- Learn about the factors that affect the value of real estate.real estate blueprint image by Dmitri MIkitenko from Fotolia.com
Establishing the value of a piece of property can be a complex -- and sometimes controversial -- challenge. Various factors come into play in determining value, and these factors then work closely together and become somewhat interwoven. And while the assessment might sometimes feel arbitrary, it is usually the result of time and research and the careful consideration of the primary factors. Understanding property assessment factors is largely a matter of thinking about where the property is located, what the size of the property is, and what the current condition of the property happens to be. - Real estate experts have always claimed that the key to determining property value is "location, location, location." Inevitably, location is also one of the chief factors in determining a property assessment for either tax or loan purposes. A brand new five-bedroom, five-bathroom home located in a small farming town in the Midwest is unlikely to be assessed as high as a two-bedroom bungalow in Culver City, just outside Los Angeles. Why? Culver City's location has created a tremendous amount of value for properties in the city, even older properties that have not necessarily been updated extensively. Within cities and towns, locations can also play an important role, because one neighborhood can easily be assessed higher or lower than others. And water access can affect value significantly: a property that is right on the water will usually be evaluated considerably higher than a property that is a block away from it.
- Property size plays a big role in property assessment, but this is not limited to the size of a building on the property. The lot size and shape can become important factors in property assessments, because the size and shape of lots can create increased desirability and thus increased value for the property. Building size is another significant part of assessment, though. A large house on a street is almost certainly going to be assessed more highly than a smaller house on the same street or in the same neighborhood. In fact, this type of comparison is a large part of the way that tax assessors and appraisers evaluate properties: they will compare an individual property to others around it to derive an assessed value. In addition to size, such specifics as the number of bedrooms and bathrooms, the number of living areas and eating areas, the size of the kitchen, and the size of the garage can influence assessment.
- Factors such as the age of the property, whether the property has been renovated, what type (and quality) of renovation has occurred, and just the overall quality of the property are important elements in establishing an assessment. From here, the other factors work together with quality to determine the assessment. To use the example noted above, consider a two-bedroom bungalow in Culver City. For the purposes of this example, assume that the bungalow is about 1,200 square feet and has undergone extensive renovations to the kitchen, living and dining areas, and bathrooms. This property, assuming that it is in good shape and the renovations have been of excellent quality, could easily be assessed for around $1,000,000. On the other hand, that brand-new five-bedroom home in the Midwest -- which is 4,000 square feet and include a range of desirable amenities -- might still only be assessed for around $350,000 or $400,000. Its quality and size might be valuable, but the quality and size alone cannot determine assessment. All of the factors must work together.
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