Real Estate Corner!
What determines the value of a home?
Written By Al Friedman- Sun Realty
I'm often asked about which attributes contribute to determining the value in a home. Is it the size of the house? Is it the quality of the materials used in the construction? Is it the fact that it has a gourmet kitchen, and a huge master suite with a walk-in closet and a Jacuzzi tub in the master bathroom? How about the fact that it has a completely finished basement with a re-room, Wet bar and room for a pool table?
Well, the truth is, all of these features certainly make a difference when comparing to a neighboring home that doesn't have them. However, when we're looking at the larger picture in establishing the value of a home, only these things really matter. Those three things are location, location, and location!
When I was taking the classes to get my real estate license, my wife and I had already purchased two homes, as well as an investment property. Because of that, I felt that I was a pretty knowledgeable person conquering real estate. My belief at the time was that I had a good idea about the things I should look for that established value in a given property.
As I sat in one of my "Principles of Real Estate" classes in 1986, feeling all full of myself, i had a rude awakening. The attributes i mentioned in the first paragraph were, in my mind, the only things that mattered. In our class one of my classmates raised the inevitable question, and it went like this. "What happens if someone builds a $300,000 home (that was an expensive home in 1986), and a year later a factory is built next-door to the house? "Doesn't that negativity impact on the home's value?" Before the student could complete his whole train of thought, the teacher interrupted. The teacher's response was simply this. "The three things that determine value in a home... location, location, and location." I was dumbfounded by this response. Basically, I felt like the instructor didn't know what he was talking about.
As i began my real estate career, it quickly became clear to me that the teacher was absolutely correct. It actually works on several levels. As you look around the country, you see a huge variation in prices of similar style homes, from one state to the another. A 3000 square foot colonial will cost much less in a state like Tennessee , or Alabama, as an example, than in a state like Maryland. Typically, at this level, it most likely has to do with the quantity and quality of job availability in a given state. The next level is within each state. Homes in Western North Carolina are generally going to be less expensive than homes in Raleigh or Charlotte. On a more local level, homes values are more impacted by the quality of school systems and which subdivisions or towns have higher or lower levels of crime. Lastly, home values vary within the framework of a community. A home located on a cul-de-sac or dead end street is typically going to be worth more than the same model located on a busy high traffic street in the same neighborhood.
So, if your're thinking of purchasing a home, keep this concept in mind, before you start your search. For more information on this and other real estate matters, please visit my website www.alchefsellshomes.com