When you are trying to sell your house or even figure out the fair price to bid on a house, you need to know the market value. What goes into the market value? What makes it higher or lower? Understanding what goes into the value will help you decide how to price your home to sell or how to bid on a home that you want to buy.
Real estate is heavily influenced by the activities in the market. When the market is good, you can expect to get or pay higher prices for a home. When the market is down, you can expect to receive or pay lower prices.
Below are the top factors that affect a home’s market value.
What is around your home? Appraisers look at this. It doesn’t matter that the home was convenient for you. Is it convenient for the ‘average person.’ In other words is there shopping nearby? Are the schools in the area rated good? Is there easy access to public transportation and the freeways? The appraiser considers these things.
If the home is situated in the middle of nowhere and it takes 30 minutes just to get to the local grocery store, it could bring the value of a home down. On the other hand, if it’s in the middle of the hustle and bustle of town, the location will play favorably in the home’s value.
The Area’s Values
Unfortunately, the value of your home or the home you want to buy is heavily influenced by the homes in the area. This can be good if the area has been selling high. It can also be bad if there has been a rash of foreclosures and short sales in the area.
When looking at comparable sales, you want to look at homes that sold in the most recent six months. If there aren’t many homes that sold within that time, you can look back a far as a year, but you might get some slack from your lender for going back that far.
You also want to compare it to homes that of similar size and layout as your home. It doesn’t have to be the exact model, but you should compare a 3-bedroom home to other 3-bedroom homes, rather than a 1-bedroom or 5-bedroom home. You should also try to keep the comparable sales within a mile from the subject house.
The Home’s Size
Some buyers base a home’s price on its size. They know the average price per square foot in the area, so they base their bid on that price according to the home’s size. Appraisers take the home’s size into consideration too. They look at how it compares to other homes in the area. If the comparable sales used are smaller than the subject home, the appraiser will increase the value of the home accordingly. The reverse is also true. If the subject home is smaller than the comparable sales, then the price will be adjusted the other way.
Age of the Home
Older homes often sell for less than newer homes, but again, it depends on the area. If an older home has been properly kept up and the appliances, plumbing and electrical are up to date, you may not lose any value because of the home’s age.
New homes tend to be valued higher just because of the lower amount of work that is necessary to maintain it. The appraiser will look closely at things like the plumbing and electrical; condition of the foundation; and the age of the appliances inside the home.
If you have made any upgrades to your home, provide the appraiser with the proof. You won’t get a dollar for dollar return on the upgrades, but it should help your value a little bit. Upgrades you make to the home’s kitchen, bathroom, front entry, and front exterior of the home often have the largest return on their investment.
Upgrades done to any other rooms in the home or the rear exterior of the home may increase the home’s value slightly, but not as much as the above-mentioned upgrades. You may see 50% or less return on your money invested in these types of upgrades.
The State of the Market
Finally, your home’s value is dependent on the state of the market. If you hear that it’s a ‘buyer’s market,’ the market is slow. You will likely get a lower price for a home you are selling in a buyer’s market as the buyer has the upper hand. In a seller’s market, though, the seller has the upper hand. This usually means the housing market is doing well and buyers are trying to outbid one another to buy the home.
Many factors influence a home’s value. It’s all about the timing, the home’s condition, and the home’s location. If you are unsure about the value of a home, talk to a real estate professional or an appraiser. This way you can get a good feel for how much you should either ask for a home or bid on a home.