Three Factors That Affect the Value of a Home
Whether you’re thinking of selling soon, contemplating purchasing investment property, or just plain curious, you may be wondering how a home’s value is actually determined. So what are some of the factors that affect the value of a home? While real estate values are determined by supply and demand just like any other good or service, there are plenty of other factors that affect the value of a home.
In this post we’ll look at three of them. While you don’t always have control over these if you are looking to sell a home, they can all be important considerations when you’re trying to decide if buying a new piece of property is a wise decision.
Your home’s square footage goes hand-in-hand with its layout when determining how much it will sell for.
In general, bigger is better. In the Denver area, for example, homes are worth on average $478 per square foot at the time of writing this post. The median sale price for a one bedroom home is just over $289,000. Compare that to the median price of $675,000 for a four bedroom and it becomes pretty clear that the size of a home affects its value.
However, other factors of a home’s design can bring its value down. Generally speaking, homes that follow standard layouts with neutral features are going to sell for more than homes that appeal to niche buyers or bear outdated designs. For example, living space that is only accessible through a bedroom is not what most buyers consider a normal layout. Similarly, homes that are very different from others in the neighborhood may not sell for as much as they are really worth.
Believe it or not, the way other houses are selling plays a major role in how your home will be valued. This is all part of the real estate market, in which buyer demand and seller supply meet to determine what any given piece of property is worth. So, your home is going to be valued very close to the selling price of similar homes that have recently sold in the area.
Think of it this way. If there were three mini marts on the same block, and two were selling milk for $3 a gallon, would you buy milk from the third store selling at $5 a gallon? Probably not. In the same manner, if five other three bedroom homes have sold in your neighborhood for around $300,000 recently, than buyers are probably going to pay about that much for your three bedroom house unless there are features or deficits that make it significantly different.
Location can be an incredibly surprising influencer of home values, even within the same city. Some neighborhoods are just more desirable than others. Location can affect crime rates, employment opportunities, recreation, retail, and most importantly, school districts.
In fact, school systems may be the biggest influencer of home values when it comes to location. According to a survey from realtor.com, more than 30% of home buyers would opt for a better school district over a bigger house.
These are just a few of the many factors that go into determining how much your home is worth. If you are curious to put a number on the value of your house, try out our home valuation tool. Just enter a few pieces of information, and our proprietary algorithm will give you an instant estimate of your home’s worth.