Glenn Musto | Thursday, August 25, 2016.
Many factors influence the value of your home. Some are obvious, while others may not be readily apparent.
1. Location. You have probably heard the oft-repeated adage that the three most important factors in determining a home’s value are A) Location, B) Location, and C) Location. To illustrate, compare the relative values of one acre of land in an Arizona desert, atop a Montana mountain, or in the center of Manhattan. The more desirable the location of your home is to others, the greater is its value.
2. Size and age of construction. Home values are often expressed as price per square foot. This valuation is affected by current material and labor construction costs. Such valuations are also influenced by the age of the construction. While a 30 year-old home may have originally cost 1/5 of its current value, today’s valuation must take into account current costs to replace that home.
3. Construction type and quality. Some construction materials are more expensive than others because of durability and/or aesthetic appeal. For example, concrete, steel, brick, and stone are typically more durable than adobe, straw, pine planks, or other wood. Granite and marble are considered higher quality than common fieldstone because of scarcity, aesthetic appearance, and demand. A concrete, slate, or tile roof generally justifies a higher value than one with tar or asbestos shingles because it will last longer and look better.
4. While home style is a matter of personal choice, popular styles typically command higher prices than ones that are out of favor. Do you prefer a Ranch home, Tudor, Victorian, Contemporary, A-Frame, Cottage, or other? Certain styles of homes may be more desirable in different climates, different areas of the country, or areas of the world – thus more valuable in those areas. A professional Realtor or appraiser understands how style and local demand will influence home values in any specific area.
5. Layout is a huge factor in valuation. There is typically great demand for a three bedroom, two bath home (or larger) in areas where many growing families live. In starter-home or retirement communities, one or two bedroom homes may be in greater demand, and thus command higher prices than homes even with larger square footage.
6. Interior features and amenities greatly influence home values. Consider the costs of hardwood flooring Vs carpet, tile, or concrete flooring. Kitchen and bath fixtures and appliances vary tremendously in quality, cost, and desirability. Also, popularity of fixture styles may change from year to year, and thus affect value.
7. Lot size and exterior amenities greatly impact home values. Does having a swimming pool or tennis court increase the appeal of your home to a family with young children? How about in a community of retired couples with no children or grandchildren? Is pool maintenance more likely to be considered a benefit or a detriment to prospective buyers in Northern Maine, or in Florida or Southern California? Is a huge yard looked upon in your area as a luxury, or a maintenance nightmare? Each of these factors can impact the value of your home.
Researching recent home sales in your area is one of the most reliable ways to determine the current value of your home. You can often begin this search online. You’ll want to look at comparable sales. This means homes of similar size and location, age and quality of construction, lot sizes, interior appointments, etc. To be meaningful, one must consider as many as possible of the 7 variables above in order to translate information to your own home from homes recently sold in your area. To arrive at an honest valuation, you must be brutally objective in this comparison. True objectivity is extremely difficult for most homeowners because of longstanding emotional attachments to their home.
For the vast majority of homeowners who are thinking about selling, the most reliable way to determine current market value of your home is to consult an experienced local Realtor. A real estate professional has ready access to updated facts, trends, and sales figures not readily available to non-Realtors. S/he will select homes for comparison that are truly comparable to yours. Such an experienced professional can provide you with valuable information that will help you ultimately receive top dollar for your home.
Note: Beware of inexperienced or unscrupulous real estate salespersons who may tell you what they think you want to hear in order to have you sign a listing agreement with them. “Oh I absolutely agree, your home is magnificent. I will gladly list your home for $#@* (some number far higher than its actual value.)” Naive homeowners who fall for such a pitch can expect zero showings of their home by honest Realtors in their area.
Should you fall for this ploy, you can also expect this salesperson to come back after a month or two of inactivity to tell you how the market has suddenly changed. Expect to hear that now you must drastically reduce the price of your home in order to have any chance of selling.
Unfortunately, professional Realtors in your area are turned off by such blatant overpricing, and they and their buyers will very likely move on to other properties. If this is your experience, you should also consider moving on – to a Professional Realtor.
Your wisest course is to interview at least one professional Realtor A) before determining the asking price for your home, and B) before listing your home for sale. A professional Realtor will give you an honest, objective opinion regarding your home’s current value. A professional Realtor will always back up his or her opinion with comparable recent home sales and reliable area statistics.
To protect yourself before listing your home for sale, the following three points are essential: A) Be sure to ask what guarantees the Realtor provides – and get any guarantees in writing! B) Make sure you can cancel your listing agreement without penalty in the event your selected Realtor doesn’t perform as promised. C) Insist on regular progress reports regarding what is being done to creatively market your home.
Selling a home is one of the largest financial transactions that many of us undertake in our lifetimes. Do you really think it wise to entrust such a valuable transaction to your second cousin’s niece or a part-time salesperson neighbor, or some coworker’s friend who just got her real estate license last year? Selling such a valuable possession is not an occasion to consider doing a favor for a friend or relative. Just as you would if you or your child needed a major surgical procedure, consult a professional. Do your homework. Ask detailed questions. And choose wisely.
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