6 Factors That Impact a Home’s Appraised Value

Are you ready to put your house on the market and sell your home? You may wonder how your real estate agent arrived at a sales price and what factors influence your home’s appraised value.

Whether you are delightfully surprised or disappointed in the pricing recommendation, it’s helpful to understand how homes are valued. While sales prices are not always exactly the same as appraisal values, they are usually tied together. To learn the difference between a sales price and an appraised value, click here.

Factors That Impact a Home’s Appraised Value

It’s normal to feel a sentimental attachment to your home and its memories, but that doesn’t increase a home’s value. In this article, we’ll discuss the factors that impact the appraised value of your home.

1. Market conditions

Local market conditions play a big role in your home’s value. When home prices in your area rise and fall, the value of your home will be impacted, too. With a professional appraisal and home inspection, a licensed appraiser will consider similar homes in your area as comparable homes for your report.

Comparable homes (also called comps) are one of the most important factors that impact value. Ideal comps are nearby homes that have recently sold and have similar space, features, and updates. These home values give a baseline for the appraisal value.

2. Age of the home

There are two types of homebuyers: those looking for an older home to renovate and put their “stamp” on the property and those looking for a move-in-ready home.

The older the home, the more upkeep it is probably going to need. For example, the cost of a new kitchen could run a potential buyer upward of $50,000 or more. The older the home, the more likely a buyer will run into further repairs as it ages, such as a new roof, foundation leveling, and more.

Unless a buyer is seeking a project, the cost to modernize or repair a property must be factored into the sales price.

3. Home construction and renovation quality

The quality of the construction materials used to build a home affects its appraisal value. A house that was built or updated with modern materials is worth more than a home that was built decades ago. Materials that improve the safety or efficiency of a home, like siding, windows, doors, or the roof, also affect appraisal value.

An appraiser must also consider the quality of any home improvements and renovations. Many homeowners invest in renovations throughout the time of owning a home, assuming that they will get a return on their investment.

The truth is that most home renovations don’t yield a 100% return, and some renovations yield much less. Understanding this can help you avoid over-improving and overpricing your home.

4. Design style

“But I have renovated my property,” a seller might say when thinking about pricing and the design of a home. A seller must objectively ask if the renovations are what buyers today are looking for.

After all, you can take a three-bedroom home and remodel it to look like a medieval castle, but that isn’t necessarily going to be an easy sell to the next buyer.

5. Home space and features

A fairly obvious aspect of a property appraisal is its square footage. Theoretically, a larger property should fetch a higher asking price. However, if the larger property is in disrepair or in need of major updates and renovations to meet modern standards, it could rival a smaller, more contemporary property.

The appraisal is assessed by determining a price per square foot, which ultimately determines the sales price and surrounding property sale comps in the neighborhood. We will discuss this in the last section of this article.

After determining the square footage of your home, the next factor to consider is the number of bedrooms and bathrooms. The equation is simple. The more spacious and beautifully designed the bathrooms and bedrooms, the higher the estimated value of the property will be.

Today’s buyer is extremely detail-oriented and often has very high expectations when it comes to floor plans and finishes. So if you are considering completing renovations before you place your home on the market, be sure to pay special attention to these areas in order to maximize the return on your investment.

6. Location, location, location

Another key factor is of course the neighborhood where your property is located. Where your home is positioned within the neighborhood is also a factor. For example, a large lot that’s more secluded is more desirable than a small lot on the main road.

There are several things that increase a neighborhood’s appeal for buyers and bring up home values. Positive factors include good schools, low crime, a walkable neighborhood, well-maintained roads and street lamps, and a high concentration of homeowners rather than renters. Suburban neighborhoods, 20 to 30 minutes from large cities, are also highly desirable.

Other factors that influence a home’s appraised value (either good or bad) include features—things like lakes, ponds, beach access, parks, bike paths, and more. On the other side, things that may lower home values include landfills, power plants, and industrial facilities.

Ready to Sell Your Home?

Of course, there are other factors an appraiser must take into consideration when determining value. These, however, are some of the main considerations.

If you’d like to chat more about how appraisals work or the factors that influence a home’s appraised value, shoot us an email at [email protected] or call us at 425-967-3794.

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Alex Todak