Hello i know this may sound like a really stupid question to most but what really determines the value of a home after rehabbing it ? is it the equity or the renovations of the home what if there is little equity would that lower the after repair value? i keep reading different things so it really confuses me.
In all actuality, the value is determined by what a willing and qualified buyer will pay.
The market will set the value…always.
Keith
So the equity doesn’t matter unless i was refinance?
Of course equity matters…however, you asked “what really determines the value of a home”…
The equity is just the difference between what it’s worth and what you owe. If you have an inflated sense of property value, you also have an inflated equity. If you have a property that is “worth” (remember, it is worth what a willing/qualified buyer will pay) $100k and you owe $70K, your equity is $30K…until such time as you get a contract and actually go to closing, equity is pretty much a “paper” position.
I’m now not sure of what it is you really want to know or are groping for…
Keith
your confusion is probably due to the fact so many posters put numbers down, where in fact they are only estimates of what the market may bear. Keith is exactly right, the value is 100% what an able and willing buyer is willing to pay. appraisals are just a due diligence analysis required to confirm estimates by educated, qualified, and licensed individuals to assume some risk, ordered by lenders who want to keep clean books. values are also done at a moment in time, e.g. houses valued on Sept. 10, 2001 may have "lost"value the very next day.
Supply & Demand
Exactly.
Worth for all things is only what someone is willing to pay. Blue book on a car is essentially the same information as an appraisal on a home (analogy only).
Have a rare baseball card, painting, etc? They are all ‘worth’ some imaginary number until you actually sell them.
This is one of the major reasons that stating that your personal home is an ‘asset’ is not correct. It’s a liability until you sell it (which may be never if you plan on living in it forever).
Now if you’re asking how their opinion of worth is determined by appraisers, that’s a different question.
DFW
Yes, but positive worth can have as a component an asset. What is the liability if I owe nothing on my house. Sure I pay property taxes, insurance and utilities but it’s still an asset. It may increase in value 20% a year. Consequently, I’ve added to my worth. I don’t have to sell my asset to convert it to cash. I can also create some cash and leverage the asset’s value to create even more worth as you put it.
It’s all good.
-H
I would also like to know what determines the value of a home. What does the average buyer look for? What renovations are most important? What about location? When comparing an older home with new-construction, what are the pros and cons?
I have an older townhouse I renovated and am trying to sell. I’m buying a new-construction house. New construction has grown so rapidly I don’t understand how an older home would compete. I am also considering keeping the townhouse and leasing it out, but I cannot afford two mortgages.
Now What ???
Older homes, if rehabed to “like new” condition compete on Price and location. If you have new homes priced competitively located a few blocks away you will have trouble selling for max ARV