Money Matters
Xstatic3333
member
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Getting a good estimate of home value
We're thinking of refinancing to a 15 year mortgage to get rid of PMI and start building equity a bit faster. Taking some money out for improvements (mainly exterior painting, siding repairs, and adding a second bathroom, which we already having piping in place for in the partially-finished basement) is under consideration too. We think we'll be here at least ten more years, so the improvements are mainly for us to enjoy. We're not averse to using debt in smart ways.
We owe about $150,000 on the home, and the current "Zestimate" is $221,000. I know those are basically crap. We have made a few major improvements-mainly converting from oil to HE gas heat, all new insulation, a couple of new appliances, and landscaping improvements. Many interior details, however, remain very out of date.
Does anyone have any good suggestions about how to get a more accurate read on our home's value to make sure that starting this process is worth it? Is it reasonable to bug our realtor about this? I hate to nag him when we're not thinking of selling. Neighborhood comps are tough. We're low-end for our street, only one bathroom, a huge yard relative to other properties, and a technical three bedroom in which one of the bedrooms is pretty weird and would never work for a kid due to its direct yard access.
We probably won't move on this until March, so this is all early-phase research.
We owe about $150,000 on the home, and the current "Zestimate" is $221,000. I know those are basically crap. We have made a few major improvements-mainly converting from oil to HE gas heat, all new insulation, a couple of new appliances, and landscaping improvements. Many interior details, however, remain very out of date.
Does anyone have any good suggestions about how to get a more accurate read on our home's value to make sure that starting this process is worth it? Is it reasonable to bug our realtor about this? I hate to nag him when we're not thinking of selling. Neighborhood comps are tough. We're low-end for our street, only one bathroom, a huge yard relative to other properties, and a technical three bedroom in which one of the bedrooms is pretty weird and would never work for a kid due to its direct yard access.
We probably won't move on this until March, so this is all early-phase research.
Re: Getting a good estimate of home value
Not sure about your area, but around here they publish all the home sales and the weekly paper even has a searchable thing online. You could do a rough calculation on price per square foot. It would give you a rough idea and at that point you could get an idea if you wanted to pursue the refi and appraisal.
Since you're looking to refi for loan term and pmi anyway, it might be easy enough to just call the bank and say you want to refi and if there's enough equity that you'd also like to take out $X.....
You could order your own personal appraisal for your home. It costs a little money, but is usually half of what it is for a bank's appraisal. Something to do with there is a lot more paperwork, boxes to check, etc. for a bank as opposed to a personal appraisal.
This is true. I've signed in and done this with Zillow for all the properties I own. But I still don't find it very accurate. Zillow does send occasional e-mail alerts to let you know if your house has gone up/down/same for value.
I think its fine to contact your realtor, be upfront about what it is for, and hopefully that person will be cooperative. They probably will. A good realtor builds long lasting goodwill. They want repeat customers, but know it might be 10+ years before a customer returns.
Outside of that, square footage is the MAIN item that determines the value for your house. It's usually easy to figure out at least a decent sq. footage range for your area. Look at current listings. If online data is available, and Zillow has some of this, look at recent sales.
Square footage is nice because it's also any easy way to compare houses that aren't similar to yours size-wise. A comparison house can be half the size, it can be double the size. But the price per sq. ft. generally runs about the same for an area, regardless of a home's size.
I don't know if you have talked to any banks yet about a refi, where you will also be taking some of the equity out. You'll typically be able to access 70%-80% of the equity's value. That range will depend largely on the bank, usually on your credit score, and sometimes on your income level. I mean, a loan product is ALWAYS about your credit score and income. But, with this type of product, it can also affect the percentage of equity you are allowed to take out.
I thought of that also. If @Xstatic3333 was just wanting to tap the equity, that would make the most sense.
But since she wants to refi anyway to get rid of PMI, I can't think of any reason to not just do it all in one loan. HELOCs are a lot more flexible but, at least for me in that scenario, it's easier to have it consolidated into one product.
With that said, @Xstatic3333, that's an option you can bring up with your lender. It would be another way to achieve what you want to do and perhaps has advantages I am not seeing.
