Many factors influence home values; from location and schools to home size and age. We’ll break down some of the most important components used to determine the value of your home.

 

Location, Location, Location

Have you wondered why some neighborhoods bring in high-dollar sales, while neighborhoods just a few miles away do not? At times, location can be more important to appraisers and buyers than a home’s size or condition. The three main indicators that appraisers use to determine the value of a home when considering location are:

  • Employment Opportunities
  • Quality of Local Schools
  • Local Amenities (shopping, entertainment, etc.)

Additionally, components like proximity to public transit, power lines, and highways can all be taken into consideration when assessing a home’s overall value.

 

Usable Square Footage

What is usable square footage? It is the amount of space that the homeowner can actually use to live in. Garages, attics, and basements are not counted in livable square footage. For example, if you have a 2,500 square foot house with a 600 square foot garage, the usable square footage is 1,900 sq ft. The number of bedrooms and bathrooms are the most valuable usable square footage for buyers.

A large portion of assessing the value of a house uses price per square footage. The average price per square foot varies greatly, depending on where the house is located. Let’s say the average price per square foot is $100, that means that you can generally expect that a 2,000 square foot house will be listed around $200,000. Obviously there are other aspects that will also be considered, but this gives you an idea of how cost per square foot works.

Home Condition and Age

Many buyers are willing to pay more for homes that are in “move-in-ready” condition. They are looking to avoid the cost of repairs and updating in the near future.

Age of the home is also a large consideration for home buyers. When the roof, plumbing, electrical, and appliances are newer, the new homeowners are less likely to have urgent repairs soon after buying. For example, a new roof can be expected to last about two decades compared to an older home that will need a new roof installed in just a few years at an average cost of $11,000 in 2024. For this reason, newer homes are often appraised at a higher value than older homes.

 

Home Updates and Upgrades

Homeowners of older homes will often upgrade or update their home to earn a higher appraised value. However, those looking to make upgrades should research which upgrades will give them the return on investment they’re looking for! Finishing a basement in one city may add 13% appraisal value to a home, while the same upgrade in another city will add maybe only 2 – 3%.

In the same way, homeowners should consider the age and condition of their home when contemplating upgrades. Smaller, older homes’ values would benefit more from a kitchen remodel or added bathroom than from a backyard pool.

 

Comparable Homes in the Neighborhood

Why do homeowners get excited when their neighbor’s house sells for top dollar? Or, on the other hand, get upset when their neighbor accepts extremely low-ball offers? The sale prices of a house impacts value of surrounding homes. Appraisers and realtors use the sale prices of homes that compare similarly to assess the value of a home before placing it on the market.

The number of other properties for sale and the number of buyers in the market in your area are of significant importance as well. A lot of homes for sale with a lower amount of buyers creates a “buyer’s market.” Similarly, many buyers competing for fewer homes creates a “seller’s market.” Both types of “markets” can have an affect on:

  • Home price
  • Timeline of the sale
  • Contract contingencies or concessions
  • Closing costs
  • Covering repair costs
  • Number of days on the market

 

Interest Rates and the Economy

Economic factors like employment rates, wage growth, and the opportunity and willingness to relocate for a job all have the power to influence whether or not a person has the ability to purchase a home.

Along the same lines, interest rates can greatly encourage or deter buyers. A higher interest rate will make homes less affordable, while lower interest rates leave more room in the budget for a more costly home.

Team Rockensock can help sort through all the circumstances that determine home value and get you started with a realistic expectation.

If you are ready to explore your home’s value, check out Team Rockensock’s Home Valuation Report.