Are you wondering how much your house is worth?
Whether it is a buyer's or seller's market, property evaluation is a fine art and takes a lot of skill, training, and experience to master. But if you do not work in that industry, those numbers can feel plucked out of the air.
Do not worry, we are here to break it down. Read on for the 7 factors that are fundamental to home value.
1. Neighborhood Comparable Homes
Comparable homes (or comps as they are sometimes known) are homes in your area like yours. And their value will be similar too. The sale prices of what similar homes sold for in recent months are a great indicator of your home's value.
Have a look for homes that have sold in your area over the past few months. Around 6 months is a good time frame to look in. You can also look for homes that have a similar location to yours.
Bear in mind that no two houses will have the exact same value. You want to use your local property market as a rough guide to give you an idea of what to expect. If your neighbors' house has the same number of rooms, is in similar condition and it is going for $400,000, chances are yours will be around that figure too.
2. The Size of Your Home and the Usable Space
Another important part of your home appraisal and valuation is the size of your house. It might seem obvious, but a bigger home can often have a larger valuation.
You can estimate prices by multiplying the square footage of the house by the valuation of each square foot. This is only a rough guide though, you will not get a definite value from this.
The usable space a house has will also play a role in how much a house is worth. This can include extras like:
But, it is a livable space that gets potential buyers excited and draws them in to make an offer. Sure, having the potential for expansion in the future is a nice bonus. It is great if a house can expand and grow with their lives, though they want to see themselves living in your home now.
How does your current home work for them? Does it give them the space they need? Can they see their lives fitting right in with little effort?
Bathrooms and bedrooms are the main attraction when it comes to this, and living space too. In general, the more bedrooms and bathrooms your home has, the higher price it can command.
This is also an opportunity for you to add further value if you have the time and funds. If you put effort into renovating these rooms to look their best you could see your home value increase.
3. Your Home's Location
Any potential buyer (and evaluator) will be thinking about your home's location. What local amenities are nearby? This is not how convenient your home is for your personal needs.
Buyers will not care how close your home is to your parents or your place of work. They are looking for how your home will work for them. So, you want to focus on things like:
- The quality, availability, and proximity of local schools
- How close highways, shopping centers, and recreational areas are
- What local available employment opportunities are there
The further away your home's location is from the above, the more it could impact your home's value. And not in the way that you would like, it will decrease what you can ask for. In fact, for evaluators, the location is actually more important than the size of your plot and home.
4. Age & Condition
New homes will generally have a higher value. The simple reason behind this is because the critical parts of the house are newer. This includes plumbing, roofing, and electrics. If these are newer, they are in better condition and less likely to break down.
This means the buyers have some peace of mind that things will not fall apart right after they move in. It also gives them time to generate a savings pot to cover any major renovations if a disaster happens.
A roof, for example, has a warranty of around 20 years. This will be great peace of mind for the buyer that they will not need to replace it any time soon. On the flip side of that, the older the home is, the sooner the roof might need to be replaced. It might even be in only a few months or a year after moving in.
A home that buyers can move into will appeal to most buyers. They are especially attractive to first-time buyers as it takes some of the stress out of moving.
Often, they will be happy to pay top dollar for that convenience. If you have any repairs to make, it is worth doing them before you put your home on the market. When buyers come to view, make sure your home is clean, tidy, and a blank canvas for them to envision their future.
5. Upgrades, Extensions, and Updates
Homeowners will most often make upgrades and updates to increase the value of their homes. With extensions, they can be practical, but they too will impact the value as they add more usable space.
In most cases, these renovations occur for older homes that are a little tired and dated. They need some TLC to look their best and bring them into the 21st century. It is not a case of a few licks of paint though, some updates and upgrades are worth more than others.
How renovating your home will impact your house price will depend on the local market. For example, some towns might value a renovated basement space, while other towns will not. So, if you are thinking of spending a little to update your home, check in with a local realtor.
A local realtor can give you insight into what renovations buyers in your area value. It is useful to get an idea of what local buyers are looking for, so you can maximize the potential of your home.
If you want to further add value to your home, it is worth considering going a bit further. Consider a project like adding hardwood flooring or a pool. Kitchen remodeling is also popular for most buyers.
It is about making your home as appealing as you can while keeping it simple. Remember the rule of a blank canvas, let buyers picture how they will live in your home. Picturing that is much easier when a home is up-to-date, clean, and ready for them.
6. Your Local Market
So, let us assume you have a spacious home in top condition. It is situated in one of the nicest local areas and you have all of the modern conveniences. While that will all work in favor of boosting your home's value, your local market will play a part too.
The number of buyers in your areas and the number of other houses for sale should be something to note. If there are a lot of buyers competing for only a few homes, this puts you at an advantage. It is a seller's market, and homes often sell faster.
If your local market is flooded with homes and there are only a few buyers, this is not good for you. This means it's a "buyers' market", and you may find yourself in a position where your value drops. Or you have to accept a lower offer if you do get one.
7. Broader Economic Factors
This last factor focuses on the health of the economy in general. If the economy is sluggish, it will be harder to get a good valuation and sell your home.
So, when you are considering putting your home up for sale, follow current affairs. Follow what is happening across the country and your county when it comes to home sales and prices.
This will help you work out if it is time to sell, or if you should put it off for a little while. As we saw in the last section, supply and demand play a huge part in what you can get for your home. If it is a sellers' market, you can even get a bidding war over your home.
In fact, a lot of experts would say that a lack of homes for sale is one of the biggest drivers for home value. On average, most communities will have between 15-20 homes for sale. But if areas only have around 4-5, if any are sought after, the owner is looking at a top-dollar price.
Understanding Home Value Made Easy
So, there you have it! Now that you know what goes into determining a home value, you are better prepared for selling yours.
The biggest tip is to keep an eye on your local market, and the economy in general. If you do not have to, it is best to avoid selling during a buyers' market. You want a market where there are not many homes like yours competing with you, but a flood of buyers.
On top of that, make sure your home is in the best condition it can be. If you want to sell your home as-is, prepare for a lower valuation. Talk with a local realtor to find out what you can do to attract the most buyers and follow their advice.
If you are looking to find out what your home is worth, check out our home valuation calculator. You will get a current, up-to-date market value that you can trust.