Admit it, we've all Googled the value of your own home--or looked it up on Zillow. You may even have input your homes' information on a "what's my home worth" calculator. Almost a quarter of U.S. homeowners use online home-value calculators to get a preliminary estimate of what their home may be worth. These online tools are called automated valuation models (AVM) . Millenials and Generation X'ers are the major p;ayers with the AVMs. However, these tools are rapidly being used by Boomers and others, especially in recent months due to the COVID-19 pandemic. There are a myriad of major players out there when it comes to AVM models, such as Zillow, Redfin, Trulia, etc.
Step one for when you’ve done your initial AVM calculation is to get a comparative market analysis, or CMA. This will give you various sources to weigh your comparisons to get a comprehensive estimate of the value of your home. In addition, another way provided by the federal government is the FHA House Price Index Calculator. This may be a more advanced option than most and it’s recommended to use this as a staple comparison tool in addition to your other options. There is no right or wrong method to use, however your Realtor will be able to point you in the right direction based off your needs.
Of course, there are some AVMs that cannot get a true value of your home because they cannot look inside the home. The most commonly used option is to hire a professional real estate appraiser to determine the true value of your home, even if you start off using an AVM. More importantly, lenders require an appraisal before they’ll approve a mortgage, if you’re looking to buy. Of course, as a home-owner, you can get an appraisal at any point in time.
Arguably the most important step is to search for comparable properties, commonly referred to as “comps” in the real estate industry. These will give you an idea of the value of similar properties in your area to help determine the value of your home. The rule of thumb is typically to get at least three comps when using an appraiser. Even if you are doing the comps yourself, three is always a good number to go by moving forward. Always have your Realtor work with you during this process.