Time for an equity check?

You take your car in for service and see your doctor for a physical -- Is it time for an equity check on your home?

The headlines are filled with news about how a majority of homeowners in some areas owe more on their mortgage than their property is worth. What the headlines do not trumpet, however, is that 35 percent of all U.S. homeowners own their property free and clear.

While you may not be considering selling your home, it is still extremely important that you know how much equity you have (or don't have) in your home.

For most people, the home is the most valuable asset that they own. The current market has depleted that value almost everywhere in the country. Here are three reasons for tracking this very important number.

1. Falling values can mean a reduction in your property taxes
Depending on how your state or local taxing district sets property tax values, you may qualify for a property tax reduction if property values in your area have declined. There are a number of ways to determine what your current property value is.

In my own case, even though I can search the comparable sales information using various online resources, I prefer to go through a local Realtor. Every time I have done this, she has found additional comparable sale information that was not included in the multiple sources I investigated online. Another option is to hire an appraiser, but it may cost more than what you could potentially save.

Whether you choose to do this yourself or seek the aid of a Realtor, you will need square-footage information and pictures of the comparable sales you are using (i.e., similar properties in your area that have recently sold and closed). If possible, it's also smart to include interior shots of the properties to make a valid comparison, especially if your property has not been upgraded or is in poorer condition than the comparables.

The next step is to calculate the price per square foot that the tax assessor used for your last tax appraisal. After calculating this number, locate as many local sales as you can find that resemble your property. As a general rule of thumb, choose properties that are within 10 percent of your lot size and 10 percent on your home's square footage. ...CONTINUED

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