Pros and Cons of a New Home Estimate

If you’ve been in your house for a few years and you’re thinking about selling or refinancing, you might be wondering how its value compares to the day you bought it. How have the market, the improvements you’ve made or the value of homes in your neighborhood impacted the price of your home? By obtaining a new estimate of your house, you’ll have a clearer picture of what it is worth to you, the bank and potential buyers. 

Estimating tools  

You can use online home value estimators or seek help from a professional, such as a real estate broker, agent or appraiser, to get a more detailed picture of your home’s value. A house price index calculator can also be a useful resource for getting a quick estimate. 

Benefits  

Having a current estimate of your home is important when you want to prepare your house for the market. It can also help with negotiating insurance premiums, figuring out the year’s property taxes and applying for a home equity line of credit. 

Determining your home’s value gives you greater control over these processes. Property taxes are almost always open to appeal, for example. If you can prove an assessment is too high by pulling comparable sales, you may be rewarded with a lower tax bill. 

A home mortgage appraisal may even reveal you’re paying too much in interest, giving you a little more wiggle room in your house budget.  

If the loan-to-value ratio is too high, the lender may charge the borrower a higher mortgage rate to reflect greater risk. However, if an appraisal shows the loan is a much smaller percentage of the home’s value, the borrower may receive a lower interest rate, which could lower the monthly payment. 

Drawbacks  

Knowledge is power, but power can come at a price. If you choose to employ a professional to estimate or appraise your home, you’ll have to pay for the service. Depending on the property and market, appraisal fees can range from a few hundred dollars to more. 

Another potential drawback is that a new estimate may not align with your expectations. While homeowners often hope their property has increased significantly in value, market conditions, neighborhood changes or deferred maintenance can lead to a lower-than-expected valuation. This could impact plans to sell, refinance or access home equity. 

An updated appraisal may also affect property taxes. In some areas, a higher assessed value could result in increased tax obligations. 

While obtaining a new estimate of your home's value can provide valuable insight and help inform major financial decisions, it's important to weigh the costs and potential consequences against the benefits. Using a combination of online tools, local market research and professional guidance can help you gain the most accurate understanding of your home's worth.