What makes a property inferior or superior to another

This guide will dive into factors that affect a home's price, particularly why one home may be superior or inferior to one right next door.

Guides
Home Ownership
by
Erin Howell

When buying a home, it is undeniable that no two properties are precisely the same. Properties on the same street can have significant differences in value, and sometimes it is hard to understand why!

This guide will dive into factors that affect a home's price, particularly why one home may be superior or inferior to one right next door.

This will help you decide a home's purchase price and how you can decipher listing prices as a first-home buyer.

Valuing a property: What to look for?

Every home is unique, and it is crucial to understand what makes your home stand out or what it doesn't have compared to other sales. Each property will have features that will impact the value of the property. If a property has unique upgrades or new renovations, valuers for banks and the market will price this as superior to something more run down. These things can be subjective, so it is important to know what to look for whether you are into real estate investing or getting your first home loan.

Features that typically drive up a home price
  • Brand new renovations
  • Additional bedrooms, bathrooms
  • Approval for extensions
  • Close to connected transport networks
  • Within school catchment areas
  • Land size - square footage increases value
  • Internal floor space
  • Location
  • Car spaces
  • Location to amenities 
  • Ability to add value 
Features that typically drive down a home price
  • On or near a noisy road
  • Outside of school catchment areas
  • Renovations required
  • Significant building defects or pest-related issues
Factors that can impact the decline or increase in price
  • Current Market conditions
  • Interest rates

If your desired home has many value-driving features, it is likely to be more expensive than an identical home that sits on a noisy street.

It is essential to look at comparative sales and the data to understand if the property you are looking at is superior or inferior to a recent comparable sale. 

When a bank values a property, they look at similar features to assess value, including
  • Whether a property is comparatively inferior, superior or similar to others in the area
  • The state of the local market 
  • Previous area growth and future potential
  • The risk involved with the house and their likelihood to recoup their money if something goes wrong

Understanding the value-driving factors is critical to knowing if your desktop valuation is fair, competitive or overdone.

The important step in negotiating for a home is to define the top limit you'd be prepared to pay for the home happily. Stay within this.

What can you look for to inform these data points?

Looking at similar properties/market depth

Deep dive into some of these factors:

What else is for sale in the area? How many homes are in the surrounding regions with similar characteristics? What price are they listed for? Are they superior, equal or inferior to the home you are looking at? When looking at a property online, look out for: 'renovators delight' and 'brimming with opportunity,' these are usually signs that a home needs work!

Comparable sales

Look at 3-5 comparable recent home sales. Understand what properties sold recently and how much they sold for. How long was each property on the market for? Who sold it? This will help provide timely context to form facts about the home's market value.

Summary

When buying a new home, understanding value to negotiate the best price with real estate agents is crucial. It will ensure that you aren't overpaying for a home or let you know if you are buying a great home at a great price. Once you have purchased your home, your lender or mortgage broker also runs a valuation to ensure it meets your lender's risk requirements.

Valuations are also important when you are looking to refinance; by adding value-driving features to the home, you are increasing the home's valuation and, therefore, the equity available in your home. This is why we encourage our customers at OwnHome to consider ways to increase the value of their homes.

Rent-to-own with OwnHome

To support your journey to becoming homeowners, we have put together the ultimate step-by-step guide to buying a house and negotiating on a property. This blog will take you through the steps to get into the housing market, whether it is your first time or your second or third property investment. It outlines the fundamentals of market analysis, comparable properties and deep diving into the property market to ensure you secure the best house prices.

At OwnHome, we help all customers navigate home purchases and get onto the property ladder without needing hundreds of thousands up front in deposit savings. OwnHome helps define the value of a property and supports you in negotiating the best sale price for your home. If you're considering buying a home and want to learn more about rent-to-own, you can use the buying power calculator online. OwnHome is pioneering the way for rent-to-own in the Australian market, particularly Brisbane, Sydney, The Gold Coast, Newcastle and Wollongong.

 

Please note: This article is intended to be general in nature, and is not personal financial product advice. It does not take into account your objectives, financial situation, or needs. You should always engage appropriate professional advisers to assist you in making any substantial financial decisions

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