What Is My Home Worth? A Homeowner’s Guide to Determining Home Value

Key Takeaways

• Many factors affect a home’s value, including size, location, condition, and comparable sales.
• Online tools use automatic valuation models to estimate the value of your home; they’re not as dependable as formal appraisals, but they’re a good starting point.
• You can get a free estimate of home value with online tools or by requesting a comparative market analysis from a real estate agent.
• Once you know what your home is worth, yu can make strategic decisions, whether that means selling, refinancing, borrowing against your home equity, or selling it with a home equity agreement.

Many homeowners don’t know what their property is worth. That’s especially the case as market conditions shift from a seller’s market to a more balanced market — or even a buyer’s market in some areas. Knowing your home value gives you important data you can use to price your home for sale, or find out how much equity you may have available to use.

You can estimate your home’s value for free using online tools. In our guide below, we’ll go over what affects home value, how home value estimators work, and how you can get a free estimate.

What Determines Home Value?

Home value is how much a property is worth. There are two types of home value: market value and assessed value.

• Market value is what a buyer would pay for your home in today’s current market.
• Assessed value is the official valuation of a property for tax purposes.

The value of your home fluctuates often, and several different factors can affect its worth: 

• Location: Homes in more desirable locations are worth more
• Square footage: Larger homes tend to have a higher home value, all else being equal
• Condition: Poor condition could drag down your home’s value
• Recent upgrades: These could improve your home’s value
• Comparable sales (comps): These are the sale prices of other homes nearby with similar features and characteristics, useful for comparison

Market conditions can also affect your home’s value. That includes things like current interest rates, how much inventory there is for sale in your area, and seasonal swings in buyer behavior. For example, the price you could get during the doldrums of January might be quite different than what buyers offer during more competitive summer months.   

Housing values can shift from month to month as rates change and nearby homes are sold, so it’s important to monitor your home’s value from time to time, especially if you’re considering a move.

How Does a Home Value Estimator Work?

An Automated Valuation Model (AVM) is a software-based way of estimating home value. You may have used an AVM if you’ve looked up your home’s address on a real estate app or search platform.

With automated valuations, an algorithm analyzes property data such as: 

• Sales history
• Assessed value
• Property age
• Address
• Home size 
• Number of rooms
• Special features
• Nearby comps

Using those inputs, the AVM then models a statistically likely home valuation. Automated valuations can be a useful tool, but they have some limitations. The most important one is that they’re only as good as the data going in. If an AVM doesn’t have the most up-to-date sales history or property details, the valuation won’t be as accurate. 

That’s why AVMs are best used as a starting point, not a definitive value. Lenders and tax assessors won’t rely on automated valuations when determining the value of your home. Instead, they’ll use a formal appraisal conducted by a professional appraiser.

However, a home value estimate is a free, low-risk way to see how much your home is worth.

How to Get a Free Estimate of Your Home Value

There are two main ways to get a free estimated of your home value: via online tools or with a comparative market analysis (CMA) from a knowledgeable real estate agent.

Online tools, including AVMs, are pretty easy to find. You can get a free estimate of your home value using Unlock’s free estimation tool. It shows you how much equity you may be able to unlock, and you can try the tool with no application or obligation. 

Another way to see how much your home may be worth is to work with a real estate agent. They can run a comparative market analysis for you, using market knowledge and recently sold comparable home prices to create an estimated value for your property.  

How to Calculate Your Home Equity

If you want to figure out your home equity, then learning your home value is essential. You’ll need to know what your home is worth because it’s a critical component of the equation. Once you know your home value, here’s how you calculate your equity:

• Home value – mortgage balance = home equity

Here’s an example. Suppose you use an AVM and discover your home’s value is $400,000. You still have $250,000 remaining on your mortgage. Your equity would be $150,000:

• $400,00 – $250,000 = $150,000

Keep in mind that “mortgage balance” refers to all outstanding liens on the home, including your primary mortgage as well as any secondary mortgages, like home equity loans (HEL) or lines of credit (HELOC). 

How Do You Access Your Home Equity?

The equity you’ve built in your home is an asset you can borrow against or even sell. You can use your home equity to pay for home improvements, debt consolidation, or other big expenses. There are a few ways to gain access to it (besides selling the home):

• HELOC: A home equity line of credit is a revolving credit line that uses your home equity as security. You can borrow what you need as you go and pay it back later with interest, often at a variable rate.
• Home equity loan: A home equity loan lets you borrow a lump sum up front and pay it back in regular installments with fixed interest.   
• Cash-out refi: This refinancing option replaces your current mortgage with a new one with a slightly higher amount; you receive the difference in a lump sum at closing. Cash-out refinancing means you’ll get a new interest rate and loan terms.
• Home equity agreement (HEA): A home equity agreement lets you sell a portion of your future home equity; in exchange, you get a payment upfront. Years later, when you sell the home, you can settle the agreement with a share of the proceeds.

Knowing your home’s value is the first step to accessing your home equity in the way that works best for you.

How to Increase Your Home’s Value

Whether you’re planning to sell or just want to grow your wealth, increasing your home’s value can pay off. Here are two ways to grow your home’s value over time: 

• Home improvements: Many homeowners make improvements and upgrades to their home to increase its value. One of the most common improvements with a strong return on investment is a kitchen remodel; even a modest renovation can boost value by 113%, according to a report published in the Journal of Light Construction. Other upgrades that can boost home value include bathroom updates, improvements to curb appeal, and energy efficiency upgrades.
• Paying down the mortgage: Every payment toward your mortgage moves you closer to owning the home outright. Some homeowners make additional principal payments each month to reduce their balance faster. Another common method is to pay half your mortgage payment every two weeks instead of a full payment once a month. This results in 26 half-payments or 13 full payments — the equivalent of one extra payment toward principal each year. 

If you take steps to increase your home’s value, it’s even more important to get regular value estimates so you can track whether your improvements are paying off. 

Conclusion

Understanding your home’s value is important for sellers, but it’s worthwhile information if you plan to stay in your home, too. It’s a good starting point for exploring a cash-out refinance, home equity loan, HELOC, or an HEA.

Get a free home value estimate at Unlock’s Apply Now page and see how much your home could be worth, as well as how much equity you may have access to. Then you can explore what you might do with it.