By Eric Fernwood

Factors that affect a home’s market value:

• Location / subdivision.
• Major home improvements (in-ground pool, covered patio, in-ground spa, etc.).
• Condition of the home.
• Curb appeal of the home.
• Comparable sales within the last six months.
  Current competition.
• What a buyer is willing to pay (and a mortgage company is willing to finance) based on comparisons with other homes currently on the market.

Factors that do not affect a home’s market value:

• What you paid for the home.
• Minor remodeling or decorating only enhance a home's desirability; neither significantly affects market value.
• The amount of money you need to buy your new home.
• What you think your home is worth.
• What I say your home is worth.
• What another agent says your home is worth.
• What others say your home is worth.

Bottom line – The “market” sets the market value range for homes within a specific subdivision. Changes or enhancements to the home may, or may not, increase the market value. For example, if you owned a home in a subdivision where the average home sales price is $500,000 and you added a $50,000 pool, I doubt the market value would increase by more than $15,000 to $20,000.

The real estate terms for these phenomena are progression and regression. The principle of progression states that a property of lesser value is enhanced by proximity to more expensive properties. In other words, the value of lower priced homes in the neighborhood are pulled up by higher value homes. The principle of regression is just the opposite. It states that a property of higher value is lessened by proximity to lower priced homes. In other words, the value of the most expensive house in the neighborhood is pulled down by lower value homes.

Remodeling - Another related question I frequently receive concerns the cost vs. return for remodeling. According to Realtor® magazine, the payback rate depends on what you remodel. Here are national averages.

As you can see, in most cases you will recover less than 100% of your investment. However, if for example you had a home with a very bad kitchen, not remodeling it might result in your being unable to sell the home at all in this market so there are special situations.

In summary, the market value of a home is determined by what buyers are willing to pay and mortgage companies are willing to finance. As to remodeling, except under special situations, I do not feel remodeling with the sole goal of increasing a home’s market value makes sense. However, there are several low-cost things you can and should do to a home before placing it on the market that will both increase the market value and reduce the time to sell. Typically, for as little as $100 to $300, the sales appeal of the home and thus the market value can be significantly increased.

Eric Fernwood
702-358-8884
EricFernwood@Gmail.com