Property value covers a lot more than just what you put into a house.
Whether you're planning to sell your home or not, its value probably crosses your mind at least occasionally. That's reasonable, since real estate is such a large and long-term investment. Few people make an investment without checking into its progress once in a while.
The housing market is determined by a lot of different outside influences, all of which have an impact on the value of your home. Of course, its square footage and overall condition are important. And so are these 7 factors.
#1: The Home's Lot
You may never have paid more attention to a lot than wondering how much time it would take to mow. But a house can be destroyed; land typically takes great effort to render useless. That's why Investopedia says the lot that a house sits on is an important factor in its overall value.
Barring an Earth-splitting quake or a sinkhole, the lot will exist no matter what happens to the house. It's an appreciating asset, says Investopedia, and it's in strict limited supply. the larger the lot, the better your home's value. A large lot in manicured condition is even better.
#2: Location Within the Neighborhood
You've no doubt heard about location, location, location. A home's community plays a major role in the desirability of the property. But location can mean different things to different people. A great location for commuters, for example, might be a bit closer to a city. But a great location for families with school-age kids might be a bit more suburban. One thing that's relatively stable is the location within the neighborhood. Some spots are just better than others.
A home on a cul-de-sac offers at least two benefits. The shape of the property means the backyard is typically larger than homes on a straight street. And because cul-de-sacs don't allow traffic to zoom by, the areas are safer for kids. Corner lots are also famous for larger yards, although that's not a universal truth.
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#3: Local Land Development
The potential for land development could affect the value of your home in the future. But development that's happening now should have an immediate effect. It can work either way, as some projects are more beneficial than others.
A new housing development is a sign that the area is experiencing growth. Shopping close by is another good sign, especially higher-end shops and grocery stores. But a new industrial facility nearby could have a damaging effect on value of your property and every other home in the neighborhood.
#4: Existing or Impending Foreclosures
It doesn't seem fair that someone else's misfortune could affect you, but it's an inconvenient truth. A foreclosure on the block, or even a mile away, could affect the value of your home in a negative way. That's because of the way that home values are calculated. Part of the appraised value is determined by comparing values of houses nearby that have sold. If there's an ample supply of other recently sold homes nearby, the effect should be smaller.
An impending foreclosure could also have a negative effect, says Bob Vila. Although the house hasn't gone through the process yet and can't be used as a comparable property, it might not be in great shape. People facing foreclosure are less likely to put a tremendous amount of effort into upkeep. And that could bring the whole neighborhood down.
If the market is active, you should have plenty of good comparables to determine your home's value.
#5: Sold House Prices Nearby
Comparables are what appraisers use to help determine the value of a house. Homes nearby that have recently sold give the appraiser a range to work within. Other factors matter, too, such as the condition of your home and certain amenities. By definition, a comparable should be a similar house. But that's not always possible, so appraisers sometimes have to get as close as they can.
It's a sticky subject. If your home is larger and has more amenities than the available comparables, its value will likely be lower than it would be in another neighborhood. On the other hand, if your home is the least fantastic one in the area, you'll benefit from the higher value of the nicer comparables.
#6: Supply and Demand
It's the age-old economic concept: Where there are more buyers and less of a product to buy, the value of that product goes up. When there are fewer people interested in buying and a lot of product on the market, the value of that product goes down. You might not think of your home as a product, but it is in respect.
Take a look around your neighborhood. Are there a lot of for-sale signs in the yards? If so, your neighborhood has a market surplus, which makes it a buyer's market. Many buyers reduce the asking price even lower in an effort to stand out a little more from the other homes for sale. If yours is the only house for sale, it might be a seller's market. In that case, your home's value could go up accordingly.
#7: Local School District
Whether or not you have school-age children, neighborhoods near a good school district are almost worth their weight in gold. These neighborhoods are often, but not always, safer, cleaner, friendlier, and have more amenities. They also tend to be a bit more stable, according to real estate investor and blogger, Ken Corsini for theBigger Pockets blog.
It's not unusual for homes in a good school district to sell for more than the asking price, although that's certainly not the rule. But families have a strong desire for a good home in a safe neighborhood, and many will bid higher in order to get it.
No home is an island. The ones that surround yours play an important role in determining its value, and so do many other factors. It all boils down to what someone else should be willing to pay for it. That's why a tiny cottage might sell for $1 million or more in southern California, while the same house would only be worth a fraction of that in the midwest.
You don't have to wonder about your home's value, not when eppraisal offers a fast and convenient way to find out. Get your free property valuation today and see for yourself.