In real estate, we tend throw around the word ‘value’ on a regular basis without acknowledging that it is an extremely relative term.
Dictionary.com defines value as estimated or assigned worth. It does not, however, specify who estimates or assigns this worth. An appraiser will assign your house a value based on comparable properties in the area and what your house has and does not have in comparison. A buyer will assign your house a value based on what he needs, how much money he has and whether he thinks he is getting a good deal. When you attempt to place a value on a home you are selling, you will inevitably throw things like emotional attachments, memories, and your selling timeframe into the mix. These three people looking at the same house are going to come up with three radically different figures. This truth is inescapable.
This weekend I showed houses in Scottsdale and Fountain Hills to a client who is transferring his family out from California. Their house in California is just outside of the San Francisco area in the mountains that overlook the bay. He wants to purchase a house with city and mountain views and a feeling of elevation that is similar to where they live now. We have been looking in the $1-1.5 million price range.
In Scottsdale this weekend we saw three houses in McDowell Mountain Ranch. Although the first one did have a nice view of Camelback Mountain and the golf course up there, I was not overly impressed with what that price would get us in that area. The houses were basically beefed up tract homes. They had some nice touches, but nothing that would make me want to run out and spend over a million dollars on a home. My client tended to agree. I have, however, had clients who loved the McDowell Mountain Ranch community and weren’t interested in other areas.
Fountain Hills was a little bit of a different story. In the same price range we were in neighborhoods that had a distinctly more spacious and custom feel to them. Although, ‘custom’ is not always a fabulous thing… we did view one house that held a very creative point of view, decorating-wise. In fact, I think that most people would say that ‘creative’ is treating it nicely. It had high-gloss red, black and blue concrete floors, it had red silestone counters, it had diamond-plate steel as a backsplash and covering the stairs. It had orange and yellow and purple and green walls, a life-sized statue of Poseidon by the pool and giant painted metal sculptures of flowers in the front yard. It had whimsical touches everywhere that I can’t even describe. Whimsical, EXPENSIVE touches, I should add. You see, the problem with this house, was that although the layout was decent for my buyer, it would be so expensive to even neutralize half of the things this seller had done to the house that it would no longer be worth it to my client. The expensive specialized decor actually reduced the value of the house for my client (and probably 90% of the general public).
The other house of note that we saw in Fountain Hills was an open house that we happend upon. It was in a neighborhood my client liked and so even though it was priced up at $2 million, we stopped in to see just how much 25% more money would get us. We discovered that in this particular case, 25% more money actually upped the value of the house to my buyer even more than that. This was an amazingly well put together house. It had so many unique (and generally-market-friendly) details that my client (and I) just loved. I’ve seen $3 and $4 million properties that I would by far prefer this one to, if I had the capital to choose.
The point of all of this is that it is impossible for one person to accurately prescribe a singular value to a property. As an agent, it is my responsibility to take into account factors like the current market, the necessary timeframe of the seller, taste and desires of the ‘general public’ and attempt to find the price that a normal buyer would be willing to pay for the property, not assign its value or worth. The fact of the matter is that right now, the price that a buyer will likely be willing to pay is below (and in some cases SIGNIFICANTLY below) the value of a home as seen by both an appraiser and the seller. This is an upleasant and largely unexpected truth to many sellers these days, but one that has to be understood for a seller to be successful in this market.
Now if only I had Peewee Herman as a client and he wanted to buy in Fountain Hills… then I bet I could get a decent value for the seller of that one house!