Tuesday, March 31, 2009

How much is it worth?

How much is it worth?
I am asked this question nearly every time I visit a house, sometimes even by friends when on a social visit! Many factors affect the value of a home. Many other factors have no impact at all on the value. Some people find it hard to distinguish between these two sets of factors.

The most important things that impact on the value of a home are:

Location – The old adage “Location, location, location” always holds true. Houses with the same accommodation and design in one estate will have a different value in another estate. Even within the same estate, different locations will have slightly different valuations. Sub-factors such as orientation, a green area to the front, nearby parking or the condition of adjacent houses have an effect.

Condition - The condition of a home can have a large impact on the value. Buyers will sometimes offer thousands less for a few hundred euro in necessary repairs. People are afraid of having to hire builders to fix problems as they think the cost might be much more than it actually is, so it isn't unusual for them to offer €5-10,000 less when the home needs repairs that might cost €1,000. That said, it is unwise to embark on a large project if you are thinking of selling your home. You rarely get the value of it back. Minor renovations or redecorating to spruce up are ok though. They can pay back many times over.

Size – Most valuations will take note of the square footage of a home. However, not all space is equal. Most buyers want good living space in both the kitchen/diner and the sitting room. Bedrooms are a secondary consideration, as long as there is one larger one. Location aside, a poorly-designed house, with larger bedrooms and a constricted living area does not have the same value per square foot as a better-designed house.

Supply and demand – Sometimes global factors affect the demand curve more than anything else, but mostly, all property is local. At the moment in Clonmel, there is a demand for 3-bed homes in good locations...that are properly priced. For the first time in ages, we are now seeing multiple offers on homes that meet these criteria, with mortgage-approved bidders starting low, but bidding up towards the Guide Price due to competition. Last year there were too many homes on the market, but now the overhang is gone. So expect more competition for properly-priced homes.

Many people have differing views on what affects the value of a home, here are some things that don’t:

How much the last owner paid for it - People always say “But I paid €x for it a few years ago.” Sorry, this does not matter whether the market is going up (as it was up to 2006), or down (as it has since!).

Special Features – This can be very personal. Some people can get offended if the sauna, (which cost a lot of money, takes up the third bedroom and nearly crashes the local electricity grid), is not fully appreciated by a prospective buyer. Home gyms are another like-it or hate-it feature. If investing substantial money in creating a putting green in your back garden, remember that you do it mainly for yourself. Do not expect a buyer to pay you more for it. Some might, but the majority won’t.

The value of a neighbouring property as listed on an agents web site - Don’t believe what you read is the best maxim here. Lots of houses are currently vastly overpriced. Combined with the Internet and almost every agent having a listing site, this has lead to entire neighbourhoods being over-valued, as the new to the market owner decides to pitch his house at the same level as his neighbours, even though his neighbour’s house has not sold for the past 18 months. The best comparison is an actual sale. A lot of agents have sold very little in the last 12 months. Make sure that the information you are being given is backed up by results!

How much the current owners owe on their mortgage - This is obvious. It may stop them selling at the real value, but it does not affect the value.

Sellers can price a home at any level they want to but if it is priced too high buyers will ignore it. Lenders are being very conservative. Buyers can only borrow 85-92% of the purchase price. At current local price levels, a twenty-something first-time buyer is expected to have their own independent funds in excess of €20,000 to secure a mortgage! Sometimes the buyer can’t borrow enough money to buy the home. Sometimes they do not have enough savings.

How much is it worth?
At the end of the day, the market decides. Whatever the owner or their agents think, a home is worth as much someone will pay for it. Buyers drive prices, no-one else.



  1. Great post. Where can I get a hoem with a sauna?

  2. And a putting green?

  3. Hi Paul, We have a house for sale with a sauna in Cloneen. (http://www.pfq.ie/modules/property/tipperary/Fethard/PFQ02158/)
    I sold a house in Clonmel 4 years ago with a sauna. It did take up the 3rd bedroom! The owners wanted a buyer to pay for it, but the buyer wanted the owner to take it out. Not easy! it got left there at a much reduced price. the buyers took it out when their second child arrived last year.