Understanding every factor that devalues a property is key when setting a price. Whether your clients are sellers or buyers, knowing the actual market value allows you to negotiate and argue with a solid foundation for your economic proposal. We invite you to explore all the elements that must be considered when pricing a pre-owned home.
Just as there are factors that increase a home's value, there are others that cause it to depreciate, directly impacting the real estate appreciation (capital gains) at the time of sale.
Main Enemies of a Home's Appreciation
- Lack of Maintenance and Poor Renovations Regardless of the type of residence, all homes suffer from inevitable wear and tear, especially in kitchens, bathrooms, and bedrooms. When owners neglect proper maintenance, problems like water leaks escalate, affecting other areas of the house—resulting in moldy walls, buckled flooring, missing tiles, and roof leaks that significantly impact the asking price. Furthermore, poorly planned renovations or structural changes can cause the property to sit on the market longer. Potential buyers may offer less, knowing they will have to spend more to fix or remodel the house.
- Decor and Aesthetics Decor is a matter of personal taste, but if your client's style is too extravagant or exotic, it can hurt the property's value. Remember that love at first sight is real in real estate; a good presentation is essential. In these cases, it is highly recommended to neutralize the home: repaint loud colors with neutral tones, remove cluttered decor, and patch up any holes in the walls.
- Safety and Security Safety is a significant concern, and the more insecure an area is perceived to be, the lower the property's price will be. Regardless of whether the house is large or in excellent condition, it will always be harder to sell in a high-crime area; therefore, the price must be lower to successfully close the transaction.
- Orientation and Layout A home's orientation determines its natural light, how warm or cool it feels, and the quality of its views. If a property has small windows and poor ventilation, the price can be affected by up to 20%.
- Street Vendors, Gas Stations, and Noise Pollution While city living can be stressful, certain external elements directly affect property prices. No buyer wants to open a window only to deal with odors from street stalls or be kept awake by the constant roar of cars, motorcycles, and trucks. Additionally, living near a gas station is often viewed as a potential risk in the event of an accident.
- New Vertical Developments in the Area In theory, new developments should boost a neighborhood's profile, but they can hurt the sale of a pre-owned home. Buyers may prefer a brand-new apartment over a used house that requires renovations (painting, floor replacement, etc.) for the same price.
Now that you are familiar with the factors that can decrease a home's value, you can advise your clients on making the necessary improvements if they want to increase the value or strategically lower the price to ensure a faster sale.
