Fully understanding what adds and takes away from the value of a home helps you make a more informed purchase and a better long-term investment.
Purchasing a new home boggles the mind. So many options prove confusing, and determining the best deal seems like a maze. You are not sure what to compare or what is a value-added item and what is not. When buying a new home, consider these thoughts when weighing value of investment between properties.
Location - Absolutely nothing rates higher on a homebuyers' concern than location of the home. Big or little, brick or stucco, new or old means little if the house sits in a horrible neighborhood with poor resale value, bad schools and no place to work nearby. Even if you have no children, the schools make a difference to whoever buys your home downstream. Location considerations are:
Schools
Commute to work
Shopping
Crime rate
Real Estate Taxes
Insurance
Taxes - Real estate taxes are based upon home value. Ask for the amount of taxes on the property now to compare for value.
Insurance - Insurance is higher on a property with more risks. Ask an agent about the difference in insurance rates for different type homes and different locations.
Age - Houses depreciate. Maintenance makes a big difference in the amount of depreciation. Lack of maintenance or major repairs due to damages may lessen the value. Pride of ownership and constant attention to a home stalls depreciation and salvages the value of an older home. Whether you prefer a new or old home, realize that unless an older home has historic or other unique value, the age will bring down the prize and the value when compared to a house of similar size and quality construction.
Slab versus Crawl Space - Houses are built up off the ground or on concrete foundations sitting on the ground. Construction is more expensive for crawl space making a home appraiser a little higher. But, moisture, pests, soil type, weather and lot slope can alter which is more valuable. Crawl spaces must be checked for water and pest damage periodically. But slabs can be costly when dealing with plumbing leaks or soil shifting.
Electric versus Gas - Study the costs of utilities when it comes to heat, air-conditioning, water heaters, dishwashers, washer and dryers. Then analyze which appliances you already have and which to purchase. If your appliances are all electric and the house is gas, do you have the financial capability to change appliances? Or should you continue to shop around?
Exterior - Brick veneer, stucco, wood siding, stone, logs, you name it. Home exterior styles range far and wide. But the difference is more than look. Brick is expensive in desert areas due to the cost of import. Stucco is less expensive and better in the hot environment. Log homes work well in mountain areas, but pests can be a nuisance. Wood siding needs treatment and repainting periodically while brick does not. These exteriors can alter your homeowners insurance and the appraisal of the house. Learn what exterior maintains its value and offers better resale in your area.
Carpet, tile or wood flooring - In the Southeast, wood floors are cherished. In the Southwest, wood floors have a short lifespan due to the harsh environment. Carpet requires replacement eventually, but tile usually lasts for the life of the house. A house with a lot of tile often carries a higher value than one that is carpeted from wall to wall. Weigh preference, long-term value and maintenance.
Frontage - What a property adjoins makes a huge different in value. The home that has 50 foot of water frontage is worth considerably less than the same structure on a lot with 300 foot of frontage. The price could easily double. A home with a corner lot can mean a better or worse value depending upon the neighborhood and community. If the home has considerably more or less frontage to anything in comparison to the neighbors, weigh the effect on value.
Homeowners Association - Organized communities often have these HOAs to maintain common areas, lakes, streets, and even to organize social events. But some HOAs can add a costly fee to ownership, so understand the expenses of living in a particular neighborhood.
Number of Stories - Single stories have different characteristics than multi-storied homes. In comparing a one-story house of 2,000 square feet to the same size two-story, you might see an appreciable difference in utility costs. A two-story has less roof area meaning less expensive replacement later on. But views might offer extra value to a two-story on a lake or in the mountains.
The list goes on and on. Cabinet quality, ceiling height, garage size, landscaping, and bathrooms are just a few more options that affect price. Create a chart listing all these different items down the left side. Allow a column coming down the chart for each house. Insert plus or minus signs for each item so you can sit back and see the variety of adjustments. Determine what is average for the area and add a plus if it's a little better quality, or a minus if it is detrimental to the price or less than the average home offers. Appraisers determine values this way only they assign dollar values to the plus and minus signs.
Fully understanding what adds and takes away from the value of a home helps you make a more informed purchase and a better long-term investment.
