Home Value 101: Here’s What You Need To Know

As a homeowner, it’s important to be aware of your home value. It doesn’t only come into play when it’s time to sell your property. It can also make a difference if you’re looking to refinance your mortgage, take out a loan, or even evaluate your overall financial position.

But your home value is not simply a number you can call and ask for. There are many data points that are evaluated to determine the value of your home. Not to mention real estate markets fluctuate often. So the value of your home today probably isn’t the same as the day you purchased it.

But why is knowing your home value important, and how can you figure it out? Here’s what you need to know about your home value:

What is home value?

Home value is exactly what it sounds like — it’s the amount that your home is currently valued at.

But while it does boil down to an actual number, the valuation process can seem complex, and the value of your home on the day you buy it most likely won’t be the same as the day you sell it.

Property values depend on things like buyer demand, local market factors, and the property itself. Property values go up and down, and can be impacted by things as big as local market conditions and as small as the roof and siding on your home.

Why does home value matter?

The value of your home has a huge impact on your finances as your home is often your biggest asset.

If you want to refinance your mortgage, you’ll need to have a higher home value than the amount remaining on your current mortgage.

Likewise, if you’re thinking about taking out a new loan, prospective lenders will look at your credit score and debt-to-income ratio to see if you can afford the payments. But your home value can factor in here too.

Finally, if you’re trying to decide whether or not to move somewhere else, the value of your home can help you weigh the costs and benefits of moving or staying put.

How is home value calculated?

There are many data points that influence a home’s value. 

The Canada Revenue Agency defines fair market value for a property as “The highest price, expressed in terms of money, that a property would bring, in an open and unrestricted market, between a willing buyer and a willing seller who are both knowledgeable, informed, and prudent, and who are acting independently of each other.” In reality, there are multiple factors that are taken into account when assessing the overall value such as:

• Location, neighbourhood and reputable schools nearby
• Age and condition of your home
• Features of the house like square footage, number of bedrooms, style of kitchen or finished basement

These all determine the price that prospective buyers might ultimately be willing to invest in your home.

There are several ways to calculate your home value, and which method you choose will depend on what you want to do with the information.

If you’re looking to list your home, talking to a real estate professional for a comparative market analysis might be the best way to go. But if you just want a sense of your overall financial health, speaking with a mortgage specialist or financial advisor can help you find the solution you’re looking for. 

Regardless of what you’re planning, you can either use online evaluation tools or compare your property to others to get an idea of value.

Online tools use an automated valuation model often utilizing public records such as tax assessments, deeds of ownership, and property transfers to determine a home’s value. The easiest and quickest way to get an evaluation is through an online evaluation tool such as RBC’s Home Value Estimator. 

You can also do a quick comparison of recent properties that have been sold. Using an apples-to-apples comparison, you can estimate the average cost of a home like yours without getting anyone involved. To do this, you can try:

• Browse online listing sites for recently sold properties that are comparable to yours in your neighbourhood
• If there aren’t enough recently sold, you can try using listed properties, but know the sale price might be more aspirational than attainable

You’ll need at least three different properties to give you a range. This isn’t going to be a true property valuation but it can give you an idea. 

Understanding the value of your home

Knowing your home value and understanding how to use it to your benefit is important when it comes to your overall financial health.

Whether you’re looking to entice potential buyers or you simply want to know if completing that unfinished basement or adding in hardwood floors will help you get more bang for your buck, there’s an easy solution out there to find your home value.

Your best bet is to speak with a professional like a financial advisor who knows your entire financial situation and can recommend the right next steps to meet your financial goals.

For more home tips, check-out the Garbage Day App.