It requires a fine touch to price your home. Price too high, and you’ll scare away potential buyers. Price too low, and you’re losing value you could put towards your next home.
According to the Calgary Real Estate Board (CREB), the average price of a home sold in Calgary was $451,210 in January 2019, down by 3.6% since last year. In such a tight real estate market, it’s important to understand the factors that determine your home’s value.
Gaining insight into what influences the price of a property will help you get the best price for your home – and enable you to sell your home the right way at the right time.
Here are seven factors that determine the value of your home.
The closer your home is to desirable attractions, the higher its value. Economists call this “hedonic pricing,” or the proximity to environmental factors that add to the quality of life.
The locational factors that most impact your home’s value are:
- Quality of local schools in the area (especially important to buyers with children of school-age)
- Proximity to local employment opportunities, such as downtown areas
- Closeness to parks, shopping malls, and other recreational centers
- Levels of crime, pollution, and through-traffic
Homes nearby a handful of desirable living elements – such as a short work commute and within walking distance of a school – are ideal. The best neighbourhoods – those that command the steepest prices – have the best accessibility to choice amenities.
2. Home Size
Larger homes are generally worth more. Bathrooms and bedrooms are most valued, so you’ll get a higher price for your home if you have multiple. From our experience buying houses in Calgary, adding a full bathroom can increase your home’s value by as much as 20%.
Livable space is one of the most important factors for home buyers. However, an attic, garage, or unfinished basement is typically not counted as usable space. When you list your house, remember that a 1,500-square-foot house with a 500-square-foot garage only counts as 1,000 square feet of livable space.
Additionally, most listings only consider above-grade square footage, even if a basement is finished. Buyers do factor in the value of a finished basement, although the value of basement space is lower than that of above-ground space.
3. Local Market
The state of the housing market will impact your home’s sale price. It doesn’t matter if your house is in a great neighborhood, is in excellent condition, and has the latest upgrades, the number of properties selling in your area and the level of competition will impact the final price of your house.
Currently, the Calgary real estate market is a buyer’s market. You can tell because the average time on the market for a home in Calgary increased by almost 19% in Jan 2019, up to 72 days from 61 days in Jan 2018.
This means that buyers have the leverage to negotiate prices down because of the surplus of homes for sale. When selling in a buyer’s market, it is typical to sell your home below its listing price, and it is not uncommon for sellers to have to reduce their prices or put extra work into their homes to sell in a reasonable length of time.
Conversely, a seller’s market allows you to list your home for a higher price. You’ll get more offers with less effort as the number of homes available is diminished.
4. Update and Upgrades
Most home buyers want a house that is “move-in ready”. Some are looking for a fixer-upper, but the majority of buyers are willing to pay for the convenience of a ready home.
To drive the best price, consider upgrading your home features to align with housing trends. For example, granite or quartz countertops are a popular feature with buyers. This means that renovating your kitchen or bathroom with granite may drastically increase the saleability and price tag of your home.
When considering upgrades, also remember that kitchens and bathrooms are the top dealmakers for homebuyers because they represent a major expense.
But what if you’re not ready for a makeover? Staging your home with just a few cosmetic upgrades like a fresh coat of paint or improved LED lighting can add up to 15% to your home value.
5. Interest Rates
Interest rates fluctuate and determine how attractive it is for buyers to apply for a mortgage.
When interest rates are high, buyers face higher monthly mortgage payments. In turn, this reduces the number of people who can qualify for a loan and the type of homes potential buyers can afford. The average home price goes down when interest rates increase because there are fewer buyers in the market.
New rules in Canada require buyers to qualify for a mortgage at an interest rate 2% higher than the current rate. This has the effect of reducing home affordability for many potential buyers, and results in home prices decreasing.
6. Age and Condition
Newer homes are typically appraised at a higher value. This is because parts of the house are less likely to break down and require fewer costly repairs in the future.
For example, the average lifespan of a roof in Canada is 15-30 years. If someone buys a 25-year-old home, they are effectively committing to spending an additional $4,750 on average within the next five years to replace their roof.
Instead of facing these costs and headaches, most buyers will pay a premium for a home in good shape. The pre-sale home inspection is a critical step in the home sale process because it verifies a home’s condition. It is not uncommon for buyers to request repairs and replacements at this step as a condition of their purchase of the home.
7. Prices of Comparable Houses Sold
Buyers look at homes that were recently sold in your area as benchmarks for your home’s potential price.
To evaluate your house in relation to others, compare it with homes of a similar size, age, condition, and features. If your home is the gem of the neighborhood, you’ll be able to command a better price. Likewise, any areas where your home is lacking will detract from the valuation.
Appraisers use the methodology above as part of the appraisal report they submit to the buyer’s lender. This lets the potential buyer get a mortgage amount, which opens the door to a possible sale.
A variety of economic, environmental, and house-specific factors will ultimately determine the price of your home. Do you want to learn your home value? Get started with your free ProperPrice™ report.