Many people keep score of many things, do you? Most probably. However, one thing that most people, surprisingly, never think of keeping score about their net worth. Do you know how much you are worth?
If you do not know but are eager to find out, this article will be of great help to you. A net worth statement ensures that you refocus your financial emphasis beyond your income. Though, calculating your net worth sometimes is not as simple as ABC.
It may take you quite a while to gather all the data you will need to determine your net worth statement. In a nutshell, to determine your net worth statement, you have to add up the value of everything you own and subtract it from the amount that you owe. In other words, you have to subtract all your liabilities from your total assets.
One of the most common and largest assets that most people have is their home or residence. Oftentimes, this is also one of the most confusing assets as most people do not know how to find its value. Are you facing the same problem? Do not worry, because, in this article, I will talk about different ways you can calculate a home value for net worth.
What is Home Value?
Home Value is an unbiased opinion of your house or primary residence’s value. As mentioned earlier, your primary residence or house is probably your most valuable asset. On the contrary, though, it can also be your biggest liability, but that is an extreme case. The more equity or value your house has, the more it will increase your net worth.
Different Methods to Calculate Home Value
There are various methods that people use to calculate their home value. While some people observe market trends, others use software and value estimators that help them determine the value of their primary residence.
Every method listed in this article works perfectly fine. It is only a matter of preference of which method you use. It would be beneficial, though, to use more than one method to calculate the home value to ensure accuracy.
1) Using Online Websites
One effective way to determine your home value is to use an online tech real-estate marketplace, such as Zillow. In such real-estate marketplaces, you can search millions of rental and for-sale listings. All you have to do is enter an address, neighborhood, city, or ZIP code, and you will get the listings in your area.
Using the listings provided by such websites, you can also compare them and connect with local professionals who can guide you through determining your primary residence’s value.
2) Observing Current Market Trends
Your house’s value is mostly influenced by recent sales of similar properties and by current market trends. If you have owned your home for several years, the current home value could be quite higher than the original price.
A common practice is to value your home slightly less, say 8% or 10% of comparable and recent sales in your neighborhood. By doing this, you would not expect to get the best price at any peak. You would also realize that any money from a sale would involve real estate commissions, legal fees, moving fees, etc.
3) Observing House Conditions
Another method to assess your home’s value is to take into account your house’s amenities, the number of bedrooms and bathrooms, and the floor’s functionality as key factors. A thorough visual inspection could be made of the interior and the exterior of the house. Any conditions that have an adverse effect on the house’s value, such as damages that need repairs, should be noted.
4) Hiring a Professional Appraiser
This method can be considered the most accurate way to find your home’s value. This method is best for people who want a professional estimate of their primary residence’s value. You can hire a local professional appraiser. They will consider the characteristics of the property and will come up with all the data related to recent market trends.
Thus, you will not have to do much as the professional appraiser will do all the work for you. Though, you should know that you would have to pay the appraiser. The rate of their work depends on many areas so you will have to ask for a quote from several appraisers before you hire one.
Controversy Regarding Home Value
There is a bit of a controversy revolving around the appropriateness and usefulness of Home Value in calculating the net worth of a particular person. One group of people is of the opinion that since a person’s home or primary residence is their most valuable asset, it should definitely be used to calculate the net worth.
However, another group of people puts forward the argument that if a person sold their house, where would they live? Thus, it is not appropriate or useful to count it as an asset during determining net worth.
To propitiate both groups of people, many people create two separate net worth statements. One of the statements includes the house or primary residence as an asset, and the other one excludes it as an asset. Though, in the latter net worth statement, home value is included as a liability if there is a mortgage. In the former, the home value could also be included as a liability if there is a mortgage.
After reading this article, I am sure that you will be able to find the value of your house or primary residence. Each method stated in the article above can be used for various other reasons too, apart from calculating your net worth. For instance, hiring a professional appraiser can be particularly useful if you are considering selling your home. One last important thing to keep in mind is to never guess your home value. If, when observing house sales in your neighborhood, you cannot find a comparable sale, leave the home value as it is until there is sufficient data for you to evaluate. I would also love to hear from you about if and how you find your home value.