Knowing how much your house is worth is important whether you plan to stay a while or sell in the near future. Your home’s value impacts how much equity you can extract when refinancing as well as the price you can expect to get from a buyer, among other things. There are several ways to figure out your home value on your own, including online valuation tools and professional appraisals.
Why does home value matter?
Most people wonder about the value of their home when they’re thinking about buying or selling. If you’re considering buying a home, you’ll want to know its value so you can be confident the lender will approve you for the mortgage amount you’ll need. If you want to sell your home, you’ll want to know how much it’s worth to help you decide on a listing price.
But even if you aren’t looking to buy or sell anytime soon, you should still have an idea of how much your home is worth. The value of your house can impact other financial decisions and aspects of your life, including:
- Refinancing. Knowing how much your house is worth is an important step in determining how much of your home equity you may be able to turn into cash with a refinance.
- Property taxes. Many Canadian provinces will allow you to appeal your property taxes if you believe they are too high. Knowing the value of your home is key to making an appeal.
- Renovation decisions. We all assume that renovations will boost the value of our home, but that isn’t necessarily true. A professional can help you decide what upgrades will add value to your home and increase its worth.
- Estate planning. If you want to leave any property to your beneficiaries, it’s helpful to know the value to ensure that your estate is fairly distributed.
- Retirement planning. Your home is a part of your overall wealth and knowing its value can help you plan for retirement, especially if you plan on eventually downsizing or perhaps moving into a retirement or nursing home.
- Capital gains. It’s important to ensure you are paying the right amount of tax on the property you sell.
- Insurance coverage. Knowing the value of your property can help ensure proper insurance coverage as well as speed things up if you ever need to make a claim.
- Bankruptcy. Your home is probably your biggest asset, so you want to make sure you get fair market value should you need to declare bankruptcy.
How to figure out the value of your home
So how are you supposed to figure out how much your home is worth? The value of your home will depend on multiple factors such as location, age, property size, upgrades, condition and more. You also need to consider the current real estate market. The following are a few methods you can use.
Online valuation tools
One option is to use a free online assessment tool. Many banks and real estate companies offer online home value estimators where you simply plug in a few details about your home and receive an estimated market value. These tools are pretty basic in what they assess and don’t consider your home’s condition or any upgrades. But it’s a starting point.
Compare sold prices
You can also look at recent sold prices for homes that are comparable to yours. Recent sales will give you a better idea than the online home estimators because you can see how upgrades and other features may affect market values in your neighborhood, but remember that no house is going to be exactly like yours. Check to see if your province makes sold data publicly available, or consider asking a real estate agent.
Professional home appraisal
While the previous options will give you an idea of what your house might be worth, a home appraisal will give you a number that’s even more reliable.
A home appraisal is an in-depth assessment of the property. This process includes assessing the home itself, comparing it to others nearby that have recently sold, and of course, considering the current market conditions. Home appraisals don’t deliver a fixed value but rather a snapshot of the value at a particular time. If you had your home appraised a year ago, its value may have changed, even if you haven’t done any renovations. You can expect to pay anywhere between $350 and $700 for a home appraisal, although it depends on your location.
A home appraisal is typically required during a home purchase if a mortgage is being used, and is paid for by the potential buyer. However, homeowners can choose to pay for an appraisal at any time.
Appraised value vs. assessed value vs. market value
When determining how much your house is worth, it’s important to note the difference between the appraised value, assessed value and market value. While they all use similar methods to determine the value of your home, the values are likely to be different.
The appraised value is not fixed. It can change week to week depending on fluctuations in the market and other variables such as upgrades or add-ons. Appraisals are primarily during a home purchase transaction, and are of most interest to the buyer and their lender.
The assessed value, on the other hand, is used for tax purposes. A municipal or provincial government does an assessment to produce data for the tax authorities. This data helps determine the taxes you should pay based on the value of your property. Assessments are usually done annually, and the assessed value is fixed until the next assessment takes place. Typically, things like kitchen or bathroom upgrades don’t play a role in assessments, which are more concerned with factors such as a home’s size, age and location.
Several cities and provinces maintain searchable databases of residential property assessments, so you can look up your home as well as others you’re curious about. For example, British Columbia residents can look up the assessed value of any property using the BC Assessment tool, and Ontario residents can use the AboutMyProperty tool.
Appraised and assessed values differ from the market value, which is of most interest to a seller. Market value isn’t so much how much the home is actually worth but rather how much a buyer is willing to pay for it at any given point in time. Market values vary based on the type, size, and location of a house, as well as current supply and demand.