Category Archives: Valuation

What Value to Expect When Renovating a Home

What Value in Renovations

“Value”, in the context of real estate, can be a nebulous term. An insulated opinion is often formed as to what features or renovations contribute to the overall worth of a home. A better suited definition should thus be specified as “market value”, based on objective observation of the collective actions of the market.

Understanding the concepts of conformity and effective age can result in a greater net effect of money saved from spending on inessential renovations, as opposed to over-improving your property in hopes of reaping some benefit. The economic concept of value is not inherent in the commodity, good, or service to which it is ascribed; it is created in the minds of the individuals who make up the market.

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What Is Your Home Really Worth? A Series On Property Value – PART 2: Physical Characteristics

What is your home really worth

In Part 1, we discussed how location affects the market value of a home. In Part 2, we take a look at how physical characteristics are factored into determining property value. Everything from the orientation of a property to the type of windows or floor level is going to affect the relative value of a home. Just because you have a countertop made of gold, however, the addition might not necessarily hold its value and appeal to buyers in a specific neighborhood, based on the principle of conformity.

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What Is Your Home Really Worth? A Series On Property Value – PART 1: Location

How appraisers determine market value of a home

In this series on valuing real estate, we reveal specific factors that contribute to the overall market value of a property, at any given point in time, so you can have a better understanding of how market value is derived. A home’s value is based on what other, similar properties in the neighborhood have sold for, going back over a preferred maximum of three months.

Appraisers use what is called the Direct Comparison Approach, which is based on the principle of substitution. It follows the notion that a prudent investor would pay no more for a given property than the cost of acquiring a similar property. Of course, not all homes are the same, and there needs to be price adjustments to account for these differing characteristics. This is where an appraisal of a property can get complicated, and result in differing opinions regarding the accuracy of pricing.

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