What is considered when setting the value of a home?

What is considered when setting the value of a home?

Appraisers assist in property sales by determining the value of real estate. Once this value is determined, many investors, buyers and sellers will take it into consideration when deciding how much to offer, setting an appropriate list price or establishing a fair property exchange.

But how do appraisers commonly come up with this value, and are these factors the same across the board? There is much to consider when attributing a value to residential real estate. Here are a few of these factors:


There is no debate that location plays a significant role in establishing value. Sure, a piece of property might be attractive and come with beneficial amenities, but if it is located in an unpopular area then the value is is going to be lower than it would be if the same property was located in a community with high demand.

"Value attributed to a specific piece of property will fluctuate."

According to U.S. News and World Report, value attributed to a specific location will fluctuate. For example, in times when gas prices are high and consumers drive less frequently, demand in urban areas tends to increase. This is because people are spending more time walking from place to place or relying on public transportation.

And gas prices are only one fluctuating commodity that affects location. Neighborhoods and communities change, and technology creates new methods of communication and transportation, which leads to demand constantly shifting between areas. Appraisers must be in tune with changing tides and popularity trends to best attribute value to specific properties.


The cultural and societal factors of a community cannot be ignored when determining a market value. Just because a brand new home is located on a beach with a beautiful view doesn't mean it has a high value. If the surrounding community has a blight of condemned homes, or there are no public parks or a lack of sidewalks, then homebuyers might not be as interested as they would be if the area was flush with good schools and public transportation.

Demographics are not the same as location, as it incorporates much more. The make-up of a neighborhood and the overall community behavior can be impactful for one homebuyer and neutral for the next.

An appraiser shouldn't just be looking at location, but the surrounding neighborhood as well. For example, Business Insider noted that noisy neighbors can bring down the value of a home by 5 to 10 percent. Even if the location is great, if the community not welcoming then value will drop.

Appraisers need to know what factors to look out for.
Many factors play a role is setting the value of a home.


Property has a history, whether it is a small home or a large complex. If the piece of real estate is old, has it been updated over the years? Have previous owners all had exceptional experiences with this property? These questions and many others are important when establishing the value of a home.

An appraiser should take into consideration all of the data pertaining to a specific home, not merely the current state. These details will include everything from modernizations and typical utility consumption to surrounding changes as well. Do businesses tend to do well in the area? Do restaurants constantly open and fail in this neighborhood?

The history is a sort of track record for the property, and knowing what a home has been through can help an appraiser decide where it is going. There are certainly times when homes will depreciate with age, but there are other instances where value will increase tremendously. Appraisers need to approach each home on an individual basis to accurately set a value.

These are only some of the factors an appraiser considers when determining the value of a home. There are all kinds of circumstances that play a role in this process. Homeowners, especially first-time homebuyers, might not be be aware of all the details that impact the price of their current or potential home, but it is important for them to learn and understand. It is also necessary for appraisers to take all factors into account.