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Four Things That Have NO Effect On Property Value

When buying or selling a home, there are a number of factors that can affect market value and the eventual sale price of a home. These include location, condition, size, amenities, features, improvements and upgrades, local economic conditions, the current real estate market and mortgage interest rates.

Figuring out price (whether buying or selling) is as much an art as it is a science. Buyers and sellers alike want to know: “what is the right price for the home?” The simple answer? The market determines what a home is worth. Researching recently sold, comparable properties is the absolute best way to determine price. But buyers and sellers always have their own ideas about what a home is worth. So I am here to set the record straight. Below are four things that do not affect what a home is worth.

The price previously paid for the home: The price the home sold for one year ago, three years ago, five or ten years ago has nothing to do with what the home is worth today. A home may have been purchased for $300,000 one year ago, and may be worth $315,000 today. Likewise, a home that was purchased for $300,000 five years ago may be worth $250,000 today. Real estate values exist at a fixed point in time, and what the seller paid for it has no effect on what it’s worth now.

The cost spent on maintenance/repairs: Sellers often try to get me to list their home for more because they’ve spent a great deal of money on repairs. Not gonna happen. “But I spent $1500 on a plumber to fix the leaky faucets.” Good. Your faucets shouldn’t leak. (Likewise, your drains shouldn’t be clogged, your windows shouldn’t be broken, your gutters shouldn’t be hanging off the roof and your screens shouldn’t be full of holes). A buyer isn’t going to pay you $1500 more because you did what you were supposed to do. Yes, the condition of a home has a definite effect on its market value—but making repairs makes a home more saleable, but not necessarily more valuable. (Note though—if necessary repairs are NOT made, they certainly can result in a loss in value of the home).

The tax assessor’s assessed value: Since tax records are available to the public, I get this argument ALL.THE.TIME. From both buyers and sellers. From buyers, it’s usually something like, “How do they expect to get X for their home, when the assessed value is $50k lower than that?” Or from sellers, “I am definitely not reducing the price. The assessed value is $50k higher than where we are priced now!” I will reiterate something from point #1… real estate values exist at a fixed point in time. The assessor hasn’t been inside the property, hasn’t seen how it looks, the condition, how the square footage lays out, etc. They judge value only by publicly available data (which sometimes can be inaccurate). And the assessed values typically come out towards the beginning of the taxable year. If you are purchasing or listing the property in say, September, market conditions have most likely changed since the property was assessed.

How much the seller needs: Whether a home owner has owned their home for 30 years and carries no mortgage, or has owned for only a few years and was a victim of the housing bubble, the market value of their home is what it is. Market value has nothing to do with mortgage balance. Buyers make their decisions on price based on how much a home is worth to them, not on how much the seller is asking or how much the seller needs. Buyers look and compare one home to another. They look at comparable sales, and they base their contract offer on what the real estate market is saying the value of the home is.

Want more advice on Atlanta home prices, or buying a home in Atlanta, Georgia? Contact me today!