Check Out 6 Ways Location Impacts the Value of Your Property
Many people have heard the age-old real estate expression of “location, location, location” — especially if they’ve searched for a rental or sales listing online at some point in their lifetimes.
As often as many of us have heard it, the statement does stand true whether we love it or hate it. In regards to affecting the value of a primary residence or investment property, the location of the home plays an instrumental role in determining what the real estate is worth.
In competitive markets like New York City and Miami especially, the location of a home can add hundreds of thousands of dollars to a property’s value.
If you’re wondering how the location of your home impacts property value, below are six pivotal factors to keep in mind. Especially if you’re considering selling your home in the future:
1. Status of Current Market
When it comes to timing the real estate market, the general go-to rule in terms of purchasing a property is find a location where you can buy low and sell high. One way is to determine in what area there are buyer’s markets. You can search online or ask industry professionals. Perhaps your home is near a highly sought-after zip code and yours is poised to shift into a seller’s market in 10 years.
Buyer’s Market Versus Seller’s Market
- Buyer’s Market: High inventory & high buyer demand
Buyers have lots of options meaning properties need to be competitively priced
- Seller’s Market: Low supply & low buyer demand
Sellers have the opportunity for higher return on investment & potential bidding wars
2. Address, Neighborhood or Zip Code
Buyers are willing to pay high premiums for a specific address or zip code — especially in competitive markets such as New York City, Los Angeles and Miami. It’s essential to consider convenience and other common features buyers often look for in a home. With homes for sale in Manhattan, for example, there’s usually a big difference in sales price if the address of a condo unit is 10 floors above another — even with the same floor plan. Better views means better long-term value.
If the property is easily accessible to transportation, shopping, landmarks and more — buyers will gladly pay more money for the benefit of accessibility. That’s why it’s important for current homeowners to pay attention to what’s going on in and around the neighborhood. Say a new exit or gas station is being built five minutes down the block, and you’ve been thinking about home selling. Convenience adds value, so you may want to time listing your home once these construction projects are almost open to the public.
3. History of Past Sales
Commonly referred to as “sales comps,” a Comparative Market Analysis (CMA) consists of researching past home sales similar to your property’s location, size, features, upgrades and other essential factors. In major cities, real estate agents will often estimate a property’s worth and potential listing range by checking out past sales in the same line or layout of the building — since they know these properties have similar features and access to the same building amenities.
When an appraisal happens, agents will usually bring sales comps to share with the appraisers and prospective homebuyers. Comps help to prove the purchase price is reasonable based on the historical valuation trajectory of the subject property and similar properties in the area. The appraisal process can make or break a financed buyer’s mortgage qualifications, so it’s crucial the sales price is as close to the appraisal value as possible without going over.
Homeowners thinking about selling their property should also look at pending sales to get a current snapshot of at what price other similar homes are going into contract. A proper CMA should consist of similar properties that are active, in contract and recently sold.
4. Property Square Footage
The size of a home in a particular location is a key component in determining a realistic value for a home or investment property. Going back to the concept of sales comps — a lot of times it may be difficult to find a similar property in sizing due to the many other variables that affect sales price.
One workaround is to try taking square footage out of the equation, which may seem counterintuitive. You can do your own CMA online by filtering through active, pending and closed listings on consumer real estate sites like Realtor and Zillow. The filtered results will match your property’s other features and amenities, and you can use these property values to calculate cost per square footage. Then take that dollar amount and multiply it by the square footage of your real estate asset to determine a reasonable price point.
5. Home Upgrades & Highly Sought-After Features
Traditional and neutral layouts with open floor plans are most commonly sought after in the real estate market. Essentially, homeowners thinking about eventually selling want to keep up with popular interior design trends of similarly sized and located properties that have gone into contract or recently sold. Otherwise you risk limiting your prospective buyers to niche audiences.
Tip: Try to look for what stands out about those photos. Can you implement some of these trends yourself? Is it worth hiring an interior designer or general contractor to remodel the guest bathroom?
In cities like New York, something as simple as a washer/dryer hookup can yield thousands of dollars in profit. It’s important, however, to consider the average cost of renovation projects before committing to them. Resources like Remodeling Magazine are available to calculate remodeling projects for different geographic areas. You can also check out the National Association of REALTORS’ Remodeling Impact Report.
6. Age of Home
The age of a home is another component of calculating the value estimate of your property. There are a lot of differences with buyers searching for a previously owned home versus a new construction build. Prospective buyers will likely ask about the age of not only the home, but also the included appliances, plumbing, electrical wiring and other home essentials. These are the items that typically come up in a home inspection recommended for repair or replacement as well. Buyers often request a certain timeframe for due diligence and inspections in the offer and sales contract, so transparency is key in determining the value of a home.
Wrapping Up: Additional Real Estate Resources
Whether you’re thinking about selling your property or just curious about your home’s value, there are a ton of free real estate resources available to keep you informed.
Real Estate Agent: Tap into expert & industry insight
Real estate agents are licensed by the state to earn a commission by listing real estate properties for sale or rent, and helping buyers or renters locate real estate. Hiring an agent requires paperwork, which should include a commission agreement. If you don’t sign any paperwork you don’t owe money — so take advantage of free consultations!
Real estate agents like us love free real estate chats too because building relationships in the community is a core factor of being successful in our business.
Moving Company: Be prepared & destress
If you’ve already committed to selling your home, an integral step in the real estate process is marketing your property and preparing for your move. Decluttering, improving the lighting and removing personal items isn’t the only component of staging a home to create engaging listing photos that attract more buyers. Sometimes selling a home in a hot market means staging a home with new furniture and fresh paint to meet the demands of the average buyer. This could mean your items may have to be removed sooner than you realized. It’s definitely recommended to schedule a strategic moving day with professional and skilled local movers in your area. Remember, don’t skim on the movers, as a good moving company can relieve sellers of much of the stress of the move.
We hope this blog about 6 Ways Location Impacts the Value of Your Property was resourceful. For additional tips and advice visit 8 Tips For Moving Out of an Apartment.
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