Ever wonder what your house is really worth? Whether you plan to sell, refinance or make home improvements, knowing the value of your home can be beneficial. Knowing your home’s value allows you to evaluate what you can afford, determine whether a listing is priced appropriately and decide how to price your own home… and the benefits don’t end there. Refinancing, home equity lines of credit, insurance premiums, and annual property taxes are all based on your home’s value.
It can also provide a picture of your overall financial health. Nearly 73% of Americans say knowing the value of their home is important for precisely this reason, according to a NerdWallet survey conducted online by The Harris Poll in August 2018.
Unfortunately, many first-time buyers do not understand how much an essentially “educated guess” can either increase or decrease the expected value of their home. From an unpredictable local housing market to unforeseen foundation problems, the fluctuation of a property’s value can become quite confusing for the average homeowner.
Whether you’re buying or selling, here are 5 reasons why you should always know what your home is worth.
Selling a House
If you plan on selling your house in the near future, then you most definitely will need to know its value. Knowing what your home is worth, and the price of homes recently sold in the neighborhood are important factors used when determining your selling price.
If your house is priced well above market value, you may find yourself with few bids. But say you installed a new high-end energy efficient AC unit and that should up your home’s value compared to the neighbor next door with a standard unit. Maybe not. The appraisal value assumes that homes considered comparable will have the same “typical” amenities. Granite countertops, wooden floors and energy efficient windows, while adding to your home’s look and comfort, may not equate to an increased home value. Adding more living space or garage space is more likely to add market value.
The net proceeds you make after selling a house is your selling price minus the loan balance minus the selling cost. You probably already know your loan balance and can easily find out prevailing selling costs in your area. The only variable being the selling price. Getting a better idea about your home value is definitely a good first step if you are considering selling in the near future.
Understanding value before starting the refinancing process is also important. There are a multitude of reasons why individuals choose to refinance, but one of the most common is to lower the current interest rate. Lowering your interest rate may lower the monthly interest cost, but not necessarily the overall cost of your mortgage. For instance, if the refinanced loan amount is greater than a certain percentage of the value, you might be required to pay mortgage insurance. Also, a refinance comes with new closing costs and may extend the length of your loan. Understanding your value before starting the refinance process could help prevent you from starting a process that won’t be as beneficial as you first thought while shedding some light on how big of a mortgage you can comfortably handle. Regardless of if you’re refinancing to get a better rate, obtain a lower payment, or take a cash-out to help with other financial needs, knowing the value of their home plays a big part in it.
Making Home Improvements
Home improvements are usually made for two reasons – making the house more comfortable to live in and preparing the house for sale to obtain a better sales price. If you’re thinking of making improvements to increase the selling price of your home, it’s important to know your neighborhood’s home values.
If your house is already valued near the highest priced homes in the area, investing in expensive home improvements may not yield a suitable return on your investment. It’s important to remember, home values are estimates of what a house may sell for if it were on the market. Property values are constantly changing, riding the wave of the marketplace. Make sure you do your research before making any improvements that could lead to little profits, or worse, put you in the hole.
Getting a Line of Credit
In today’s economy, many homeowners are looking for additional sources of income to cover those out of the blue expenses that come with owning a home and any other unexpected costs. You might consider refinancing your mortgage to get a cash-out, but it may not be a good move, especially if your interest rate is lower than the current market rate. In such a case, applying for a Home Equity Line of Credit (HELOC) as a second mortgage would be a better play. Similar to a refinance loan, HELOCs will also require you to have a certain equity level in your home. Typically, it’s expected for a homeowner to have a minimum of 20%-25% in order to qualify. %. Once again, knowing your home value will guide you if getting a HELOC is something you could qualify for.
Staying in the Know
Even if you have no intentions to do anything mentioned above, it’s important to at least have an idea of what your home is worth. Life can be unpredictable, and things come up, plain and simple. Whether it’s a new addition to the family, moving because of a job in another area, or just needing a little help with your finances, it’s important to be ready for when life throws you a curve ball.
How to Find the Value of Your Home
There’s no shortage of websites that claim to provide an instant valuation for your home. The most widely used is Zillow’s Zestimate feature that provides an estimated value range when you search your home on their site. However, tools like Zillow Zestimate and others are notoriously flimsy and inaccurate. In fact, in 2017, a Chicago homeowner filed a lawsuit against Zillow claiming their Zestimate “misled homebuyers by providing them with very low figures.” Zillow itself has said publicly that their Zestimates could be anywhere from 4-10% off. That’s upwards of $50,000 on a $500,000 home.
So, how do you get a true valuation for your home and not just a guess from an online aggregator? REX recommends having an in-person consultation with an experienced, local agent. A REX Relationship Manager will come to your property, factor in all the upgrades and modifications you have made, provide a true market assessment, and use comparable homes nearby to provide the most accurate value possible.
For more information or to set up a FREE consultation, visit REXhomes.com or call 855-342-4739