- The seller sees a castle
- The buyer sees a modest house.
- The lender sees a shack
This old cartoon is not unfamiliar for real estate professionals – as we regularly deal with people who have different views of homes. However; while we may see each home differently, one thing we agree about is that money and value matters.
So – what is your house worth? In simplest terms, a home is worth what you paid for it, the appreciation of your house over the years owned, plus any capital improvements. While it may be tempting to believe our home has appreciated faster than our neighbors’ – it is unlikely. Using a chart like the one below at the zip code level, we can get a pretty good idea of appreciation.
You then add in the capital improvements you did to the house over the period you owned it. Generally, capital improvements do not appreciate as much as your real estate. It is also important not to include the things you will be taking with you – so that antique armoire you bought or the custom rugs do not count.
If a seller does this exercise he or she will have a good idea of the fair market value of the house. That should be the price the home is listed at, but this is not always what happens.
In addition to the exercise above, it is important to have an agent do a comparative market analysis of the home and research the sold homes in the vicinity. It is the SOLD homes, not the listed ones, which are important here. The active market usually has a number of listed homes with inflated prices that will just sit on the market and not sell – including them will inaccurately skew your findings. So, just because your neighbors listed their house at a higher-than-expected price, does not necessarily mean your value has gone up. Of course, it is also important to adjust comparative properties for any major circumstances that add unusual value above or below yours – such as an A+ location, different schools, the condition and overall appeal, etc.
After a comparative market analysis, you should have an even better idea of what price range your home falls in. As a seller, this may be exciting or disappointing. It is important to not let emotional barriers affect your pricing decisions. While agents hear “I need more than that” frequently, buyers do not care how much a seller needs – they care about value. But as selling a home is an emotional process, so is buying. Occasionally buyers have emotional connections to a home and are willing to pay more than it’s “value.”
While you can look through online tools and do your own research, ultimately it is important to find an agent that knows the marketplace and to listen to them. They have your best interest at heart and have a fiduciary duty to act in fairness. With proper pricing, outstanding marketing, and a technologically savvy agent – we will help you get you the best possible price.
And ultimately your home’s value is what it sells for – the price a willing buyer paid and what a willing seller accepts. Let’s figure it out together.
This article recently ran in the January 11th, 2013 Palo Alto Daily News publication Premier Homes.
Mary Gebhardt joined the management team of Alain Pinel Realtors to open its Menlo Park office. She has since set about assembling the area’s most successful agents who thrive in this demanding marketplace which includes Atherton, Woodside, Portola Valley, and Menlo Park. She aspires to increasingly dominate this market by offering an unmatched level of service and understanding of her agents and clientele. For more information call Alain Pinel Realtors Menlo Park at 650-462-1111 or email at firstname.lastname@example.org.