Valuing a house that you want to buy or sell is a necessary process, but a challenging one. Even when you’ve had experience in the property market, prices can differ from your previous evaluation. Why?
You might have valued homes in Connecticut, and now you want to buy or sell house fast in San Diego. Considering these are two different locations, house prices differ too. There exist many factors that affect the price of a built property. So let dive in and have an in-depth understanding of these factors.
Supply and Demand
The value of any commodity at any particular time depends on the interaction between housing demand and supply. For supply to increase, an existing property needs to be subdivided into smaller units, or investors have to build more houses. Demand, however, snowballs, stimulating property value. When demand is high, and supply is at the same point, the value of properties goes high. At this point, builders of property have to increase supply, which will take time, thus birthing short term high prices of a house.
The economic situations of buyers may also influence demand. If specific people want to settle in a particular geographical area because they have the money, the house prices increase.
Is the location close to school, restaurants, roads, city center, and more? When an area is popular, close to amenities and in a sought out tourist destination, it influences the pricing of the house. People want to leave somewhere; they can conveniently access resources at no extra cost. In that case, you have to spend more on the house to cover the price you’d have used to access resources.
Related: Factors affecting Land Value
House Size and Usable Space of a Home
The market value of a built property is mentioned in regards to price per square foot. The total cost of a house, say $300,000, is divided by the whole square foot say 1500 sq. Ft. in this case, the price of this house is $200 per square foot. So a smaller home in the same location would cost less than $200 per sq. Ft.
Usable space in regards to the pricing of the house, on the other hand, is the sq. Footage of space a buyer will use. These include bathroom space, bedroom, and resting room. Basement, attic, and garage are not included in the usable space when calculating the value of the house and thus can’t increase house value.
Age and the Condition of a Property
Another factor that affects the pricing of a built house is age and condition. Many people go to a new home as they require minimal renovations and maintenance. These houses have high demand, which translates to high house pricing. If, however, the house is new, but the conditions are questionable, you’ll have fewer buyers.
When you want to buy or sell a house fast, check the real estate comparable property in the area. Some of the features used as comparable include;
- year built
- location, whether it’s near a mall, school, road or beach
- number of rooms in a house
- square footage
- type of the house, whether it’s a condo, single-family home or multi
Looking at these comparable could increase or reduce house pricing.
If you build a house using a loan, you repay the loan plus interest. If a reserve bank increases the rates, lenders do the same leaving house builders with more interest, which is then transferred to house buyers. If, however, the interest rates are reduced, house prices also decrease.
When the economy of a place is booming, there is job creation, and people earn more. This results in people wanting to invest in a new property or a second home—this translates to an increase in demand that then result in higher property value. On the other hand, if unemployment rates go high and wages are low, property values also decrease.
Planning and Building Regulations
Today, building a house requires planning permission and building regulations. The planning permission aspect covers the shape, size, design, and sitting of the property. Building regulations cover the technical aspect of the construction process. When a property fails to meet these two aspects, it is demolished. But, if they follow the guidelines, the property value increases as it is per planning and building regulations. Simply put, the amount of building regulations and planning permission applied on a property will determine the pricing of that house.
Upgrades plus Updates
Older homes after upgrades and updates increase in value. However, value of a property to increase after upgrade or update depends on the market you’re in. For example, a house whose basement has been upgraded in Portland is five times valuable than one in Atlanta. The kitchen, bathrooms, and roofs are some of the things that could affect property value. Ideally, buyers feel they’ll spend more to upgrade stuff like kitchen features, roof, or bathroom. They, therefore, prefer buying a house that is ready to settle even if they have to spend a premium amount on it.
First impressions could instantly increase or decrease property value. As a seller of a house, don’t underestimate the street appeal of a property as sellers are attracted to a property from its aesthetic appeal.
A property built with quality materials that are easier to heat or cool could also increase the value of a home. With high electricity bills and other utility bills, the builder may prefer to add solar panels, double-glazed windows, insulation, and other features that, in the long run, reduce your utility bills. However, your initial payment will be high.
Population and Demographics
If more people are seeking to live in a specific suburb, house demand in that area increase. Also, if family-based people want to live in the suburb, multi-bedroomed houses will be more sought after than any other type of house. This, therefore, increase the value of multi-bedroom homes while small apartments are cheap in the same demographic.
It’s essential to know the value of a home before you buy or sell. Doing so will give you the correct range in which you’ll sell your house and have a budget range if you’re buying a home. Using online tools can help you calculate property value, but they are not inclusive of every factor. You, therefore, will need a third party to help you evaluate a property correctly.
More articles related to housing & real estate investing:
- Why Co-Living is Becoming a Popular Housing Option in Major Cities
- Benefits of Living in Cities
- 5 Reasons Why Millennials Choose to Live in Suburbs
- In real estate investing, is owning a rental property worth the headache?
- When is the best time to buy or sell a home?