What Determines Property Value?

In an affluent area like ours, we have many choices in the quality of a home, particularly if we are willing to pay for the quality. Until I built my first home 35 years ago, I never understood why people built simple, rectangular homes. I began to learn that the least expensive home to build is a simple rectangle and although it is not difficult to build a more attractive, interesting home - it takes more money.

Many builders, architects & designers are masterful at design and really maximize what you receive for the dollars paid, but there is usually a large cost difference between "standard" or "luxury" homes. Over the years, even the definition of standard and luxury has changed. There is nothing wrong, and often much desirable, with buying an older home, as long as you understand you may not be buying what had become today’s’ standard. Here are some examples:

Houses 25-30 years ago

Vs. almost standard today

Windows were aluminum single pane

Windows are vinyl clad or wood & double pane

Wall & Roof Insulation was minimal

Wall & Roof Insulation is required

Vinyl & wall-to-wall carpeting for Flooring

Hardwood, Bamboo, Marble & Tile flooring

Formica or Ceramic Tile Counter Surfaces

Slab Granite, Marble, Corian Counter Surfaces

Master baths common but small

Master baths are often larger than bedrooms

Minimal Baseboards & Crown Molding unusual

Baseboards & Crown Moldings are frequent

Landscaping minimal in new construction

Landscaping required in new construction

Natural lighting not priority, Skylights rare

Frequent use of Skylights

Bay, Green house, or Dormer windows rare

Bay, Green house, or Dormer windows frequent

Formal entry small or awkward, not standard

Large Formal entries standard in most homes

Separated, smaller rooms

Large un-partitioned spaces open to each other

8 foot ceilings throughout the home

9/10 ft ceilings particularly on lower levels

One phone line

Multiple phone & high speed internet access

Walk in closets maybe

Walk in closets are larger than some bedrooms

Golden Oak trim, molding and doors

Painted or darker wood trim, molding or doors

Equally significant in determining an older home’s value compared to a newer home is the extent of the updating. Are all of the components updated, or are some of them still 30 years old? Plumbing, electrical, roof & appliances of the home may be at or near the end of their life, which means that while the price to purchase may be less, the maintenance may be higher. On the other hand, an older home can have a great location, a larger yard or other attributes that make it highly desirable.

Even with the above, the most important factor in determining value is current functionality. Even if you have many luxury features and recent updating, 'functional obsolescence' will dramatically reduce the value. This term means that something about the functionality of the home is obsolete and difficult to cure. Today, smaller homes that are divided up, or have a small closed off kitchen, don’t work as well with our current life styles. They may have been fine when "Leave it to Beaver" was more of the norm, but today when both parents often work and the main time the family has together is mealtime - families want open kitchens arrangements or "Great rooms". If a home is priced lower than others because of some defect, is it curable? Be cautious when viewing an obsolete feature that will be difficult or expensive to remedy.

Some functional features to pay attention to:

Things that increase value

Things that decrease value

Location, Location, Location

Location, Location, Location

Close proximity to a diverse, economic area

Remote locations from economic diversity

On a hill with a view, and/or privacy

Near noise (Hwy) that’s likely to increase

Uninterruptible views or access to water

Lack of privacy

In the path of progress

In a neighborhood mixed with industrial uses

Spacious, open plans w/good traffic flow & light

Awkward floor plan, separated or dark rooms

Quality materials, details & workmanship

Cheap materials &/or shoddy finish work

Currently popular materials and finishes

Dated materials & finishes

Knowing all of this, the beauty of owning homes in our area is that with lack of additional land to build on, and resistance to building more homes in general in the greater bay area, all homes increase in value. As long as you can be in a property from 2 to 5 years, you will find the value increasing. I started in this business long enough ago to remember when a little cabin without a perimeter foundation sold for $20,000.00. Now they sell for $450,000.00 in the same condition. Granted it’s the low end of our local housing scale, but this is remarkable appreciation. We can be thankful that even though we have ups & downs, the strong economic base of our area continues to keep our real estate values rising as it has since the 1920’s.

Go Coastal With Ara!