Determining The Value Of Your Home

Have you ever wondered how a home’s value is determined? With online property evaluation tools, Zestimates, and professional opinions, it can be confusing to determine what your home is worth. A property’s value is based on factors such as location, amenities, structural condition, and recent sales of similar properties around the area. To come up with a value, a property appraisal is completed so you can know the exact value of your home.

The most common form of appraisal is determining the fair market value of your property, or what the home should sell for on the fair market. There are other types of appraisals to determine the property’s tax-assessed value, which determines how much tax the homeowner should pay on the home annually.

There are formal appraisals, which can be done by a property appraiser, or they can be done by a real estate agent. If you are buying or selling a property, most lenders will require the services of a professional appraiser, but don’t confuse this with a home inspector. A home inspector is a qualified professional that will tell you about the condition of your home, not the value.

Here are the different reasons for needing an appraisal

  •      Selling your home
  •      Buying a home
  •      Refinancing
  •      Home equity loans
  •      Cash or business loans
  •      Tax reassessments


When selling your home, an assessment of the property’s value is an important step in coming up with an initial listing price. This service is typically offered by your real estate agent and looks at comparable properties in the surrounding area.

Comparable properties are those sold within the past year or two that are similar to your home in terms of size, features, and condition.

After finding the “comps,” the agent then adds or subtracts value to your home. For instance, a property fence can add value to your home, but pealing exterior paint can subtract from it.


When an offer on a home is accepted, the lending company will need a professional appraisal to be completed on the property. The lender requires this so they know the proper amount given on the loan. This also ensures that the amount you agree to pay for on the property is priced correctly.

For this reason, most buyers will include a contingency clause in the purchase agreement which states that the sale is contingent upon the approval of lender for the mortgage loan. This is contingent upon appraisal.


Refinancing a home means replacing your current mortgage loan with a completely new one. You can do so with the same lender you took out your first loan with, or you can find a new lender. Either way, it essentially means starting over with a brand-new loan term, which is why you don’t want to make the decision in haste because rates are low.

Refinancing also requires a property appraisal to make sure the collateral value offered by the property justifies the refinanced loan amount you ask for.

So, why do people refinance their home?

  1.      To shorten the term of their loan
  2.      Lower their interest rate
  3.      Lower payment
  4.      Adjustable-rate mortgage to a fixed loan
  5.      And cash out some equity
  6.      A home equity loan

A home equity loan is basically a line of credit secured by your home. When the line of credit is drawn down, the lender providing it places a second mortgage loan on your home until the loan is paid off, then you can use the loan to finance other purchases. However, if the loan is not paid off, your home could be sold to pay off the remaining debt.

You want a property appraisal for this because it could help you secure a loan. Also, it’s great thing to know if your property has increased in value or decreased.


You can use your home as the primary collateral source for other types of loans. This requires a current valuation of the home made by a professional appraiser and put in writing. You would then bring that written document with you when you got speak to lenders about the loan you’d like.


Many states base property taxes on the fair market value of homes. If your property has decreased in value, then you can request a reappraisal for it. This might lower your annual property tax, and who wouldn’t love that?

Having your home appraised will either add money to your pocket, or it is an eye opener to make changes. Or, if you’ve found your dream home and the asking price is $300,000, it’s always good to double check that the house is actually worth that amount.