I am researching and getting conficting answers to this question. Can anybody tell me the best practice for valuing real estate for FAFSA? Thanks in advance.
The best practice may be to hire a professional real estate appraiser and get a current fair market value. This can also be relatively expensive and impractical, so it’s often not the preferred option. When was the property last sold or appraised? What have similar properties nearby recently sold for?
if it is your primary residence, your original purchase price would be your house value. correct me if am wrong
If the purchase was recent enough, yes. But a house purchased 20 years ago at fair market value very likely does not have the same fair market value today.
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Absolutely not usually unless it’s a recent purchase or the home has not increased in value at all.
That said, primary residences aren’t included on FAFSA.
Only additional properties, rental properties, etc, are included on FAFSA
Some people go to Zillow to get a market price…then subtract any outstanding mortgage to get the equity.
I read a book that suggested using the property calculator at finaid.org to determine the present value of the home.
Thank you @BelknapPoint @mom2collegekids @DoinResearch for correcting me. Good to know the fafsa does not include primary home. I heard CSS does include the primary home. anybody has any insight why private schools care about your primary home value?
Because many private schools (and some public schools that use CSS Profile) use the equity in the primary home as a factor in determining need-based aid.
So when I fill out CSS and put value of house I can subtract what I still owe on it? That would help a lot.
The other part that gets me is that it is hard to compare home values as you don’t know what work it needs. My kitchen is from the 1950s. Can’t compare that to a recent sale with new kitchen, bath etc
Newh-- a person might have an average income but are living in a million dollar house with no mortgage.
@BelknapPoint Thanks.
Yes. The number that matters is the current equity – current fair market value minus mortgage amount still owed.
Edited to add: I believe that CSS Profile asks for both of these numbers, so you don’t even have to do the math yourself.
This is what a professional real estate appraiser is paid to do. When that’s not practical, find a recent sale that more closely matches your property.
Recent sales are usually of fixed up properties. We discount ours a bit because we’d either have to invest in fresh paint and flooring, etc or take a chunk of money off the sale price for not having done these things. Our kitchen appliances are in good shape, but our carpets are just horrible.
If you had to get cash out of your house fast, how much would you realistically get?
“Fast” can be a relative term. There have been posts here by those claiming that a “fire sale” value is ok to use, as in what could you expect to receive if you had to sell it tomorrow. I don’t think this is correct. The value should be what you could expect to receive if you sold the property without delay, in its current condition, through a normal business transaction.
Thank you so much, everybody.
We bought our house at the height of the real estate bubble 14 years ago and basically overpaid by about 10% because we had to get out of our previous home quickly after it sold. Anyway, I’d say the current market value to sell our home within 3 months or so is right about what we paid for it. Recent neighborhood sales indicate same and in some cases less than we paid. Tax assessment and estimates from Zillow on homes in our neighborhood are higher than the houses are selling for, too. I think this might be due to the fact that our neighborhood was built up in the 1920s. Many homes, including my own, have 1950s kitchens and bathrooms and such.
While I’m confident in my estimate, I’m concerned that somehow this will look incorrect when schools are reviewing our profile.
How would a financial aid officer conclude that your reported value is incorrect? I have a hard time believing that much time, if any, is spent reviewing the correctness of real estate valuations reported on thousands of financial aid forms every year. Schools rely on the belief that students and parents are making a good faith effort to report as honestly and accurately as possible.
@BelknapPoint Good point. Maybe I just needed reassuring! It also occurs to me that if an FA officer had a question about it, then I could produce our neighborhood sales data.