Is there an official method for determination of home value for FA? I took a guess on the NPCs for my home value,
but it’s really just a good guess. Does the college check that? Do I have to go out and get real estate comps to do that?
I used the assessed value on my tax invoices. It seems like a fair number to me, and is easily documented.
Another question- is a 2nd mortgage or home equity loan taken into account?
Your assessed tax value is not the full value of your house. Where I live, it is 75% of the value, so I would need to add an additional amount to the actual value.
You should find out what your assessed tax value actually means. It’s not a bad thing to know anyway!
In some states assessed value is market value, in others it is a fraction of market value. Also some states freeze the assessment while you own the home. In any case, assessed value cannot generally be used for fair market value, although that may work some places.
Home equity is generally what is counted as an asset for financial aid, so yes the debts against the home are relevant. There is also often an exclusion for some amount of home equity.
Yes schools do check. They’ll use things like Zillow to determine if the family is under-reporting a home’s value.
What if the house needs work, does condition matter? Do I need to consult a real estate agent on that concerning fair market value?
^^
I don’t think that matters. They’re going to use a Zillow-like system. They’re not going to visit your home to see that it “needs work”, just like they’re not going to visit homes that recently sold to see what condition they were in.
Huh. That calculator at the FinAid link @4kidsdad provided puts our estimated value about 7% higher than the value on Zillow, and that’s before adding the “recommended 10%.”
I’ve been using a rounded figure in the neighborhood of the Zillow value where they ask for the value of the home outright. If the NP calculator asks for the inputs of the purchase date and purchase price at the time - as some have done, usually in Cegment - then they will come out with the higher calculated value. Whether they tack on 10%, I don’t know.
Could this be a factor in the variance I’m seeing among EFC figures yielded by different individual schools? In the Big Future calculator, the two different home equity figures cause no change in the “Federal Methodology” output but almost a 2K difference in the “Institutional Methodology” output.
Question: In calculating home equity is it simply market value minus loan principal, or can you subtract the typical real estate broker commission of 6% or so (which is a factor in how much you’d actually take away from the house if you sold it)? Thanks.
Even worse from an equity erosion standpoint at sale time is the additional 3% conveyance tax, split between the buyer and seller, in that blasted “tax free” state we moved here from. Fortunately, not here.
Just value minus loan principal.
We just use the Zillow value.
Just out of curiosity, I ran Zillow on our place to see if using my tax assessed value has been wrong all this time. It was $5000 below the tax assessed value, so pretty close. As I said, the tax assessment here is pretty accurate, but of course you need to figure out how well your own area’s assessments fit with reality.
^ Note that the Zillow value fluctuate day to day, while your tax assessed value is fixed on the day of assessment.
Make sure to include all debt against the house: mortgage, balance on a home equity account. Sometimes there are major infrastructure charges that are also recorded on your county’s records as debt against the property. I’d include that as well. (In one part of our county, septic systems were prohibited, and the charges to join the sewer system were something like $40K/house, which the county loans to homeowners with some kind of payback period. I’d include that as well.)
Thanks arabrab-Having not filled out a FAF before (I know it’s not until January), is there a line to fill that in on the form, or do you just write a letter to the colleges with that information?
Are you talking about the FAFSA…because if so, your primary home equity is NOT mentioned one time in any way on the fafsa form. Primary home equity is not used to calculate the fafsa EFC.
If you complete the Profile, that will ask you two questions…your current home value, and your current mortgage balance. The difference is calculated as your equity.
@thumper1 Some schools’ supplemental question may ask for property value, isn’t it on FAFSA? I forgot about it.
thumper1-So I can just add the home equity amount to the mortgage balance then on Profile? Do the schools ask for documentation?