A licensed real estate agent needs to understand how to perform a comparative value analysis. This is like a rough but technical estimate of value. Not an official appraisal. In real estate school, we’re taught what factors influence the worth of the home.
I don’t need you, the reader, to use me as your agent.
What I am saying is, before you list your home for sale and get excited about how much the home will sell for, it’s a good idea to figure out what it’s really worth.
If your home is worth $300,000 and you mistakenly assume it’s worth $350,000, and you need the extra money to do something else, you may waste a few months of your time cleaning and showing homes and be disappointed if no one comes along and offers $350,000.
Similarly, if you think it’s only worth $250,000 and advertised only on craigslist, and 1 buyer came, and offered you $250,000, you would probably take it. Then you’ll be sad later if you find out it was worth $300,000.
If you are buying a home, you also don’t want to offer too much above the comparative market analysis value unless you’re willing to pay the difference between appraisal value and your offer price.
Here are a few factors for estimating the value of a home that competent real estate agents and appraisers consider and analyze that the average person may not:
Floor Plan
The floor plan may be a factor
- Example: One home may be 2000 square feet and another 2050 square feet. Not a big difference, right? Same neighborhood. Same condition and upgrades. Will probably sell for a similar price?
- Sometimes. But if the 2050 square foot floor plan has a 3rd shower downstairs and better open layout, it may sell for much more than the 2000 square foot plan, simply because there’s more demand for that kind of home.
Subdivision (Neighborhood) and Year Built
Competent agents are aware that the value of your home is influenced by your neighborhood and age of the home, and the selling prices in another part of town aren’t necessarily consistent with your neighborhood.
- Example: Selling prices for one home in a non-gated neighborhood built in the 1990’s should not expect the sell for the same prices as homes in the guard gated community built in 2015 a few streets over.
Recent Sales and Trends
Competent agents take into account the current state of the market.
- Example: Selling prices for homes in your area that sold 3 months ago have more relevance than the prices of homes that sold 3 years ago.
- If prices have been coming up, down, or staying the same for the past few months.
Square footage
A 1500 square foot home will usually not sell for the same as a 2000 sft of similar floor plan in the same neighborhood.
Number of Floors/Stories
One-story homes that are 2000 sft tend to sell for more per square foot than two-story homes that are 2000 sft.
- One story homes tend to take up more land, and be easier to live in, since there are no stairs to climb to access the entire home.
- This makes the home usable for elderly and handicapped people.
- This increases demand and subsequently, selling value.
Lot Size
The size of your land matters.
- A home with a 10,000 square foot lot of land will probably sell for more than a similar home with a 4000 square foot lot.
Position
The position of your home matters.
- A home backed up onto a busy street will not usually be as highly valued as a home at the end of a quiet cul-de-sac.
- A home with a backyard that backs onto a desert or train tracks would probably not be as desirable as a home nestled within other homes.
The Value of Relevant Upgrades
We know that not all upgrades bring up your value.
- The $10,000 designer paint job that’s not a popular style is likely not worth that much to other people. It would probably be painted over and seen as an additional expense.
- Nice upgrades in nice neighborhoods also matter more because it’s consistent with the neighborhood style. A nice swimming pool with a waterfall in Summerlin may be worth an additional $50,000 compared to similar homes in that neighborhood with no pool.
- But the same $50,000 pool may not be worth that much when you’re buying a home in a neighborhood where the average selling price is $100,000. Someone with $150,000 to spend would probably just spend it buying a home in a $150,000 neighborhood. The $100,000 with a nice pool may sell for $120,000.
- If you’re going to spend money on unique stylistic upgrades, I would recommend to do it for your own enjoyment and not to try and increase the value of the home.
- If you want to try that anyway, here’s a nice article from HGTV
- HGTV – Which Home Improvements Pay Off?
The Costs of Buying or Selling a “Fixer-upper”
Some homeowners believe that buyers can “just buy their own” or “fix it themselves” after they buy the house. What people often fail to realize is if the home is in need of repairs, those usually translate to extra up front costs to the buyer that aren’t clear to the buyer. This tends to influence in many ways.
- The home will not sell for as much as a home that needs no repairs.
- Why would a buyer pay the same price for your home as the same home next door that’s ready to move in? I don’t think anybody would.
- Less people will look at the home, so less people can bid on it. It will sell for less and take longer to sell. Why? Here’s an explanation:
- Many buyers have just enough money for the minimum 3 to 3.5% down payment and a few thousand for closing costs. Just enough to pay to get in the house, and not much more.
- The buyers who can normally buy a house like yours will see those repairs as additional up front costs, that aren’t easy to calculate.
- Even if the A/C unit takes $150 to fix after it’s all said and done. In the buyer’s head, it can possibly be $3000 or more. No one can say for sure. But most buyers won’t risk buying that house if they feel they can’t afford the potential repairs.
- What does this mean?
- Usually since there’s less people who can buy the home, there’s now less competition of buyers.
- The home will get more lowball offers from the remaining buyers that think the repairs may be high and lower their offer accordingly. So even if there may be $3000 of repairs to do, buyers may fear it could be $10,000 and drop their offer price by $10,000.
- Cash buyers tend to haggle pretty hard too. And will probably pay less than a financing buyer.
- The average buyer can more easily buy a home that costs a little more but is ready to move in. Why?
- Because they can put most of it into the loan and it won’t be an up front cost.
- The $3000-4000 you put into new paint and carpet can easily come back in increased selling price of $5000+ and a faster sale.
My Advice on Repairs?
If you have the money, it’s best to try and make sure the home is as “move-in ready” as possible.
- Major Systems: Make sure the major heating, air conditioning, and water systems work.
- Appliances: If you have really old appliances, you can replace them with clean basic ones that match the house so that any buyer looking at the home won’t factor in an additional $3000 to get new appliances.
- Kitchen Cabinets: If they’re a little worn, you can probably have them sanded and repainted and attract many more offers. Clean looking cabinets are worth it in my book. It’s a $3000+ expense the buyer doesn’t have to think about.
- Floor and Walls: If you really need new paint or carpet, it may be well worth it since it runs around $1 or less per square foot to get a home painted, and a little over $2 a square foot for carpet and installation.
- If you need to get some estimates with some contractors I have used, I list them here:
- Air Conditioning and Heating
- Frank Lee @ 702-528-0753 (text ok)
- Landscaping
- Rigoberto (Rigo) @ 702-773-9759 (text ok)
- Painting
- Hector @ 702-980-6407 (text ok but calling is best)
- Carpet Cleaning
- Website:Zerorez
- 702-903-1300
- Parts and Labor for – Kitchen – Cabinets – Carpet – Tile – Laminate – Wood Flooring
- Website: Cabinets Now Plus
- 4375 South Valley View Blvd., Las Vegas, Nevada 89103
- 702-220-6688
- Handymen
- Andy’s Handy Services @ 702-265-2028 (text ok, he’s pretty busy but great and has a team and contacts with various trades)
- Bill Mack’s Handyman Services @ 702-236-1565 (text ok, he’s not as busy as Andy)
- General Home Inspector
- Roger Johnson @ 702-285-1399 (text ok but calling is best)
- Air Conditioning and Heating
I hope this article was helpful in showing you what a good agent considers when valuing your property.
Please have a great day!