Home LoansMortgage

Fair Market Value: Find Out What Your Home Is Really Worth

With the real estate market going strong, many homeowners are eager to determine their property’s worth. Whether you want to sell, or you’re considering a home equity loan, knowing your home’s fair market value is the first step. You may have your own opinion on your home’s value, but those expectations may not align with reality.

To get a real estimate, there are a few ways you can approach it, which we’ll cover in this post.

3 Ways to determine the market value of your home

#1 Ask a real estate agent to do a current market analysis

The market value of a home is based on a combination of real estate conditions in your area and the specifics of your property. To determine a home’s value, real estate experts recommend letting an expert who has a history of working in your area take a look at your neighborhood and home. From there, they’ll dig into data, using recent sales and comparable listings to create a comparative market analysis, also called a current market analysis or CMA.

A CMA report is designed to give both the agent and homeowners a comprehensive picture of how other similar homes have been priced, how long they were available for sale and, ultimately, how much they sold for. That can help an agent and homeowners arrive at a market value.

To establish a home’s value, real estate agents suggest homeowners look closely at a CMA. These market reports can facilitate honest — but sometimes awkward — conversations between homeowners and their agents.

In Nashville, for example, where property values have increased in recent years and new residents are flocking to the area, some homeowners believe their homes have ballooned in value, said Rebecca Richards, a Nashville-based Realtor for Exit Realty. “One of [the] biggest mistakes people make is they are confident they can get more than 20% for their house than what it’s worth,” she said. “But then, when they go to sell, it sits on market for a few weeks with no activity.”

To gather additional intelligence, agents also mine their professional and personal networks. “Looking at comps is critical, but it can also be like looking in the rearview mirror,” said Amanda Mulholland, a real estate agent with Paragon Real Estate Group in San Francisco. “You have to get the story of why that property sold, what was the competition and what happened with other buyers.”

Some agents even encourage homeowners visit open houses. “They can see firsthand how similar properties compare to the condition of their own home,” said Keith Marder, a New York- based real estate agent with Halstead Property.

#2 Get an independent appraisal

In some instances, buyers can elect to hire a certified real estate appraiser to make an estimate on the value of the home. Appraisers are independent contractors who assign value to the home and are not involved in the transaction, giving them an impartial view.

More commonly, appraisals are part of the purchase process. In order to secure a home loan, a lender will usually ask for an independent appraisal of a property’s value.

While a pre-listing assessment isn’t typical, it can be instructive for setting a home’s value. This service can run between $400 and $1,000, depending on your location, agents said. “It can give a homeowner confidence,” said Barry Richards, a Realtor for Exit Realty in Nashville and Bowling Green, Ky.

To determine a value, appraisers factor in details such as the condition, size, structural condition, quality of construction, upgrades, square footage, location and lot size. They also analyze comparable properties that have recently sold. Appraisers may visit your property and review the inside and exterior, but in some instances, a site visit isn’t necessary.

To find a certified appraiser, homeowners can ask their agent for suggestions, or contact the National Association of Realtors or the American Society of Appraisers.

With appraisals, one word of caution is that estimates are subjective. Different appraisers could assign a slightly different value, or, if several homes sales close between appraisals, the value could also be altered.

#3 Use online tools

More than ever, homeowners have a plethora resources available online, allowing them to become veritable real estate experts. But licensed realtors say that homeowners should proceed with caution when using these sites. They note that information that is used to assign home values can vary by real estate site and, even within individual sites, based on computer formulas and the type of data it harvests per market. With the various sites, important factors including how the estimate is established and the way square footage is expressed, can vary, and that limits websites usefulness, said Josh Weinberg, a licensed Realtor in Chicago with Keller Williams.

“I think people are way more educated than they were years ago because of all the access to information online, which is great,” Weinberg told LendingTree. “But it can distort a buyer or seller’s view of what a property is worth.”

Also, real estate sites have no way to express valuable selling points like a prime block, unique features, construction quality or upgrades, said Mulholland. “They can’t really capture if something has a view or if it has been remodeled.”

Sellers may also receive an inflated projection of values. Depending on the site, a home’s projected value could jump when a property goes on the market or nearby homes are listed for sale, puncturing sellers’ expectations.

“It can make our job hard as realtors if the estimate has their house overpriced and we have to bring the bad news,” Rebecca Richards said. “We show them actual comps of what is selling in the area. You’ll still make a profit, but maybe not the tens of thousands of dollars you thought.”

In the months before you list your home, search for similar properties and review their listing details, including square footage, lot size, upgrades and recent sale prices. If possible, attend an open house and see tour these homes. You can also speak to friends and neighbors with homes that are comparable in size and budget. Once home sales close, the prices become public record, so homeowners can monitor these transactions as well and track values.

Compare Home Loan Rates

What factors determine a home’s value?

A home’s value is determined both by its physical structure, interior and exterior conditions, square footage and its property. Other factors include upgrades, renovations, views, additional features like vaulted ceilings or intricate interior design, as well as construction. A home’s location, including its neighborhood, subdivision and street, are also critical factors. Nearby amenities, such as natural attractions, schools or access to transportation, could also increase value, real estate agents said.

In a multi-unit building, an apartment’s layout, floor and view can even make one unit more valuable from another similar-sized property in the same space. In contrast, rural properties, which can include significant amounts of land, a market analysis is useful to set value, since there typically aren’t many recent sales of similar homes and land, said Barry Richards.

“You can have a much harder time pinpointing price, and an experienced agent can be very helpful,” he said.

A home’s value can even change with the seasons. In some markets, fall and spring are the most active times for home sales.

Lastly, demand is essential as well. Where housing supplies are low and demand is high, a home may be worth much more.

In San Francisco, for instance, the market is especially tight, which drives up prices.

“You have a fixed housing stock with a rising population and rising job growth,” Mulholland said. “You have a seven-mile by seven-mile market. It is always going to be hot here.”

Can you get more than your house is worth in a hot market?

In sought-after neighborhoods or areas, sellers can expect their home to fetch a premium price,  agents said. “You really can get more and, if something is [listed] at a reasonable price, you’ll get multiple offers,” said Marder. He recently represented clients who, after just a week on the market, received eight offers on their property and accepted one above asking.

Still, agents occasionally have to remind homeowners a property is only worth what a buyer will offer. “Sometimes people have expectations beyond what is available or possible,” Rebecca Richards said.

A hot market can also be problematic when a financing is involved. While a buyer may commit to a premium price, if they need a home loan, their lender will require an appraisal to establish value. In some cases, the appraisal may value a property at a lower amount than the sale price, limiting the buyers’ amount of funding, Rebecca Richards explained.

In that case, the buyer may ask a seller to renegotiate to a lower price. A seller is not required to accept a lower price, but that could scuttle their deal, forcing a homeowner to relist their property and start all over.

“Most of the time, sellers will drop the price because they know they’re getting top dollar at this point,” she said.

The bottom line

While real estate professionals have data at their fingertips, homeowners can do research on their own. To determine a property’s fair market value, licensed realtors will use firsthand experience on the sales environment, assemble data on comparable properties and conduct a detailed market analysis, veteran agents said. On your own, homeowners can consult with friends, family and neighbors about how they determined their own values. It’s also a good idea to look online for estimates of your home and similar properties, as well as recent sales.


Today's Mortgage Rates

  • 2.485%
  • 2.393%
  • 2.91%
Calculate Payment
Advertising Disclosures Terms & Conditions apply. NMLS#1136