How Real Estate Sites Can Reveal the True Value of Your Home

Estimate your home’s value online to learn how much equity you can access.

Key takeaways

  • Real estate sites estimate your home’s value by using an automated valuation model (AVM).

  • Your home’s value fluctuates with market conditions. Increased demand with limited supply equals higher prices.

  • Use online home valuation tools to assist in planning for home refinancing, access home equity and time home repairs, or to simply gain perspective.

A home is worth whatever a buyer will pay. Increased demand drives prices higher when the market is saturated with prospective buyers.

Just take the real estate market, for example. Home prices in markets nationwide have soared in recent years. With interest rates poised to rise higher, it’s a seller’s market.

If you want to refinance your mortgage, access your home’s equity, or sell at a profit, you can use a real estate site to estimate your home’s value.

Estimating your home’s value

The recent booming real estate market caused a proliferation of online real estate companies that provide homeowners with accessible property valuation tools. These sites, including Zillow, RedFin, OpenDoor, and others, promise a quick estimate.

WATCH: How accurate are those Zillow "Zestimates," anyway?

They work by implementing an algorithm that utilizes publicly accessible and user-generated private information to compare homes in a given neighborhood.

A comparison of home value estimates

BONUS READ: Are Zillow Zestimates Accurate? Truth on Real Estate Estimates

These algorithms are known as automated valuation models (AVM). Though generally accurate (Zillow’s Zestimates tool boasts an error rate of only 1.9%), these AVMs only render accurate results to the extent that they have access to accurate information.

You should try to ensure the accuracy of your home’s value in all sources, but particularly in:

1. Tax records

All homeowners must pay property taxes. The amount depends on your home’s value as determined by your local tax assessor.

Tax assessors estimate your home’s value in one of three ways:

  • Sales evaluation: Compares your home to similar sales

  • Cost method: Determines cost to replace your home

  • Income method: Evaluates income derived from renting the property

  • The tax assessor’s office periodically assesses this value and records it in publicly accessible records.

Real estate sites then incorporate this data into the AVM algorithm. Therefore, it is essential that your tax assessment is accuracte.

2. Comparable sales

Like tax records, property sales records are also publicly accessible. Comps, or comparable real estate sales, help buyers and sellers determine a home’s value by providing similar sales in a given neighborhood.

Imagine that you own a three-bedroom, two-and-one-half bathroom home with 2,000 square feet of living space. Online real estate estimators would compare your home with other similar homes that have sold in recent years to approximate its value.

Comps don’t always account for unique upgrades or features, however. Take a home in a centrally planned subdivision. Every three-bedroom home might has two bathrooms and an unfinished basement. Unlike the standard, though, you may have finished your basement and added a recreation room with a half-bath, adding another 500 square feet.

Your home would then be unique among the others, but it would be difficult to determine its value using comps alone. This is why a home value estimator incorporating multiple factors is likelier to be accurate.

Incorporating sales turnover rate of a given area also comes into play. Some locales experience a higher homeowner turnover rate than others. The most competitive real estate markets, like the San Francisco Bay Area, see homes change hands much more frequently than do rural areas.

A higher turnover rate equips the algorithm with more complete data when estimating your home value. The more complete the data, the more accurate your estimated home value is.

3. Listings on the Multiple Listing Service (MLS)

Comps determine a home’s value based on past performance of other sales in the neighborhood. The MLS, on the other hand, helps determine a home’s value by comparing it to the current market price of comparable properties.

Unlike tax records and comps, however, the MLS is available to members only.

Real estate professionals use the MLS to advertise their listings with other realtors. Online real estate companies become MLS members to obtain another data point for estimating home value.

Using your home’s estimated value

An online real estate site provides an estimated home value useful for:

Refinancing: Refinancing creates the opportunity to reduce your monthly mortgage payment. Refinancing can make sense when interest rates have fallen, or your home’s value has increased. When you pay down your mortgage, you build equity in your home. The same thing happens when your home’s value increases.

Selling: In general, a home’s value appreciates over time. The longer you own your property in good repair, the greater the profit you often can realize when you sell. You can use this profit as a down payment on your new home or to invest.

Accessing equity: Your home’s equity remains unused until you tap into it. Financial products like the home equity loan, home equity line of credit and home equity agreement provide cash in exchange for an interest in your property.

But unlike a home equity loan or home equity line of credit, a home equity agreement is not a loan.

An example of a Zillow Zestimate

Unlock home equity with Unlock Technologies

One method of tapping into your home’s equity is through a home equity agreement (HEA). With a HEA from Unlock, you receive cash now in exchange for a percentage of your home’s future value. This is not a second mortgage or a loan – there are never any interest fees or installment payments. Instead, you get cash to use as you see fit.

Contact Unlock Technologies today to get started.

The blogs published by Unlock Technologies are available for informational purposes only and not considered legal or financial advice on any subject matter. The blogs should not be used as a substitute for legal or financial advice from a licensed attorney or finance professional. Links in our blogs to third-party websites are provided as a convenience and for informational purposes only; they do not constitute an endorsement of any products, services, or opinions of the corporation, organization, or individual. Unlock bears no responsibility for the accuracy, legality, or content of the external site or for that of subsequent links.

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