Calculating How Much Your Home Is Worth

How much is your home worth these days? The nationwide decline in home values over the past three years has many people worried about how far "underwater" they might be on their own mortgages, i.e., whether they owe more than their home is worth. It's a particular concern for anyone who's thinking about refinancing their mortgage, but just about anyone with a mortgage is probably concerned as well.

If you're thinking about refinancing, you'll want to know what your home is worth before you commit a lot of time and money to the process. If you owe more than the property is worth, it's going to be more difficult to obtain a refinance in the current climate, although you may be able to qualify for one of the 125 percent refinances that Fannie Mae and Freddie Mac are supporting under the government's Making Home Affordable Program.

Even if you're not refinancing, you may still want to get a handle on your home value, particularly if you're concerned that it may have fallen significantly. Depending on how much value your home may have lost, it could affect your long-term plans or even whether you think you would be better off walking away from the mortgage (which is a difficult and complicated decision in itself, even if you do owe significantly more than the home is worth).

There are several ways to calculate your current home value, some more accurate than others. Generally speaking, the more accurate assessments will either cost you money or otherwise require professional assistance. There are also ways to calculate a "ballpark" figure that will at least give you a reasonable idea of where you stand, in terms of home value, and help you decide where you want to go from there.

Professional assessments are most accurate

The most accurate way is to have a professional assessment done. This is something you'll need to do anyway if you're going to refinance your mortgage and will provide a figure that a lender can use to base a mortgage on. However, it will cost a few hundred dollars and probably isn't something you want to pay for when you're still trying to decide whether to pursue a refinance or not.

You can also request an estimate from a mortgage broker or real estate agent. Although it doesn't carry the weight of an official assessment, this will generally give you a pretty good idea of what your property is worth. However, performing such an assessment requires that the broker or agent perform a certain amount of research, for which they may reasonably expect a formal business relationship or financial compensation.

Getting a ballpark estimate

If you're just trying to get an approximate value of what your home is worth to determine if it might be worthwhile to pursue a refinance or get a handle on where you stand financially, there are several approaches you can take. First, you can use any of a variety of online estimators that will calculate your home value for you, usually either by entering your address or providing specific information about the property. The problem with these is that many of them require that you register with the site first and the estimates provided can be highly unreliable. If going this route, try to get estimate from half a dozen sites or more and see where the values are clustered - that's probably your most reliable estimate.

You can also do your own research into comparable properties, finding homes similar to yours that have sold recently and seeing what the price was. Unfortunately, given the wide variety of homes out there, this can be difficult. It's not enough to compare other homes in your community of similar size, they also have to be of similar age, construction and neighborhoods for the comparison to be meaningful.

Ideally, you want to try and find three or more comparable homes to your own that have sold in the past six months. Unfortunately, unless you live in a high-density subdivision, this may be difficult to do. You may have to look at your entire community to find recent sales of comparable homes, and even then, neighborhood factors and other issues could mean a significant difference in price.

Tax data can show relative changes

What you can do is use the local tax data that many communities post online to identify recently sold properties in your community that were previously purchased around the same time you bought your home. You can then look at how much they changed in price over that time to get an idea of what your home should be worth, paying particular attention to homes in the same price range. Foreclosure sales will usually be about 5-10 percent less than regular home sales, so you want to take that into account as well.

This won't give you an exact figure, but at least will enable you to get a sense of what prices in your community are doing. And since real estate prices tend to be highly localized, it should give you a better picture of your home value than relying on published reports of prices in your state, county or metropolitan area, which may fluctuate across the region. But you'll still want to get a professional estimate before committing to a refinance or any other course of action.