Washington, D.C., and has more than 22 years of experience in the industry, says that there are several factors that go into assessing a home’s worth.

“House size, neighborhood, home condition, how long you’ve owned the house — these are all things that affect a home’s value,” he says. Wydler says if you’re trying to determine the value of your home, you’ll want to consider all of these things, plus a few more.

Market rate appreciation

Simply put, this is how much your home increases in value over time.

If you bought your home back in the 1970s for what was the fair-market value back then, it stands to reason that your home is going to be worth significantly more today. Conversely, if you just bought your house a year ago and paid top dollar, chances are your home hasn’t appreciated much in value, if at all.

Financial advisors typically recommend that homeowners live in their homes for at least two years prior to selling, which not only protects you from having to pay capital gains tax, but also gives the house time to appreciate in value.

Location

According to Wydler, the location of your home is going to have a big impact on value.

“It’s the one thing about a house you cannot change,” he says.

When determining the value of your home, take a look at what’s around you.

Are you close to parks or schools? Can you walk to your neighborhood coffee shop? What about public transportation? These are all questions you’ll want to ask yourself, and they are all part of the equation.

House size and curb appeal

Square footage, number of bedrooms and bathrooms, and lot size all come into play when determining a home’s value.

Does your home have any unique or special features that make it stand out? Is your yard fully landscaped, and how does your home’s outside space stack up against other homes in your neighborhood? Are there trees on your lot, a fence, or a storage shed?

Age is also an issue, as an older home is generally going to have a lower value than a brand-new house of the same size. This is where maintenance becomes important.

“Deferred maintenance does affect the value of a house, so taking care of things like a cracked window, cleaning air ducts, or other repairs is important,” says Wydler.

Current mortgage interest rates

Mortgage interest rates aren’t something you can control, but you should still keep them in mind when it comes to determining the value of your home. Higher interest rates mean a larger mortgage payment, something that can often lower the number of qualified homebuyers. Lower interest rates, such as those seen in 2020 and 2021, make buying a home much more appealing.

Because low rates might mean more qualified buyers, they can also result in a shortage of homes for sale if a lot of people are trying to buy, as well as processing slowdowns if mortgage lenders are bombarded with loan applications (including refinance applications from homeowners with higher rates).

Step 2: What kind of improvements have you made since you bought the house?

Making improvements to a home can potentially increase its value, but not as much as you might think.

Expensive add-ons such as swimming pools or major renovations such as a complete kitchen remodel definitely add to the overall appeal, but don’t expect that $40,000 swimming pool to add exactly $40,000 in value to your home.

“If you own a home and know you’re eventually going to sell it, I wouldn’t recommend expensive improvements,” says Wydler.

“We tend to focus on cosmetics, such as painting, which is one of the best investments you can make, or updating flooring and carpets.”

Wydler says one exception would be if you add a bedroom or bathroom to a house. “Four bedrooms is going to be better than three,” he says, “and if you have an older home that only has one bathroom, most families want at least two, so adding another bath can add to your home’s value.”

Step 3: Review the FHFA’s HPI calculator

The Federal Housing Finance Agency (FHFA) offers a House Price Index (HPI) calculator that projects what a house purchased at a certain point in time would be worth today.

While this doesn’t account for things like home condition, improvements made, or the local real estate market, it can be a good way to evaluate how much your home has potentially appreciated in value over time. The calculator asks for your state, the year you purchased your house, the current year, and the original purchase price of your home, which results in a graph that indicates the percentage your house has appreciated and an estimated value.

Be aware — this is only an estimate, and it does not project the actual worth of your home.

Step 4: Take a look at online valuation tools

You can find plenty of online home valuation calculators just by Googling, and these are also helpful when trying to determine the value of your home.

Sites such as eappraisal.com, which uses data from recent home sales, or forsalebyowner.com, which also shows recent sales of comparable homes in your region, can give you a basic idea of your home’s value.

Step 5: Look at some comps from your neighborhood

If you know of some homes in your neighborhood that recently sold, you can see what the asking price was, and once the house sale has closed, you’ll be able to look online at the sales price.

Home values can be different from neighborhood to neighborhood, or even from block to block, so reviewing recent sales of comparable homes (known as “comps” in the real estate industry) in your area can help you assess your own home’s value.

Finding and analyzing comps on your own isn’t going to give you a fully accurate picture, nor will it provide information on current housing market trends, but it can be a good tool for helping to determine a home’s value.

Step 6: Talk to a real estate agent

Once you’ve done your own research and estimations on what your house might be worth, it’s time to sit down with an experienced real estate professional and get their take.

A real estate agent will also look at your home and suggest ways you can improve the curb appeal and potentially increase the value of your home, as well as provide some of the most accurate information on what your home is worth.

Your real estate agent will know things like what the housing market is doing in general, what pools of buyers they might be able to tap into, how mortgage interest rates have been shifting, and whether or not any improvements you’ve made have actually added to your home’s value.

“You can do the online valuations and use computer pricing algorithms, but those calculators don’t know the current market conditions or what’s inside your house,” says Wydler.

“If you bought your home 15 years ago and have made renovations or improvements since then, those algorithms aren’t necessarily going to be accurate.”

Step 7: Get a comparative market analysis (CMA)

A professional real estate agent will also do what is called a comparative market analysis, or CMA. Real estate agents use CMAs to look at recent sales of properties in your area in order to determine the value of your home and what kind of price to set when the time comes to sell, or to assess whether a price seems fair for a buyer.

When you retain an agent, a CMA is usually one of the first things they do in order to provide the best composite of your home’s value.

“We look at dollar value per square foot, house size, and location,” says Wydler. He adds that a CMA goes beyond a spreadsheet, taking into consideration the subtleties of your home, such as whether the street you live on is a little nicer than the next block over, or what the general presentation of your home looks like.

It’s also important to note that a CMA looks at what other homes actually sold for, not simply the asking price.

Step 8: Get an appraisal

While it seems like getting an appraisal should be the first thing on this list instead of the last, most of the time an agent isn’t going to recommend spending the money on one unless you have a house under contract.

That being said, if you really want to get your home appraised, there’s no reason you can’t do so. There can be certain benefits to getting an appraisal for valuation purposes, especially if there aren’t many comps for a CMA in your area, or if the real estate market seems to be shifting.

Wydler, however, says there usually isn’t a compelling reason to pay for an appraisal before you sell your house.

“Short of an estate trying to take care of state requirements for a property sale, I see no use in getting an appraisal ahead of time,” he says.

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