What Determines the Market Value of Your Home?
The price that a buyer is willing to pay for a property is considered its market value. Market value is based on several different factors, estimated as part of a Comparative Market Analysis (CMA). These three major factors – location, condition, and price – determine how much your home will sell for and how fast your home will sell.
Part of your home’s value is dependent upon its location and neighborhood comparisons. While you cannot change the location of your home, it is important to know how it impacts the market value. And while it may seem your home value is the only one that impacts you, let’s discuss why neighborhood comparisons matter.
A prime location in a desirable neighborhood can significantly increase your property value. Many prospective buyers focus their home search on location-based factors. A home’s proximity to schools, shopping centers, transportation and recreational facilities can impact what buyer’s are willing to pay for the property. Other factors that buyers may consider are crime maps or the closeness to family and friends.
In a similar vein, neighborhood comparisons (often referred to as “comps”) play a big role in determining market value. Real estate professionals look at recent sales of similar properties in the same neighborhood to get a sense of what buyers are willing to pay. If homes with similar features in your neighborhood have recently sold for a certain price, it can give you an idea of how much your home will sell for and how long it may stay on the market.
While you cannot move your home to a new location, you can impact your homes value by considering its condition. When evaluating your home’s condition, make a list of any renovations that have been made to it and when those renovations were completed. Let’s talk a little more about home condition and its effect on a home’s value.
Well-maintained homes offer more appeal (and less risk). Generally speaking, a well-maintained home is more appealing to potential buyers and can sell for a more competitive price. Buyers tend to be more interested in a property that has been kept in good condition with regular maintenance. A well-cared for home is less likely to provide unexpected (and unpleasant) surprises to new homeowners after they purchase it.
Move in-ready homes are more attractive than fixer-uppers. While some buyers relish the challenge of buying a property that is in need of extensive repair, most buyers prefer to purchase a home that is turn-key. Home buying can be stressful enough without committing to a property that requires a lot of work. A home that is move-in ready often sells for more, simply because of the convenience factor involved.
Renovations can drive market value (within reason). Homes that have been renovated to expand space, enhance functionality and conserve energy can command higher prices. However, it’s important to keep in mind that not all improvements are a good return on investment. Since home value is also determined by comparing your property to those in the immediate area, it can be risky to add unique design or fancy upgrades to a home in a modest neighborhood.
Here’s how targeted renovations can affect your property’s resale value:
Interior vs. exterior: Based on cost vs value reports, certain renovations are more likely to directly increase the market value of a home. This remodeling research shows that interior renovations do not create as much value as exterior renovations. The exterior condition of a home plays a significant role in its market value. A well-maintained exterior, fresh paint, and attractive landscaping can significantly improve a home’s curb appeal. The saying “you never get a second chance to make a first impression” is true. Make sure your home has the best possible first impression among potential buyers by maintaining your home’s exterior.
Functionality: Renovations that improve the flow or usability of a home can add significant value. Open floor plans, additional storage space, and added rooms (like an extra bathroom or bedroom) may increase the attractiveness of a home to potential buyers. On the contrary, awkward layouts or dysfunctional spaces can detract from a home’s value.
Other upgrades: Homes that have been updated with energy-efficient appliances, windows, insulation, and other eco-friendly features can command a higher market value. Improvements to a home’s foundational structure, roofing, electrical systems, plumbing and HVAC systems can also greatly influence market value.
While you and your agent will set your home’s asking price, the buyer will set the sales price. If you price your home too high, you will miss out on potential buyers. Pricing your property at fair market value, from the start, will generate the most activity from real estate agents and home buyers. The price must attract enough attention to result in showings and offers. Studies show that if you price your home at true market value, the property will appeal to 95% of buyers. However, if your price is 15% over market value, the property will only appeal to 20% of buyers.
When the time is right for you to sell your home, any experienced agent from ERA First Advantage Realty would love to sit down and talk through what your home is worth in today’s market. If you’ve made any recent upgrades, consider getting a new comparative market analysis to determine how much your home’s value might have changed. At ERA First Advantage Realty, we know experience matters. Connect with a local ERA agent today!