There are many factors to consider when determining the value of a property. Some of them have a major impact and can affect the value of the property either positively or negatively.
Because their influence is so great, it's important to be aware of these various elements, especially when it comes to determining the optimal selling price for your property.
First and foremost, it's important to remember that there is no single value for your home. Real estate is not an exact science, and there is no definitive way to price a property.
Location of the home
The region, city, area and neighborhood in which the property is located all affect its resale value. Homes in more remote areas, for example, tend to be less expensive than those closer to the city or in more popular suburbs.
Some cities are also more popular than others, driving up property values as supply tends to outstrip demand. There can even be significant price differences between two areas or two neighborhoods in the same city.
To illustrate this phenomenon, we need only think of the neighborhoods of Montreal and the considerable gap between the value of properties in the Plateau and those in the Parc-Extension.
Location is therefore one of the first criteria to be taken into account when determining the value of a property. In general, properties located in highly requested neighbourhoods are likely to hold their value best over time.
Quiet locations with beautiful views, green spaces, easy access to shops and public transportation are usually the most sought-after.
Type of property
Is your home a semi-detached house? Single-family or multi-generational? Is it a plex or a condo?
The type of property with which your home is associated can have a significant impact on its resale value. For example, single-family homes are generally more expensive than semi-detached ones, not only because they are more desirable, but also because they tend to offer more space.
Lot size and room layout
The size of the house and lot is another factor to consider when determining the value of a property. A large house on a large lot is generally worth more than a smaller house on a smaller lot. But square footage isn't the only factor to consider.
The layout of the house also plays a role. The layout of rooms and hallways can make a big difference between two homes of equal size. A well-appointed home can feel much more spacious than a similar home that has been built in a less functional manner.
The type and number of rooms should also not be overlooked. For example, a 5-bedroom house with only one bathroom could lose some of its value, as most buyers are looking for at least 2 bathrooms for the same number of bedrooms.
Additional features
The presence of additional elements or luxury features can also influence the value of a property, usually upwards. This is the case if the house has a garage, swimming pool, wine cellar, etc.
The quality of the materials used in the construction and decoration of the home can also be very helpful in increasing the value of the property. High-quality materials will show the quality of the home and will also enhance the visual appeal of the property.
General condition of the property
Obviously, even if the property is large and located in a desirable neighborhood, it will inevitably lose value if its general condition does not meet expectations.
In fact, if the property needs major work or repairs, the owner will have to lower the price if he wants to sell it, as few buyers will be interested in purchasing a home in poor condition. If only minor improvements are needed, the home will not lose value.
This general condition can also be directly related to the year the property was built. Properties age and deteriorate over time, especially if there is no regular maintenance to ensure their preservation.
The deterioration of a building can be seen in several components, including:
- Overall structure;
- Insulation;
- Roofing;
- Electrical system;
- Heating system.
These elements can be costly to a future buyer, reducing the value of the property compared to one in excellent condition.
Renovations: how they affect the value of your home
To offset the negative effects of aging and deteriorating components, you need to repair or renovate.
Renovations are considered an excellent way to increase a property's value in the short, medium or long term. If you're planning to sell your home in the near future, it's even possible to boost the sale by doing some renovations.
But not all renovations are the same. Kitchen and bathroom improvements are recognized as the best ways to add value to your home before a real estate transaction.
Comparables: a good indicator for setting the value of a property
The comparables method, used by many real estate professionals, involves comparing the property you are valuing with other similar properties that have recently come on the market. This is a good indicator to rely on because it takes into account the current market context.
To make the comparison, you need to look at the price at which similar neighboring properties have sold in recent weeks and months. They're known as "comparables”.
You should also pay special attention to those that are on the market at the same time as the property you are appraising, especially if the appraisal is intended to lead to the sale of the property.
A real estate agent who is familiar with the area in which your property is located can be an excellent ally in helping you determine the ideal selling price for your home based on the local market.
Should emotional value be considered?
To ask the question is to answer it. Whether in real estate or any other business, emotion should not play a role in determining the sale value of a property.
The value of your property should be determined as impartially and objectively as possible, based on the criteria mentioned in the previous paragraphs.
Determining the value of your property based on emotion does not add any value to a sale process. In most cases, you'll overvalue your property and risk alienating potential buyers. As a result, you'll prolong the transaction process unnecessarily.
Municipal assessment vs market value
The property assessment should not be a criterion for determining the real value of your property. It is only carried out every 3 years by the municipality, which means that it does not take into account changes in the real estate market. It is therefore not accurate, especially since its sole purpose is to determine the amount of municipal taxes you will have to pay during the year.
You should also abandon the belief that it's enough to list your home at 1.5 times the municipal assessment. This calculation is not appropriate because the ratio can vary greatly depending on the local market, the type of property, the condition of the home, etc.
Now you know a little more about the factors that can affect a property's value. Still, it's always a good idea to consult a real estate professional, such as a real estate agent or a certified appraiser, to get the most accurate estimate of your home's value.
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