We all get a thrill when a home near ours sells for a nice juicy price, and we think maybe that’s what our property is worth, too.
But the truth is, what determines property value isn’t always a one-size-fits-all number.
Instead, property value is determined by everything from the year your home was built to its proximity to transportation to the number of bedrooms.
And experts say there are many more intricate details that buyers and sellers might not realize that influence value. So here are the little-known facts that go into determining property value.
Unseen location specifics
Appraisers will consider your home’s square footage, the number of bedrooms, and the size of the lot when determining your home’s value. And they will also note how much other homes similar in size in your area sold for. (These are known as comps, or comparable properties in your area.)
Yet confusion about the value of a property can arise because of the location of county lines and districts.
“I had a client selling a home, and the house directly across the street could not be considered a comp despite square footage, bed, and bathroom count being the same,” says Michael Martirena, a top broker with Compass in Miami.
Why? “Because the county line was through the middle of the street,” explains Martirena.
Due to this unseen delineation, the appraisal price for the home was significantly altered.
“Most buyers and sellers don’t think about variations in the map when it comes to pricing,” says Martirena. But in this instance, each house was in a different school district.
The home’s (actual) square footage
Usually, the bigger the property, the more square footage, right? Not always, say experts.
“It is a matter of the usable or functional square footage and evaluating the areas that are wasted space,” says agent Jeremy Kamm of New York City’s Coldwell Banker Warburg.
For example, attics, garages, and unfinished basements are typically not included as usable square footage. So though you might have a 2,000-square-foot home, an appraiser might be able to value only 1,750 square feet.
When the home was built
Appraisers will examine the property’s condition and its overall upkeep. And newly installed features such as a new bathroom, new hardwood flooring, or a new garage or roof will get bonus points.
“Appraisers choose a score for how new parts of the home are with a bias toward recent updates,” says Max Stokes, founder of the Fox & Stokes Team at Compass in Bergen County, NJ. “Your kitchen will get a score, your bathroom will get a score.”
So homes with recent renovations or newer builds will automatically have a higher appraisal value.
The home’s utilities
New mechanicals and utilities also score high on an appraiser’s list.
Energy-efficient upgrades can reduce utility bills and are appealing to buyers. For example, adding a smart thermostat can improve efficiency and increase property value.
Meanwhile, old, out-of-date electrical wiring can tank an appraisal because it means buyers might have trouble running the air conditioning, microwaves, and hairdryers.
The property’s climate resiliency
While it’s not something that most buyers or sellers really think about, a property’s climate resilience affects value.
“We’ve recently dealt with many waterfront home sales, and I’ve found that a key element for appraisers is the condition and age of the sea wall,” says Ivan Chorney, a broker with Compass in Miami. “If it’s up to code, it adds tremendous value to the property and can save time for someone wishing to build their own home.”
Chorney adds that protection from extreme weather is a key element to the property’s appraisal value across the county. The better the protection from the elements, the greater the value.
Importance of using the right appraiser
Buyers and sellers should be aware of variations among appraisers. Stokes is an appraiser himself and says that as the appraisal industry becomes more regulated, fewer people are in the profession.
“The result is that appraisers registered in the state could be assigned to a property in an area where they have no local knowledge,” says Stokes.
Plus, an inexperienced appraiser can significantly affect a home’s overall value.
“The better your professionals understand the comps, the more accurate the appraisal price will be,” says Stokes.
So if you think an appraisal you get is way off, you can question the number—and request a new appraisal.
Knowing what increases or reduces a home’s value can help keep buyers from paying more than a home is worth. And for sellers, understanding the ins and outs of property values could help them price their home to sell quickly.
Learn more on Realtor.com
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