A Comparative Market Analysis (CMA) is a tool used by real estate agents to value a home. It evaluates similar homes that have recently sold in the same area. Agents find comparable sales and use them to conduct a sales comparison. In most cases, an agent will find three homes that have recently sold and are as similar to and located as close to the home being valued as possible. Each one is then analyzed to pinpoint differences between it and the home being valued. Once these differences are priced out, the price of each comp is adjusted to see what it would cost if it was identical to the home being valued were it to be sold in the current market.

An appraisal is an unbiased valuation of a home based on a professional’s opinion. They are usually what mortgage companies use for home purchases and refinances. When a lender requires an appraisal, ask who orders it, what it costs and who pays for it. An appraiser does a complete visual inspection of the interior and exterior of the home as well as taking into consideration recent sales of similar properties and market trends. The appraiser then compiles a detailed report on the home, including an exterior building sketch, a street map showing the home and any comparable sales, photos of the home and street, an explanation of how the square footage was calculated, and any other relevant information.

A lender reviews the property value along with your income, credit, debts and the loan program when considering a refinance. Ask your lender which valuation is required and how the proposed loan affects your costs; an online estimate does not establish eligibility or loan terms.

If you’re doing home improvement projects to increase the resale value, you want to make sure you’re not pricing it out of the market. If your home is already priced on the high-end for your neighborhood, making too many improvements could make it more difficult to sell. When you get a valuation, you can see how your home compares with others in the neighborhood and let this guide your home improvement decisions.

A home equity line of credit uses your home as collateral. Eligibility, rates and borrowing limits depend on the lender and your circumstances, including equity, income and credit. Review the costs, repayment terms and risks with the lender; an online estimate does not determine whether you qualify.

Though it’s not a necessity, simply knowing the value of your home is good information to have. It will help you plan for the future and deal with unforeseen circumstances when you might be in a position that requires extra money or a quick relocation. Knowing how much equity you have in your home and how much you may be able to borrow against it or sell it for will help you respond to any financial curveballs that life throws at you.