Determining the Value of Your Home
10 Factors That Affect Home Prices
We often get questions from potential sellers trying to figure out what their homes could sell for in the current market. They bring up their most recent tax assessment or a number they’ve found online such as Zillow’s Zestimates as an indicator of the best price to list their homes. Both of these numbers focus on very generalized data, not taking into consideration the specific things that potential buyers consider valuable. The visit from the annual tax assessor doesn’t involve a trip inside your home, so all they base their assessment on how it compares to the homes around it.
Home prices are a living thing, changing day to day based on buyer demand for a specific product. When determining the value of your home, you must take into account several factors that influence home buyers:
- What Product Are You Selling?
Most home buyers are looking for a specific type of home, so knowing what product you’re trying to sell and the quantity of similar products in the area is very important. One story homes are desirable to a larger share of buyers than a 2 story home with the master bedroom upstairs, so they often go for a higher price per square foot. Being on a golf course is worth more to buyers than backing to a busy road. The size of your lot, whether you have a pool or other amazing outdoor living areas, and your specific floor plan can have a significant effect on the price your home could sell. Knowing your product and what products are selling is huge in determining your home’s true value to buyers.
- Where Does Your House Fit Within the Neighborhood?
In addition to knowing what you’re selling, it is highly important to know how it compares to your neighbors and other homes in the general area, especially those currently on the market. Is your home the largest in the neighborhood? The smallest? Somewhere in the middle? Knowing where you fit within your area and what market you’re considering selling your home in makes a big difference.
- What Type of Market Is Your Neighborhood In and How Much Inventory Is Available?
A huge factor in determining your home’s value in the eyes of potential buyers is, of course, the competition. During a buyer’s market, the buyers have more power over dictating prices due to a glut of inventory providing plentiful choices. During a seller’s market, the seller has more power due to a lack of inventory pushing buyers all towards a smaller selection of homes. Most important, know the amount of inventory of your particular product is available in your neighborhood. If in general you’re in a seller’s market, but there is an excess of 2 story homes with the master bedroom upstairs in your area, that could lower the value of your home compared to other rarer options.
- Are You In a Destination Neighborhood or a Spill-Over Neighborhood?
A destination neighborhood are those areas where everyone wants to live, whether it be because of the location, the schools, community amenities or just because the area is considered “the place to be”. It’s the sort of place where a home buyer chooses the location and then find a home rather than choose a home and deal with the location. Selling a home in one of these popular neighborhoods can add a premium to your price because of high demand. A spill-over neighborhood are those surrounding neighborhoods where buyers go once they’ve determined no homes were available in the destination neighborhood.
- Is Anything Going On In the Local Community?
Factors you have no control over can also affect your home value. If a big local employer has just laid off tons of people or school redistricting occurs, that can quickly affect what you home could sell for as the market shifts with an increase in inventory. In reverse, a large company announcing they’re hiring hundreds of new employees could raise demand while keeping inventory low.
- What Upgrades Do You Have in Your Current Home?
Top items on most buyers list include upgraded flooring, granite counter tops, and expanded outdoor living spaces. A home built in the 1980s that has been recently upgraded will go for a higher price than one kept in good condition, but still featuring wallpaper and linoleum.
- Is Your Home Going to Be Staged?
It has been proven time and again that buyers have a difficult time looking past the family photos and mementos to imagine their stuff filling the walls of a home. By staging your home, you can create an inviting atmosphere that entices buyers while maximizing the space and emphasizing the best features. Home builders have fully decked out model homes for a reason – it sells!
- What Makes Your Home Unique?
Most people love their home partly because of all the memories created within its walls, so it can take bringing in an unbiased third party to determine what truly makes your home stand out from the rest. A great Realtor® can come into any home and figure out the unique selling proposition that will catch the eye of potential buyers.
- What Are the Amenities in Your Area?
This isn’t just the community amenities available in your neighborhood. What’s around your home? Being close to grocery stores, schools and other shopping options can be a convenience that boosts the potential value of your home. Having access to toll roads and shortening commuting time is a huge advantage for most buyers and when you increase your buyer pool, the higher the potential home value.
- What Is Selling Out There Right Now?
This is huge. If no one is purchasing homes like yours, your home value will be much lower than if everyone is fighting to get into homes just like yours in your particular neighborhood. A knowledgeable Realtor® will be able to analyze recently sold homes in your area to see how your home fits into the larger buying patterns. Knowing what’s available on the market and what’s selling makes a huge difference in determining your home value.
Market value comes down to many factors and can be influenced by marketing tactics. Make sure you bring in a professional with knowledge not only about your neighborhood, but also current buyer habits, what upgrades are considered a premium, and how to highlight the unique value proposition you have available to sell. The value of your home is much more than just comparing generalized data. It’s an ever-changing thing that relies on many different factors that can change on a daily basis, so make sure you use an expert to help you not only determine your home’s value, but also put you in the best position to increase that value to the max.