10 Factors That Affect Your Home’s Value

Estimating a home’s value can be a complex process and there are a lot of factors that most aren’t even aware of. Today, we’ve pulled together some of the most common elements that can affect a home’s value, many of which will be considered during your next home appraisal.

 

Unless you haven’t followed the housing market during the last couple of years, you’ll know supply and demand are the biggest factors that typically contribute to increasing or decreasing a home’s value. Home location, age, condition, and other details also contribute to a property’s value. Read on to learn the 10 factors that control your home’s value.

 

1. Location

Location, location, location. It’s not just a saying, it’s a real estate truth. You can make a home the most beautiful in the world, but the location will always stay the same. The location of a home and how close it is to basic necessities is often the most important deciding factor for a buyer. Buying a home in a popular area of town can help maintain or increase the home’s value and hedge against economic downturns that cause the average home value to decrease.

 

Here are some of the location factors that go into determining home value:

• Neighborhood desirability: Some neighborhoods have it and others don’t. This could be due to location, amenities, or a certain level of local prestige. A home in a more desirable neighborhood, ZIP code, or even an area of town, will almost always sell for a premium price.
• School system: Education can play a huge role in a family’s decision to plant roots in a community. The National Bureau of Economic Research found that for every $1 spent in schools, area home values increase by about $20. Homes located within desirable school districts maintain their resale value and tend to sell quickly once listed.
• Proximity to highway access and mass transit: For some, having quick and easy access to major highways is important to their daily commute and it can be important to your home’s worth. A joint study by the American Transportation Association and the National Association of REALTORS® found that homes located within a half-mile of public transportation services had higher home values than homes located further away.
• Lot location: Even within a desirable neighborhood, certain lots can be considered more desirable than others. This could include homes on a cul-de-sac or a corner lot. In general, homes on streets that are less busy or lots situated to be more private might sell for a higher price compared to smaller, busier locations.

2. Size

Second to location is the size of the home. A home with more living space will likely be worth more than a smaller home in the same market because livable space is a hot commodity. Some spatial factors that could impact your home’s value include:

• Number of bedrooms
• Amount of square footage
• Lot size
• Number of bathrooms

But not all space is good space. When looking to add value to a home, adding too much square footage can make it difficult to find comparable homes in the area to help determine the property value.

 

If you’re looking to add value to your home, understand where your current home value sits compared to others in your neighborhood. If your neighbors have a finished basement but yours is only partially finished, it might be worth the investment to finish the entire basement to stay competitive in the market.

 

3. The Market

As we discussed before, the supply and demand in the housing market is one of the primary drivers of housing market conditions. While national trends give hints to what could be happening in your local market, it’s important to research what’s going on in your area. There could be other factors at play in the local market like the loss of a major employer or local laws causing shifts in real estate sales trends.

 

Working with a real estate professional who is an expert in your specific neighborhood or area will be the best way to get a feel for your local housing market and determine if it is currently a buyer’s or seller’s market.

 

In a buyer’s market, there are a lot of homes available to purchase and the homes tend to stay on the market a little longer. In some instances, buyers can better negotiate terms in their favor. A seller may need to adjust their price to accommodate a buyer’s budget because the home’s market value is lower than a seller anticipated.

 

In a seller’s market, there is less inventory available and therefore more competition among buyers. In a seller’s market, those selling their home can dictate the type of loan they are willing to accept and often have multiple offers to choose from. Understanding whether your local real estate market is a buyer’s market or a seller’s market can help you determine the market value of a home and whether it will sell quickly.

 

4. Age And Condition Of The Home

A home’s age and condition are high on the list of considerations when evaluating a home’s value. A newer home will typically have modern amenities like plumbing, electrical, roof, and appliances that will require less maintenance and upkeep. Because of this, buyers are likely to pay more for the convenience of a turnkey home with all the bells and whistles.

 

If an older home has been well maintained throughout the years, it too can appraise well. While the market value may dictate a sale price, the intrinsic value of the home could be priceless to certain buyers.

 

Architectural features or the historical significance of a home can be valuable to some buyers and its value cannot be quantified with comparables. With older homes, buyers will want a thorough home inspection to ensure the systems in place are safe, and efficient and have some useful life left.

 

5. Renovations

 

Making improvements can add value to your home, especially an aging home that might have out-of-date technology and appearance. It’s important to remember that not all home renovations will add as much value as you think. For example, in an older home, updating the electrical system could make more of an impact on the home’s value than a new kitchen floor.

 

On the other hand, a newer home may benefit from a new kitchen floor to bring the home’s aesthetic up to current home design standards. It’s important to follow current home trends if you want to make renovation decisions that are a worthwhile investment and will stand the test of time.

 

Here’s how some popular renovations factor into determining a home’s value:

 

• Curb appeal: Curb appeal and landscaping are the first impressions that potential buyers see and are therefore important selling factors. While you most likely do not need to do a landscaping overhaul, cleaning up the front yard and exterior of your home can go a long way in helping your home to look its best.
• Updated kitchen: Kitchens are one of the rooms that home buyers focus on the most. A remodeled kitchen can catch the eye of many potential home buyers. Consult with your real estate agent to determine if you should renovate your kitchen, or possibly make small updates to modernize it.
• New systems: Some buyers will be very concerned with the age and condition of the systems of the home, such as an HVAC system or the roof. If the current system is very old, it could be worth it to fully replace it. Even if it is newer, it can be nice to be able to market the system as recently serviced, cleaned, or updated, as appropriate.

 

6. Future Development

As a community changes, so do property values. Staying up to date on the upcoming developments in your area can give you insight into the future value of your home.

New schools, large businesses, and local amenities can make an area suddenly become more appealing – and therefore more expensive – to buy a home in. Similarly, the closing of a large employer or a downturn in school ratings can decrease a neighborhood’s overall perceived value.

 

7. The Economy

The national and global economy can impact your local home values and real estate trends. During an economic downturn, jobs become unstable or nonexistent. With fewer qualified buyers looking for a home, you may need to lower your sale prices to accommodate the market value.

 

During an economic uptick, many more Americans are equipped to make larger, longer financial commitments and have more discretionary income to do it. Keeping up to date on local sales trends can help you determine the best time to sell your home to get the most value.

 

8. Real Estate Comps

Real estate comps are similar homes that have recently sold and might hold a similar value to your home. They can be used in appraisals and to help set the going rate for homes in your area. An increase or decrease in the sales price of comparable homes can affect the value of your home accordingly.

 

9. Interest Rates

Interest rates are another common factor that affects home value. As interest rates increase, home buyers can afford less of a mortgage for the same monthly payment. So, they will have a decreased overall budget. When loans get more expensive, that tends to drive the overall price of homes down.

 

10. Zoning Regulations

Changes in zoning regulations can also affect property value. Land that is zoned as residential-only will not appeal to business owners and therefore could have less interest in it. Homes that are zoned as mixed-use could appeal to a larger pool of buyers and therefore could drive a higher price.

 

How To Determine The Value Of A Home

 

It can be difficult to determine the fair market value of a home. This is one reason why so many people use a real estate agent for help. Real estate experts will have the best possible understanding of the local economy and comps to help you price your home to sell quickly and for the maximum profit. If you would like an estimate of what your home is worth reach out today to one of our mortgage experts to give you a rough estimate of how much your home is worth.