Does Property Size Increase Home Value?

A bigger house and a bigger lot usually are worth more than smaller ones. It's not a simple equation, like "double the size, double the value," because there are so many factors involved in an appraisal. One of those factors may be how the size of the property compares to other homes nearby.

When an appraiser examines a house, lot size is one of the factors she looks at. A big lot usually adds to the value, because it gives the owners room to expand. A bigger home also can increase value, but the increase depends in part on where the added size goes. More bedrooms and bathrooms are a big plus because more people can use the property comfortably. That can add more value than, say, extra square footage in the attic.

Owning the biggest house on the block isn't always a plus. A 2013 study in the "Appraisal Journal" found that a large house surrounded by smaller houses sells for less than big houses surrounded by other big houses. At the other extreme, a small house in a neighborhood where most of the properties are larger can go for a higher price than the same-size house situated in a small-house neighborhood.

Research is too limited to determine if the effect of relative house size always works the same way. There's no definite explanation why it works, either. The University of Connecticut's business school has suggested property tax plays a factor. In this theory, every house in a given neighborhood receives the same services from local government, but a substantially larger house pays substantially more tax for the same amount of service. That makes it look less attractive.

If you want to estimate your own home's market value, size is one element to consider. One of the methods appraisers use is to compare a given house to similar houses -- same lot size, same age, same number of bedrooms, same square footage -- that sold recently in the same neighborhood. They assume the given house will sell for roughly the same amount. Researching recent sales of similar houses close in size to yours can give you an idea what yours is worth.