Selecting the right list price for your home is crucial when selling. We’ll explain some important factors that determine a home’s resale value.
A home’s value is set by what a willing buyer would pay for it, but every buyer has their priorities. For example, one family might weigh the location of schools and jobs over the size or condition of a house when choosing where to live.
We’ve summarized some of the most important factors that impact a home’s value:
Residential Comps
The most useful way to know your home’s value is to find out what similar homes in your vicinity have sold for recently. Home appraisals, market analyses performed by real estate agents and Opendoor evaluations often rely on comparable homes to estimate your home’s value.
Advice for finding comps
- Look for homes sold recently—within the last few days or weeks, if possible.
- When choosing comparable properties, look for homes almost identical to yours in terms of features like type (two-story vs. ranch), year built and number of bedrooms/bathrooms.
- When possible, choose homes that belong to the same subdivision as your own. This way, you can compare amenities such as the school district and HOA rules more accurately.
- If your home is in a unique setting, see if you can find comparable properties in the same location.
Fortunately, computers are great at this task. We combine a robust data model that analyzes hundreds of couples of comps for any given address with insights from local pricing experts. We offer home sellers a fast way to sell their homes by giving them an all-cash offer within 24 hours of the initial contact.
Location
When appraisers determine the value of a house, they consider three main factors:
- The quality of local schools.
- The availability of jobs.
- How close a new home is to shopping centers, restaurants, and recreation options
Some neighbourhoods are worth more than others. Location is everything, and the price of a home depends on where it’s located: closeness to roadways, utility lines, and public transit can all impact a home’s overall value. Location is often more important than size and condition when determining the value of a home.
Home Size And Usable Space
When estimating the market value of your home, consider its size. A larger house is likely worth more than a smaller one with similar amenities and conditions.
A home’s worth is in price per square foot—the sales price divided by the square footage. For example, if a 2,000-square-foot house sold for $200,000, its total value would be $100/sqft.
$100 per square foot may seem like a steal or an outrageous price, depending on where you’re buying.
Beyond its size, the usefulness of space plays an important role in determining home value. Only finished garages, basements, and attic spaces are included in usable honest footage. So if you have a 2,000-square-foot residence with a 600-square-foot garage (6 x 10 = 60), that’s only 1,400 square feet of livable space.
Buyers and appraisers value livable space, so the more bedrooms and bathrooms a home offers, the higher it is likely to appraise. But these trends vary by location.
Age And Condition
New or nearly so homes typically appraise at a higher value than older homes. The fact that crucial parts of the house, like plumbing and electrical systems, are newer—and therefore less likely to break down shortly—can generate savings for a buyer. For example, a 20-year warranty represents savings over the following two decades compared to an older home that may need its roof replaced in just a few years. According to HomeAdvisor’s 2019 Cost vs Value Report*, the average cost of replacing or installing your roof is $7,990.
Many customers will spend top-dollar for a move-in-ready home. It is why most savvy sellers include an inspection contingency in their contract—they want to negotiate repairs before closing to dodge any major costs following the sale.
Our housekeeping and rehabilitation list can help you identify areas of concern before putting your house on the market.
Upgrades And Updates
Some home improvements can increase the value of your house, while others may not be worth the cost. The impact of renovation is different in every market, and it varies depending on the value of your existing home. For example, the cost of finishing a basement in Portland is five times more than one in Atlanta. This increase also reflects the much higher median home value (roughly $100k versus $60k).
The Local Demand
Even if your residence is in superb condition and has premium upgrades, the number of other properties for sale in your area—and the number of buyers looking for houses like yours—can impact its value. In a seller’s market, there are more homes for sale than people who want to buy them. A buyer’s market is the opposite: many people are looking for a few houses.
If you’re buying in an area with a lot of supply and not many buyers, you may have more room to negotiate on the home’s price, timeline or contingencies than if fewer homes are available. During a buyer’s market, it’s best to keep your expectations realistic and consider making concessions when negotiating with sellers.
Additionally, market conditions can affect how long your home takes to sell. In a seller’s market, homes tend to get snapped up quickly; however, it can take months for properties to be in a buyer’s market.
Economic Indicators
In a weak economy, housing prices tend to fall as people put off buying homes or move into less expensive ones. A slowdown in either employment or wage growth could mean fewer people can afford to buy a home, which would slow the movement of new residents. To determine the most advantageous time to sell your house, you should keep abreast of current real estate trends in your neighborhood.
Interest Rates
Why should you care about interest rates? Both short-term and long-term rates can impact your ability to afford a home — but in other methods. A rise in short-term interest rates may raise the amount of money you earn from your savings account, but it also makes it more expensive to borrow money. So when the Federal Reserve raises or lowers its benchmark rate, it doesn’t mean people will pay more for 30-year mortgages.
Many factors, including inflation, influence the long-term rate. You can understand more about these in our blog post on interest rates and home ownership. Increased interest rates will likely cause people to spend less money on houses, which could impact their value of yours. We’ve written this guide to help you understand market trends and prepare for possible changes in real estate values.
Conclusion
Several factors can affect a house’s value, including location, size and condition of the property, the housing market’s state, and the house’s amenities and features. The house’s location can significantly impact its value, as properties in desirable neighborhoods tend to be more valuable. The size and condition of the house are also important, as larger and well-maintained houses tend to be more valuable. The state of the housing market can also affect a house’s value, as demand for housing and market conditions can fluctuate over time. Finally, the amenities and features of the house, such as a pool or updated kitchen, can also impact its value. In conclusion, a house’s value is chosen by a combination of these and other factors and can vary significantly depending on the specifics of the property and market conditions.