9 important factors that affect the value of your property
Category Seller Advice
The value of your property is an amount influenced by a whole bunch of factors. If you're selling your home, you need to choose a price that will make sense for you and potential buyers.
This value can be determined by nine key factors. Each of these elements is vital in choosing a price for your home because the Right Price will help you reach your goals as a seller. Picking the wrong price for your property when you're selling your house can have more serious consequences than you think.
Discovering the ideal price at which to advertise your home starts with understanding how its value is determined.
Watch here on important factors that affect the value of your property:
Factors that affect your property's value
1. The amount of accommodation the property offers
This is the most obvious point but it is also one of the most important ones. The price at which your property is likely to sell will depend on the number of bedrooms it offers.
A one-bedroom home will almost always be less valuable than a three-bedroom property of the same condition and design, in the same area.
It doesn't matter that the main bedroom of your one-bedroom apartment is large in comparison to the rooms of a two- or three-bedroom property. Buyers will only be willing to spend that much on a property with few bedrooms, in comparison to those with more sleeping space.
2. The size of your plot and the buildings on it
In contrast, the size of your yard does increase the value of your property. Homes with large gardens are typically sold for more than houses with less plot space.
Similarly, the more additional rooms and spaces, such as garages, entertainment areas, outdoor spaces and living spaces, the more your property is likely to be worth.
Large bedrooms and indoor spaces can also increase the value of your home, but to a lesser extent than the size of the yard. Remember that a buyer will only be willing to spend that much for a one- or two-bedroom house as opposed to a house with multiple bedrooms.
3. The design of your property
They say beauty is in the eye of the beholder, but when it comes to architecture, a beautifully-designed house pays, no matter who looks at it.
If your home was designed by a well-known architect or built in a popular style, then it could increase its value in the eyes of buyers.
The opposite is also true. If the architecture of your home is unfashionable, buyers will be less likely to spend on it. You might find potential buyers offering less than you expected because they'll need to spend on upgrading or modernising the design.
4. Condition of the home's interior, exterior, fixtures, finishes and fittings
A property is worth more than just the land that it was built on and the walls that make up its buildings. The smaller things also make a difference, such as:
- Doors
- Windows
- Lights
- Electrical elements
- Built-in appliances
These elements can either improve your chances of getting the price you want for your home or seriously hamper your odds.
A newly installed air conditioner might, for instance, make a buyer more willing to buy your house at the asking price while badly maintained doors, damaged window frames and barely functional light fixtures can lower the amount that buyers are willing to offer.
5. How the bank and municipality value your house
This is a big one: banks and municipalities keep records of property values, which determine the size of loans that buyers are likely to have access to.
Banks keep housing price indices that consider both historical data and the effects of inflation on property prices to determine the value of each home on its list.
Similarly, municipalities also have lists of properties and their corresponding values. This is kept on a Property Valuation Roll and is accessible to anyone.
6. The value of other properties in the area
Another vital element that affects the value of your property is the price of homes in your suburb.
Luckily the process of pricing your home by comparing it to others in the area doesn't have to be a guessing game. Several professional organisations exist to perform what is called a Comparative Market Analysis to offer homeowners this information.
Why is the value of my property affected by those in your neighbourhood? It's simple: Few buyers would be willing to fork out large amounts for a house in an area where the surrounding properties are of a lower value.
There are exceptions to the rule for historical houses and properties used for hospitality, but in general, residential properties on the same street fall in a similar price range.
7. The precise location of your house within the suburb
This is where things can get a bit complicated. Yes, the value of your property is influenced by the price of homes in your area, BUT it also depends where in that area you are.
Most suburbs have a few highly popular streets where homes are of higher value than other streets. This might be because they are closer to the freeway, further away from a high-traffic area or just generally thought safer.
If you price your home based on what similar properties in the most popular parts of your suburb are worth, you might be disappointed to find that buyers don't agree.
Not sure which estate agent is right for you? Get our advice in our article, What to look for in an estate agent
8. The state of the property market
Here's yet another factor that you might need a professional's input on.
Here's how it works: You may have heard experts use the phrase "buyer's market". That's because there are times when people are more likely to buy homes.
These fluctuations in the market can impact house prices. If there are lots of homes on the market, making it a buyer's market, then your home will be competing against lots of others for buyers. That means it will have to be valued very competitively, and even then, buyers might negotiate a lower price.
There have also been times when there are few properties available on the market, especially in high-demand areas. This allows sellers to ask for a slightly higher price and makes them more likely to receive offers for that amount.
9. The amount the bank is willing to loan to potential buyers
Here's the thing: Even if your home is one of those one-in-a-million properties that a buyer is willing to splurge on because it's exactly what they want in a home, it doesn't mean that you'll be able to sell it for that price.
Why? Banks are only willing to loan so much to buyers for your home. If buyers can't secure a loan for the amount you're asking for, then the sale is a no-go.
Banks aren't usually willing to lend their customers more money than what a property is worth. What the bank believes your property is worth is usually the highest you can expect to get.
Luckily banks base their valuations on updated data so it's unlikely that your house will be undervalued to the point where it hampers a buyer's chances of getting a loan to buy your home.
What it does mean is that buyers are unlikely to get a loan for a larger amount than what your home is worth. You can only sell your home for more than it is worth if the buyer has a large amount of cash on hand to supplement their loan.
Smart homeowners make their properties' strongest assets work for them. If your house has a unique design, then make sure this fact is highlighted when your home is promoted on property portals. If a lack of maintenance issues is the only reason why you're not getting good offers from buyers, it might be time to play handyman.
Now that you understand each of the elements that determine the value of your property, you're in a much better position to choose the Right Price for your home.
Ready to take the next step? Read our advice on steps to pricing your home in our article, Pricing property: How to choose the Right Price for your home.
Need the assistance of an estate agent?
Request a free valuation now or contact us to meet with an agent to sell your property in the Northern Suburbs of Cape Town, Worcester, Rawsonville, the Whale Coast and Jeffreys Bay.
Author: NS Property Solutions