Whether you’re a home seller or a buyer, the value of a home is always based on what willing buyers in the market will pay for that property. But every buyer is different. For example, one family might consider the size and condition of the home over location factors like schools, jobs, public utilities and others.
We’ve collected the most important factors that influence home value:
One of the best indicators of your home’s value is the sale prices of similar homes in your neighborhood that have sold recently. These comparable homes are often referred to as “comps”. Whether it’s a home appraisal, a comparative market analysis done by an agent or realtors. Most real estate experts will rely on comps to estimate your home value.
These factors can influence why some neighborhoods command steep prices, and others that are a few miles away don’t. In addition, a location’s proximity to highways, utility lines, and public transit can all impact a home’s overall value. When it comes to calculating a home’s value, location can be more important than even the size and condition of the house.
A home’s usable space matters when determining its value. Garages, attics, and unfinished basements are generally not counted in usable square footage. So if you have a 2,000-square-foot home with a 600-square-foot garage, that’s only 1,400-square-feet of livable space. Livable space is what is most important to buyers and appraisers. Bedrooms and bathrooms are most highly valued, so the more beds and baths your home offers, the more your home is generally worth.
Typically, homes that are newer appraise at a higher value. The fact that critical parts of the house, like plumbing, electrical, the roof, and appliances are newer and therefore less likely to break down, can generate savings for a buyer. For example, if a roof has a 20-year warranty, that’s money an owner will save over the next two decades, compared to an older home that may need a roof replaced in just a few years. Many buyers will pay top-dollar for a move-in-ready home.
Updates and upgrades can add value to your home, especially in older homes that may have outdated features. However, not all home improvement projects are created equally. Some projects like adding a pool or wood floors tend to have bigger increases for more expensive homes, while projects like a kitchen remodel or adding a full bathroom tend to have a bigger increase for less expensive homes. The upgrade also varies based on the market location you’re in.
If you’re buying in a buyer’s market, you’ll likely have more room to negotiate on the home’s price, timeline, and contingencies in the contract. Although if you’re selling in a buyer’s market, you may have to adjust the price to attract more offers or be willing to make concessions to a seller, like paying closing costs, covering repairs, or being more flexible with the timeline.
The broader economy often impacts a person’s ability to buy or sell a home, so in slower economic conditions, the housing market can struggle.
Both short-term interest rates (like what you pay on a credit card) and long-term interest rates (like what you pay on a mortgage) influence your ability to afford a home, but in different ways. A rise in short-term interest rates may increase the interest on your savings, but it also makes short-term debt more expensive. The point is as interest rates increase, fewer people may be able to afford homes, and this can impact how much you can sell your home for.
It’s easier to avoid common home-selling or home buying mistakes when you’re aware of the factors that influence home value. Need more information? Call us now at CPD Homes, LLC and we’ll be more than happy to help you! Feel free to contact us at 216-619-4387, or visit our website www.cpdhomes.com for more of our products and services!