If you’re like most people, you’re probably curious about the value of your home. Even if you’re not ready to sell, you want to know how much your home is worth. Awareness is a key element for the educated homeowner and we believe that everyone should have a sense of their property value, so they can look at their total wealth including their home. Not only does the information help homeowners become knowledgeable of their market, but it also encourages them to take an active participation in their financial decision-making process, concerning the asset itself and beyond.
Getting your home appraised regularly may feel like a costly burden but timely appraisals are necessary to those who sell, as much as to those who are looking to buy. Investors also will need an independent appraisal before deciding on a possible equity participation. We believe that data collection and processing is part of the analysis needed to gather useful information. But, what are the elements that drive the value of the home? Several factors contribute to forming it; some of them being tangible and predictable, others less so. Let’s see which are most definite in their nature and defining in their function.
If location came first to your mind, you are certainly right. Where your home is located geographically is the first determining factor. Going from macro to micro, the state, county and proximity to the city creates the first range of possible values of your home. Neighborhood, street and lot position and size then follow. A home with easy access to transportation or located in a neighborhood with highly ranked public schools will enhance these benefits in the value of the home. After location comes condition. A newly renovated or partly updated home, or well-maintained property will generally have a higher value than a home which hasn’t been taken care for in years. Among all the updates that most matter, kitchen and bathrooms score the highest. Third and last among the main home value determinants, we find the current market status. This should not be a surprise. Home median price, latest sales in your area by zip code, supply and demand around you have a big influence. In a highly sought-after part of town, where homes that enter the for-sale market are quickly sold, home values will tend to be higher than in a section that is overall less desirable. Intuitively, home buyers interested in a specific area will be willing to pay a premium for the right home when it becomes available.
There are other very important considerations that factor in the value of the home. Some are economic trends, such as employment rates in the area, expected demographical shifts and population growth. Other more intangible components are market perception and homeowner bias, which is the belief that homes in a specific area will behave a certain way, based on personal observation. A home in an area that is about to experience commercial or corporate growth may be affected by such expected changes. Equally, a home with flat expectations in terms of growth and development may have its value impacted by the present circumstances.
Overall, homeowner’s awareness – when it comes to home values – is important and should be actively monitored. As much as you like to know regularly the status of your checking and saving account, as well as your 401K or RIA, you should also want to know how much is under your roof. Many homeowners are very surprised to learn the value of their home when they finally decide to sell. Don’t be caught off-guard. Be informed and prepared. It will be useful not just for when you sell, but most importantly while you live in your property. Thanks once more for being here and see you next week!