The 6 Factors That Determine Property Value for Sellers in Northern Virginia

The Power of Six 
There are many examples of how factors of six can be very powerful. For example, bees construct their hive in the shape of the six-sided hexagon, because the hexagon is the most efficient, least wasteful shape found in nature. There are examples in business too. There is a Big 6 in media – GE (NBC), Disney (ABC), CBS, News Corp (Fox), Time Warner (CNN) and Viacom. These six companies control over 90% of our media – what we read, watch or listen to. There is also a Big 6 in high-tech. Amazon, Apple, Google, Microsoft, Facebook and Netflix touch nearly anyone with a smartphone or computer. They have a combined market capitalization of $4 trillion – these six companies represent only 6% of the Nasdaq 100 companies, but carry nearly 40% of the index value.

How Does This Relate to Real Estate? 
There’s also a Big 6 in real estate when determining property value – Market, Location, Neighborhood, Age, Condition and Improvements. These six factors have been historically tried, tested and are true when assessing the value of a home. Combined, they represent nearly 100% of everything tangible and intangible that goes into assessing a home’s value. Each factor can be either categorized as a micro-factor or macro-factor. A micro-factor is considered intrinsically part of the home’s value, while a macro-factor is an extrinsic part of the value calculation.

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  1. Market (Macro-Factor)
    The market is generally used as a multi-faceted, macro-value term when assessing property value. Market can mean historical sale prices of the home and those homes comparable in close proximity, size and age. Market can also mean the supply and demand of housing in general and current inventory levels and absorption rates. It can mean general economic conditions, interest rates and buyer sentiment. The market can even be affected by the political climate in Washington DC.
  2. Location (Macro-Factor) 
    We’ve all heard Location, Location, Location when it comes to real estate. Location is usually the first macro-value consideration of a buyer and is certainly very important to property value. A location’s desirability and proximity to city centers, employment and general conveniences is crucial to value. Access to major highways and public transportation can be important to commuting times to work. Distances to shopping, restaurants and entertainment is also part of the value calculation for many people.
  3. Neighborhood (Macro-Factor)
    The sub-market or subdivision where a home is located is a factor in determining property value. The neighborhood’s location compared against the school district controls exactly which elementary, middle and high school children can enroll. The neighborhood’s quality of housing, general condition and appearance play crucial roles in the macro-value carried to a specific home.
  4. Age (Micro-Factor)
    Age is a micro-factor and is an important determinant in home value. Newer homes typically sell at a higher price than older homes, because they have incurred less depreciation and require less maintenance. However, condition matters – a well-maintained, older home with recent updates can sell for just as much as a new home.
  5. Condition (Micro-Factor) – 1 of 2 Significant Determinants of Value
    The general condition of the home is a micro-factor and it plays a very large part in influencing value. In fact, condition is one of the two central factors that determine property value (improvements being the other). Sometimes age and condition go hand-in-hand, but condition specifically relates to the home’s maintenance and upkeep. What is the condition of the kitchen, bathrooms, fixtures, flooring and painting? Beyond these characteristics, the condition of the bones are important – the home’s foundation, structural integrity, electrical and plumbing. The size, type and design of the home can be important. The more general the appeal, then typically the higher the value. The majority of buyers do not desire average to fixer-upper property conditions. This can seriously affect property value.
  6. Improvements (Micro-Factor) – 2 of 2 Significant Determinants of Value
    Just like condition, most buyers do not desire average to fixer-upper homes in terms of improvements. Most buyers prefer a home that is move-in ready and they are willing to pay a reasonable premium for that comfort. Examples of high value home improvements include kitchen and bathroom renovations, new flooring, carpeting and painting. A structural improvement is a new roof, siding, windows and doors, while equipment improvements include a new HVAC, hot water heater and kitchen appliances. Improvements can also include moving walls to create open spaces and a better sense of flow. Bathrooms, sunrooms, decks, sheds, garages and outdoor living spaces are all examples of common addition improvements. The National Association of Realtors reports modernizing kitchens and bathrooms are among the most sought after improvements by buyers when searching for a home. This is why improvements are so important to property value.

Maximizing Seller Value for Seller Benefit
Would you like to know the current value of your home? I use my strong knowledge and experience in statistical and financial analysis to produce a thorough Comparative Market Analysis (CMA) that considers all six of these value determinants. My CMA goes beyond a traditional CMA, including multiple valuation techniques. I determine a consensus of value and then test that value against supply and demand analysis by reviewing market conditions and absorption rates. My CMA produces a value in which buyers will likely find agreement to yield maximum proceeds to the seller in the shortest time frame.

I leave no stone unturned for my sellers. I show my sellers all options in terms of net proceeds and reaping maximum selling dollars. One of the important assessments that I can perform in certain seller situations is an Improved Market Analysis. This compares the net proceeds and time on market of selling the home in its current condition as compared to a case whereby the seller performs strategic, high value improvements. Sellers leave an estimated $28 billion a year on the table for buyer benefit by either choosing not to perform, or not being properly counseled by their agent to perform certain relatively simple improvements like painting, replacing carpet and installing new kitchen appliances. At the time of selling a home, sellers typically experience a 150% return on their renovation investment. I even show my sellers an easy way to have the work managed and performed by a team who works quickly, helps to select all the finishings buyers love and will even defer payment to settlement when the home sells, requiring no payment, money down – absolutely nothing out-of-pocket from the seller.

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