Navigating the realm of property value is like trying to decipher the real estate industry’s favorite riddle – it’s complex, intriguing, and often comes with a few surprises along the way. A common misconception is that the value of your home is solely based on what a willing buyer is prepared to pay for it. While finding a buyer willing to meet your expectations is indeed a part of the equation, the process of determining a home’s value is far more intricate than that. It’s important to understand that sentimental value and personal upgrades may not align with a buyer’s perspective. Even if someone agrees to pay $450,000 for your property, it doesn’t automatically translate to a valuation of $450,000. The financial arrangements surrounding the transaction, often orchestrated by a mortgage lender, play a crucial role in assessing a property’s value. So, what is it that makes up a property’s value?
One of the initial factors examined in property valuation involves analyzing recently sold properties near yours that share similar characteristics. These properties, commonly known as “comps,” serve as crucial benchmarks in determining a property’s value. Try to find homes that are most similar to yours in terms of features like number of bedrooms, square footage, style of home, and the year it was built.
Home size and usable space is another major factor that makes up a property’s value. One common approach is to estimate it based on the price per square foot, which is calculated by dividing the sales price by the total square footage of the property. For instance, if a 3,000-square-foot house was sold for $300,000, the price per square foot would be $100. In addition to square footage, the usable space within a home is a crucial factor in determining its value. Spaces like garages, attics, and unfinished basements are typically not included in the calculation of usable square footage. So if you have a 3,000-square-foot home with a 600-square-foot garage, the usable living space is actually 2,400 square feet. Livable space is of utmost importance to both buyers and appraisers when assessing a home’s value. Bedrooms and bathrooms are highly valued components, and homes offering more beds and baths tend to be worth more. It’s important to recognize that these trends can vary significantly based on local market conditions, making it essential to consider the unique characteristics of your specific area when determining a property’s worth.
Enhancements and updates to your home can also significantly boost its value, particularly in older properties with outdated features. However, not all home improvement projects yield the same results. Some of the most impactful upgrades will be seen in the kitchen and bathrooms- and of course, if you can add a bedroom, that will certainly help a home’s value as well.
There are many other factors that make up a property’s value and some of which we cannot control. Interest rates, supply and demand, and economic factors are examples of a few. Property value is not just a number; it’s a complex blend of location, condition, and a dash of market magic. May you find your perfect blend!
Eve Leombruno, 2023 MBOR President
