11 Factors That Affect Property Value

5 Min Read
Updated Aug. 29, 2022
Written By
Mary Grace Schmid
A luxury house against blue sky.

Owning a home is something worth taking pride in. You went through the process of purchasing the property, keeping up with the maintenance and decorating the home to fit your unique style. The pride you take in your property is priceless, but every property has a market value that is impacted by a variety of factors.

Whether you’re simply curious about your property’s value or looking to sell your home soon, understanding what affects property value can help make you smart decisions as a homeowner in an everchanging housing market.

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Factors That Affect Home Value

Property value is typically the fair market value, or the price of what a buyer is willing to pay and the seller is to accept. However, the current market will impact the value as well. Let’s look at what major factors affect how much a home is worth.

1. Location

Some factors that affect the value of a home are things that you simply can’t change. Location is one of the most important elements to people who are buying a house, as everyone wants a location that fits their needs.

The house may be perfect, but if it’s located in a rural area and the home buyer wants the amenities of city life, that will have a major impact on their decision to make an offer. If the neighborhood is in a safe area and is close to public transportation, grocery stores, schools and job opportunities, the property value will most likely increase.

2. Interest Rates

Interest rates have a direct impact on the affordability and value of homes. If interest rates are high, potential buyers might not be able to afford the payments and the upfront costs that come with purchasing a new home.

If interest rates are low, first-time home buyers and homeowners looking to upgrade begin to enter the market and home values go up. Whether interest rates are high or low, they impact how much a home can will sell for.

3. Economic Factors

The state of the economy affects the housing market in a major way. A healthy economy results in higher employment rates, which typically means that more people can afford to purchase a home. With more buyers on the market, demand and property value increases. If the economy is suffering, more people might not be able to afford buying a home.

4. Property Size

The size of a home plays a big factor in how much it’s worth. Larger homes will always sell for more money because they are larger and offer more to potential home buyers. With more usable square footage, potential home buyers see more potential in customizing or renovating the property. With many people working from home nowadays, having extra room for a secluded office is a big attraction.

5. Supply And Demand

Whenever there’s a high demand for properties and not much inventory, home prices will continue to rise. Even if a property is not in perfect condition, they become more valuable when there is not enough supply. If there is a low demand for property and an abundance of inventory, home prices will decrease and become less valuable.

6. Real Estate Comps

The sale prices of comparable properties near the home are known as real estate comps. Being aware of the real estate comps in your area will give a better idea of what the estimated value of your property is.

Real estate comps can be used by appraisers and real estate agents to determine the home’s value, as comps assess the type of home, square footage, location, number of bedrooms and bathrooms.

7. Renovation Potential

This factor is highly dependent on the potential homebuyer, as everyone has different preferences. If the property doesn’t have much renovation potential, home buyers who want to customize the home might not be too interested in the property. On the other hand, a property with a lot of renovation potential is not alluring to those who are looking to buy a move-in ready home.

8. Property Age And Condition

The age and the current condition of the property are big factors that are considered when assessing property value. A well-maintained older home can still sustain its value over the years. But, if the home hasn’t been well maintained or updated, the property value will most likely decrease and leave the property less desirable to potential buyers.

9. Property Upgrades And Updates

Both major and minor home improvements can bring a lot of value to a property. Examples of upgrades and updates include finished basements, pools, modernized kitchens, more bathrooms or bedrooms and outdoor entertainment areas. It’s important to note that properties that aren’t updated will have a lower property value.

10. Curb Appeal

First impressions are everything, even for properties. Curb appeal is the first thing people notice when visiting a property and leaves a big impression on potential buyers. Properties with little to no curb appeal tend to have a lower property value. But properties with great curb appeal usually have well-manicured landscaping, a welcoming front door with seasonal decor, walkways, and anything else that adds visual interest to the front of the property.

11. Zoning Regulations

While it may not be the first factor to come to mind, politics and zoning regulations can directly impact property value. Zoning establishes local laws that specifies how real property can be used within an area. Zoning regulations can protect the value of a home, even when a growing population can create the need for residential expansion.

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The Bottom Line: Pay Attention To What Brings Down Property Value

Homeowners don’t have control over certain factors that affect property value, like interest rates and location. But paying attention to the factors that you can control as a homeowner can give you more confidence, whether you’re looking to sell your home soon or not. Being aware of what factors can increase your home’s value can help you decide what improvements will work best for your property. Learn more about what upgrades will increase a home’s value to get started.

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