If you’re hoping to sell your home or a piece of real estate, you probably already have a figure in mind about how much it could be worth –depending on the aspects you think make it a prime product.
For instance, you may value your home up based on the new paint job you did, new granite kitchen countertops, or exterior lighting fixtures you just acquired. Similarly, you may believe that being located in a high-end neighborhood alone implies that your property is highly valued.
However, there’s much more that goes into property valuation, and understanding how it works can help you adjust your expectations and get the right price. With the right price, you can decide when is the appropriate time to sell, how to negotiate a sale, understand the impacts of your property’s value in refinancing, and more.
In this article, we’ll talk about the factors that come into play when valuing property and tips on how to value your property.
Factors That Determine Property Valuation
Here is a list of factors to help you understand how valuers arrive at a certain figure.
Other than the state, city, town, or neighborhood, proximity to social amenities plays a big role in determining a home’s value including:
- Public transportation,
- Entertainment joints
- Recreational facilities
- Employment opportunities
Also, being close to social amenities doesn’t impact a home’s value as much as those amenities’ quality.
On a similar note, a property’s value goes up when its location is secure and down if the crime rates are high.
To determine the value of a property, valuers also consider how much the most recent pieces of property in your neighborhood sold for. These properties are what are called comps.
Comps are also based on similarities in property features such as:
- Three-bedroom house
- Age of the property
These features may extend to finer details such as:
- Types of ceilings
- Scenic views (or the lack thereof).
Age and Condition
Older homes are valued much less than new homes. The idea is that a new buyer may not have to spend any money on repairing essentials on a new house like they would with an old house. These essential include:
- Electrical wiring
Condition of the Local Market
Beyond the age and condition of your property, the state of the local housing market plays a major role in determining your property’s value.
You may have a home in great condition and even made upgrades -like adding a swimming pool or calamander wood flooring –but if the local market is not doing well, your home’s value may not be as high as it should be.
This is because the local market is run by whether it’s a buyer’s market or a seller’s market. If demand for property is high, it’s a seller’s market. However, if the demand is low, buyers have a bigger say on the price than sellers.
The national economy also determines people’s purchasing power and with it homes values.
Take for example how the Great Depression affected the housing market between 1929 and 1933. During this period, the construction of residential properties fell 95% and by 1933, foreclosures spiked to 1000 every day while housing values declined by about 35%. A home valued at $6,000 before the economic downturn was worth about $3,900 in 1932.
How to Value Your Home
Now that you understand the main determinants of your property’s worth, here are tips you can use to value your home correctly:
Use Valuation Tools
Online home value calculators are a quick and easy way to acquire an estimate of your home’s value. They use the details you supply about your home, as well as data collected from public sources, to arrive at a certain figure.
Use the FHFA HPI Calculator
The Federal Housing Finance Agency House Price Index goes deeper with estimates by using science. This tool applies the repeat sales method where it uses mortgage transactions running back to the 1970s and tracks how a home’s value has changed since that period with each sale. The results of the tracking are used to estimate how home values change in a particular market.
Ask a Real Estate Agent for a Comparative Market Analysis
Alternatively, you can ask a real estate agent to carry out a comparative market analysis on your property. Typically, real estate agents use a comparative market analysis tool to estimate the value of your property by evaluating similar properties in your area that have recently been sold.
Hire an Appraiser
This may be the most expensive option but it’s also the most accurate. The appraiser will inspect your property then use factors such as comps, market trends, and features of the home to create a report. Here are some of the most common home features they use:
- Proximity to social amenities
The Bottom Line
The price of a property is not solely determined by how much the owner thinks it’s worth but rather by aspects outside of their control that touch on every piece of property in a certain area.
In carefully determining these factors, you can make a good estimate of the value of your property so you can make better decisions regarding putting it up for sale, buying more property in the same location, or looking for a loan.
While you’re at it, remember that you can get more accurate valuations when you work with expert real estate agents. For all your concerns about buying or selling a home or determining its value, contact us today and we’ll be happy to help.