It’s always useful to know the worth of your home. There are numerous benefits to understanding the value of your home, one of them being the ability to determine an accurate listing price. Recognizing the market value of your home can also help you assess whether recent improvements or renovations may have increased its value. This is important if you’re looking to tap into your home equity and take out a second mortgage.
The following article will help you understand the value of your home and the factors you need to consider as a result.
How Much Is My House Worth? Factors To Consider
An easy way to determine your home’s value would be through a comparative market analysis (CMA). Simply put, this means observing property valuations in your immediate area. However, this involves a thorough analysis, and it will require more than just logging on to MLS.com and having a quick browse.
Let’s take a closer look at the criterion used by analysts (realtors or home equity loan appraisers) while carrying out a comparative market analysis (CMA).
This involves researching the sale of homes in an around your area. The time range you choose to consider is entirely up to you. For example, in a booming real estate market like Toronto, you can simply go back one or two months as property prices can rise up to 10% within a year.
Given that the average home in Toronto sells for around $1 million, using last year’s numbers as a reference can lead to you making a loss of $100,000 or more on a sale.
However, in stable markets, it’s fine to look at sales within the past 12 or even 24 months. Remember that every house in your area is different. Additional factors customized for your home specifically will help inform your understanding.
The prevailing economic conditions of the time can have a huge effect on the value of your house. For example, if unemployment has increased dramatically in your area, the demand for homes would be greatly inferior to the supply. Resulting in decreased valuations.
Another question homeowners frequently ask is, “How much is my house worth instantly?” Given that economic conditions may not improve by the time you decide to cash in on the value of your home (through a sale or home equity loan), this may well become a major consideration.
Your Home’s Target Demographic
The demographic that you’re targeting with the potential sale of your home is an important factor in determining the value of your home. For example, if you own a single-family home containing an unfurnished basement located in a college town, you may have trouble selling it compared to a house with a furnished basement apartment designed for the purpose of being rented out to students.
Most people would opt against purchasing a home located in a violent and run-down neighbourhood. Therefore, location is a key factor to consider while trying to determine the sale price of your home.
However, if your area possesses amenities like well-established schools, access to transportation, and good infrastructure, these can dramatically increase the value of your home.
Factors Unique to Your Home
Other than the factors listed above, there are various indicators that are specific to your home which can either increase or decrease its value. These supplementary factors will help you gain a more concrete and exact valuation of your home.
The Home’s Design
Detached homes are increasingly popular with buyers. This can be seen in major real estate markets like Vancouver, where detached homes are becoming scarce and are selling at a base price of a million dollars.
Another important factor is the number of bedrooms in your home. If you own a family home, a minimum of two bedrooms is required to be competitive if neighbouring houses in the area have three bedrooms or more. Anything less will decrease the value of your home.
The number of bathrooms can also have a similar impact. Buyers will look more favourably upon a home with two or more bathrooms.
Finally, the interior design of your home is a vital contributor as well. For a long time, buyers favoured open designs and as a result, these homes are more popular now.
More square footage corresponds to a higher valuation for your home. Of course, this is relative to smaller homes in the area.
A home with a lot of outdoor space may be very attractive to certain kinds of buyers, especially families. On the flip side, buyers that view large outdoor spaces as a liability will likely steer clear. Buyers like this could be in the form of older property owners who are unable to maintain wide open spaces on a regular basis.
The inclusion of a driveway or garage can add considerable value to your home. However, street parking will likely decrease it.
The Condition Of Your Home
A Home in need of substantial repairs will not attract serious buyers. Despite there being a market for such properties (house flippers), you’ll still be selling the home at a much lower price in most cases.
Home renovations are hugely beneficial when it comes to increasing the value of your property. An upgraded roof or the installation of heated flooring can make your home twice as desirable to potential buyers.
Usually, homeowners don’t make a profit through renovations. Despite this, home upgrades will undoubtedly add value to your property. Homeowners often take out loans to pay for renovations for this very reason. In some cases, the loans can pay for themselves.
Property’s Potential To Generate Income
A home with a basement capable of being used as an apartment can be very lucrative. Even though the cost of renovations can be quite high, the income you’re likely to generate will help you get your money back.
Buyers are fully aware of this and are willing to pay a premium for a home with a basement apartment. Although, it’s important to be aware of the provincial regulations and standards for basement apartments. This can include acquiring a permit.
Therefore, be sure to do your research before investing in renovations from your basement to avoid a situation where you’ve sunk in more money than you’re going to get back. By the same token, a spare room can also be an asset to you. This is where having a two- or three-bedroom home plays to your advantage.
Factors That Can Change Your House’s Worth
The process of determining the value of your home is very rarely straightforward. There are many variables and external factors that contribute to the estimated value of your home. Based on how you approach the process, your home value may differ from the actual price you sell it for.
The Time Of Year
According to RE/MAX, springtime is best for selling a house. Usually, buyers are looking to move in before the summer. The next best alternative would be to sell during autumn. However, selling your home in the winter would be counterproductive as you are less likely to profit from your sale.
A sound and decisive marketing strategy is vital, even in a booming market like Toronto for example. Potential buyers prefer to see high-quality photos of a properly staged home beforehand. Your house needs to be presentable in this regard, quick pictures on your phone will do you little good.
Willingness To Wait
Being patient is key. In an ever-expanding real estate market like Canada’s, you are very likely to get the offer you desire. It’s quite common for first-time sellers to cave and jump at the first offer they get. However, don’t be intimidated by aggressive negotiators stick to your guns and you will get the valuation you seek.
Looking To Tap Into Your Home Equity?
Whether you’re looking to renovate your home, consolidate debt, or cover the cost of school, Alpine Credits can help match you with the right home equity loan provider based on your unique needs.