To determine the equity of a house or a car, you'd generally subtract what you owe on them from their current market value. Here are the steps in more detail:
House Equity:
Step 1: Determine the current market value of the house. This could be done by getting an appraisal, looking at the selling prices of similar homes in your neighborhood (known as "comparables"), or using online estimation tools provided by real estate websites. See below for more details.
Step 2: Determine the total amount you owe on your mortgage. This information can be found on your most recent mortgage statement.
Step 3: Subtract the amount you owe on the mortgage from the current market value of the house.
Equity = Current Market Value of House - Outstanding Mortgage Balance
Car Equity:
Step 1: Determine the current value of the car. There are several online tools that can help you estimate your car's current value, such as Kelley Blue Book or Edmunds.
Step 2: Determine the outstanding balance on your car loan. This information should be on your most recent car loan statement.
Step 3: Subtract the outstanding balance on the car loan from the current value of the car.
Equity = Current Value of Car - Outstanding Car Loan Balance
In both cases, if the number you get is positive, you have equity in the asset. If the number is negative (which means you owe more than the asset is worth), you have what's called "negative equity".
How to determine the fair market value of real estate:
There are several methods to determine the fair market value of real estate:
Online Estimators: There are several online tools and websites that estimate the fair market value of a house based on the address or location and it's basic information like square footage, bedrooms, bathrooms and age of the house. Some you may consider include Zillow, Trulia, Redfin, Realtor.com, Eppraisal.com among others.
Comparable Sales Method: This method involves looking at the prices of similar homes that have recently sold in the same area. Real estate agents and appraisers will look at factors such as size, condition, location, and amenities to find comparable homes.
Income Capitalization Approach: This method is often used for rental properties and commercial properties. It involves estimating the potential rental income and then applying a capitalization rate to determine the value of the property.
Professional Appraisal: Hiring a professional appraiser to determine the fair market value of a house is another option. A professional appraiser will typically inspect the house in person and take into account factors such as the house's condition, location, and amenities.
How to determine the fair market value of a car:
There are several methods to determine the fair market value of a car:
Kelley Blue Book: Kelley Blue Book is a well-known resource for determining the fair market value of a car. It provides information on the market value of new and used cars based on make, model, year, condition, and other factors.
NADA Guides: NADA Guides is another well-known resource for determining the fair market value of a car. It provides similar information as Kelley Blue Book and also includes a trade-in value.
Edmunds: Edmunds is another resource that provides information on the fair market value of a car. It also provides information on the dealer cost of a new car, which can be used to negotiate the price of a new car.
Professional Appraisal: Hiring a professional appraiser to determine the fair market value of a car is another option. A professional appraiser will typically inspect the car in person and take into account factors such as the car's condition, mileage, and options.
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