Understanding home value

In the most basic terms, your home’s value is its price tag if you want to sell it. That price tag is important to understand before embarking on any new financial endeavors.

For new homebuyers, one key benefit of your purchase is owning an asset that can appreciate in value. Understanding your home’s different types of value can help you in the following scenarios:

• Selling your home: Knowing your home’s value can ensure you are fairly compensated if you sell it – and can help you plan your next home purchase.
• Assessing your property taxes: In some instances, knowing your home value can help you anticipate what you’ll owe in property taxes.
• Refinancing: If you want to consider refinancing your home, your home’s value and your current equity will come into play.
• Taking out another loan: Your home’s value can influence your borrowing capacity as lenders evaluate your finances and assets. 

Determining your home’s value often requires professional assistance. Talk to an appraiser or a real estate professional and check online to see what tools can help you obtain an accurate home value assessment.

Your home’s appraised value is its estimated value that is determined by an appraiser or licensed professional and reflects how much your home is worth.

A licensed appraiser completes a formal appraisal where they analyze your home’s size, age, location, and other factors to determine your home’s appraised value. The appraisal process is typically a lender requirement if you purchase a home with a mortgage, so appraisers will often provide a detailed report that explains why your home is valued the way it is. This service may include additional fees.

Your home’s assessed value, also known as tax value, is determined by tax assessors to determine property tax amounts. Even if you’re not looking to sell your home anytime soon, knowing its assessed value can help you estimate what you’ll pay for property taxes, since those taxable amounts are often a set percentage of this number.

Your home’s assessed value can be determined by a local government assessor, who often uses a formula based on your local municipality. Assessors also use factors about your home, like its age and size, to inform their final valuation.

Any asset or property you own may fluctuate in value over time. While some factors are out of your control, there are some aspects of your home you can control to help maintain or increase its value. Below are some of the most common ways your home’s value may be influenced.

The market climate can vary at both the national and local levels, as interest rates and home supply and demand are constantly changing. Whether you’re in a buyer’s or seller’s market, your home may appreciate or depreciate due to supply and demand – a buyer’s market indicates a market where there are more homes available than buyers, and a seller’s market indicates there are more buyers on the market than available homes.

Aspects of your home’s location can influence its value, including:

• Factors about your neighborhood, such as how close your home is to desirable locations
• The quality or value of other homes in your neighborhood
• Whether you’re in an urban or rural area

Keeping your home in good condition as it ages may help prevent depreciation. Some ways you can keep up your home’s condition include:

• Regularly maintaining or updating appliances like furnaces, kitchen appliances, or washers and dryers
• Ensuring your home’s structure is sound, including your roof, foundation, and plumbing
• Regular maintenance on your home’s exterior, including your lawn, siding, and landscaping

Other aspects of your home can help boost its value, especially if it has unique features or amenities. Some aspects of your home that can contribute to its value include:

• Square footage and lot size
• Additions made to your home
• Extra units such as garages or ADUs (additional dwelling units)

Sometimes your home value can naturally increase due to factors outside of your control, such as rising buyer demand. Otherwise, the most common way you can increase your home’s value is through home improvements or renovations. Explore whether some of the following home improvement projects are feasible, including:

• Room renovations: Expanding a room, upgrading its appliances, or giving it a cosmetic refresh can help increase value.
• New rooms or amenities: Adding new elements to your home (such as an outdoor patio) or adding energy-efficient upgrades (such as installing solar panels) can also effectively increase home value.
• Exterior improvements: Aesthetic upgrades to your home’s exterior, such as landscaping or roof repair, can help boost its curb appeal for prospective buyers.
• Lower-cost changes: Sometimes, smaller changes, such as updating light fixtures or painting rooms, can help maintain or increase your home’s value.

Whether you’re looking to buy or sell a home, understanding the different types of home value can help you approach your transaction with more confidence. Talk with a professional today to gain more specific information about your home’s value or learn more about how to access your home equity.

Current Wells Fargo customers can track neighborhood estimated values, learn ways to increase the value of their homes, explore home improvement opportunities, and much more.

If you extend your loan term, you may pay more interest over the life of your loan.

If you are a service member on active duty, an eligible spouse, partner, or dependent, or currently receiving SCRA benefits, please consult with your legal advisor prior to seeking a refinance of your existing mortgage loan. In some cases, a refinance may impact your eligibility for benefits under the Servicemembers Civil Relief Act or applicable state law.