The value of a house is not calculated only according to the number of square meters. Several factors determine its market value. Are you shopping for the house of your dreams, or do you want to sell your property, but you have trouble estimating its market value? Discover here the elements to take into consideration to properly appraise the true value of a property and, thus, get a good deal in the real estate market.
MARKET VALUE VS MUNICIPAL ASSESSMENT VALUE
First, you must understand the difference between the market value of the property in question, its municipal assessment value, and its purchase price.
According to the government of Kent, Washington. the fair market value is the “price that would be agreed. upon by two competent. arm’s length parties, acting freely and with full knowledge of the facts in a market. where competition can freely be exercised”. It should also be noted that the market value should not be confused. with the reconstruction value. used to set the amount of insurance required for a property.
On the other hand, the municipal assessment. value is determined by chartered appraisers employed by the municipality. or a private office. They generally offer nationwide property and appraisal services. This job is carried out every three years. This means that this value is unlike the fair market value. does not take into consideration the charges. incurred in the real estate market between each municipal evaluation.
Finally, it is important to remember that the purchase price of a property is not necessarily representative of its fair market value. We speak of overbidding when a property is sold at a price higher than the asking price and, often, higher than its market value.
REAL ESTATE VALUE: 8 DETERMINING CRITERIA
Beyond the size of its block, many factors influence the value of a property. Here are the 8 criteria most likely to affect the resale price of a property:
1. LOCATION
The geographical location is the criterion having the most influence on the real estate value of a property. A property located in a popular area, well served by public transport, easily accessible, full of services, and offering a good quality of life is worth more than a similar property located in a less attractive area. Similarly, a well-located property is more likely to retain good value over time. This criterion also applies in reverse. For example, a property located on the main artery or in a noisy area will sell for less.
2. THE TYPE OF PROPERTY
The type of property is another element that helps determine the market value of a property. The single-family home, i.e., a single dwelling located on a single-use lot, is the most popular type of property and the most in-demand in Kent, Washington. Moreover, historically, the real estate market for single-family homes has been one of the most stable and profitable. You will need to get in touch with a home or commercial real estate appraiser to get the job done.
3. SURFACE AREA
The number of square meters of land, the living area as well as the number of rooms, and their size play an important role in the value of a property. The number of bedrooms and bathrooms are particularly important points for buyers.
4. AGE
An old, unrenovated property will be more difficult to sell than a renovated or recent property. In addition, a house requiring a lot of work is likely to be the subject of negotiations. Therefore, many sellers undertake profitable renovations before putting their property up for sale.
5. THE MATERIALS USED AND THE QUALITY OF CONSTRUCTION
The quality of materials and construction work influences the longevity of the property and the costs associated with its general maintenance. Durable materials reduce the risk of breakage, luxury ones such as marble and quartz are more expensive, and those considered better insulators reduce heating and electricity costs. All benefits that come with a price!
6. EQUIPMENT
The additional equipment of the property can also increase its value. This is particularly the case for a garage, a shed, a fireplace, a swimming pool, a gas stove, and a wooden patio.
7. STAMP
The aesthetics, historical aspect, and charm of a property can also be determining factors for a buyer. Cachet is the criterion that can create an emotional attachment to a property, which can translate into better market value.
8. A SPECIAL ASSET
A view of the river, access to a river, or unique architecture are all examples of particular assets that can increase the value of a property.
THE ECONOMY AND THE REAL ESTATE MARKET
Economic conditions, the general state of a country’s economy, and the concept of supply and demand are both factors that have a significant impact on real estate prices. They are also the cause of the recent explosion in the real estate market during the pandemic.
In general, interest rates fall during an economic crisis to encourage people to consume. Usually, in such a situation, many job losses ensue, which reduces the demand for real estate.
However, since the start of the pandemic, low-interest rates and time spent at home have created a buzz in the real estate market. The few properties for sale and the very strong demand led to overbidding, which caused price increases of up to more than 4.5% per quarter for a two-story house.
CONSTRUCTION AND REAL ESTATE VALUE
What about the market value of these overbid properties? According to economists, the Canadian real estate market is currently overvalued by 10 to 15%. Some Quebec cities are more at risk of ending up in a real estate bubble than others. This is particularly the case for Quebec and Montreal. Many are predicting a slowdown in real estate price growth over the next few months. This means that buyers who have recently acquired property may have to hang on to their investment for a few years to see the market value of their property rise above the price they bought it.
CONSTRUCTION AND REAL ESTATE VALUE
With the valuation of government programs such as the Guarantee Plan for New Residential Buildings, many buyers are considering new construction. In addition to offering more layout options and the possibility of using materials that are better insulating and less harmful to health, new houses are not necessarily more expensive to buy than used houses.
Thinking of getting built? What about the market value of a new property? In short, unlike a used house, it is difficult to increase the value of a new property in the short term, because it is not possible to carry out renovations. However, demand and economic conditions can increase the value of your new home. Therefore, you must make the right choices at the time of construction to optimize the market value of your property.
Choose your Land wisely
To maximize the resale value of your new build, be sure to consider the following:
- Choose your land wisely: your house depreciates over time, but not your land! The geographic location of the property being the most determining criterion of its value. it is in your best interest to choose land. that is close to services, well served. and located in an attractive neighbourhood. or one with strong development potential. Be aware that the price of your land. It should represent 25% to 30% of your total budget.
- Hire an architect or technologist to optimize the living space. The design of your new home.
- Shop around with your general contractor. to minimize your construction costs while maximizing. the quality of the work.
- Use the right materials opt for materials that are durable. insulating, and that defy trends and time.
RENOVATE TO CAPITALIZE EVEN MORE
Some (not all!) renovations can increase the value of a property. If you’re thinking of taking on projects like this, choose cost-effective renovations. Here are some tips for doing jobs that will pay you big:
Set a budget and stick to it: compare your property to others that are being renovated in the neighbourhood and try to define the amount of money you can invest to capitalize on these renovations. Be sure you don’t go beyond your budget!
Renovating the kitchen or the bathroom: these are the two types of renovations most likely to increase the value of your property. The addition of a cooking island and a bathtub is, among other things, two projects considered profitable.
THE ECONOMIC REAL ESTATE MARKET
Go for the energy-efficient retrofit: Energy-efficient homes are growing in popularity. Changing windows, maximizing insulation. installing smart systems are improvements that increase the value. of your property in the eyes of buyers.
Make small, noticeable changes: your budget is limited? No problem. Repainting the exterior and changing accessories (cabinet doors, light fixtures, etc.) are examples of low-cost renovations with high potential returns.
Finally, if you are doing renovations don’t forget to contact. your insurer to ensure that your home insurance corresponds. It is to the modifications and additions made to your property. Whatever your real estate projects, from purchase to sale, including renovations, do not hesitate to contact your representative. He will be able to guide you towards the best home in
