Understanding Home Resale Value and How to Improve It (2024)

When you purchase a home, it likely immediately becomes the most valuable asset you’ve ever owned. It’s also one of those rare assets that has the potential to appreciate in value as it ages, depending on market conditions and many other factors. This is known as your home resale value.When you purchase a home, it will likely immediately become the most valuable asset you own. It’s also one of those rare physical assets that has the potential to appreciate in value as it ages, depending on market conditions and many other factors. This is known as your home resale value.

Below, we outline what you need to know about home resale value, including what determines it, how to increase it, and more.

What Is Resale Value?

Resale value is a term that transcends virtually every industry, from automotive to real estate to electronics. It’s basically the amount you expect an item to sell for in the future. For instance, if you purchased an item for $10,000 today and sold it two years later for $8,000, the resale value is $8,000.

For many items, the resale value goes down year over year. This is generally the case with cars, electronics, and similar items. (You’ve probably heard how a car depreciates as soon as you drive it off the sales lot.) However, the resale value in real estate has historically increased over time.

What Determines Home Resale Value?

Many factors can come into play when determining a home’s resale value, from the local real estate market trends to the home’s condition and everything in between. Let’s review some of the most important determining factors for home resale value.

Local Market

Sometimes referred to as local comps, the recent selling price of similar homes in the local area plays one of the more significant roles in home resale values. You can see these comps from a report put together by your real estate agent or during the home appraisal process. Always keep in mind, though, no comps are the same.

Mild variations can make your home worth more or less than a nearby comp. Some factors that can cause this variation include having a pool, solar panels, a solar water heater, being on the waterfront, and other upgrades.

Home Size

Home valuations are calculated in price per usable square footage, so if a 3,000-square-foot home sold for $300,000, that would be $100 per square foot. By usable square feet, this generally means footage that is heated and air-conditioned and used for living. So, for example, a garage or patio generally would not be included in this calculation unless it was converted into living space.

Location

Location also plays a big role in home resale value. Some factors that impact the location include proximity to shopping and entertainment, distance and accessibility of public transit, parking availability, local school district ratings, and crime rates. It also considers nuances that may impact quality of life, such as being too close to an airport or a busy road or an unsightly factory.

Home Age

The age of a home can also impact the resale value. This is the case for several reasons. First, new homes often come with a warranty that saves the new owner money over that period if something breaks down. Also, older homes are more likely to need repairs and updates, such as a new roof or updated wiring. These are sneaky expenses that can add up over the years.

Home Upgrades and Features

Upgrades, renovations, and desirable features — such as a remodeled kitchen, swimming pool, or finished basem*nt — may impact a home’s resale value. Remember, though, the amount that a home improvement affects the resale value may vary. For example, areas with year-round swimming weather, such as Florida, may value an in-ground swimming pool more than others.

Home Loan Interest Rates

Many home buyers purchase a home based on the monthly payment, and their loan’s interest rate directly impacts this amount. For example, a 30-year, $300,000 home loan at 3.5% interest will run $1,347 monthly not including taxes and fees. If the rates rise to 7.5%, that payment will skyrocket to $2,098 per month. This may squeeze a lot of buyers out of the market for a $300,000 home, potentially driving down prices.

Overall Market Conditions

Like any market, the housing market is driven partially by supply and demand. If the housing supply is low and demand for buying homes remains high, it could drive up your home resale value. On the flip side, if the supply increases and demand remains steady or wanes, you could see home prices drop.

Why Is Home Resale Value Important?

When purchasing a new or pre-owned home, its resale value is critical for several reasons. First, a home with a high resale value will typically have a value exceeding your loan balance. This increases your net worth and allows you to take out additional loans using this home equity for remodels, upgrades, or even refinance into a better loan.

Second, having a high resale value means if you hit a financial rough patch and need to sell the home, you’re more likely to get a selling price that exceeds the loan. This would allow you to pay off the loan and have some cash left over to handle your financial issues or purchase a more affordable house.

How Do You Determine the Resale Value of a House?

You can use online tools to find an estimated resale value or even pull comparisons of similar homes that sold in the area yourself. However, these aren’t very accurate in determining your true home resale value. Getting the most accurate home resale value comes with the help of one of two professionals.

The most accurate way to determine your home resale value is to hire a home appraiser. These professionals will look at all the determining factors that affect a home’s value and give you an accurate appraisal of what you could sell the home for.

Another way is to consult with a real estate agent. These agents have boots on the ground in the local market and can assess your home based on the local market and their experience. Remember, a real estate agent’s appraisal will not be as data-driven as an appraiser’s, so it may not be as accurate.

However, realtors have the added benefit of suggesting ways to increase your property value through remodels and other upgrades or improve your home’s curb appeal (like updated landscaping) to drive interest.

