How to Add Value to Your Home: Part 2 (Types of Value)

Types of value

But what do we mean when we talk about value? Broadly speaking, there are three types of value: principal, resell, and intrinsic. Whenever we use the word value, we mean it interchangeably unless tying it to one of the three specific types.

Principal (price) value

The principal value—or price value—is the literal, actual price of the home. When speaking of this value, we mean the listing price you will decide upon with guidance from your real estate guide.?

Particular renovations will occasionally have measurable effects on the principal value. For instance, in your market, you can estimate the value a 3 bed 2 bath home will have over a 3 bed 1 bath. However, how much effect certain renovations have on the principal value will depend on a number of factors ranging from the renovation's quality and scope to the home's area and location.

Resell value

Rather than affecting a price point, resell value speaks to a home's appeal, attractiveness, and desirability. While certain renovations might not move the needle on the home’s listing price, they may drastically tip the scales on how desirable your home is. So even though your home may be at the top of the range for your neighborhood, the resell value and attractiveness of the house may be enough to justify someone bidding on the “expensive” option.

Intrinsic living value

For some people, a renovation has little to do with improving their home's principal or resell value. Not every decision relates to the product-market fit of their home or maximizing their return. Sometimes, people just want their home to feel more like theirs.?

Your home's intrinsic value comes down to what your home means to you. If you love your home, neighborhood, and community but don’t feel like you’ve fully settled into your home as much as you know you could, a renovation may be right for you. A new couch, rug, or art won’t always be enough. It may be time for a more elaborate effort.