to see whether it had a one-tower or a two-tower view. I compared the sale prices of similar homes with unobstructed views of both towers, those that could see only one tower, and those that had no view of the bridge. I accounted for other features that raised or lowered the value of each home as well. Then, I analyzed all the data and arrived at a valuation of $350,000 for the view, which was a little more than 1 percent of the original cost of building the bridge, not adjusting for inflation!
An accurate home valuation requires delving into the less tangible elements that enhance or lessen value in a home: the design and flow of the home, finishes, the outdoor living space, the contours of the land, curb appeal, and environmental factors, among others. The consideration and weighting of these factors is challenging, but makes all the difference in deriving the correct market value for a property.
Valuing these elements requires a deep understanding of the market, the neighborhood, the psychological factors that influence today’s home buyers, and, above all, knowing what drives value in a home.
What Buyers Want Drives Value
What buyers desire determines what the market “values.” The more closely the characteristics of a home measure up to the desires of home buyers, the higher the value the home will be awarded in the marketplace.
Design and lifestyle trends—how people want to live in their homes—drive residential real estate values. It’s a universal truth, whether you live in Topeka, New York, or London. People often think architects and designers are the arbiters of style, but it’s buyers, and how they want to inhabit the spaces inside their homes, that propel design.
A shift in design taste happens every seven to ten years. As the seller, you must keep up with the shift if you don’t want to leave money on the table. The following are the most important design and lifestyle trends to consider when valuing a home today.
Living Space
The interior layout and design are critical factors in the valuation of a home. The overarching questions are, “How closely does the living space mirror what the current market wants? Does the layout reflect how buyers want to live in a home?”
Not all rooms are valued equally. The most highly valued rooms in today’s market are an open kitchen connected to a family room, bedrooms, a secondary family room, and a home office for telecommuting. Extraneous spaces like a sauna, a walk-in wine cellar, a crafts room, or a massage room don’t hold the same per-square-foot value. The price per square foot for these spaces gets adjusted down because they are not necessary for everyday living. For example, I valued a home in Sausalito, California, with an indoor pool. The owner thought it was a unique selling feature and wanted me to understand how special it was. He said, “How many homes in Marin have indoor pools?” as if its rarity made it more valuable. I turned it back on him, “Right, how many homes in Marin have indoor pools?” followed by a long pause so my response could set in. “There’s a reason. People don’t value indoor pools—and the conditions they create with the steam and water—in an area that overlooks a bay with year-round gentle weather.” Just because something is unique or rare, that doesn’t make it valuable. The market must value it.
While there’s no one-size-fits-all plan for living spaces, in the current market, the concept of an “open plan” living space has become the standard in home design. The days of compartmentalized rooms divided by doors and walls are gone, supplanted by a desire for open, connected living in a space that feels bigger.
The great room of this home in Belvedere, California, is an excellent expression of a beautifully designed open floor plan. Millennials, families, and empty nesters will all be attracted to the perfectly proportioned rectangular living space that accommodates informal dining at the kitchen island, more formal dining just off the kitchen, and a useful and relaxing living space adjacent to the fireplace. The scale of the furniture not only makes the room look larger, but also shows prospective buyers how they will live in the house. The message here is that spaces do not have to be big to be highly valued. The concept is applicable to most homes by creating a big, open great room, even if you have to remove a wall or two to do this.
Buyers want clear sight lines and a great room combining the kitchen, family room, and dining area, so they can interact with guests from the kitchen, watch the kids while they play, or have the whole family together, even if engaged in separate activities.
“Open plan” might spark images of grand, cavernous spaces, but the design is not limited to large homes. An apartment or cottage can combine multiple purposes in a tight space if the areas are clearly defined.
| Checklist—Living SpaceIs the home’s central living area a large, rectangular space with high ceilings? What is the scale of the home? Does the rest of the home have high ceilings, and do the spaces feel large and open? |
Finishes
Finishes are design elements that are usually attached to structural elements of a home, like walls, ceilings, and floors. Paint, flooring, appliances, countertops, and light fixtures are the dominant finishes in a home. The look and feel of the finishes can enhance or undermine market demand and desirability.
A home’s finishes must align with what buyers desire. The level of finishes should also be commensurate with the pricing tier of the asset. A more expensive home will necessitate higher-end finishes. The brand and expense can be adjusted; it’s the look and feel that’s critical for resale.
Young buyers, in particular, place a premium on finishes. They want to walk into a space and feel like it’s new. Accustomed to a fast-paced, always-plugged-in lifestyle, they have less downtime. Unlike previous generations, they are less likely to enter with a vision to remodel a home and a willingness to credit the seller for its positive attributes. They will severely discount an outdated home because all they can see is what you didn’t do. They want to turn the key, unpack their suitcases, and get back on email.
| Checklist—FinishesA prudent seller will frequently flip through design magazines to be aware of what buyers and consumers want. |
