Median home sale prices have risen on a year-over-year basis for 52 consecutive months. In June, they reached yet another all-time high. Sure, at a macro view, we all understand that it’s a matter of supply and demand-not enough properties for sale within the major employment centers. But what about your house, or perhaps the house that you want, within the city where you live? What drives the price of a specific home in a specific place?
The Main Factors That Affect the buying price of a house
Rick Singh, the elected property appraiser for Orange County, Florida, says the buying price of a home hinges on three factors: location, product and timing.Product and location are intertwined, meaning “the right home in the right neighborhood,” Singh says. Timing, though, is usually tricky, especially when you are considering selling your house.
“You don’t want to list a home when there [are] 50 other homes on the block for sale, because the law of supply and demand will kick in,” Singh says. “You want to essentially list when there’s scarcity in the neighborhood.”
How Appraisers Value a Home
The last word on the value of a particular house originates from an official, independent appraisal. After all of the buyer-seller negotiation, it’s what banks require to do a deal.
Appraisers value a property by starting with an in depth physical inspection of “the main ‘bones’ of the property,” says Sam Heskel, president of Nadlan Valuation, an appraisal management company located in Brooklyn, New York. He says this means examining the roof, the boiler, the bathrooms as well as the kitchen – anything from front door to back, from floor to ceiling – all to acquire a feel for the condition of the home.
Then an appraiser considers the neighborhood, he says, which includes comparing similar homes and up to date sales to narrow down the value, adjusting the appraised price for similarities as well as differences.
The Home Features in Highest Demand
That raises the question: Which home features have the most impact on the price tag on a home?
“Granite countertops used to be the hot thing. I think today it’s becoming the norm,” Heskel says, adding that it’s a component particularly used by investors looking to prepare a property for sale.
He adds that interior colors have changed from beige and brown to shades of gray.
But consumer preferences are determined by each individual real estate market, Singh says. As an example, having a pool or second floor might not add value in some areas.
“It’s all market-driven,” he adds.
How Home Sellers Can Add Value
Sellers looking to get the most for their home really should be sure there’s no deferred maintenance. “You may put off fixing that dishwasher or that garbage disposal for four or five years, or whatever,” Singh says, “but when an inspection report comes in after you’ve listed the house, you’ll probably have to end up paying a premium to get it fixed.”
That maintenance ought to include items like landscaping – “ensuring that your home is the nicest home on the block,” he says.
Value Traps Buyers Should Avoid
Buyers can get caught in a trap, particularly in hot markets flush with bidding wars. In those situations, a would-be buyer might see a home fail to appraise for its contracted sale price, which means the sale might fall through.
“People tend to buy with their stomach, not with their head,” Heskel says. “It becomes an emotional bidding war with no logic. The appraiser analyzes the market, the real sales – not emotionally – and it just doesn’t make sense; the numbers are not there.”