What Type of House Has the Best Resale Value?

While resale value has many determining factors, some home styles simply have higher resale values than others when all other variables are equal. Topping that list are ranch-style homes. These single-level floor plans have no steps to climb up and down, making them ideal for older buyers. Also, because these styles of homes are generally newer construction, they require less maintenance, which further improves their value.

A close second to ranch homes are colonial-style homes. These are box-shaped, two-story homes with a minimalist design and lots of functional living space. These factors make them one of the most popular options among buyers.

How Can I Increase the Resale Value of My Home?

There are many ways to increase your home resale value, ranging from easy and low-cost methods to pricey upgrades that could take some time to complete.

Here are some ways to improve your home’s resale value:

• Increase square footage: Since home values are determined mostly by price per square foot, increasing the square footage of your home is a surefire way to improve its resale value. However, you’ll want to focus on useful areas for living space. This means expanding the living room or maybe converting a deck or patio into a closed-in, air-conditioned space. Just follow local permitting laws, as unpermitted improvements may hurt the home’s value.
• Deep cleaning: When you walk through a home you’re considering buying, it’s much easier to picture it as yours when it’s clean and clutter-free. With lots of clutter around, you may not be able to see your family living in it. This can lead to sellers struggling to find suitable buyers, driving down their resale price. Do a deep cleaning and declutter the space by putting things in a storage unit until the home sells.
• Improve efficiency: With rising energy rates, having an energy-efficient home can save you cash over time. This means even small improvements in energy efficiency can go a long way in improving home resale value. Something as small as a smart thermostat can increase your home’s value. You can also reseal leaking windows and doors, install energy-efficient appliances, or even add a larger investment, such as solar panels or a solar water heater.
• Fresh paint: A fresh coat of paint can indeed help an old house look newer and improve its curb appeal and resale value. Start with the home’s exterior to get the most bang for your buck, then move to the interior if time and finances allow it. The great thing about painting is nearly anyone can do this task themselves and save money compared to hiring a professional.
• Remodel the kitchen: For many buyers, the kitchen is a prime part of the decision-making process, and an outdated kitchen may have them seeing major dollar signs to get it up to their expectations. You can ease most buyers’ minds by remodeling your kitchen, giving it that modern look, feel, and functionality buyers want. Even minor upgrades, such as new cabinet hardware or plumbing fixtures, can help if you cannot complete a full remodel.
• Up-to-date maintenance: Unperformed maintenance can turn off buyers, driving down the value of your home. Things like an aging roof or an older HVAC system can leave buyers seeing dollar signs. Sure, you can negotiate these into the selling price and agree to repair them if the buyer agrees to pay the full asking price, but many potential buyers prefer a move-in ready home. If your roof is nearing the end of its lifespan or your air conditioning hasn’t been serviced in some time, paying the cash to have these taken care of can increase buyer interest and maximize your sale price.

How Accurate Is Zillow Home Value?

Earlier, we mentioned online estimators and how they’re not the most accurate option for determining a home’s value. One of the more popular online home valuation estimators is Zillow’s Zestimate.

The Zestimate system uses all the same factors an appraiser would use. However, instead of doing manual research to gather all the information, Zillow relies on public records to calculate its Zestimates. This means that if your home is in a new neighborhood with limited data on public records, the Zestimate could be too low or too high. The same goes for an area with few home sales in recent years.

So how accurate is a Zestimate? That depends. Zillow claims a 2.4% national median margin of error between the selling price and the Zestimate for homes currently listed on the market. While this seems quite accurate, realtors quickly point out that Zillow often adjusts the Zestimate to be near or at the listing price once a home goes on the market. As for off-market homes, the margin of error is much wider at 7.49%.

What Is the No. 1 Thing That Determines the Value of a Home?

If you want to simplify the entire home valuation process and get right down to brass tacks, there’s one place to look to get a solid grasp on your home’s value: local comps. This list of recent home sale prices of similar homes is the number one place to find what you can expect your home to sell for. Of course, this is not a complete picture, as you must take all the previously mentioned variables into account. But this will give you a quick and simple look at the expected range.

Protect Your Investment and Maximize Your Home Resale Value

By maximizing your home resale value, you’re not only ensuring you can get top dollar if you choose to sell it but you’re also protecting what’s likely the most valuable asset you have: your home. By protecting its value, you increase your net worth, which can offer some financial freedom in the long run — even if you choose not to sell your home.

If you want to further increase your financial freedom, you can do so by lowering your energy costs through your electricity plan. Check out Just Energy’s plans to find one that suits your lifestyle and budget.

Brought to you by justenergy.com
All images licensed from Adobe Stock.

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