Fences & Flowers

The CB Bain Blog

What Determines Real Estate Prices Most?

Sep 11, 2018



Home price increases are beginning to cool in Seattle and surrounding areas. With any big shift in the market, we often wonder what the future holds. We also wonder: What affects housing price to begin with?

The answer is complex and subjective, depending on the city and neighborhood. It’s a combination of the appraised value of a home, and larger factors like current interest rates and the home’s location.

  1. Economy. The general state of the economy, including unemployment rate and wage, plays a big role in the area’s house prices.
  2. Interest Rates. Mortgage rates are largely determined by the Federal Interest rate. While this may affect mortgage bank rates universally nationwide, the many other local factors, such as economy and location, influence prices greatly, accounting for the wide variation in price.
  3. Location. Yep, this is a big one. So, what makes a great “location?” It boils down to three things: Employment opportunities, local school quality, and proximity to shopping and recreation. Think of these as the trinity of ideal location. If you find a home with all three, the price will likely be higher. Beautiful views and larger lots may bump the price up even more.
  4. Comps. You know those comparative market analysis (CMA) reports your real estate agent has? These reports are a list of recent “comp” home sales in the neighborhood, and they’re vital for the appraisal of a home. Speaking of…
  5. Appraisal Value. This is a formal process done by an appraiser licensed or certified by an organization accredited by the Appraiser Qualifications Board (AQB). Comp sales are used to find a base price, with adjustments made depending on improvements (see below), damage, etc.
  6. Home Improvements. Certain home upgrades, like bathroom and kitchen remodels, can significantly increase the value of a home.
  7. Inspection. A lot rides on a good inspection. Major home issues may drop the value, and ultimately, the price of a home.

If you’re selling, your real estate agent can help you examine all these points to determine how to price your home for sale. Buying? Work with your real estate agent to gauge the true value of your targeted dream home so you can make an offer that’s realistic for you, won’t offend the seller, and will hopefully give you the edge in a bidding war.


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