By Shelley Sakala
Home values are determined not by size, square footage, school districts, or features, but by the marketplace. This may sound counterintuitive because we’re so used to all the measuring sticks we use to gauge a home’s value such as price per square foot. But your home is worth exactly what a buyer is willing to pay – no more, no less. Case in point: In parts of the Midwest and Northeast, many neighborhoods and sometimes entire cities were built as “factory towns.” Residents would work in an auto factory or steel mill while living in the surrounding neighborhoods. The towns supported the factories, and the factories supported the towns – until they didn’t. When the local (or national) economy took a downturn, factories began to consolidate, move, or simply close down. Very bad news for homeowners who depended on the factory for work. Suddenly the jobs were gone, and the towns began to die. Homes that once sold for tens or even hundreds of thousands of dollars were essentially worthless. It didn’t matter how many bedrooms there were, or whether there was a swimming pool or energy-efficient appliances. Nothing impacts home values faster than when nobody wants to live there anymore.
Although North Phoenix has a few major employers such as USAA, American Express, and Honeywell, our community isn’t dependent on any one company or industry. This gives our home values a relative measure of stability, allowing buyers and sellers (and Realtors) to use traditional methods of measuring home value. The most common method is a price comparison of similar homes in a given neighborhood, which is known as “pulling comps.” To oversimplify things, suppose that over the past few months 5 homes in your neighborhood each sold for $350,000. All are approximately the same size with the same features as yours. Based on this recent sales activity, you can reasonably expect your home to sell for about the same price. There might be small adjustments based on lot size, features, and condition of the home. But at least you and the buyer have an idea of what your home is “worth.” Let’s suppose, however, that not one but two buyers decide your home is perfect… They could potentially get into a bidding war, driving your home price up to $360,000, $370,000, or even more. In a situation like that, you get a boost to the proceeds of the sale, and your entire neighborhood enjoys a lift in their values because you just raised the average comp. All because emotions came into play and someone had to have your home.
In the absence of any anomalies such as factory closures or bidding wars, a properly priced home will sell within a timespan driven by the market and affected by features. For example, single-story homes remain popular in North Phoenix, often spending less time on the market than two-story homes. And a home with a freshly remodeled kitchen might get snapped up quicker than a comparable house containing the original cabinets and flooring. But the important thing to remember is that it’s not one single feature or factor that determines price. Solar panels might be seen as a plus to some people, while others might see them as a blight. A lush landscaped backyard may be appealing to one buyer, while another shudders at the prospect of yardwork. Even swimming pools, which seem like a no-brainer in Arizona, don’t always make a house sell faster or for a higher price. In a snapshot of currently active homes from the past 6 months, homes with swimming pools actually sold for less money per square foot, and took longer to sell! Again, other factors may be at play such as property size, proximity to busy streets, or the condition of the house.
At the end of the proverbial day, selling your home is simply a matter of the right price intersecting with the right buyer. If you’ve done your homework (or hired a Realtor who has), finding that right buyer will get a whole lot easier.