In the real estate industry, the concept of value can sometimes seem vague.
Market Value fluctuates often and is dependent on where the real estate is, the condition of the property, and to a certain extent the costs associated with owning it.
‘Market value’, by its very definition, is the price that willing and able buyers are prepared to pay for a property at a particular moment in time. It is important to remember that ‘at a particular moment in time’ bit as the market never stays still for long; it’s a living thing. And the answer to true value does not lie necessarily in how much the seller wants for their home. In fact, the listing price of a home sometimes has nothing to do with its market value.
To find out how much a home is actually worth you need to know what similar properties have recently SOLD for, then you need spend some time learning to recognize certain “value markers.” The chief value markers are location and condition.
Location: Where a home is located is crucial to determining its value. When you begin to compare homes, it’s important to factor location into your house valuation formula. First, think about where the house is situated in relation to the entire city and then neighborhood. What is the reputation of that area? Are shops and various services within walking distance? Is the house close to major forms of transportation and to schools? Is it too close to any of these amenities?
Next, think about where the house is located on its block. Is it on a corner, or on the interior row? Is it next to a high-rise building or a three- or six-flat building? Are there many homes just like it on the block? Does the block have a nice residential feel or is it mixed residential/commercial? If you’re considering a townhouse, start by asking yourself about the townhouse’s location within a subdivision, compare its location with the premium location within that subdivision.
In townhomes or apartment complexes location within that community also drives value. For townhomes end units generally sell for higher prices as do units with exceptionally private yards or decks, not backing onto busy roadways. For apartments end or corner locations and units on higher or top levels that afford a view fetch a bigger dollar.
Knowing what the relative value ($X) of each of these location factors is comes with even more research and a lot of local market knowledge. Figuring out that X Factor for the location is the beginning of the exercise I do in evaluating properties for my sellers and buyers.
Condition: Calculating value next comes down to condition. It makes sense. The better the condition the less investment is required to be put out to make it comfortable and livable. Most buyers and their agents will estimate the value of improvements required, or the value of renovations that have already been done, and then add or subtract that from what they believe to be the average market price for a property in a given location. I do this with my buyers all the time to help determine what we believe is a fair offer price for a home we are interested in so it is an exercise I also do with my sellers too to make sure that we are priced right.
So now we have the Market Value formula. The most current sales data, compared against the location and condition of the subject property. Not to worry, whether it be establishing a list price for your home or deciding what to offer on the home of your dreams I can help you figure it out!
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