Home Value: Appraised, Estimated, Actual

Jan 31, 2023 | Mortgage Guides

Understanding Home Value: Appraised, Estimated, and Actual Differences Explained

The value of a home is measurable in three ways: appraised, estimated, and actual. These three measures provide different data and have diverse uses. Each method of obtaining home value offers unique information, helping to address questions that buyers, sellers, and even real estate agents may have. 

Mortgage rates, taxes, and insurance are essential details to consider when buying a property, and using a calculator for these rates will help ensure accuracy in your financial planning. Working with a lender, such as Wesley Mortgage, and utilizing their services can help make sense of your property’s mortgage rates, taxes, and insurance.

Learn more about your home’s value in the following guide and how factors such as market conditions, mortgages, and trademarks affect the valuation process.

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Appraised Home Value

Appraised home value is the property’s value as determined by an expert. Appraisers use various methods, including comparable sales in the area, analyzing the property’s condition, and accounting for improvements that have been made to it. Real estate agents often help sellers find a qualified appraiser to assess the home’s value accurately.

This method is often used when looking at the home’s value through a professional lens. Refinances, using your home as collateral, or opening a home equity line of credit (HELOC) all use the home’s appraised value as the primary measure. 

Lenders consider appraisal rates and market conditions, as well as factors like loan terms and interest rates, when determining mortgages for buyers.

How to Appraise Your Home

The only way to get your home appraised is to hire a specialist. An appraiser will visit your home, measure the property, and assess its condition. They will also look at comparable properties in your area and address any factors influencing the home’s value.

While the homeowner can estimate these, most banks will only consider the number provided by the professional. That is because personal estimates, while helpful, may be biased or misinformed. The appraiser is a third-party house examiner, so they will give a fair market value estimate.

How Accurate are Appraisals

Appraisals are accurate because the appraiser has been vetted and tested throughout their career. You can generally trust the numbers despite the influence of factors such as experience and the quality of the information provided.

Estimated Home Value

The estimated home value is a valuation of what a home is worth based on the home’s location, size, condition, and other characteristics. It is used as a starting point for determining the value of a home for sale or mortgage lending. It is not an exact value but an estimate based on available data and market trends.

The estimated home value can be determined by a professional or through online tools like a home value estimator. These tools use algorithms to evaluate the value of a home based on various data inputs. They can also help with details such as loan calculations and interest rates.

How to Estimate Your Home Value

The three primary methods homeowners use are online home value calculators, CMA, and professional appraisals.

  • Online Calculators: There are many online resources for home value calculators, which use public data to estimate the value of a home based on factors such as location, square footage, and the number of bedrooms. Although the most accessible, these will also be the least accurate, providing a rough home value estimate.
  • CMA: A comparative market analysis (CMA) is a report prepared by a real estate agent that compares the home to similar properties in the area. This estimate is more accurate because it considers factors unique to the property, and agents use their experience in the field to better evaluate the home value.
  • Professional Appraisals: For the most precise estimate, hire a professional appraiser. This involves an inspection of the home and an analysis of comparable properties in the area. It is more expensive, but it will provide the most accurate estimate and help you make more informed decisions about selling your home or securing a mortgage.

Difference Between the Appraised Value and Estimated Value

An appraised value is a professional determination of a property’s worth conducted by a licensed appraiser. It is based on a comprehensive analysis of the property, including its condition, location, size, age, and features. An estimated value is less thorough and is based on simplified calculations.

An estimated value is simply a starting point rather than an absolute value. It may be provided by a real estate agent, a property owner, or an online tool to gain insight into a property’s worth, considering elements such as the home’s specific features and market conditions.

Actual Home Value

The actual home value is what the home sells for. Under most circumstances, it will be the market value. However, it may shift up or down depending on property conditions, renovations, personal connection to the buyer, neighborhood, or local events that affect the market.

How to Determine The Actual Home Value

There is no way to determine a home’s value with absolute certainty. Appraisals and CMAs will get the closest, but they are estimations. They offer a working value, from which one can begin to sell their house or open a HELOC; however, they differ from the exact amount the home could sell for.

Factors That Affect Home Value

Factors that impact a home’s value include

  • Location
  • Size
  • Quality of construction
  • Number of bedrooms, bathrooms, and amenities.
  • The age of the house
  • The economic setting of the area

How Does the Value of a Home Change Over Time?

If well maintained, homes tend upward in terms of price. However, several factors can sink the price of a house. The value will plummet if the house falls into disarray or the area becomes less stable. Unforeseeable financial crises, such as a recession, will also impact the prices of homes.

Your lender can help you navigate these challenges, ensuring that you account for all factors that may influence the value of your property. With their resources and services, lenders such as Wesley Mortgage, the official mortgage provider of the Tennessee Titans, can assist with understanding mortgage rates, taxes, insurance, and other financial details crucial to home-buying.

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