The resale value of a house depends on many, many factors,
some of which you can do something about, and some of which you can't. I'll
address both types of factors, starting with those you can't do anything about
(typically they factor most heavily in the value).
Generally, the most important factor in the value of a home is its location.
A good location is, to a certain extent is subjective, but common indicators
of a good location include good schools, a safe and clean surrounding area,
and proximity to shopping and transportation lines. Even within a particular
locale, some locations are better than others. For example, on the same street,
a house in the middle of the street will be have a higher value than the one
on the corner and the house in a cul-de-sac will have an even higher value than
the one in the middle of the street. Houses on quieter, smaller streets are
likely to have higher values than houses on neighborhood thoroughfares.
The resale value of your home, obviously, depends on the market. The hotter the
market, the more valuable your home. Market, to a certain extent, is a function
of location. An obvious and easy example is that homes in California are far more
valuable than homes in Iowa - there is less land left to develop (tighter
inventory, even though there are more houses overall) and more people who want
to live there.
The demographics of the area can also play a big part in the
resale value of the home. If the area is made up of mostly young professionals
and it is growing and expanding, then it may indicate what the area will be
like in the future. On the other hand, if the area houses mostly baby boomers
then the homes may be more accessible to an older crowd.
Location, market, and demographics are all out of your control, but the characteristics
of your house are not, and having a home with desirable characteristics can
usually affect the resale value of your home by a couple thousand dollars. There
are two things to keep in mind here: 1) first impressions matter;
and 2) you typically don't get out the entire amount that you put into improvements.
Let me address the second thing first. Homeowners rarely recover the cost of
improvements that they make to their homes. For example, the
most valuable improvements include kitchen and bathroom remodels
(or additions). Typically, a homeowner can expect to see an 85 to 95 percent
return on the money expended to make the remodel. Pools, popular improvements,
are horrible investments. Even in the best areas, they only return about 40%
of the investment.
Given this, the best idea is to focus on the first thing I mentioned: making a
good first impression. Making a good first impression can be very cheap, so it
is easier to recover your money and enhance the resale value of your home. The
easiest way to make a good first impression is to make regular repairs to your
home and do a deep cleaning at least twice a year. Another easy way to enhance
the resale value is to improve the landscaping of your front yard. This is the
classic curb appeal. Don't just stop at landscaping. Consider a new front
door and lighting and look for ways to make the front yard a usable space. The
thing to keep in mind here is that the more valuable your house looks, the more
valuable it will be.
Above all, remember that any increase in value is usually a function of appreciation
as much as it is a function of making an improvement, so if you want the most
resale value, make the improvements to your home and then wait.
Answer Submitted on Wed, Nov 29 2006
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