The challenge of determining a fair price to list your home can be a delicate balance. With the values of real estate are constantly changing, if you're a homeowner and contemplating selling, understanding the value of your home in the current market is a necessary part of the process - and it can be a challenge.
Homebuyers also need to schooled-up as far as home prices in the current market, so they are able to submit a strong and competitive offer on a home without overpaying. As the homeowner, if your price is too high, you run the risk of scaring off potential buyers. Too low, and you're leaving money on the table.
It, therefore, becomes crucial that you understand the factors that affect a home’s value and the following 7 influences are factors you should turn your mind to.
1. Market Comparisons
When looking for the right figure to put on your home, we start by looking at the previous prices of properties that have sold in your area. Don’t focus on the properties listed for sale. Consider the prices of recently sold properties with similar characteristics to your home. For example, we look at the number of bedrooms and bathrooms or approximate square footage and lot size. We note the condition of the house, including any upgrades. These criteria will become the basis of our comparison. Your house may be the ideal location for you, but we also consider these indicators to determine its value based on location:
· Employment Opportunities
· Distance to entertainment, shopping and recreational centres
· Quality of local schools
These location factors can influence why certain areas command steep prices and others don’t. Location proximity to highways, utility lines and public transport can also impact a property’s overall value. When it comes to assessing a property’s resale value, the location could even be more important than the size and condition of your house.
2. Size Matters
When estimating your property’s value in the market, its size is an important element to consider. A value of a home is estimated at a price by square foot – the sale price divided by the square footage of the property. Say a 2,000 square foot house is listed for $2,000,000. The price per square foot if the home sold at list price would roughly be $1,000. The number of buyers that will pay per square foot can vary immensely and it depends on where you’re buying.
In addition to square footage, a property’s usable space also matters when determining its value. Attics, garages and any unfinished features of the house are generally discounted as usable square footage. So if you have a 2,000 square foot home with a 600 square foot garage, that’s only 1,400 square feet of usable space. Usable space is what’s crucial to buyers. Bathrooms and bedrooms are highly valued, so the more baths and beds your property has to offer, the more your house is worth.
3. Age and Condition
Typically, newer properties are appraised at a higher value as certain parts of the house that typically require upkeep are new and therefore less likely to break down, such as electrical, plumbing and roof appliances.
If a roof has a 20-year warranty, that is money that an owner will save over the next two decades, whereas an older property may need a new rood in just a few years. Most buyers look for a well-maintained home that is in good condition and are willing to pay top dollars for a move-in-ready property.
4. Updates and Upgrades
Updates and upgrades can raise the value, especially in outdated homes that have few modern amenities. However, not all renovations are equal. Secondary suites conversions, upgraded bathrooms and kitchens are among some of the most important home improvements according to home buyers as they represent a major expense and headache if the buyer has to convert or upgrade them. With that said, keep in mind that buyers will check if your improvements are up to code, if they are not, this could be used against you to negotiate a lower price.
5. Local Market
Despite your home being in excellent condition, in a prime location with premium upgrades, the number of other houses for sale in your area can impact the overall value of your house. If there are a lot of buyers competing for a small number of houses, it’s a seller’s market, vice versa, a market with few buyers but plenty of homes on the market is referred to as a buyer’s market. If you are buying in a buyer’s market, there is room to negotiate on the price of the property as sellers are competing for a limited number and will do whatever it takes to close the sale. However, if you are selling in a buyer’s market, your house may not sell for as high a value as you expect. In a seller’s market, you can generally list your home for a higher value and expect more offers with less effort. Check our Monthly Market Insights for a review of the current market position.
The real estate market and economy often go side by side. The current economic outlook, as you may have already heard - Canada’s real estate market is expected to slow further, with rising interest rates and more stringent mortgage rules set to cool home sales and price rises. The median forecast in a Reuters poll of 16 analysts taken Sept. 4-7 predicted national house prices will rise by a median 1.7 per cent this year, slower than the 1.9 per cent in a poll taken in June. That is below the expected rate of consumer price inflation this year and in 2019.
However, wind the clock back 2 years where selling conditions were as favorable for the Whistler market as they had been in over 15 years. Real estate accounted for 18.36% of the provinces GDP (Statscan report) and we saw increased sales activity and a steady increase in values across all market segments.
This is why it is crucial to keep up with current events, particularly when you are trying to determine the best time to sell your house.
7. Interest Rates
Interest rates are also important to keep in mind when evaluating a listing price. Higher interest rates mean larger monthly mortgage payments. Potential buyers may not qualify for a larger amount when factoring in higher interest.
The Bank of Canada raised its interest rate to 1.75% this week, the highest it's been in almost a decade, dating back to December 2008. This evidently will filter down to consumers, because it affects the rates banks offer their customers for things like variable rate mortgages and savings accounts. That's already happening, as four of Canada's biggest banks increased their own prime rates by a quarter percentage point on Wednesday 24 October. Royal Bank, TD, BMO and CIBC have all raised their prime lending rates from 3.70 to 3.95% per cent. Scotiabank is expected to follow suit soon.
For sellers, higher interest rates could lower the number of available buyers in a given price range, especially if the home is priced at the higher end of your neighbourhood. On the other hand, rising interest rates could incentivize first-home buyers who are on the fence about buying as they might want to take advantage of lower rates while they last.
The moral of the story is... it’s much easier to avoid making mistakes when you’re selling your house when you’re in the know about important factors that can influence your home’s value. By pricing your house with these factors in mind, we'll be able to sell your home with confidence, less stress and without compromise.