What Determines a Home’s Value? 6 Things Investors Should Know

New Door Blog Post

If you’re venturing into today’s real estate market, you’ll want to be prepared in understanding a home’s value. Whether you’re buying or selling, determining the property’s value will ensure you make a wise investment decision without overspending. Because today’s Lehigh Valley market is vastly different than it was five or ten years ago, you’ll need to sharpen your pencil. Here are the most relevant key factors that contribute to a home’s value.

1. Location Matters

One of the most significant contributing factors to a home’s value is its location. Where the property is physically situated in relation to major thoroughfares, metropolitan areas, and nature views, will lend value to the home. Before you invest in any real estate, consider its location. Those properties with beautiful views, in proximity to restaurants, retail, and school districts, will tend to be more desirable. Those homes within HOA neighborhoods can also see increased home values. On average, Homeowner Association properties sell for 4% more than non-HOA properties.

2. The Home’s Features & Amenities

Lehigh Valley home values are also determined by the amenities and aesthetics each has to offer. A larger, more spacious property with more bedrooms and square footage of living space will naturally be worth more than its smaller counterparts. Open floor plans, attached garage spaces, and robust storage solutions can all also add value to a home.

3. The Property’s Condition

Before investing in a property, consider its age and condition. Both are significant factors contributing to the home’s value. Newly constructed houses will, in general, appraise for and sell for more because they are in better shape, requiring fewer updates or repairs. However, older homes can be more valuable in certain circumstances, especially if they feature unique features and have been remodeled or updated. The best way for property investors to determine the condition of a property is by scheduling a home inspection with a licensed home inspector. A report will help identify any condition deficiencies, including the foundation, structural integrity, and its operating components.

4. Market Supply & Demand

Home value is also dependent on local market supply and demand. For example, you could find a large property full of luxurious upgrades and extras, but because it might not be an attractive fit for the market, it won’t be highly desirable. In today’s hot Lehigh Valley housing market, there is high demand. To know if a home is marketable, you can look at similar properties to see how much they’re listing and selling for, to gauge value. There are a host of online estimate calculators, including AVMs, the FHFA House Price Index Calculator, and the HPI Calculator, to help property investors get an idea of what a particular market looks like.

5. Comparative Market Analysis & Appraisal

Because so many variations play into determining the value of a home, it’s often recommended that you get a comparative market analysis. These are not typically as thorough as an official appraisal, but they can be great for securing a more precise figure. Real estate agents can help perform a comparative market analysis, which is ideal for property investors who may be interested in learning a home’s value before listing. A CMA report will essentially compare your investment property with others in similar condition and scope. It will also cumulate more up-to-date and relevant data to determine a home value estimate. However, the official appraisal will be your best tool for the most concrete home value calculation.

The hired appraiser will consider:

  • Market: The city and neighborhood of the home.
  • Property: Characteristics of the house itself, including improvements and any acreage.
  • Comparable properties: Other recent sales, property listings, current vacancies, associated costs, accurate depreciation, and other factors for similar houses in the area.

6. Improving a Home’s Value

For Lehigh Valley real estate investors who are keenly interested in improving ROI with each real estate transaction, there are always benefits to exploring new ways to improve a property’s value. Whether you’re building a portfolio, investing in rental property, or simply looking to increase the value of your primary residence, these are the factors you can control, unlike the location or age of a home.

  • Curb appeal upgrades
  • Kitchen and bathroom remodels
  • Finished basements
  • Replace new systems, including HVAC, electrical, or plumbing

Knowing how to calculate a home’s value will allow you to better understand what you can afford, improve your likelihood of selling, and make your wisest real estate investment decision. Consider these key factors in your efforts, and let New Door Property Transfer be your guide through the transaction.

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