5 Main Factors That Affect the Price of the Home
Have you ever browsed real estate listings wondering exactly how home prices are determined? Who decides the value? And what makes a home more or less valuable?
A firm understanding of what factors are considered to determine the price of a home will help you prepare to buy or sell a home.
Appraisal
In order to determine the value of a home, an appraiser will assess the house. Generally, this includes the actual house, the property, and any other on-property amenities such as a detached garage, pool, etc.
When assessing the value of a home, an appraiser will document its physical features related to a home’s age, size, layout, updates, and upgrades.
Features include square footage, number of bedrooms, bathrooms, the quality and state of the roof, foundation, flooring, fixtures in the bathroom, kitchen, and more. So, it’s important to closely review the home appraisal to ensure the findings are accurately portrayed in the listing price. For example, a pricey home with a faulty roof may allow you some negotiation room. Alternatively, be wary of homes that have a more attractive, lower listing price that may require expensive renovations, especially if it’s because of a lack of maintenance.
What impacts the appraisal?
1. Upkeep and maintenance
Speaking of maintenance, a key factor impacting the appraisal of a home’s value is it’s upkeep. This is especially critical when you’re selling a home. It’s important to note that your entire home, including the property, will be evaluated during the appraisal, which will justify the need for proper upkeep and maintenance over time. No stone—or shall we say flooring tile—is left unturned during the appraisal.
Having the key physical features of your home professionally evaluated once a year will help ensure that they’re in good standing.
Investing in the long-term upkeep of your home is a smart decision that will play a big role in getting the best value for your home down the road.
2. Upgrades and renovations
Be mindful when considering home upgrades and renovations, because it’s far too often that homebuyers start a home renovation project thinking it will increase the value of their home when instead the renovation might end up causing a decrease in the home’s value. For example, removing walls and therefore the total number of rooms may negatively impact the listing price depending on total square footage. That’s something not all homeowners consider when trying to make a space “open-concept.” Similarly, over-improving may elevate your home’s listing price beyond that of your neighborhood, which could potentially make selling your home more challenging in the future.
Talk to real estate professional prior to starting home renovations to make sure you’re investing in projects that will positively impact the value of your home.
3. Negative events
Other aspects evaluated in the home appraisal are negative events. For example, a past fire, flood damage, presence of mold, and incident of crime or death on the property. In some circumstances, these events must be documented by law and may negatively impact a home’s price.
4. Location
We’re all familiar with the phrase “location, location, location” when discussing real estate. There’s a real reason for that. A home’s location plays a large role in value. Let’s face it, you’re likely not just only looking for a new home, but you’re probably also looking for a community that best suits your needs. Highly-sought after community amenities can justify higher home values. Likewise, a home located in a less-desirable community would most likely carry a lower listing price. The following are location-based factors that could either decrease or increase a home’s listing price:
Location-based factors that could increase a home’s value:
Close proximity to desirable school systems
Close proximity to shopping centers and other popular businesses
Convenient access to interstate and/or expressways
Close proximity to parks, recreational facilities
Location-based factors that could decrease a home’s value:
Densely populated areas that could cause congestion
Close proximity to construction
Close proximity to homes under short-sale/foreclosure
Higher than usual crime rate
5. Timing and considerations
Timing and the condition of the real estate market are two critical factors that can impact the value of a home, as well. The housing market is constantly evolving due to many sub-factors such as competition, interest rates, the local economic climate, etc. These fluctuations can vary annually, seasonally, and sometimes even monthly. Home values are impacted by the current market conditions at the time it’s appraised and listed. If you’re considering selling a home, consult with a real estate professional to determine the best timing to list your home for the best and most accurate value possible. Your mortgage banker can easily point you in the right direction.