Real estate. It is something that you may consider investing into, but you want to make sure that you get fair real estate value for your troubles.
In the United States, the average home price is $428,700. That home price increased by $100,000 from 2021.
If you want to invest in real estate, you probably want to have an idea if you can match that average as a return on investment. Well, this guide will show you how to determine home value and show you the biggest keys that you need to watch out for.
Market Research
One of the biggest things that you can use to get a good idea of what your home value is, is to do some market research. This is essentially taking the time to see what similar houses in your neighborhood are selling for.
It can be a house that is in the same town as yours and even better, it could be on the same street as your house. You will also want to look for houses that are a similar size, have a similar number of bedrooms and bathrooms, and have similar modern amenities, as yours.
So, you can't expect a studio apartment to go for the same price as a two-bedroom home. At the same time, a house that was built in 2000 is not likely to go for the same price as a house that was built in 1950.
You need to keep all of this in mind when you are doing market research for homes around you. Once you get an idea of what houses around you sell for, you can get a much better idea of what your home is worth.
Neighborhood Value
Another thing that you should keep in mind for home value is how desirable the neighborhood is. People not only have to like your home, but they also have to like the neighborhood that is surrounding the home and what is near said home.
For example, people can find a great little home somewhere. However, they may not live there either because it is unsafe, it is too far from all of their daily needs, or it is too far from all of their friends and family.
Also, a lot of what you do in your daily life is not going to be free. That means that you are going to need money to financially support yourself in your daily endeavors.
That is where the job market comes in. Outside of upgrading their home, a top reason why people say they move is because of either a job offer or a job transfer.
People want to be somewhere they are not only valued but also where they feel financially secure. What this means is that they likely need to be somewhere they have a good job.
As far as a neighborhood goes, if it happens to be near a metropolitan area or a general job industry that provides a lot of jobs that make a good living, it can become a more desirable area for people to live in.
Condition of the Home
Like anything else in life, you will likely pay for something in good condition rather than something that is beaten up and worn out. Well, that is exactly how it works when it comes to valuing a home.
A home inspector can come to your house and conduct a home appraisal. During the process, they can see how your house structure is holding up and determine what would need to be upgraded or replaced to maximize the house's value.
Once that happens, they would give the homeowners an appraisal of what they believe the house is worth. So, how do they come to that determination?
First, they look at the exterior of the home. They take a look at the roof and see if there are any major issues with that. Then, the inspector takes a look at things such as the windows to see if there are any cracks in them or if they need to be replaced.
After that, a home inspector can start to look at the interior part of the home. They can evaluate things such as the ceiling conditions, what the interior walls look like, what the electrical wiring situation is in their house, and what the plumbing situation is in the house.
All of that goes into determining if your home has the maximum value and if not, what things you would have to fix or upgrade to get it to that state.
Cost Valuation
Once the condition of the home is assessed, a home inspector will do what is called a cost valuation. That means that they will add up what they think the estimated costs are to fix any issues that are holding your house back from its maximum value.
For example, let's say that a home inspector determined that you had to replace all of the windows in your living room to increase the value of the home. They would factor in how much modern windows would cost as well as how much the labor to install them would cost.
This is important because when homeowners make renovations or upgrades inside of the home, they most likely have to put that cost as part of the new listing price. The reason for this is that to make the upgrades worthwhile when trying to sell the home, they at least have to get the money back that they put into it.
So, when it comes to cost valuation, that can partially be used to determine what the new listing price should be once the necessary changes are made.
Fixing Minor Repairs
Above, we discussed what has to happen when you need to fix major issues in a home. However, what about the minor repairs?
These can be things such as a small hole in the wall, a minor leak coming from your duct, an outdated kitchen design, and more. The point is that these are things that would not be too difficult for a homeowner to fix before they put their house on the market.
On top of this, it would not cost too much money for a homeowner to conduct these repairs or upgrades. However, some owners are resistant to the idea, they are too lazy to do the work, or they just do not want to take any extra money out of their own pockets.
This means that a homeowner is actually holding themselves back from maximizing the value of their home. The reason, in this situation, is the money that they would have to put in to fix these minor issues, which would easily be returned. Normally, homeowners can have a much higher listing price after these repairs because the house looks like it is in better condition.
Market Climate
Along with market research about how much the houses around you are selling for, you need to figure out how much demand there is for houses in the market right now.
One thing that you may need to account for in this climate is the housing inventory available. For those of you that are unfamiliar, this is the number of houses that are available for sale in a certain area.
As an example, consider the housing inventory in the United States throughout 2022. In the early months, there was lower inventory than at any other time of the year.
What does that mean? It means that there are fewer houses available to put on the market. As a result, that should create more demand for potential buyers if the same number of people were looking to buy houses across the country.
Another factor you may look at is the current mortgage rates. Early in the pandemic, they had a low enough interest rate which created a large incentive for people to buy homes. Now, those interest rates have gone up significantly, so there is less incentive for buyers to jump on that.
Get an Accurate Real Estate Value
These are some of the things that you need to keep in mind if you want to get an accurate real estate value of your property. You need to keep things in mind such as the condition of your home and if there are any easy fixes.
Also, keep an eye on the market climate, do some market research, and do not underestimate how much your neighborhood is worth.
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