Factors that Determine the Value of Your Home (And Why They Matter)


Whether You’re Buying or Selling, Knowing What Determines a Home's Value Can Help You Successfully Navigate an Increasingly Competitive Real Estate Market.

The conventional real estate wisdom is that a big home with plenty of upgrades is far more valuable than one without.
And it's true—to a point.
Certainly, much of a home's value is derived from its square footage and what occupies it, but many more factors determine its list and sales price. Let's explore three of the most critical factors that determine the value of your home (and why they matter).

The Location

Real estate's primary mantra is location, location, location—and for an excellent reason. A home's baseline value begins and ends with where it sits. Highly desirable neighborhoods close to excellent schools are the sweet spot for a high-value location.
So too are areas that are near natural amenities and city services—parks, hiking paths or wilderness areas, hospitals, fire, or police stations—or have a high walkability factor. Neighborhoods that are predominantly owner-occupied add value, as do those with low foreclosures, low rentals, and yards not filled with for sale signs.
Homes that are in cities or towns with a strong economy will rate very high as well. Even better if they're close to those economic drivers, whether it's jobs or strong retail and entertainment centers.

The Market

Arguably one of the most abstract factors in determining a home's value is the market itself. As evidenced by 2020, the market can change rapidly, in both expected and unexpected ways. The primary market factors that influence your home's value often work in tandem and result in increasing values or flat growth. Factors include:
  • Inventory, both the immediate submarket or larger primary market
  • Demand, or lack thereof
  • The local job market and a community’s overall economic situation
  • Interest rates
  • Comparable sales, or your home's "comps"
Gauging the market correctly results in buying a great home at a highly competitive price or selling a home for over its asking price.

The Home

Of course, the home itself matters when it comes to determining value, but it's not always as straightforward as one would think. For example, a common misconception is that a relatively new residence (built within the last three to five years) carries greater value than an older home. 
While age is a valuation factor, it's not the only one. The number of bedrooms and bathrooms, a home's usable space or overall square footage, it's design aesthetics, curb appeal, and it's amenities, updates, or upgrades all factor into a home's overall value. Context also matters.
For instance, all other things being equal, if your neighbor's home has an additional bedroom and updated kitchen, expect it to value higher. However, those selling points could be negated if your home has historical significance or offers a more livable layout or with newer mechanical systems (such as a new roof or HVAC system).
Understanding a home's value is critical to your real estate buying or selling pursuits. 
As a buyer, knowing how location, the market, and the home itself contributes to its total value helps you make informed decisions. Your negotiations come from a place of knowledge, and you can make offers that are both smart and competitive.
If you're a seller, an appreciation for your home's value informs the improvements you make and how to list it competitively to generate the most looks and multiple "above asking" offers.

Ready to sell your current home or in the market to buy and make your next major move? Contact Prema Subramaniam today and let her be your guide to East Bay luxury homes in Danville, Dublin, and Fremont, California.

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Prema understands what it is like to stand in her client’s shoes. Buying and selling houses of her own, has afforded Prema a sensitivity towards her client’s journey. Meeting new people and helping clients find the right house to call home is her passion.
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