Thinking about selling your home soon? Here’s a perspective to think about coming from a former real estate appraiser. Home valuation is a complicated process that takes a multitude of factors into account. The process is a combination of art and science. An appraiser’s job is to provide an objective analysis of the market value of your home. While these appraisals are ordered during the real estate process when a mortgage is involved in the selling, buying, or refinancing of the property, it is good for you to understand what goes into it as a seller so that you can maximize the value of your home.
Newly refurbished luxury kitchen with modern appliances, granite countertops and dark cabinets.
3 Key Factors That Impact Your Value
1. Location, Location, Location
You have heard it before, and it still rings true: it is all about location, location, location! The factor that has the most sizable impact on your home appraisal is your neighborhood and where your house is positioned within it- the corner lot is worth less than the large lot in the back of the neighborhood.
When assessing your home appraisal value, these are the questions you should be asking to see if the location helps, or hurts, the value of your home.
- What is the crime rate?
- How are the schools rated?
- Where are the nearest hospitals, fire stations, police stations, etc.?
- How walkable is it?
- Are the roads well-maintained?
- What is the status of the nearby homes? Are they mainly owner-occupied, not rented, foreclosed, or for-sale?
- Are you by a busy road?
Fannie Mae’s Uniform Residential Appraisal Report also uses these factors in its judging criteria and is used to compare homes based on a uniform standard.
2. Local Comparable Homes – Comps
When doing home valuation, comparable homes, or comps, are one of the most vital factors that affect the final appraisal value. By looking at comps, the appraisal can create baselines of how much buyers are willing to spend on a house like yours in the area you live in.
However, not all houses that have been sold near you can be used as comps, and they have to be:
- Within 1-mile radius
- Sold within the last 6 months
- Have similar attributes
- Condition/age of the home
- Number of bedrooms
- Square footage
Want to do your comps yourself? Keep in mind that you need three comparison homes that have already sold that are very similar to yours. Since location plays a critical factor in the home’s value, try to find homes in the same school district, same walkability, etc. Once you have found the right homes, calculate how much the buyer paid per-square-foot as a starting point. If home A sold for $452 per-square-foot, and home B sold for $503 and has an updated kitchen, whereas home C sold for $495 and has new landscaping, you can deduce the price of an updated kitchen and new landscaping in your area.
3. Real Estate Market Status
One of the factors that have the most consequential impact on the value of your home, and one you have the least amount of control over, is the current status of the real estate market. Depending on whether it is a sellers’ or a buyers’ market, or if the market is hot or cold, it can significantly impact how much your house is worth.
Here is what to do depending on what the market looks like-
- Sellers’ Market – market is saturated with buyers and not enough sellers
- Get an appraisal and sell as quickly as you can!
- Buyers’ Market- market is saturated with sellers and not enough buyers
- If you don’t have to sell now, wait. Since there is more supply than demand your house will be appraised lower
Remember that the real estate market, like most things, is cyclical. Supply and demand will fluctuate, and if you have enough time and patience, you can wait them out and get the home valuation when supply is low, and demand is high. That being said, there are a few changes that you can make that can increase the value of your property, no matter what the status of the real estate market.
Increase the Value of Your Home- How to Remodel Right
Now that you know what goes into the value of the home, here are some golden rules that I tell all my clients so that they can figure out where to make key repairs or renovations. Follow them, and you won’t be wasting your money. You certainly don’t want to be throwing money at something that will not increase the overall value of your home.
1. Highest ROI
Focus on small projects, not large remodels. Smaller projects are less expensive and have a greater return on investment (ROI). While the larger projects may have the most significant impact on the flow and usability of the home and your wallet, these types of projects do not provide a high ROI and you will likely be spending more than you will recoup back the costs. If you want to see the highest ROI on home renovation projects, here is a list of projects and their resale value according to the 2020 Cost vs Value Report.
- Adding Manufactured Stone Veneer
- Average job cost – $9,357
- Average resale value $8,943
- Cost Recouped: 119.5%
- ROI: 95.6%
2. Replace your garage door
- Average job cost – $3,695
- Average resale value $3,491
- Cost Recouped: 117.1%
- ROI: 94.5%
3. Replace your entry door – Steel
- Average job cost – $1,881
- Average resale value $1,881
- Cost Recouped: 87.9%
- ROI: 68.8%
2. Biggest Impact
When doing remodels, be conscious of where to invest your money in the remodel. Focus on where the biggest impact within each project. If you keep that in mind, you will realize that you don’t have to spend as much on renovations.
Let’s consider the most popular remodel projects – kitchen and bathrooms. People spend a lot of time in the kitchen and bathroom, and this is where you can make a huge impact with the improvements that you make here.
Consider the following: Minor-midrange kitchen remodels with an average job cost of $23,452 have an ROI of 77.6%, whereas major-midrange kitchen remodels with an average job cost of $68,490 only have an ROI of 58.6%. Why? Because people tend to send all out for a major remodel – along with the new countertops, throw in the new commercial appliance, new cabinets, new lighting, etc. It all adds up when the biggest impact is the change in countertops along with a fresh coat of paint. You get the idea. And when it comes to bathrooms, your money will go further if you add one instead of remodeling. A study by Florida State University professors G. Stacy Sirmans and David Macpherson found that adding a bathroom increased the home’s sale price by 8.7 percent, more than twice the rate for adding a bedroom.
Whether you are redoing the kitchen or the bathroom, think traditional with modern appliances. Use all-wood cabinets with commercial-looking appliances, natural wood or stone floors, and stone countertops. When in doubt, choose the option that has the least amount of maintenance – the walk-in shower over the whirlpool tubs.
If you are thinking about selling your home and thinking that you need to do some home improvements, it is important to know the value of your home before you start any projects. You don’t want to see an appraised value lower than what you had invested. Give these guidelines some thought before embarking on any renovations, and you could save yourself some money and potential headaches.
As a top producing agent with 20+ years of experience in the East Bay, I have helped hundreds of clients sell their homes in the Greater San Francisco Bay area and the counties of Alameda and Contra Costa. My experience as a former appraiser allows me to help my clients understand the market and help them renovate to maximize the sale of their homes. If you have any questions, I am here to be a resource for you.