Assessing the market value of a house: Everything you need to know
One of the first questions you ask yourself when you want to sell your property is « How much is my house worth? ». The purpose of this question it to determine the price at which your property will be listed.
In this article, we explain what the market value refers to and how it is determined.
SUMMARY
Definition: understanding market value
Municipal value vs market value
How to assess the market value of a house?
Property features
Location
Market comparables
Market conditions
Factors that have no impact of a property value
Assessing the value of a house: the role of the real estate broker
Definition: understanding market value
The market value of a house is the price at which a property could be sold on the market, under normal conditions and within reasonable delay.
To assess market value, multiple factors are considered such as geographic location, property condition and market trends.
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How to assess the market value of a house?
Determining the market value of a house involves analyzing a number of factors that allows establishing the right selling price.
Property features
To determine the market value of a property, you need, among other things, to assess its characteristics such as:
- Property type (single-family, condo, semi-detached, etc.)
- Number of rooms
- Year of construction
- Property size (living area and land area)
- Quality of construction
- Features and assets (ex: high-end building materials, cathedral ceilings, garage)
- Etc.
The condition of the property also plays a role in the market value. A well-maintained property in good structural condition may have a higher market value than a property that requires major repairs.
For example, a house with a renovated kitchen and bathrooms generally has more value than a house of the same size which rooms that have not been updated since the 1990s.
Location
The location is another important factor in determining the market value of a house. Homes located in popular neighbourhoods with easy access to school, pubic transport, shopping and services, tend to have a higher value.
For example, a single-story house with three (3) bedrooms and two (2) bathrooms does not have the same value in Montreal as in Chicoutimi. Similarly, a same two-bedroom condo is not valued at the same price in the suburbs as in downtown.
In addition, the specific characteristics of the location, such as panoramic views, proximity to parks and bodies of water, can also influence the value of a property. Indeed, the « views » or access to body of water bring added value in the eyes of buyers, so the market value of houses with these assets is therefore generally higher.
Market comparables
The assessment of a house market value is based on the analysis of recent sales of similar properties in the same area. By examining the characteristics such as size, type of property, number of bedrooms and bathrooms, and the price of recent sales of these comparables, it is possible to estimate the value of the subject property.
For example, if five (5) bungalows similar to yours have sold between $400,000 and $ 500,000 in your neighbourhood in recent months, this is a good indicator that your bungalow could sell within this price range.
Market conditions
Real estate market conditions play a crucial role in assessing the market value of a house. Supply and demand, mortgage interest rates and economic trends can all have an impact on property prices.
For example, what has rapidly driven up the market values of properties during the pandemic was the very low supply of properties for sale and the high number of buyers, attracted by low interest rates. Competition led to higher bids, driving up the property prices.
Factors that have no impact of a property value
Here are a few examples of factors that have no influence on the market value of a property.
1. The price you paid when you bought your house
Whether you bought your house 30 or 5 years ago, the price you paid has no impact on the market value since it varies according to the current market.
2. Money spent for repairs
While some renovations increase the value of a property, the money you spent does not guarantee a corresponding increase in market value. Some repairs have a better return on investment than others.
3. The love you have for your house
The sentimental value you feel towards your property is subjective and, most of the time, does not reflect its real value. Even if you are passionate about your home, its value is determined by an objective assessment of the market.
4. Your expected profit margin
As property prices follow the market, it is possible that your house will be appraised lower than your expected.
5. Luck and superstitions
A meeting with a medium and a lucky number will not determine the market value of your house since it is based on an assessment of tangible factors.
Assessing the value of a house: the role of the real estate broker
Real estate brokers have a wide range of skills including the expertise required to evaluate a property accurately. Drawing on an in-depth knowledge of the market, an analysis of recent sales of similar properties (comparables) and their experience, real estate brokers are highly qualified to determine the market value of a house. This evaluation allows brokers to set an optimal selling price, reflecting both the current market condition and the specific features of the property.
Understanding how to assess the market value of a house is essential in the process of buying or selling real estate. Having a good understanding of the factors that influence a property value and working with trusted professionals will help you easily navigate the real estate market and make informed decisions that meet your needs.
Contact your real estate broker now to ensure the success of your project.
