When it comes to the value of your home, why should you know exactly how much it’s worth? You already own it, so what’s the difference? Well, whether you plan to sell in the next year or stay put forever, knowing your home’s value is fundamental to helping you build your financial foundation.
But why? Two major reasons: insurance and taxes.
An undervalued home means undervalued insurance
Your homeowners’ coverage is determined by the appraised value of your home. This value is established by a professional appraiser who physically inspects the property, including your roof, foundation, and in many cases, the interior of your home, to determine your appraised home value.
This dollar figure is used to calculate coverage needed for either the “actual cash value” or the “replacement cost” of your home. If you’ve made improvements that could impact your home value, you’ll want to let your insurance agent know so he or she can help you get the proper coverage. An annual review of your insurance coverage with your agent can be a great way to stay current on the value of your home.
An overvalued home means higher taxes
Taxes on your home and property are based on another value called the assessed value. This value is determined by your city, county or state, and is often different from your appraised value because it is not based on a physical appraisal of the property, but rather an assessment of historical sales of similar properties in a similar area.
Your assessed home value is sent to you annually, or you can access it on your local city, county or state assessor’s website. By keeping track of your home’s assessed value, you’ll be able to better understand changes to your property taxes and keep from being over-taxed as the value of your home changes with the real estate market.
Your home is one of your most valuable assets. By knowing your home and property value, you can protect yourself and your family from extra expenses if the unexpected happens.