One of the first steps every homeowner takes when they start considering a move is how much they can sell their current home for so they can plan the next stage of their life.
Are you ready to sketch out a rough estimate of what your home’s worth? Let’s talk about how the pros figure it out, what detracts from your home’s value, and how you can make big or small improvements to increase your home’s value.
What Does an Appraiser Look For?
Appraisers have a formula that they follow as they figure out how much your home is worth, but different appraisers may weigh certain home features more heavily than others. Generally, appraisers will consider the size of your home, including the number of bedrooms and bathrooms, your location, and the condition of your home.
Location, Location, Location
Are you located next to a busy highway or train tracks? A home in perfect condition will be devalued if the location is less than desirable. As a city is built up around a home, the quality of the neighborhood can plummet. An appraiser will be considering your home’s proximity to a fire station, hospitals, or a police station, as well as the reputation of the school district you’re located in.
Home Maintenance
Once an appraiser establishes that faucets, lights, and other fixtures work in your home, they’ll then consider their age. Have they been updated? Or are they original to your 50-year-old home? Is there visible damage in the home? Are there signs of mold anywhere? A home that’s been well-maintained will be worth more than a home that shows visible signs of distress.
Amount of Liveable Space
FHA and HUD guidelines define what constitutes a living space. Appraisers are constrained by these rules such as “finished basements and unfinished attic areas are not included in total gross living area” and “a level is below-grade if any part of it is below-grade”. These rules might cut into your vision of finishing your basement and instantly doubling the size of your square footage.
However, depending on the kinds of homes you’re surrounded by and the typical types of homes in your area, an appraiser might make exceptions for basements that are finished exceptionally well.
Lot Size
Don’t forget to take into account your lot size. In most cases, you can’t change the size of your lot, but it’s definitely going to count for or against you if it’s significantly different from the homes in your area.
Bedrooms and Bathrooms
What qualifies as a bedroom? If you’re trying to count your converted basement storage room as a bedroom, just remember that home appraisers use a specific formula to determine whether a room is a bedroom or not.
A bedroom has:
- An interior entrance
- 7-foot tall ceilings in 50% of the room
- Minimum 70 square feet
- No less than 7 feet in any direction
- An exit into the exterior (window or door)
Is Your Home Worth More in the Spring?
Sometimes you plan a move, and sometimes a surprise promotion has you scrambling to get your home on the market. However, if you time your move, then adding your home to the spring MLS could improve your home’s value by nearly 6%. Because so many potential buyers flood the market at this time of year, you could also sell your home 18 days faster.
Some markets, especially in warmer areas like San Diego, California, or Orlando, Florida, don’t see wild fluctuations in their value. Many families prefer to sell and move at the end of the school year, but in areas with great weather and a large number of retirees, any time is a great time to move. Ask a local real estate agent what’s typical for your market.
What Detracts From Your Home’s Value?
Think the rickety shed in your backyard isn’t a big deal? Think again.
Deferred maintenance like broken windows, damaged downspouts, overgrown landscaping, and rotten siding will cost you tens of thousands in lost funds when it’s time to sell your home. As you add up your home’s amenities, keep in mind the unfinished house projects that will reduce your home’s value.
“Zombie homes”, or abandoned and unkempt homes in your neighborhood, will drag down your home value as well. Even though you’re limited by what you can do about your neighbor’s neglected home, you do have a few options.
- Contact your city or county government to see what their rules are for abandoned homes.
- If the home is empty and available, can you contact a fix and flipper to purchase it?
- If the home isn’t empty, offer to mow the lawn or repair the landscaping and improve its curb appeal (and therefore your own).
- If you have an HOA, contact them about enforcing HOA guidelines.
How to Improve Your Home’s Value
If you’re eager to increase your home’s equity, there are steps you can take to improve its market price in the eyes of appraisers, buyers, and lenders.
Make Consistent Improvements
Rather than overwhelming yourself and your budget with a massive remodeling project right before you list your home for sale, stay on top of your to-do list by tackling smaller house projects. Swap outdated light fixtures, replace worn-out carpet and keep current with your yearly home maintenance list.
Curb Appeal
There’s a reason curb appeal is mentioned so often. No matter how little or how much you spend on refreshing your landscaping when buyers see an attractive yard, they’ll think that the inside is just as well-maintained, and they’ll be more inclined to schedule a viewing.
Increase Your Square Footage
Despite the fact that remodeling your bathroom or kitchen has mixed ROI results, increasing your square footage by adding another room, finishing your basement, or building a garage can add value to your home. Part of the appraisal process takes into account a home’s square footage, so by adding an additional room, you can bump up your home’s price.
But what kind of room addition will add the most value to your home? That depends on the area of the country you live in, what your home’s current amenities are, and what buyers in your area are looking for. For example, finished basements will see a higher ROI in the Pacific Northwest and a much lower ROI in the Northeast. A reputable real estate agent can help you identify what kind of addition or remodeling project is more popular in your area.
The Bottom Line
Calculating your home’s value isn’t an exact science. There are multiple variables that change depending on what part of the country you live in. Even so, you can get a rough idea of how much it’s worth when you compare it to similar properties in your neighborhood, and you can improve your chances of a fantastic appraisal if you address delayed home maintenance projects beforehand.
