What has the biggest impact on Home value?

Attempting to price your home appropriately, conducting thorough home evaluations, and understanding the true value you home can all help you negotiate a better deal for yourself. Even if you have prior knowledge of real estate, home prices can vary significantly from your first estimates and the market is changing daily. 

Your approach will be much easier if you concentrate on the aspects that significantly impact a home's worth. The following are the most significant factors that may affect your home value.

Neighborhood

The neighborhood is one of the most important factors influencing a home's value, accounting for both qualitative and quantitative components of a home's appeal. For example, the quality of the local school system and housing values are often significantly associated. Similarly, crime rates have a negative correlation with local house values. Neighborhoods that have certain features such as walkability to local attractions (shops, restaurants, grocery stores, etc) also draw in a lot of buyers due to the convenience factor. Other features of attractive neighborhoods are tree-lined streets, large lots, homes with a decent degree of separation from one another, and cul-de-sacs. Of note, many buyers also do not prefer neighborhoods on or adjacent to busy or noisy roads.

One of the signs of a desirable neighborhood is the previous sale prices of comparable properties as compared to adjacent neighborhoods with lower values. These similar properties are commonly referred to as "comps." or “relevant properties”. According to recent National Association of Realtors (NAR) research, preferring to be closer to jobs, schools, or public transportation is a top motivation for buying a property. Other elements that can make a community pleasant enough to increase a home's value include:

• Close to grocery stores, shopping, and entertainment
• Accessibility to transportation options and major roadways.
• Adequate parking
• Wide streets with sidewalks

Location

Your current home may be beneficial for you—near work or family—but it is not for everyone. Appraisers and Realtors use three key signs when determining how much value to give based on the house's location:

• Accessibility of local schools
• Proximity to major highways and public transit
• Accessibility to major cities or downtown areas
• Opportunities for work
• Proximity to shopping, entertainment, and recreational landmarks

These considerations can explain why certain communities have high prices while others a few miles away do not. When determining the value of a home, location can be more significant than size or condition. 

Size and Appeal

When determining your home's market value, size is a crucial factor to consider because a larger property can have a favorable impact on its valuation, with some prospective purchasers looking particularly at price per square foot to filter out this effect and calculate value. In fact, appraisers often use square footage as the most important factor in determining value. The more living space a home has, the more valuable it should be. Of course, your local real estate agent can determine whether the extra space in your home is perceived as valuable to local buyers.

Larger residences command higher prices. You should also examine the home's appeal; classic, neutral plans tend to be more valuable than unusual layouts that appeal primarily to a small number of people. For example, a custom design and build may fit your family’s particular needs, but those specific features may not be mass appealing when it comes time to sell. The more extensive the appeal of the home, the higher its worth (particularly in terms of resale value).

A home's value is roughly assessed as the price per square foot, which is the sales price calculated by the square area of the home. Assume a 2,000-square-foot house sells for $200,000. The price per square foot would be approximately $100. Most appraisers only take into account true living space when calculating with figure, meaning, below grade square footage and unfinished space does not count towards this calculation. And remember, this is not the only factor you should be considering when calculating your home’s value, but an important one, especially in the case of new construction, where the quality of build varies dramatically. 

The price customers will pay per square foot varies substantially. According to where you're buying, $100 per square foot could be an affordable price or significantly more than the average price, so check with your local realtor to see what the average PSF (price per square foot) is in your neighborhood.

Age and Condition

Along with factors related to size and appeal, you should consider the home's age and condition. New or recently constructed houses will sell for more than older homes as they often require less maintenance, repair and upgrading; and sometimes, they are still under builders warranty.

Nevertheless, an older property that has been maintained properly or fully renovated may sell for the same price as a modern home depending on the neighborhood—condition is important. The home's foundation, structural stability, electrical work, plumbing, and furnishings are all important considerations.

Newer homes are typically evaluated for greater value. The fact that vital components of the home, such as plumbing, electrical, the roof, and appliances, are newer and hence less likely to fail, greatly benefits the buyer as it reduces their potential out of pocket expenses.

Age can reduce the value of a home, especially if it needs renovations. Purchasing a fixer-upper might result in a variety of additional fees. Aesthetic issues, such as an old-fashioned kitchen or a less-than-modern floor layout, exist alongside functional challenges, such as roof or drainage issues.

The State of Local Market

The current conditions of the local and global market will also have an impact on a home's worth. Home values, like every other financial asset, are influenced by supply and demand, and they may fluctuate due to minor changes in your local economy. In addition to supply and demand, other external factors such as interest rates, inflation, global events and politics can affect buyer and seller motivations.

For example, if there aren't enough available properties and a lot of buyers want to move to that area, housing prices will rise. If the general national economy is performing well, housing prices will rise.

Even if your property is in outstanding shape, in the ideal location, and has premium features, if the number of other properties for sale in your neighborhood, as well as the number of buyers in the market are less than the number of homes for sale, it can have an impact on your home’s value. A seller's market exists when there are a large number of purchasers competing for a limited number of homes. A buyer's market, on the other hand, is one in which there are numerous homes for sale but fewer purchasers.

Furthermore, market conditions can influence how long it takes for your house to sell. In a seller's market, properties sell quickly; in contrast, in a buyer's market, residents often spend more time on the market. DOM (days on market) is a real estate statistic that measures how long a home is actively advertised before a contract is executed. If your house has been on the market for an extended period, buyers may believe something is inappropriate or that the price is too high. And remember, as days on market increases, your leverage as a seller decreases.

How do I estimate the Market Value of a House?

To get a broad estimate of how much a home is valuable, use an online home value estimator, which uses current sales and market values to estimate a home's value. Popular real estate websites generally offer these options. You can also use the Federal Housing Finance Agency's House Price Calculator, which utilizes a home's most recent selling price to estimate its current value, assuming it appreciated at the same pace as other properties in the region. If a home is being financed, the financial institution will normally have an independent property appraiser assess the property and determine a value based on its overall condition, size, number of rooms, and so on. Cash buyers and those seeking a second opinion may choose to hire their appraisers. 

Remember that these estimates are just that, estimates!  For a more precise estimate, consult with an experienced real estate agent who is familiar with your area and can help you identify comparable properties. Contact your local listing expert for an in-depth evaluation.

If you’re looking to assess the value of your home and wondering how to price your home, reach out to Nadia Khan, today.