What you are saying about a HELOC does make a lot of sense @jtmh2012. The payment on a 15 year mortgage, based on our estimates, would be easy for us with our finances as they are currently. We'll need to see how things shake out when we redo our budget after adjusting to the baby, but a refi and then a HELOC could make a lot of sense, particularly if we already have enough equity to get rid of PMI, but aren't quite there yet on enough to kill PMI plus make the improvements we'd like to make. I have a tendency to want to keep things simple, but we'll need to look at this from all angles.
I'll definitely check out the private owner's estimate as well @LillibetteV. I wasn't familiar with that feature.
My gut says a realistic value for the home is probably around $200,000, but it's tough not to dream that it could be more with the numbers Zillow keeps emailing me!
Which leads me to a side note, I, as a real estate professional, was thinking we'd appraise somewhere around $480-485k. So I was surprised at the 512k. But refi appraisals tend to come in higher than what you could actually sell it for, so keep that in mind when deciding how much money to pull. My BFF had this happen to her too. I ran comps for her and figured her house to be worth around $650-675k if she were to sell it tomorrow. The refi appraisal came in at $800,000. Now, I think I estimated low, but I don't know how on earth she could sell it for $800k based on her comps. She only owes like 400k and only wanted to pull around 75k for a bunch of home improvement projects (kitchen remodel, new roof and a few other things), so she was stoked
When we refi'd to lower our rate, and pull some cash, we opted to do a 75% LTV for the first loan (which was a bit less than our original mortgage, with a better rate), and then did a HELOC at 10% of the appraised value. We didn't want to be stuck with the larger 1st mortgage, which is spread out over 30 years, and we will pay way less interest by having a HELOC. Our HELOC is a fixed rate of 3.99% for 4 years, but amortized over 10, so our goal is to pay it off in those 4 years. Plus, we haven't pulled out more than I honestly think we could get if we had to sell it tomorrow, since I think the refi appraisal was high. Another benefit of HELOCs is you can shop them around yourself. So if you found a better rate somewhere else, you could move it to another bank without having to do a full on refi again.
I've had my personal duplex appraised 4x (to buy, 1st HELOC, 2 HELOC raises). I haven't had a blatantly horrible one, but there is some kind of black and white error on every single one of them. And some seriously questionable items.
Two of them have the same sq. ft. The other two have a different number and are also different from each other. It's not crazy off, but lowers the value by $3K-$4K.
Two of them wrote the rents I'm collecting down incorrectly. For all of them, their rental comps were WAY off. Like, 20-30% lower than what I actually rent the next door unit for.
NOLA can be tough for appraisals, because there are very nice/safe neighborhoods next to very bad ones. But I still don't appreciate my house, in its safe/lovely neighborhood, being compared to houses in super sketchy/high crime areas that have much lower values. All of them had at least one comp that was like that. Though I didn't complain when two of them also had comps from the nearby higher value neighborhood
.
You know I'm anti-debt, but I'd probably refi to the 15 year then save up cash to do the upgrades. Primarily because that way you aren't paying on them for 15 years, and the upgrades you're wanting to do don't sound like things that will be insanely expensive.
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She should check with her bank on if they would accept an appraisal she ordered herself. I could be wrong, but I don't think they would.
I wanted to "price shop" the appraisal for one of the rental properties I own. I was told I couldn't, even using their list of appraisers, because my choosing the appraiser is a "conflict of interest". Perhaps that was just them, but he implied it was a Federal guideline.
Thanks everyone for your feedback!
I'd get comps from your realtor first. You may not even question that you have enough to do a refi and drop the PMI after that. But, if its close, than look into ordering your own appraisal.
Where I live, $400 is about what a bank's appraisal is for a single family home. But a personal appraisal runs more in the $250-$300 range. However, that cost probably varyies by region.
I think it does, but not a lot and there is a good sized range between price points.
Multi-family units definitely cost more. And the more units there are, the more it costs. Which makes sense. Even a big single family house generally only has one kitchen! I've done multiple appraisals on my personal duplex and one appraisal on a rental duplex. They were all appraisals for banks and ran $500-$600 each.
I have a former coworker who was a real estate investor before I was and owns quite a few properties. He periodically orders personal appraisals on his properties just to be "in the know". I think that's a waste of money, but to each their own. At the time, he paid $200 for each, but that was about 6 years ago.