Whether buying a new home or selling your own, you need to know what affects a home’s valuation positively and negatively. Some aspects of a home valuation are rather complex, while others are simple. In Australia, the color of a property’s door could change its final valuation. For example, properties with black or gray doors sold for $6,271 more than those with lighter-colored doors.
Another tip many people give for higher home valuations is giving your place a brand-new paint job. However, we’ve found that to be false, and the impression it leaves on appraisers is minimal compared to upgrades and room additions.
Many features can swing properties’ values more than what color your door is, but emotions remain one of the biggest factors in a homebuyer’s decision. Buyers were happy to pay slightly above market value if they “really loved” the property. Don’t hesitate to squeeze the trigger if you’ve found a property that captures your imagination. Just be sure to temper your sentiment with multiple, thorough inspections.
The Four Principles
Regarding property valuations, four principles help determine a building’s final price: demand, utility, scarcity & transferability. A property’s demand is gauged by the magnitude of interest in said property. One way to determine this is by finding out how many properties in the area have been bought within the past few months.
A property’s utility is about its ability to satisfy its prospective buyer’s demands. Some homebuyers’ needs are complex, whilst others are simple. Most appraisals concern the home’s amenities – their newness, effectiveness or lack thereof. These things greatly impact whether or not this property can offer its buyer a high quality of life and minimal hassle.
Scarcity goes hand in hand with demand. Scarcity concerns itself with how common – or uncommon – a property is. Collectors’ items fetch high prices because of their rarity; the same can be said for one-of-a-kind properties. If a scarce property is in high demand, get ready to see some exorbitant prices.
Lastly, there’s a property’s transferability, which is about how easy it is to transfer a building’s rights from one owner to another. For instance, there have been many instances where a buyer pays for the property, but the previous owner doesn’t cede all the ownership rights to the property. Sometimes, transferring a property’s rights could mean incurring huge amounts of debt.
Property valuations are largely subjective, and thus, the numbers can fluctuate. However, according to Investopedia, other smaller factors called “comparables” influence appraisers’ evaluations. Here are a few examples:
- Age and condition of the buildings
- Date of sale, if economic changes have occurred between the date of sale of a comparable and the date of the appraisal.
- Terms and conditions of sale, such as if a property’s seller was under duress or if a property was sold between relatives (at a discounted price)
- Location, since similar properties might differ in price from neighborhood to neighborhood
- Physical features, including lot size, landscaping, type and quality of construction, number and type of rooms, square feet of living space, hardwood floors, a garage, kitchen upgrades, a fireplace, a pool, central air, etc.
Contact us today if you’re a prospective home buyer in the DFW. Grand Homes has been helping homeowners find their dream houses here in the metroplex for over 20 years.