It doesn’t matter if you’re buying or selling a property, learning how your home can appreciate is important for your success. Real estate appreciation is how a property increases in value with time. Your home may rise in value because of renovations or changes in your market.
Calculating the appreciation of your property may seem complicated, but you can figure it out by using a real estate appreciation calculator. Don’t know how they work? We’ll tell you everything you need to know about these calculators and how to use them.
What Factors Does Real Estate Appreciation Calculators Consider?
A home’s fair market value is the top factor considered in calculating real estate appreciation rate. This value refers to the price at which the property can sell at in current market conditions. While you can determine a property’s fair market value alone, consult with an expert like an appraiser or a real estate agent for an accurate estimate.
Our Clever Partner Agents offer free Comparative Market Analysis to help you price your home or make a competitive offer on a listing according to current market conditions. The purchase price, estimated annual growth, and years of ownership are other factors considered when calculating the appreciation rate. If you’re a home buyer, estimate for how much time you expect to own the property.
How Can You Calculate Your Home’s Appreciation?
You can find an online calculator to estimate a home’s appreciation rate. However, it’s important to understand how to calculate this value to get an accurate estimate. It all starts with calculating the estimated future growth.
To get this value, you must divide the forecasted market appreciation rate by 100 and add one. Afterward, you will raise the result to the number of years you owned or expect to own the property to get the estimated future growth or appreciation rate of the property. Then you’ll multiply this number by the price you paid or will pay for the property to learn how much your home will appreciate.
Let’s say that you plan on buying or selling a property that you purchased at the national median listing price in June 2019 of $289,900 and expect to own or own it for 5 years. According to June 2019 data from Zillow, the forecasted national appreciation rate is 2.8%.
To get the property’s estimated appreciation value, you raise 1.028 to the fifth power for a total of 1.148, and multiply this result by $289,900. After 5 years, this home is estimated to appreciate to a value of $332,823.35.
When calculating your home’s appreciation, it’s important to use the estimated appreciation rate for your market. You can find this number online on websites like Zillow, Trulia, among others, or by consulting with an experienced realtor.
How Can It Improve Your Home Buying and Selling Process?
When you find the perfect home, you want to go all in — possibly without considering the property’s estimated appreciation. However, learning the potential home appreciation value or rate can help you figure out if you’re making a sound investment. Calculating this value is vital to avoid a negative ROI when you sell your property.
As a home seller, also look into the potential appreciation of your home. This number can give you an idea of your ROI from completed renovations or repairs. Sticking to this number as your listing price may be tempting, but it’s important to price your home competitively.
In certain cases, your estimated home appreciation value may be below the market which allows you to get more for your property. If this value is over the fair market value, you shouldn’t use it as your listing price.
Pricing your home competitively or making a great offer is vital to getting the best outcome in your home selling or buying process. Top performing real estate agents like our Clever Partner Agents possess the knowledge and experience to help you calculate your home’s appreciation.
Don’t leave money on the table or overpay for your new home. Contact Clever to connect with a great seller’s or buyer’s agent to calculate your home appreciation and get a great result when buying or selling your home.