When you think about selling your property and buying an investment property, first among the thoughts that comes in your mind is the price or value. You would like to achieve the best price for your property, as you rely on that equity to help you purchase your next property.
There are several important factors that contribute or influence the value of your property, and the knowledge of them could help you understand how the value or price of the property is determined:
The location of a property is very vital as it is one of the most decisive factors for valuation and price determination. If the property is near the office, schools, shopping, entertainment and recreational centers. Its proximity to highways, utility lines and public transit, these factors have an impact and can influence on the overall value of the property.
2. Real Estate Comps
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”. The properties could be comparable in terms of type of home, year built, square footage, number of bathrooms and bedrooms, and location (if near a mall, beach, etc.)
3. Home Size and Facilities
When estimating your home’s market value, size is an important element to consider, since a bigger home can positively impact its valuation. The value of a home is roughly estimated in price per square foot — the sales price divided by the square footage of the home. For instance, a 1,200 square foot home sold for $360,000. The price per square foot would be $300. In addition to square footage, a home’s usable space matters when determining its value. Garages, attics, and unfinished basements are usually not included in usable square footage. Livable space is what is most important to buyers and appraisers. Bedrooms and bathrooms can significantly increase the home value, so the more beds and baths your home offers, the more your home is generally worth.
4. Age and Condition
Usually, newer homes are appraised at a higher value. The buyer can generate more savings from repairs and renovation since critical parts of the house, like plumbing, electrical, the roof, and appliances are newer and therefore less likely to break down. Besides age, property buyers also consider the condition of the structure. They would rather buy a 15-year-old house that is well maintained than a newer one that needs major renovation.
5. Upgrades and Updates
Updates and upgrades can add value to your home, especially in older homes that may have outdated features. Landscaping, kitchen and bathroom remodel, finishing a basement, replacing windows, garage and exterior doors are some of the updates that will let you have the biggest increases in property value. The impact of a project or upgrade varies based on the market you’re in, and your existing home value. Additionally, some projects like adding a pool or wood floors tend to have bigger increases for more expensive homes, while projects like a kitchen remodel or adding a full bathroom tend to have a bigger increase for less expensive homes.
6. Local Market
If demand exceeds supply in each market, property prices will increase. This is because there are more people in the market for a smaller number of properties and the competition to secure a home drive prices up.
Even if your home is in excellent condition, in the best location, with premium upgrades, the number of other properties for sale in your area and the number of buyers in the market can impact your home value. If there are a lot of buyers competing for fewer homes, it’s a seller’s market. Conversely, a market with few buyers but many homes on the market 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, you may have to adjust the price to attract more offers or be willing to make concessions to a seller, like paying closing costs, covering repairs, or being more flexible with the timeline.
7. Economic Indicators
The overall performance of the economy can also have an impact on the property market. If the economy is experiencing strong growth, employment and labor conditions, more Americans can afford to purchase a property, which leads to rising property values. 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 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
Historically, cheaper interest rates and an easy availability of credit (how easy it is to borrow money) tend to boost property prices. Both short-term interest rates (like what you pay on a credit card) and long-term interest rates (like what you pay on a mortgage) influence your ability to afford a home, but in different ways. A rise in short-term interest rates may increase the interest on your savings, but it also makes short-term debt more expensive. 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 to afford a home. Short-term interest rates don’t directly impact long term interest rates. So, an increase in the Federal Funds rate, doesn’t mean a 30-year, fixed-rate mortgage will become more expensive. Long-term rates are influenced by Department of the Treasury yields, investor sentiment, and inflation rates, among many other factors.
With the above stated factors in mind, the best way to work out the value of your property is to seek help from a trusted real estate agent who can provide a professional valuation. Our team at Pacific South Coast, have expert knowledge and experiences when it comes to working out property values in your local area, and can give you a much more accurate idea of the true value of your property