Determining the Market Value of Your Home
The Sun Valley Report
Friday, January 20, 2023
In the real estate business, determining the market value of a property is one of the most important things we do. However, market value is not necessarily a mathematical formula but rather, it is the price that a buyer is willing to pay that a seller is willing to accept.
The Five Factors to Determining Home Value
- External characteristics. Curb appeal, exterior condition of the home, age of the home, lot size, and home style.
- Internal characteristics. Size and number of rooms, construction quality and condition, heating systems, energy efficiency.
- Location. How desirable is the neighborhood?
- Supply and demand. The number of buyers and the number of sellers in the area.
- Comparable sales. What similar homes in the same area have sold for recently.
Lately, I have had a number of discussions with both clients and other agents on this very subject: how to determine the market value of a brand-new home when there’ve been very few new homes sold in the past few years? Most buyers and sellers want to rely solely on “comps”; however, when there are none (or only one or two), this factor is taken out of the equation. In those situations, we must rely on the criteria listed above, along with two additional factors:
- Replacement cost. How much it would cost to build the exact home, along with the cost of the land.
- Time. A buyer might be able to replicate a property for less than the asking price, however they will have to wait a year or two before they can use the home.
Construction costs went up considerably in the past few years, so it’s no wonder that the few new homes currently listed for sale are exponentially expensive than past sales.
Jordan’s Corner: Sales of New Homes, 2012-2022
Jordan put together the chart below showing how few new homes have sold in the past few years. Since the Recession, speculative building has been a risky endeavor, so builders stopped bringing new product to the market, especially the more expensive single-family homes and townhomes in Sun Valley, Ketchum and Elkhorn.
The chart also shows why our inventory remains low, since builders have not been supplying new inventory to satisfy demand. It’s interesting to note that the last real influx of new inventory was 22 years ago.
If you are interested in the market value of a property you own, don’t hesitate to reach out. We are always happy to provide you with a free market analysis.
Wishing you all a fantastic weekend!