How to Calculate the Value of Lost Equity in Your Home
In a declining real estate market, you can lose the value of equity in your home. Real estate equity is the difference between the current appraised value of a home and the purchase price of that home. Negative equity results when a home's current appraised value is less than the price for which it was purchased.
Other People Are Reading
Instructions
-
-
1
Determine the purchase price of your home. This is the actual price you paid when you purchased your house. You can find this information on your purchase contract and on documents filed at the county recorder's office in the county where the house is located. For example, the purchase price of your home may be $200,000
-
2
Go to an online home valuation tool. Examples of free online home valuation tools include Yahoo! Real Estate, Zillow and Trulia, all of which are linked in the Resources section. Enter your home's address in the home valuation tool, and click on the "Search" or "Go" button. Select your house to display the estimated appraised value of your home. These websites use currently available information from public records to estimate property values.
Alternatively, you can hire a licensed real estate appraiser to obtain a more accurate estimate of your home's value. A licensed appraiser also uses sales data from public records to determine the actual sales price of comparable homes in your immediate area. A comparable home has the same basic size, structure and condition as your home. An appraiser will view your home in person, however, offering a more accurate assessment of your home's true market value. For example, the current appraised value of your home may be $150,000.
-
-
3
Subtract your home's purchase price from its current appraised value. Continuing the same example: $150,000 minus $200,000 = negative $50,000. The result represents the value of the lost equity in your home.
-
1
References
- "Principles of Real Estate Finance"; Charles Long; 2010
- "Real Estate Principles"; Charles F. Floyd and Marcus T. Allen; 2002
