In a neighborhood of similar homes, why is one worth more than another? This question has perplexed buyers and sellers for ages, but the answer is simple: every home is unique, and the circumstances of every sale are unique too.
Every home is different, and the circumstances in every sale are different too. When a home is sold, a willing seller and a willing buyer have just announced to the world the price of that home. From there, that sale becomes a benchmark, a single data point, which other home owners or buyers will use to determine the worth of other properties.
But many factors come into play. The most important are:
Location: Is the home on a corner lot? Is it adjacent to a greenbelt, or a park? Does it have any kind of view? Is it next door to a dilapidated, unkempt house or to a gleaming new custom home?
Home Size and Lot Size: larger houses on larger lots tend to sell for more than smaller homes on smaller lots. Even small differences in size can have an noticeable effect on values, because they can have a big impact on the property’s functionality or utility: an extra office space, room in the backyard for a garden or to build a granny unit are examples.
Number of bedrooms and baths: Over time, American homes have tended to grow larger. Decades ago, household members shared bedrooms and baths without complaint, but today, families want more privacy. The typical home purchased today is a three-bedroom, two-bath home.
Features and finishes: Features such as outdoor kitchens and spa baths make a home more luxurious. A home finished with hardwood floors and granite countertops is going to cost more than a home with carpet and laminate countertops.
Bonus areas: offices, basements, detached studios and the like are also factors which drive prices. Condition – The closer a home feels to new construction, the more it will retain its value. It’s perceived as more modern, up to date, and perhaps cleaner. Homes that are not updated or in poor repair sell for less than other otherwise similar homes. Even if your home has not been updated with the latest styles, just having it kept clean and well maintained will make a big difference compared to homes which aren’t.
Curb appeal: From the street, the home looks clean, fresh, and inviting. Fresh landscaping and flowers won’t change the size or location, but they do attract buyers like flies to honey. If buyers don’t like what they see when they drive by, it means less buyers through the door, and likely a lower sales price.
Motivation and capacity of both buyer and seller: this is kind of a wildcard in the equation. Is there a buyer who needs to buy in the neighborhood right now, and is willing to pay a premium to get into contract on a house? Or is there a seller who needs to get out of the house ASAP, and is willing to let it go for 2, 3, or 4 percent less than he could otherwise get if he had more time to wait, or more time and money to spruce up the property before selling it?
This kind of stuff happens all the time, and it’s difficult to know the story behind each and every sale or listing to know how that effects prices. When two homes are identical in the same neighborhood, a higher price may come down to something as simple as views, paint colors, the tastes of buyers and sellers, fluctuations in the market, and motivation of buyer and seller. Not every factor can be changed or controlled, but those which can will mean a big difference in your bottom line when you sell your home.