Various factors can affect the value of a property, and in this article, we will break down what they are to give you a clearer understanding of property valuations.
Whether attempting to value a property yourself, hiring a professional appraiser, or having an experienced real estate agent like Milica Vasiljevic do it for you, the factors outlined below are those taken into consideration when running a comparative market analysis (CMA).
A CMA is the industry standard for determining the value of a property. It involves comparing the subject property to at least three similar properties recently sold in the same area.
Here’s what a real estate appraiser will look at when determining the valuation of a property.
1. Location
The first thing an appraiser will consider when valuing a property is its location. You cannot get an accurate valuation by comparing properties from different areas, as some areas are simply more desirable than others.
Whether it’s crime rates, schooling, distance to the beach, employment opportunities, or access to public transport, there are countless reasons location is so important.
The size of the area used when comparing properties for a valuation can vary depending on whether it is in an urban, suburban, or rural location. But ideally, the closer to the subject property, the better.
For properties in dense urban centers, you’ll want to compare properties on the same street or even in the same building for condominiums. For properties in the suburbs, you’ll want to look at those in the same neighborhood, and for those in rural areas, you may consider a slightly larger geographic area due to the lower density of properties.
2. Size and Type
The next key factor to consider is the size and type of property. We are aiming for apples-to-apples comparisons here, so if the subject property is a two-story house with three bedrooms and two bathrooms, you’ll want to compare it to properties that match this in the same area.
If you cannot find an exact match, let’s say you can only find recently sold two-story houses with four bedrooms and two bathrooms, then a method can be used to deduct value for the additional bedroom, making it suitable to use in the comparison.
However, comparing a ranch-style home to a two-story house or a cottage to a townhouse would not be appropriate or accurate, as they are distinctly different property types.
Square footage is another key aspect to consider, and the properties used in the CMA should ideally be within 200 square feet of the subject property.
3. Age and Condition
The third main consideration when valuing a property is its age and condition. A newly built home would have a different valuation than a house built in the 1950s, and so would a property that is ready to move into and one that needs repairs.
Here are some key aspects the appraiser will look at regarding condition:
- Exterior: Foundations, walls, roof, etc.
- Interior: Walls, kitchen, windows, flooring, doors, etc.
- Utilities: Electrics, plumbing, heating/cooling, insulation, etc.
Obviously, if a property has a hole in the roof, bad foundation, faulty electrics, or anything else that is potentially hazardous, this will affect its valuation to some degree and should be considered.
4. Additional Factors
Aside from the main factors listed above, there are many additional factors that appraisers can also look at when valuing a property. For instance, they might check if
it has desirable features like a two car garage, swimming pool, or nice views or if there are environmental issues like the risk of flooding, noise from traffic, or air pollution.
However, even if you use the main factors above to guide you in finding three properties that are most similar to yours that have sold within the last three months, it should give you a fairly accurate idea of the value of your property.
Still, if you would like an expert’s opinion, you can also Get a FREE Home Valuation from Milica Vasiljevic, your Real Estate Agent in Houston, Texas.