How to Find the Fair Market Value of Home

The fair market value of a home can be hard to pin down. However, there are plenty of ways to get a decent estimate. Getting the value of your home right is important for a number of reasons. For starters, an accurate price can help you decide if you should sell your home. Your home's valuation is also important if you decide to refinance your mortgage. Here's a look at ways you can start to narrow down just how much that house of yours is worth.

The only way to get a true fair market valuation is through a licensed appraiser. The appraiser researches comparable sales -- recently closed sales of similar homes in your neighborhood -- and compares them to your home. During this comparison, the appraiser adds to or subtracts from the value of your home, depending on whether it compares favorably or unfavorably to the comparison homes. The appraiser also considers neighborhood characteristics, such as schools, transportation and accessibility of shopping, as well as socioeconomic trends. The result is considered an estimate of value rather than an exact, set-in-stone figure, but it's the most accurate valuation available.

A comparable market analysis estimates optimum selling price, not market value. However, in many cases, such as when you're trying to determine a sale price for a home you want to sell, or an offer price for a home you want to buy, the likely sale price is all you need. Your real estate agent will prepare your analysis by searching recently closed sales of similar homes in your neighborhood. The primary differences between an analysis and appraisal are that the analysis is done by an agent, not a licensed appraiser, and the agent doesn't make an appraisal's detailed adjustments to the subject property's value.

A number of websites offer free home value calculators that perform automated valuation modeling. An automated valuation can't replace an appraisal, and it’s only as good as the data it uses, so estimates vary widely from one site to another. For example, one sample home was valued at approximately $148,000 by Zillow and approximately $171,000 by the Chase Home Estimator. Note that Zillow uses tax assessments, previous sales and recent comparable sales, as well as the home's physical characteristics to estimate value. The Chase home value calculator uses these factors as well as such public information as mortgage records and deeds. The Federal Housing Finance Agency HPI Calculator can help you estimate what a home should be worth based on the purchase price and the average appreciation of homes in the local area.

You might be able to find a property's market value by researching its property tax valuation, which is called an assessment. The records are available to the public. Because different counties have different methods of assessing value and of expressing their assessments, it's important to talk to someone at the tax office to learn how to interpret the figures. For example, some counties' assessments are expressed as full market value, whereas other counties use a percentage of market value.

The bottom line is that the answer to the question "What's my house worth?" is nebulous. Although professional appraisals, comparable local sales, and online valuations are a good start, at the end of the day, a home is only worth as much as someone will pay for it. In fact, the literal definition of "fair market value" is the price an informed buyer will pay for a home that's been on the market for a reasonable length of time. If you're looking to sell your home, you'll find out soon enough what others are willing to value your home at. If you're just curious as to what your home is worth, you'll have to settle for one of these valuation estimates to give you an approximate figure.