Real Estate 101

You've heard it said that real estate has three important factors:
1. Location
2. Location
3. Location.

This, however, is not really true. While location is an important factor that helps determine value, there are other factors that are vital to real estate.

Supply and Demand
Real estate is a market of supply and demand. Everyone(nearly) lives in a home. Most people want to own their home. The more demand in a given location, the higher the price. All real estate is driven by demand. In conjunction with demand is the ability to get financing. Demand with no ability to pay is equivilent to no demand at all. Land cost in LA is greater than land in South Dakota because of demand.

Location
The location of a home helps determine value. An identical home in two different locations will pull two different prices. A real world example of this is a 1,100sf 2bed/2.5bath townhome located near the Uptown sells for $240,000...the exact same townhome located near Mt Island Lake sells for $140,000. Difference? Location. The location helps determine the value, but there's a lot more to real estate.

Ammenities
Ammenities, not just complex ammenities--but surrounding things to do are very important. People are increasingly focused on what they can do near their homes. Nearby restaurants, grocery stores, gyms, and school are more and more attractive buyers these days. Having community features such as walking trails and town centers are more and more important. Isn't this a part of location? Well, not really. It is more about lifestyle than location. What lifestyle can a home provide? The greater the benefit, the greater the price.

Condition
The condition of a home is a big influence in the value. The better the condition, the more emotional appeal, the greater the price people are willing to pay. The more emotional appeal--the more they will be willing to pay. A home that needs updating, typically pulls substantially less than a home that has peak emotional appeal.

Price
The price of the home is the value that a person is willing to pay for the home. The value of the home is a factor of the future benefit of the current home. Similarly sold homes influence the value and impact the magnitude of future benefit. Sold homes that are similar in size, location, and finish that sold for substantially less will negatively influence the value of a home.