You can make all the necessary repairs to your home, clean it, stage it, maybe even remodel it. But there are some factors that may impact the eventual sales price of your home that is out of your control. So, regardless of how impeccably you’ve maintained the home and despite its ideal location, one or more of these circumstances may rear its head and dash those dreams of riches at the closing table.
Let’s take a look at three of the factors that may impact your home’s value.
1. The condition of the current market
You’ve no doubt heard real estate markets referred to as buyers’ sellers’ or balanced markets. A buyers’ market occurs when there are lots of homes for sale and few buyers competing for them. Since the buyer is in the driver’s seat, prices tend to stagnate or fall in this type of market. When the inventory of available homes is tight and there are many buyers seeking homes, we are in a sellers’ market and home prices rise.
So, what creates these micro-markets? Many factors affect both national and local housing markets, chief among them is the strength of the economy. When times are good, consumers have money to buy homes and home prices typically increase. In tough times, when unemployment is high and incomes stagnant, the real estate market will feel the pinch.
Then, there are interest rates. When they rise, many are priced out of the housing market and when they fall, folks clamour to buy homes. Therefore, the overall strength of the economy may help dictate the eventual sale price of your home.
2. Neighbourhood changes
Your neighbourhood, and the surrounding area may look nothing like it did when you bought the home. Even the most careful research performed before committing to buy a home can’t foresee future zoning changes or the neighbour that builds an extra story on his home and blocks your view or the “type” of person the area attracts. All of these events can negatively impact your home’s value and, subsequently, how much you’ll receive when you sell it.
Suppose a change in zoning allowed a dump, landfill or quarry to be placed near your neighbourhood. Nearby home values will drop by as much as 7.3 percent according to Business Insider’s Mandi Woodruff.
A power plant will ding your value from 4 to 7 percent, a sex offender as a neighbour will drag down your home’s value by up to 12 percent and, woe to you if a neighbour forecloses because, according to Woodruff, the national average loss of value of nearby homes is $7,200.
Now, some neighbourhood changes should be applauded, at least by nearby homeowners. There’s even a name for the phenomenon: The Walmart Effect. The name typically describes the economic impact on local businesses when a big-box store, such as Walmart, moves into the area, but it’s been found to apply to home values as well.
So, if a Walmart comes to your neighbourhood, rejoice – you may just get a 3 percent neighbourhood home value, according to a study by the University of Chicago and Brigham Young University.
And cheer loudly when you learn that a Starbucks is coming to town and hope that it’s within walking distance of your home. U.S. Real estate portal Zillow found that between 1997 and 2014, the average increase in home value nationwide was 65 percent. Homes within walking distance of a Starbucks, however, saw a hefty 96 percent increase.
3. Your real estate agent
While pricing a home for the market isn’t rocket science, it’s also not something that the inexperienced can do and meet with success. It takes time and experience to learn how to properly research a real estate market, to learn how to find truly comparable homes and all of the various other factors that go into determining a home’s current market value. If your listing agent comes up with the wrong price, your bottom line is impacted.
Overpriced homes are notorious for eventually selling for far less than expected. Buyers’ agents know how much homes in a particular area are worth and won’t show their clients’ overpriced homes. So, they sit on the market. The listing becomes stale and agents and buyers think there must be something wrong with the home.
Underpricing is also a gamble. Sure, your agent may tell you that it will create a bidding war, but what if it doesn’t? Are you really willing to take rock-bottom dollars for your home?
After pricing a home, the number one job of a listing agent is to market the home to find the buyer that will pay the most amount of money the market will bear. Marketing not only requires know-how but money as well. Ensure that the agent you hire has a robust marketing knowledge, especially of online marketing as well as a hefty budget and isn’t afraid to spend what it takes to get your home sold.
You’ll pay the same amount of money for the services of an agent who gives you bare bones service as you will for the professional – so choose wisely.
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