Welcome to February’s Homewatch post. In this installment, we discuss the six layers of a building that determine value, and how those layers are evolving.
Knowledge is your ally, whether you are a homeowner, seller, or buyer. As such, it is of great importance to understand how there are six interconnected layers of a building that influence value. These six layers— Site, Structure, Skin, Services, Space Plan, and Stuff (the furnishings), as illustrated in the title diagram, are all drivers behind determining the value of property – both the market-influenced number, and the actual cost.
SITE – Surely you’ve heard the mantra “Location! Location! Location!” It’s not just a saying – some would say location is the most important force in determining the value of a property. The term ‘site’ encompasses the physical setting of a home, as well as tenure status. The site, whose boundaries and context will exist far beyond that of the building itself, is solid and unchanging; a significant portion of real estate cost is directed towards it.
Looking at tenure (ownership) status, the values attributed to freehold detached, semi-detached, and row dwellings will all be different, much in the same way as they are for condominium, co-operative, and co-ownership properties. Throw into the mix the knowledge that the actual market value of a property can be different according to the rights awarded to the buyer to modify the site’s use, and the numbers become more fluid. At the end of the day, you are subject to city zoning bylaws if you are looking to modify anything, specifically with respect to what can be built, actual use, height, size, setback guidelines, and design guidelines. These items must be considered carefully when making purchase decisions.
STRUCTURE – The foundation and load-bearing elements generally stay as they are because of the potential danger and expense in changing them. While it’s true that a building’s life can span from an average of 30 to 300 years, in reality, it is rare that a building makes it past 50 years. Like other consumer goods, obsolescence is included in the production process (at least from a perception standpoint); we purchase something assuming that it will eventually have to be replaced or changed. There is also the issue of affordability, forcing consumers to consider cost thresholds. Financially speaking, buildings built to last longer than 50 years are cost-prohibitive for many. Also, our very ideas of shelter have evolved this century; we almost expect to be housed with the by-product of a manufacturing programme, which is in stark contrast to European urban centres, where centuries-old buildings still stand.
SKIN – The ‘skin’ is what is seen and perceived first, being the face or cover of a structure, and is arguably the biggest influence on a potential homebuyer. In the past few of decades, thanks to swift and dramatic advances in available technology (not to mention the evolution of fashion and associated tastes), exterior surfaces now change every twenty years or so. Also, the recent focus on the energy efficiency of our homes has led to a shift in materials, causing a re-engineering of skins that are air-tight and better insulated, with enormous strides in window construction, exterior siding, and roof membranes.
Don’t be fooled by a pretty face though, as the recently installed vinyl siding and aluminum fascia on that cute cottage you’re looking at may be masking rotting wood underneath. Today, our desire for immediacy in regards to fixing aesthetic deficiences in our homes is compromising quality and resulting in a loss of character. Snap-in plastic gingerbread mouldings and E-Z-to-install siding may be low-maintenance for a while, but lack both the quality and the impact of authentic architectural detail. These solutions fade quickly, and can turn what was once ‘beautifully quaint’ into something obtrusively ugly.
SERVICES – These are the bones of the building or the working components. Among them are the electrical and communications wiring, plumbing, sprinkler system, HVAC (heating, ventilating, and air conditioning) and moving parts like elevators. Like all things that have some basis in technology, they face the risk of obsolescence, with their life spanning seven to twenty years, on average. Advances in services in recent history continue to modify buildings, including the arrival of public water services at the turn of the century, public gas and electricity beginning around 1910, cable television in the 1970s, and now ﬁbre optic and wireless communications. Many buildings are simply destroyed if fixing outdated systems poses more problems than solutions, as in, for example, embedded water lines in poured concrete slab construction (like those found in many 1960s and 1970s Toronto high-rises).
SPACE PLAN – The interior layout of a building, including the location of walls, ceilings, and doors, can change as often as desired, but rarely survives untouched for more than thirty years. There is much that changes within a home over the years that goes far beyond the walls; shifts in attitudes towards lifestyle, wants and needs, household size, and expectations for the way in which we live have all inﬂuenced movements, such as those toward larger bathrooms and kitchens, open concept living and dining areas, and a demand for fewer large rooms in a less formal setting. These shifts, in turn, affect the market value of traditional family dwellings, where demand often mirrors changes in the demographic climate (average age and household size).
STUFF – They say you are what you eat. I say that, to a certain extent, you are what you have, in the sense that your belongings reflect your tastes and much of your character. Sofas, tables, lighting, cabinets, books, and clothing all experience frequent turnover within our home environments. Our desire to change decor is influenced by the evolution of fashion and design trends, while often mitigated by affordibility.
If you’re a seller, know that the dwelling that is ‘perfectly presented’ will undoubtedly attract a greater number of interested parties and may even be valued higher. As a buyer, be aware that the appearance present at a showing is not necessarily what you will end up with when you take possession. When the property sells and everything not contract as an ‘inclusion’ is removed, the naked space will show all evident ﬂaws and may have a completely different feel. This is why vacant dwellings take longer to sell; without furniture and decor to make it feel ‘lived in’, potential buyers have trouble seeing the space’s potential and imagining their own belongings in it.
The bottom line? Each property has a unique value composition comprised of these six layers. The value of a site, inﬂuenced by location and the zoning controls associated with the property and those around it, is critical. It is worth investing the time to do some homework by approaching the municipality to see what future growth is planned, including road-widening, parking restrictions, or new proposed or pending developments that could impact views or increase trafﬁc congestion.
Look closely at the structure of the building. If there are indications of weakness, amplified by things like age, dry rot, or insect infestation, repairs can require thousands of dollars to correct. On the other hand, a solid brick house with a slight slope incurred over its hundred year life span may not seriously impact value if it appears stable and the property has character qualities difficult to ﬁnd or replicate. That said, wood frame construction is not necessarily worth less than brick if in good shape, as its malleable construction can be well-received during renovations and additions (it will be easier to do things like install larger windows or alter the space plan).
Always have the concept of limited life expectancy when looking at the exterior and services of a dwelling, unless, of course, superior ﬁnishes have been used such as slate roof tiles. In the case of condominiums and Reserve Funds (an excellent hidden value to this housing form if substantial), it would behoove a homeowner to set aside funds monthly so as not to be caught by surprise by sudden repairs, while also planning for future maintenance.
Finally, when considering the space plan layout, remember that fashion is a constantly evolving entity. While there is no question that good design and quality materials can be timeless, in the age of HGTV, most homeowners now prefer to place their own stamps on their dwellings. With this in mind, when doing renovations, it is important to be mindful of whether you intend to stay put or whether you intend to sell, and to tailoring renovations to that end. If there are plans to re-sell, renovations should favour simplicity and current architectural trends, so that future homeowners can adapt easily.
At Urbaneer.com, our service includes demonstrating the interconnectedness of these six layers on each property’s value, ensuring you can make a rational educated decision when buying your next home. We also encourage you to invest in the services of a reputable home inspection company that are trained to detect potential problems. Offering consumers insight and assistance in making rational and educated decisions about real estate, if you are thinking about buying or selling, call us for a pressure-free consultation that will quickly put the realities of today’s housing market in perspective. Call us at 416-322-8000!
Steven Fudge, Sales Representative
& The Innovative Urbaneer Team
Bosley Real Estate Ltd., Brokerage – (416) 322-8000
earn your trust, then your business
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