With market conditions like Colorado Springs is currently experiencing, it can be fun to check your home value online even if you have no intention of selling your home. It feels great to see how well you’ve done with your home investment as home prices continue to climb and equity builds. You might be surprised to know that it’s actually very important for homeowners to stay informed about their home’s current value even if they don’t plan to sell.
Inaccurate Sources for Home Values
Zillow and all other sites pull their information from public county assessors’ sites and combines it with other factors. This usually includes website specific trending data as well as information entered by homeowners. The collection and analysis of all that data is expressed as a home value and presented to the world. This home value must be taken with a grain of salt because any algorithmic home values are not able to consider current dynamics in the real estate market, nor quality and location of the home. For example, when your home backs up to open space, is located on a corner lot, or has a fantastic 360 view it is simply more attractive to buyers. A pool in Florida is an advantage, while in Colorado it is not considered an asset to increase home value.
- Assessor’s Website
Homeowners are often shocked by just how low their home is valued on the assessor’s website. The county assessor reevaluates your home every 2 years based on the sales of the prior 2 years. El Paso County had their last evaluation in 2020 and sales averages were calculated from 2019 and 2018. That’s a lifetime in Colorado Springs real estate at a moment when home values are increasing nearly every week. Therefore, you will see a huge difference between the assessed value and your actual home value from a professional real estate agent or any algorithmic online calculators. Keep in mind that this is a good thing because you pay property taxes for the assessed value of your home. The lower the better in this circumstance!
- Neighborhood Sales
You can pay attention to how much your neighbors’ homes are selling for and try to make an estimate of your own home value. This is a good strategy to get a ballpark idea but it still won’t be very accurate.
Where can you find an accurate value of your home?
Now that we’ve established less accurate sources for home value, where can you go for accuracy?
- Hire an appraiser
An appraisal is a particularly good idea if you have a property that is very unique and has a limited number of comparable sales in the area. It will give a great baseline on what to expect.
- Ask a real estate professional
A real estate agent can provide you with a Comparative Market Analysis (CMA) which is the best way to look at the value of your home. This thorough report combines market trends, a real estate professionals’ expertise about what’s happening in your local market, and other factors that might be important to you as the homeowner. Click here to request a CMA from us.
Why is it important to know your home value?
People usually want to know how much their home is worth so they can take comfort in knowing that their investment is increasing in value. Buying a home is usually the biggest financial investment folks make. Staying informed about your home’s value and the trend of home prices will also allow you to make better financial decisions. It all boils down to knowing how much equity you have accumulated since you purchased or last refinanced your home.
- You Might Sell
Perhaps you are thinking about selling your home but you are not sure if you have accrued enough equity to make it a smart decision? Or maybe you want to upsize into a bigger home and you’re researching the feasibility of that move. Obtaining a precise and accurate current market value for you home is a vital first step in this research.
- Home Improvements
Many homeowners in 2020 contemplated making home improvements. Now that home prices are steadily increasing and a new home purchase seems out of reach for many homeowners, home improvements and additions are becoming even more popular. It is definitely important to know which home improvements will bring the most return on investment. Many homeowners plan to stay in their forever home, only to sell 2 years later because circumstances suddenly change. Tip: Consult a real estate professional before making any home improvements for a home sale. There are only a few specific improvements that will increase your appraised value, but many others will improve your home’s marketability. Some improvements will actually reduce your home’s attractiveness to buyers (that outdoor pool in Colorado Springs is a great example).
- Homeowners Insurance
Living in Colorado brings some natural hazards with it: high wind, blizzards, landslides, water runoffs and wildfires. This is on top of everything else that could threaten your home. Adequate homeowners insurance is critical. Rebuilding or just repairing a home has become so much more expensive. Have you seen the lumber prices lately? Review your insurance coverage if you haven’t taken a look within the last 2 years. Make sure that your replacement value is adequate even if it increases your insurance premium. Consider coverage under an umbrella insurance if you have multiple homes and assets.
- Financial Decisions
Interest rates are still historically low, particularly if you do a streamline refinance with a VA loan that is quick and very inexpensive. Refinancing can help you reduce your monthly payment or life of your loan, or allow you to pull equity out of the house for another investment. It’s important to know the value of your home in order to determine a strategy with your lender for refinancing.
- Home equity line of credit (HELOC)
Homeowners have collectively gained over one trillion dollars in home equity over the past year. That’s an average of $14,000 in a single year. The easiest way to tap into that equity is with a HELOC. Banks will allow you to withdraw 75%-95% of your home’s equity this way. A HELOC is inexpensive (interest rates are slightly higher than a mortgage), but it will allow you to follow through with any plans you have while only paying interest for the funds you actually withdraw. A HELOC has a short timeline before you have to reapply. Speak with your local bank or credit union for details. In the current Colorado Springs market, it can be advantageous to use HELOC funds as a down payment for an investment home or on your new primary residence. This will enable you to leave off any contingencies on offers you are making and make the transaction much less stressful because it won’t be dependent on your current home selling.
- Dropping Private Mortgage Insurance
Many loan products allow you to buy a home with a down payment less than 20%, but they usually require private mortgage insurance (PMI). PMI can be 0.5-1% of your home’s purchase price. Even if you purchased fairly recently, it’s worth researching to see if you are able to drop this insurance that can cost more than $150 per month. We can easily provide you with a home value estimate that allows you to determine if you can approach your lender about removing PMI. The Consumer Financial Protection Bureau states that you can request your mortgagor to remove your PMI when your principal drops below 80% of the home’s value. At 78%, your lender is required to drop it automatically. Note: you do not have to refinance your home in order to get PMI removed.