Your home is likely one of the largest purchases you'll make, as well as a major investment. So, it makes sense to understand your home’s value and how it can work to your advantage. This knowledge can help you make informed decisions—especially when it comes to selling or refinancing your home. 

In this guide, we'll discuss the factors that determine your home's value, along with common methods used to calculate value. Then, we'll cover ways that you can improve your home's value.

Factors Influencing Home Value

How can you know how much your home is really worth? is an associate real estate broker, home renovator🦩, and stager. She explains, "Determining a home's worth and market value involves considering various objective factors such as location, size, condition, amenities, and recent comparable sales in the area." 

She adds, "Beyond that, the valuation is also very subjective and it's important to consider what is trending among homebuyers in that area at the moment and what the overall experience of being in the home is really like."

Here's a breakdown of how these factors can affect your home's value.

Location 

When it comes to the value of real estate, the old refrain, "location, location, location," is a key factor for a home's value. For instance, homes located in prime school districts, all other things being equal, will typically fetch a higher price. If you are closer to certain amenities like parks, libraries, recreational facilities, an💛d natural attractions like hikin🌞g trails or a body of water, this can add value to your home. 

Size and Layout

Of course, the size of a home is always a factor in value, as the formula for pricing a home for sale largely depends on its total area (size). Often, you'll see a home's price broken down per square foot or square meter to help you compare the price per unit to nearby homes. For this reason, larger homes in the same area will cost more than smaller ones. 

Finally, depending on what's trending, the layout of your home can affect your home's value. For instance, high ceilings are often attractive to homebuyers because they tend to create the illusion of a larger space and, according to some studies, may prompt feelings of freedom and overall well-being. Open floor plans have become preferred to closed-off, more compartmentalized ones, so homes catering to popular layout trends could com𝐆mand a higher price.

Condition and Age

New homes in good condition are desirable because they are more aesthetically pleasing with more modern architectural features. Another advantage of a new home is that there will be less maintenance and repairs than an older home would require. If it's a brand-new build (new construction), it may even come with a limited builder's warranty, designed to repair defects in the home, for up to 10 years, making the new homes even more appealing. 

Older homes with obsolete features may take hits on value simply because a buyer will consider🍰 the cost of updating and repairing them. However, older, updated homes can still do well on the market, provided they meet the needs of prospective buyers. 

Market Trends

Supply and demand is an economic principle that will always influence the market value♐ of a home. When the real estate market is flooded with homes and there are fewer buyers in a given area, the market price of homes tends to be lower. When the reverse is true (there are more buyers than homes), then home pr🔜ices will typically increase. 

Additional macroeconomic factors like the state of the economy, prevailing interest rates, and monetary supply can also influence home values. For instance, when interest rates are very low, many people are motivated to buy a home because the cost of borr🅷owing a home is lower. 

This increases the number of people looking to buy a home, i.e., increased demand, which, in turn, increases home prices. Also, if there's a recession with higher unemployment, generally, people cannot afford to buy a home, which means less demand and lower home prices. 

How To Determine Home Value: 3 Methods

If you'd like to know your home's value, there are a few ways to do it, but the outcomes for each method should be similar. 

Comparative Market Analysis

A comparative market analysis, also known as a CMA, is also called a "comp" in real estate agent jargon. This method estimates a home's value by comparing it to properties with similar characteristics in the same area. Adjustments are made for differences in features such as square footage, the number of bedrooms and bathrooms, amenities like swimming pools or upgraded kitchens, and the property's overall condition. 

For𝕴 example, if a subject home has a newly renovated kitchen or a new addition that adds square footage and a recently sold CMA does not, the sale price of the CMA may be adjusted downward to account for the difference in features. This method can help sellers come up with a reasonable listing price and assist buyers in arriving at an appropriate offer price based on market data. 

Professional Appraisal 

A property appraiser is licensed to provide a professional opinion of a property's value. A property appraisal is typically used for banks who lend money for the purchase or refinance of a home.

Unlike real estate agents who create CMA reports, an appraiser personally visits the subject property to assess its value. During this visit, they'll examine the home's condition, location, and size, along with the quality and condition of its interior and exterior features. The appraiser will also take note of recent upgrades or renovations, the property measurements, lot size, and its overall appeal compared to similar properties in the area. 

Once the appraiser completes the inspection, they'll compile this information with data about the local real estate market, including recent sales of comparable homes, to establish a fair market value for the subject property.  Banks will use the appraiser's report to decide on an appropriate loan amount for the loan's collateral, which is the subject property.

Online Valuation Tools

Online valuation tools gather, compile, and process large amounts of data related to local real estate markets, which are then used to estimate property values. Also known as automated valuation models (AVMs), these tools are available through online real estate search engines like Zillow, Redfin, or Realtor.com. 

While AVMs are very accessible and convenient, it's important to know that these tools are limited in their ability to provide the most accurate value for a property. These tools are best for ballpark figures or general information regarding your home's value.

Broker Price Opinion

A broker price opinion (BPO) is a valuation or appraisal method in which a real estate broker estimates a property's value. Unlike a detailed appraisal conducted by a licensed appraiser, a BPO is often quicker and less expensive.  It involves the broker ex💫amining the property, comparing it with s🍰imilar properties in the area, and considering current market conditions. 

is a real estate lawyer and real estate broker in the Irvine, California market. He explains how BPOs work: "A real estate bro𒉰ker will give you their opinion of value based on their experience in the submarket of where your home is located and the current comparabꦆle sales in the market they are seeing. This will include homes listed for sale and homes actually sold in recent months."

While less comprehensive than a professional appraisal, a BPO provides a reasonably accurate valuation us♋eful for sellers, buyers, and꧃ lenders, especially in urgent situations like foreclosure or short sale. 

How To Improve Home Value

There are ways to "force" appreciation and 澳洲幸运5官方开奖结果体彩网:increase the🦄 value of your property. Here are some higher ROI home improvement p🎶rojects that may increase your property's value.

Renovations and Upgrades

Though there are many ways to improve a property, 澳洲幸运5官方开奖结果体彩网:some renovations can offer a better ROI than others. For instance, deep cleaning, decluttering, and organizing can make your home feel larger and enhance i💙ts perceived value with just a little effort. Also, consider power washing exterior areas of the home like the driveway, siding, fencing, or roof. 

Kitchen and bathroom remodels are great opportunities to boost your home's value, though you don't have to break the bank. Updating electrical and plumbing fixtures and counte🔥rtops or painting walls and cabinetry can go a long🅷 way with even a smaller budget. 

Adding usable square footage by finishing a basement or adding a deck can also increase your property's value. Exterior improvements, such as new siding, windows, and doors, can improve your home's energy efficiency, which may attract buyers desiring those features. 

Maintenance and Repairs 

Perhaps one of the best ways to preserve and 澳洲幸运5官方开奖结果体彩网:boost your home's value is t♎o keep up with regular maintenance and repairs. No matter which method you use to assess your home's value, there will 🍰always be a reduction for anything in disrepair. 

Take especially good care of the big-ticket items like your roof, HVAC, plumbing, and electrical systems. Though it may sound daunting and costly to keep up with all of these items, it willꦜ be worth it when you eventually reap the value of a well-maintained home. 

Frequently Asked Questions (FAQs) 

The Bottom Line 

Knowing and understanding your home's value can help you with a number of financial decisions. Whether you’re planning to sell, refinance, or leverage your home equity, getting an accurate valuation sets the stage for smart money moves that could make a difference in your finances for many years to come.