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A home’s property value has various functions. In addition to helping sellers determine what they should list as an accurate asking price, it can better prepare you for a refinance and can provide a snapshot of your overall financial health.
Many people believe property value is only dependent on local market trends, but that’s not necessarily true. Let’s dive into the most common things that affect your property value.
Homes on larger property lots are generally valued higher than similar homes on smaller lots, even when compared in the same area. Usable space also makes a difference in value measurements. Livable space is what’s important to buyers and appraisers, so areas such as garages, attics, and unfinished basements are generally not counted in usable square footage.
Properties that have recently sold and have similar square footage, bedrooms, lot size, and other qualities are called comparables. Comparables, also known as “comps,” show how much buyers are willing to offer for properties like your own and are used by appraisers to help determine your home’s value.
Renovating your home with high ROI (return on investment) upgrades boosts your property value and helps recoup project costs. If a comparable home in your area is appraised at a higher value, it’s most likely gone through updates. Buyers are more likely to pay more money for the convenience of move-in ready homes over fixer-uppers.
People are willing to pay more money for a home if it’s in a desirable area. Neighborhoods with greater amenities, such as parks, businesses, and schools, often have a higher buyer demand than those without. The National Bureau of Economic Research found that for every $1 invested in schools, area home values rose by about $20. This is evident if you compare prices inside a major city and its surrounding suburban or rural areas. Research data by the University of Washington suggests homes adjacent to natural resources, like parks and open spaces, have property values 8 to 20% higher than comparable properties not near green spaces.
Your local housing market conditions will also affect your property value. As is true in any market, supply and demand are primary drivers in prices. In a buyer’s market, there is a large inventory of homes available to purchase and less competition between buyers. In a seller’s market, there is a smaller pool of inventory, which often sparks competition or bidding wars amid buyers. When supply is low, such as in a seller’s market, home prices tend to rise because there’s less competition.
Your property value is an effective measurement when calculated correctly and is used for future financing, sales listing, insurance, and even taxation. For a home financing company that helps you understand the process, every step of the way, contact us today!
Homestead Funding offers exceptional customer service and a convenient mortgage process. Whatever your financing needs, our goal is to exceed your expectations.