Your home value is largely based on what willing buyers in the market will pay for your home, but every buyer is different so therefore there is what we call a “Range of Value”.
1. Neighborhood comparable sales
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, or a comprehensive comparative market analysis done by us. Many real estate experts will rely on comps to estimate your home value, however with Cory being a licensed appraiser, we are able to provide a more detailed analysis of your homes value.
2. Location
Your current home may be the ideal location for you — close to your job or near family — but when appraisers determine how much value to assign based on the location of the house, they’re looking at three primary indicators, according to Inman:
- The quality of local schools
- Employment opportunities
- Proximity to shopping, entertainment, and recreational centers
These factors can influence why some neighborhoods will sell for dramatically more than other neighborhoods. 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.
3. Home size and usable space
When estimating your home’s “Range of Value”, size is an important element to consider, since larger homes can positively impact the value.
In addition to square footage, a home’s livable space matters when determining its value. Garages, and unfinished basements are generally not counted in usable square footage. So if you have a 3,000-square-foot home with a 1,600 square foot unfinished basement, that’s only 3,000 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, typically the more your home is worth.
4. Age and condition
Generally speaking, homes that are newer appraise at a higher value. For example, if a roof has a 15 year warranty, that’s money an owner will save over the next two decades, compared to an older home that may need the roof replaced in the next few years. According to HomeAdvisor, the average cost to replace or install a roof in 2023 is around $10,000.
There are several buyers who will pay top dollar for a move in ready home (meaning a home they need to do little to no work on). This is why most buyers require an inspection contingency in their offer as they want to be able to negotiate any repairs to avoid expenses following the purchase.
5. Upgrades and updates
Updates and upgrades will add value to your home, especially in older homes that may have outdated features. However, not all home improvement projects will provide a return on investment (ROI).
The ROI of a project or upgrade varies. For example, a finished basement in Colorado is about 5x more valuable than finishing a basement in Kansas.
Additionally, some projects like adding a pool will generally HURT your value where as wood floors tend to have a large ROI. For above average home, a kitchen remodel or adding a full bathroom tend to have a ROI.
6. The local market
Let’s say your home is in excellent condition, its in the best location, and has all premium upgrades… the number of other homes for sale in your area and the number of buyers in the market will impact your home value. If there are a lot of buyers competing for fewer homes it’s a seller’s market. On the opposite, a market with less buyers but an abundance of homes for sale is referred to as a buyer’s market.
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, there are several ways to “spice up” your offer to create a win-win for both you and the seller.
Additionally, market conditions can affect how long it takes your home to sell. In a seller’s market, homes tend to sell quickly, whereas in a buyer’s market it’s typical for homes to see longer days on market (DOM). Currently at Wilks Real Estate, Our DOM is an average of 9 (well above the average realtor which according to the Association of Realtors the average agents DOM is 16 for 2022). If your home has been on the market for a longer period of time, buyers may perceive there is something wrong or that the price is too high.
7. Economic indicators
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. For example, if employment or minimum wage growth slows, then fewer people might be able to afford a home or there may also be less opportunity to relocate for new opportunities. It’s important to keep up with the current status of home sales and home price appreciation in your area, especially when as you evaluate the best time to sell your house.
8. Interest rates
Do interest rates really affect you? An increase in short term interest rates may increase the interest on your savings, but it also makes short term debt more expensive (like credit cards, car loans, etc.). For example, if you’re spending more money paying off a credit card or short-term loan, then you will likely have less money available in your budget for a down payment on your new home or your mortgage.
Long term interest rates are influenced by Department of the Treasury yields, investor sentiment, and inflation rates, among many other factors.
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.
Final thought
It’s easier to avoid common home selling mistakes when you’re aware of the factors that influence your home value. Consider these factors in mind when considering selling your home to help attract serious buyers and to prevent long days on market.
For a Free in depth, comprehensive value analysis on your home, please call us at (720) 545-9000