Whole Determines Property Values?
Property Value Truths
I have been a real estate investor and agent for over a decade. As a real estate agent, I would go on listing presentations when I first started my career. A listing presentation is when you meet with a potential seller of a home and interview with them to become their listing real estate agent. We would go out and talk with people interested in selling their property. We’d go into the property and we’d look around and take pictures, and then we would go back and sit at the kitchen table. Inevitably, the question would arise, “well, Ryan, what do you think this house is worth?” and my response would be that it honestly doesn’t matter what I think this house is worth; ultimately what matters is what a buyer thinks this house is worth. I can tell you a value based on what other buyers have paid in the neighborhood and from what other buyers can choose from in your neighborhood right now. We would go through and show them similar homes that have been purchased recently or that are currently on the market. We would show them the real price range for recent sales and recent listings. Often the seller would look up and say, ” Yeah, I know, but my house is worth more than those others, my house is just nicer.” Some sellers just believe that their home is better than anything else. I believe my personal home is better than anything else out there as well, but a buyer doesn’t. So the question is, Who Determines Value? Is the buyer or the seller determining the value? Many sellers think that they are going to determine the value of their property, and nothing can be further from the truth.
The person who will determine the value of a property is the buyer, in the context of the current market conditions, not the seller. So whether you think your house is worth a million dollars more than the other homes on the street or not, it is irrelevant, because you have no control over what that property is really worth. The new buyer is going to make that determination, depending on all that is available. That new buyer will look at two things: what else can they buy for the same amount of money, and what else has sold for that same amount of money. That’s it. You can set an asking price, but it isn’t necessarily what the property is worth.