Dear Ray,
Our neighbor’s home recently sold. I invited our neighbor’s Realtor to evaluate our home, as we’re planning to sell later this year.
To my surprise, he valued our home at a price lower than our neighbor’s home, which is the same size and age. Both homes have remodeled kitchens, and we added a family room in our basement.
How can our home be worth less than the home across the street?
— P.M.
Yours is a simple question, but the answer is complicated. Two homes of similar age and size, located in the same neighborhood, can have very different values.
There are a number of factors that influence the value of any home:
•Location — Everyone knows the famous real estate adage, “Location, location, location” — it’s true. Location is the No. 1 factor influencing your home’s value. It’s why waterfront homes in Seattle sell for millions of dollars, while homes near Sea-Tac International Airport sell for hundreds of thousands less.
There’s a wide variety of amenities that influence your home’s value. In Seattle, mountain and water views add value. Another important factor related to location that affects value is the quality of local schools. A low crime rate, ease of commuting and increasingly walkability also add value.
Walkability means desirable amenities are located just steps from your front door. These amenities may include a park, schools, a local coffee shop, library, restaurants and public transportation. Increasingly, walkability is a factor that adds value to any Seattle home.
•Size and floor plan — Last year, the size of the average American home rose to an all-time high of 2,600 square feet; for years, the average American home has fluctuated between 2,400 to 2,500 square feet.
A smaller home, with fewer amenities, can be expected to sell for less. A larger home with a bad floor plan may also realize a below-average sale price. In contrast, a well-designed home of average size, with thoughtful design elements, may command a top-of-market price.
For example, mid-entry homes (aka “split-level”), first popularized in the 1960s, are not so popular today. Although mid-entry homes make efficient use of square footage, the above-grade, divided entry is unpopular. This design typically sells for less than a standard two-story home, with an entrance on the ground floor.
•Age and condition — New construction is an important factor that drives the price of all housing. Similar to a new car, a new home is sexier than an older home, and new homes are usually easier to sell. In cities like Seattle, new construction is rare and less of a factor driving home prices.
In Seattle, after location, condition is the factor that is most influential in the value of a home. A new roof, new electrical system and new plumbing and heating will help support a higher sale price for any Seattle home. I find most buyers ask me for “turn-key” homes, which are move-in-ready; far fewer buyers are seeking a “fixer-upper.”
•Upgrades and remodeling — In Seattle, a well-done remodel adds significant value to any home. Seattle, compared to other cities, rewards remodeling with some of the highest return-on-investment ratios in the nation. In most cities, a kitchen remodel returns about 75 percent of your investment; in Seattle, a well-done, new kitchen will return up to 125 percent of your investment.
For many years, granite countertops and stainless appliances were features of only the most upscale homes; today, granite countertops and stainless appliances are standard features.
Pay attention to trends when considering a remodel project. In Seattle, you might want to consider installing a deck or patio to create an outdoor living room, rather than adding an attic bedroom, for example.
Make certain to obtain proper permits and licensed contractors do all the work. Unlicensed contractors and lack of permits will come back to haunt you when you must disclose that information at time of sale.
•Negative factors — Does your next-door neighbor breed pit bulls or park a boat with a blue tarp in his driveway year-round? Does your basement flood every other year and have an unmistakable odor of mildew? Does your home have asbestos or a buried oil tank? Galvanized plumbing? Single-pane windows? These are factors that will make your home less desirable.
Before selling, do an honest assessment of all the negative factors. Seek advice from your Realtor about what issues should be prioritized for repair or replacement. Tour new construction open houses to gather ideas for remodeling. Talk to your neighbor about their remodeling project, and ask for contractor referrals. If they’re happy with their contractor, they’ll be pleased to share his/her name.
Best tip: Engage a full-time, professional Realtor early and often. You’ll benefit from the advice and guidance of an experienced real estate professional.
RAY AKERS is a licensed Realtor for Lake & Co. Real Estate in Seattle. Send your questions to ray@akerscargill.com or call (206) 722-4444.