The value of your home
Your home value depends on who needs to know the value of your home and why.
Homeowners are usually more concerned with the value of their home when they want to sell or obtain a mortgage. However, the value of a home depends on why a valuation is needed and who is making the decision.
A home appraisal is one way to establish home value. Appraisals are conducted by professional appraisers. This is usually done for selling or financing purposes. The appraiser considers housing details such as neighborhood, square footage, number of bathrooms and bedrooms, and condition and quality of the house. The appraiser will compare the house to similar houses in the area and determine the appraised or fair market value.
A property assessment is another way to establish home value. Property assessments are done to help determine the amount that property owners will pay in property taxes. Many jurisdictions will reassess the property annually. However, others may reassess the property more often. The assessment is based on the market value of the home. This value may also be used in an assessment calculation to derive the tax amount.
The last two types of home values are used by insurance companies when homeowner insurance rates must be determined. The two types of insurance are replacement cost and actual cash value. A replacement cost policy will pay the amount needed to replace, rebuild or repair the damaged property. A replacement cost policy will cover the costs necessary to return the home to its original condition with materials of the same kind and quality. An actual cash value policy will replace, rebuild, or repair the damaged property based on the property’s depreciated value.
Michigan State University educators invite you to assess your financial health and visit Michigan State University Extension. In addition, Michigan State University offers money management and homeownership classes. For more information about classes offered in your area visit MI Money Health.