Understanding Your Home’s Value

Wednesday Nov 24th, 2021


Understanding Your Home’s Value


Part One: Factors Influencing Property Values

Ever wondered what determines the value of your biggest asset,  ie: your home? 

While there are a lot of complex factors influencing property values, they fall into two broad categories: 


  1. These include the larger economic conditions dictating buyer affordability; factors like rates of unemployment, immigration and bank interest all having bearing on general market conditions. Regional, local and even neighbourhood markets are in a constant state of flux. 
  2. Property features such as location, property type, square footage, lot size, numbers of bedrooms, and the like set certain upward limits to what a property can reasonably sell for. The best source for this data is a search of the local MLS* to set expectations.
  3. What the “competition” is selling for. Even in an over-heated sellers market like the one we are experiencing, a surprisingly high number of properties do not sell during their first listing contract. Plus with the “plunge pricing” strategy used to attract multiple offers, home sellers cannot rely on the listing price of property around them to ascertain value. 


What sellers can control about the value of their property is its condition. Home buyers are obviously looking for the best value they can afford. In properties for sale that means the best condition for the lowest price. When assessing the likely selling price of a property, consideration is given to the following factors:

  1. Degree of Renovation. There can be a spread of several hundreds of thousands of dollars between properties in mature neighbourhoods that are in original, unrenovated condition and those that are fully renovated. Most homes fall somewhere in between, and part of my assessment depends on where your property falls on that continuum.
  2. Last update to the “Big Five.” Buyers, and more importantly their mortgage lenders, ascribe more value to homes with updated roof, windows, HVAC, and a finished basement. If they can confidently purchase without concern about these big-ticket items, your home will sell and appraise for higher. N.B. Please do not lease a furnace if replacing. You may have to buy out the contract which can be extremely costly.
  3. Cosmetic Improvements. Bringing your property’s flooring, kitchens and bathrooms up to current standards can net between 10% and 20% increase in sale price. On a $1,000,000 home that’s up to a $200,000 return on investment! In general, a judicious sprinkling of your renovation budget throughout the property is a better payoff than a $50,000 kitchen remodel in an otherwise original home. 

The key principle in all of these conditions is making your home as broadly appealing as possible to fetch the highest price. Yes, some home buyers can see beyond paint colour or old broadloom to recognize your home’s “good bones,” but by ignoring these changeable items you are eliminating a certain portion of your buyer pool, which is always going to cost you in the long run. 

For more information on renovations that net a higher sale price, check out our downloadable booklet, “Best Renovations for ROI” Click to receive a digital or hard copy booklet.




Part Two: Maximizing Your Accessible Equity from Downsizing


Interested in receiving listings from any of the areas (or others) mentioned in this report? Shoot me an email! 




Part Three - A Looming Dark Cloud on the Horizon? 

Sensational headlines about the sharp rise in home values fill the media:

“Canada's unhinged housing market, captured in one chart”



Canadian Real Estate Prices Are Overvalued By Up To 91%: Moody’s”



“This is the busiest year ever for the housing market, with prices up 18%”




The lack of inventory, historic low-interest rates, and surging demand have all contributed to record prices across all property types and market segments. 

There’s been much ink spilled debating whether we are headed for a crash in the market. Even though inventory is anticipated to remain low, which by the law of supply and demand would suggest prices will remain high, there is another looming factor to consider: The most prevalent threat to affordability that may impact house prices is the anticipated increase in interest rates. For every 1% increase in the cost of borrowing, buyers experience a several-fold decrease in buying power (maybe as much as 8-10%). 

So think of it, if the potential buyer of your home qualifies for a mortgage of $700,000 under current conditions, the possible forecasted interest rate hike of 1.5% diminishes his/her budget by -12% or -$84,000. By anyone’s measure that’s significant. Not to mention the $200,000+ down payment and a household income of $175,000 just to qualify in the first place!

What does that mean for long-term homeowners considering downsizing to access the equity in their property? If you were planning to move 24+ months from now, you might want to accelerate your plans to within 12 months. Interest rates can only be moved upward in small increments, and the real estate market typically responds rather slowly. You stand a very good chance of “cashing out” at the peak of the market in 2022. Beyond that, who knows? 


Ready to get started? Click Here for your “Pin-point Price Analysis”



Post a comment