The biggest questions Realtors are faced with is simply what the homeowner can realistically expect to sell their home for. How many values are there to a home and who decides? There are basically four different types of value on residential properties.
The first is assessed value. This is the value a local taxing authority assigns to a property for taxing purposes. Generally, this is the lowest value in the equation, and can be considered the most inaccurate. The second value is market value. This value can be derived from doing a careful analysis of homes in the same neighborhood or vicinity with similar amenities and what they sold for in the last six months or year. Your agent should be able to provide this information. The third value is appraised value. This is the value a certified and/or licensed appraiser hired by a lending institution places on the property using a similar approach to determining the market value, and those two values should be relatively close. An appraisal will not be ordered until an offer has been accepted. The fourth value is market or list price of the home. Amenities, style, updates, number of rooms , lot size and general maintenance can all make a difference on the value. As you can see, it’s crucial to price the home correctly so the end result appraisal will be in line with the offer that is accepted.
When I sit down with a potential client/seller, the first thing I ask if what they think their house is worth. I’ve already done the research and have a good idea of what that answer will be, but many times am shocked at the answers. What the house sold for down the street doesn’t matter, unless it is very, very similar. What you need in order to clear your mortgage and have a down payment for the next house is not a factor. What you spent fifteen years ago to install a state-of-the-art deck will not reap you any more money than the guy next door with an ordinary deck. And I’ve heard the statement, “well yes, but we’d like to try it just $10,000 higher to see what happens”. If you have no one marching through the door in the first two weeks, it’s too high.
With all of that in mind, there’s also the idea of “marketability”. In other words, what makes your home attractive or unattractive to that potential buyer? For one thing, deferred maintenance, no matter how small, may not have the potential to affect the value, but could most certainly hurt the marketability of your home. By the same token, replacing a fifty year old furnace or thirty year old roof will not increase your appraised value (remember, it’s supposed to have a decent furnace and roof anyway), but can make your home more attractive to potential buyers who don’t want to be faced with large expenses in the immediate future. And personal-taste items you so lovingly installed in your home make no difference to the buyer. What you put value on won’t necessarily reap even a fraction of the cost down the road to the next owner. I’ve seen homes with imported stained glass windows, antique mantles or wood floors refurbished from a barn that were meaningless to the buyer.
When my buyers and I tour a home that has been in a family for many years, I kind of brace myself. I’ve heard it all……”daddy built this place from the ground up”…..or …..”we had twenty five family reunions here”……or ……”I climbed that tree for the first time as a child”…..or…..”I remember when mom bought that shag carpet! She spent so much money on it at the time and just loved it!”. Do you see a pattern here? Do NOT price your home out of a sense of emotional attachment. When a buyer and their agent realize this could be the case, they suspect the home is severely over-priced and/or negotiating with the sellers will be difficult, at best. I had the pleasure of selling my “home place” for my parents early in my career. It was probably the hardest transaction I ever faced, and I had to remind my family every step of the way to not base their decisions on emotional attachment.
At the same time, I’ve had buyers say “well, it’s not worth what they’re asking for it! We want it, but we’re not going to pay near that for it!” And lo and behold,, the house sells for asking price the next week. As a buyer, your agent should give you comparables on your ultimate choice before you sit down to write the offer. Take their advice! Otherwise, wait to see if the price comes down, but don’t be disappointed if the next buyer does think it’s a great deal and purchases it!
Inventory is still very tight, with not enough homes on the market to satisfy the demand of buyers. Price your home correctly to begin with to avoid problems later. And if you’re buying, just know there are a lot of other competing buyers looking at the same properties.
As appearing in The Canton Repository 1-22-16