You've probably heard that real estate professionals establish home prices based on the sales prices of comparable properties in the immediate area. Real estate agents have access to computerized databases that list the size, features, amenities and selling prices of every property in the country for decades.
Generally, the agent locates comparable properties with about the same square footage within a few blocks of your home. The comparable properties need to have the same number of bedrooms and bathrooms, and usually have similar features. Your home's price is based on the selling price of those properties.
That's true. But of course, it's more complex than that.
Every home is unique. Even in an entire subdivision of nearly identical homes designed and built by one company, the homes will have differences in amenities and features. Some are more expensive options that the homebuyer added on during construction, like granite countertops or whirlpool tubs. Other amenities may have been added later, like built-in shelves, a sunroom or a hot tub. The art of home pricing comes into play in knowing what value to assign different amenities.
Keep in mind that almost every home has some amenities, but not all amenities are equally valuable. In general, upgrades to kitchens and baths increase the home value more than other add-ones such as a fireplace, skylight or wood floors.
Full attics with ceilings over 7 ft., and full, dry basements with good light are amenities that add value to a home, even if they have not been finished. They provide the potential for expanding the living space. On the other hand, a damp basement prone to mildew or an attic with supports every few feet, adds little to the home value.
Some built-in cabinets and shelves add value to a home, while others can be a drawback. When choosing customized cabinetry, always keep in mind that the next owner may have very different tastes. You may love the ebony entertainment center and purple shag carpet, but that doesn't mean it will significantly add to your home's value.
The value of amenities can also vary according to location. Take an in-ground swimming pool, for example. In many parts of the south and west, a quality in-ground swimming pool on an appropriate-sized lot can add $10,000 or more to a home's value. In some more exclusive neighborhoods in warm climates like Arizona and California, a pool is an expected feature. In those areas, a home without a pool would be worth less than average in the neighborhood.
In other areas of the country, however, a pool may actually decrease the selling price of a home. In the upper Midwest, outdoor pools are prone to leaks and mechanical problems due to repeated freezing and thawing. At best, a pool can be used for two or three months of the year. In those areas, many homebuyers are reluctant to pay more for a feature that may need costly repairs.
Taking the time to objectively assess your home's amenities, and consulting an expert, will give you the most accurate picture of your home's true value.
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