How much is your house worth? How to determine your home value.

A home’s value will come into question when a homeowner wants to refinance their mortgage, tap into their equity, sell the house, or when they face capital gains taxes. All that to say — it’s useful to know how much your home is worth.

Once you understand how to determine home value and which factors can impact home prices, you’ll be better prepared to handle your next real estate transaction.

Learn more: 7 ways to build equity in your home

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“Since a home is one of [your] most valuable assets, it is important to be aware of its value, just as knowledge of how much is in your bank account can help you make prudent financial decisions,” said licensed associate real estate broker Andrea Saturno-Sanjana via email.

You’ll need to know a property’s value when you:

• Plan to buy or refinance it.

• Need to sell it due to divorce, inheritance, relocation, or other reasons.

• Want to tap into your equity with a cash-out refinance, home equity loan, or home equity line of credit (HELOC).

Dig deeper: HELOC vs. home equity loan — Tapping into your equity when rates are high

Several factors can impact your home’s value, including ones you can control and those that are out of your hands.

Read more: When will the housing market crash again?

Your home has three distinct values: appraised, fair market, and assessed. Here’s how each of them works:

The appraised value of your home is the informed, expert opinion of a licensed professional. However, the appraiser’s valuation isn’t necessarily the amount you would get from a sale. Depending on economic conditions and personal preferences, buyers may offer more or less than the appraised value.

The fair market value is how much a home buyer is willing to pay for a property. “It can change rapidly and is greatly influenced by many factors, including supply and demand, condition, location, features, interest rates, and more,” Drew Heberer, founder at Heberer Homes, said via email.

Dig deeper: What’s the difference between a home’s appraised value and market value?

Determined by the tax assessor, the assessed value is the worth the county or local government assigns to a residence to calculate your property taxes. The tax assessor considers the property type, square footage, year of construction, and lot size. Generally, the assessed value is a percentage of the fair market value.

“Homeowners might be eligible for tax exemptions, which reduce the property tax they, as individuals, pay without changing the assessed value of the property itself. Some local governments have an appeals process in case a homeowner wants to challenge the assessed value of their property,” Saturno-Sanjana said.

Read more: How do property tax deductions work?

There are several ways to determine your home’s value, including the following:

If you have the time and inclination, you can get a solid idea of your property’s value without spending a cent. First, review your county’s tax records and take note of your home’s assessed value.

Next, enter your home’s address into an online valuation tool, like Zillow, Redfin, or Realtor.com. You may want to try multiple tools to see if they generate the same result.

Then, you can take it a step further by using the tools to look at other properties in your area. Heberer said it could be a good idea to focus on homes sold within the past year similar to yours in size, age, and number of bedrooms and bathrooms. You can also check the prices of comparable homes currently for sale (often called “comps”) and gauge general demand by how long the homes have been on the market.

Finally, use the Federal Housing Finance Agency’s House Price Index calculator. Based on the repeat sales of single-family homes backed by Fannie Mae or Freddie Mac since the 1970s, it estimates your residence’s current value by assuming it has appreciated at the average rate of other properties in your area.

If you’re shopping for a new home, it’s wise and customary to have a Realtor put together a comparative market analysis (CMA). Most real estate agents offer this service for free as part of their regular duties.

Similar to what you can do independently, your real estate agent will analyze recent public sales data on homes comparable to your target property. They’ll rely on their market expertise and consider location, size, age, build quality, property taxes, and final sales price. They may also be able to access information you can’t by contacting listing agents for more details.

“The most accurate method would be to hire an appraiser to do a full appraisal (not a drive-by appraisal),” Heberer said. During the process, a licensed appraiser will evaluate the residence’s condition, amenities, and upgrades. They will also consider recent nearby comps.

If you’re buying a home, your mortgage lender will require an appraisal to ensure it doesn’t loan you more money than the property is worth. While cost can vary based on home size, appraisals generally run a few hundred dollars.

Dig deeper: How a home appraisal works and how much it costs

Your home’s value can change throughout your ownership. Below are some common reasons your property’s worth may increase or decrease.

Your residence’s value might go up if you do one of the following:

• Update the home by remodeling the kitchen, bathroom, or landscaping areas.

• Install a new roof or HVAC system.

• Increase the usable living space by building an addition or finishing your attic or basement.

On the other hand, your home’s value might drop if you experience any of these situations:

• Your property falls into disrepair due to deferred maintenance, a natural disaster, or another reason.

• The values of other homes in your neighborhood decline.

• Local government changes zoning laws or environmental factors, such as building a busy road in front of your house.

While it hasn’t happened widely in the past decade or so, your property value can also decrease due to poor economic conditions, mortgage expert and author Anna DeSimone said via email.

Read more: Why are house prices so high?

Each type of home valuation has a purpose. The assessed value determines how much you’ll pay in property taxes (before potential exemptions). The appraised value dictates how much you can borrow to buy or refinance a residence. The fair market value is how much a buyer is willing to pay for your home.

You can get the best return on your investment by spreading your remodeling budget across several areas in your home. “For example, if $30,000 is spent on a large patio and BBQ, [the] property value will increase slightly. But, spending $10,000 to replace windows, $10,000 to refresh kitchen cabinets, and $10,000 for a smaller patio will boost [the] property value even more,” said DeSimone.

If your home’s value decreases, you may have negative equity. This occurs when you owe the bank more than your residence is worth. If you decide to sell your house in this situation, you must make up the difference. You may also have difficulty selling your home — particularly if you’ve deferred major property maintenance and repairs, Heberer explained.

This article was edited by Laura Grace Tarpley.