5 Crucial Factors that Affect Home Value
April 18, 2020
Are you a homeowner looking to sell? Are you wondering how to sift through mounds of information, data, and paperwork while getting the maximum profit? The amount of information available is overwhelming, and it can seem impossible to verify. Home sellers and owners have only a single chance to get it right. You don’t want to hear after the sale that your house could have gone for a higher price. That’s why we are here. We will bring you proven, effective methods to maximize your profits while selling a home and help you become a professional. These are not fancy trends or fads; these are effective, simple tips and ideas for you to sell your home at an optimum value.
These ways will save your time and energy and determine the simplest method to achieve your goal.
In this post, we will explain the five factors that affect the value of your home.
We all know about appreciation and depreciation. For the unaware, let me define those terms. Suppose you bought a piece of land in 2012 at 100,000 dollars. After five years, the price of the land will be around 112,500, with an increase of 2.5 percent annually. The increase in value is called appreciation. Depreciation would be buying a car for 5000 dollars and selling it a year later for 3,500 dollars. The decrease in value is called depreciation. As a homeowner and eventually seller, using these concepts will allow us to help establish home value. What you do or don’t do will help you appreciate your home value. You may think renovating your backyard or adding a pool could increase its value but chances are it, in fact, may reduce it. Something as basic as new flooring could increase your value. Isn’t that mind-boggling?
To simplify matters further for you- LAND APPRECIATES, BUILDINGS DEPRECIATE.
Today, we talk about five crucial factors that affect the value of your home. You may think it’s quite simple and obvious, but the answer may surprise you.
1. Location, Location, Location
The first and foremost question one has while buying a home is where is it located? That answer could and usually does vary from person to person. Some will mention the city; some will mention the neighborhood, and some will specify the region. Every town, city, suburb, and area has its real estate market and fluctuations. That is why location is one of the KEY factors affecting your home value.
Location here indicates the region and suburb where your home is located. For example, in a suburb with a University or college, having flats/apartments would mean they would sell/rent faster. Younger students/couples would also prefer easier commutes; hence they would pay more for a home located near public transportation. Geography, topography, and climate also shape the value of your home to a high extent. Houses at the top of hills or with steep terrains may face difficulties when going on sale. Cities or suburbs with sunny climates and warm weather can demand high prices and receive them as everybody wants to live there.
Population density, income, and transportation have a direct relation to the value of your home. Zoning laws, councils, and local regulations will also influence a buyer before he/she can purchase your home. If you can understand those, you can use it in a way to target the right audience and buyer for your home.
2. Community
Selling a house in Boston sounds easy enough, but which neighborhood? What is the area? Are there any good schools? Are there any parks or playgrounds nearby? How is the cultural mix? What are the crime statistics?
To make a sale, to establish a baseline price, you have to understand your community and your neighborhood. Is it safe? Are there enough streetlights? Can a woman walk alone in the dark? Can children play on the streets? You should be making a checklist and adding these questions because rest assured, your buyer will be asking them. Some of the things that will affect your community and neighborhood home value are-
- Amenities- Shopping malls, Grocery stores, cafes, and restaurants
- Transportation- Convenient and easy access to public transportation
- Schools- Good quality schools are usually the BIGGEST factor in driving home prices upwards
- Employment- Availability of local, regional jobs and employment could boost demand for homes
Couples or families plan their new homes with a lot of criteria in mind. A good or premium school is the first and foremost for them. Studies have shown that families tend to move near good school districts while planning their first child or when their child is young. Understanding this mentality could be an advantage if your home is located in a good school district or neighborhood. It could allow you to demand higher than your actual home value and even receive it.
Whether you are a young couple, family, or elderly person living alone, one thing these groups have in common is the need for amenities. A home that is walking distance to grocery stores, cafes, essential services is highly valued for its ease and convenience. It reduces the dependency on a car and allows people of all income and age groups to travel daily and easily to their required chores. Connectivity is important and with amenities clustered around your home, it is a given that the value will zoom right up.
Cities are where you need to go for work or socializing but you don’t necessarily live there. Suburbs around cities are slowly developing and expanding their communities. This is where the transportation and commuting factor steps in. The shorter the commute time, the higher the property value. You may not want to live close to a train station because of the noise, which can then cause depreciation in your home value. Homes in or closer to the city are valued at a higher price range compared to homes in good neighborhoods but at a long commute from the city. Anywhere between 20-30 minutes commute from the city, and you can expect a higher value for your home.
3. The House
Now that we have taken a look at the EXTERNAL factors affecting your home value, it’s time to look at the specific house. Every home and house is unique and individual in its own way. That is why size, location, interiors, age, and style can impact home value.
As we mentioned, every house is unique. This is where uniqueness could also be an obstacle as trends and needs keep changing over the years. Smaller homes or apartments will be difficult to sell due to their limited space and constraints. A house with a swimming pool may find itself being priced lower because not everybody wants to maintain a pool or needs that space for something else. Cul-de-sac lots have the reputation of being friendly or neighborly and safe. A seller with a house in a cul-de-sac lot can capture on that and it will affect his home value.
You need to market your home to the right buyer. Selling a flat to a family or a couple with pets is probably doomed to failure. Approach young couples, working professionals, or students and position it as a sensible investment for a starter home. The way you word or market your home will make a huge difference in its value.
The age of the home will also help in appreciation or depreciation as older homes require more looking after and repairs. To sell an older home, convince the buyer about its durability and stability. Every home has a buyer, and it’s all about finding the right one.
4. Market Research
Knowing the legalese involved in selling a home can impact the value of your home. When you turn to professionals such as agents and appraisers, understand that their role is to advise you. You should be researching by visiting other neighborhoods, attending auctions or sales, reading up on the property market, and investing wisely in your home.
An appraiser is someone who will confirm the value of the home during the sale. Most sellers take their word and amount as the Holy Grail, which necessarily isn’t true. Valuing a home is a combination of art, science, and theory which can differ from person to person. That’s why it is practical to know that there may be an error or difference in the figure given to you. Do not lower your value or price out of fear or concern. Some sales can take time, but if you do your research and market your home well, then you could impact the home value positively.
5. Unpredictability
Nothing is permanent. A good real-estate market may not last forever. Your neighborhood, which was safe and friendly, could change due to urban development or gentrification or several other reasons. There could be a recession, and everybody would be selling homes, which creates an excess supply, and it drives down the prices of houses for all.
Certain things are unpredictable and out of your control. You can’t handle them or expect them, but you can know how to deal with them or have a contingency plan ready. With enough preparation and knowledge, you can establish a home value and market your home accordingly.
That’s our list of 5 crucial factors that could impact home value. To the unobservant eye, these seem too simplistic but believe us about the effectiveness of these methods. They are basic and efficient and can guarantee positive results for you. These factors combined together will help you in building a range of estimated home value and set you in the right direction. The trick is to think of your home as a product and keep applying strategies that will let you sell it in the best way at the maximum profit.
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