Proper research is essential for homebuyers. Not only should you be familiar with the steps in a real estate transaction, you should also know what your physical and financial needs are.
In a recent broadcast of “Eye on Real Estate with Dottie Herman” titled, “The Art of Negotiations,” Herman, CEO at Douglas Elliman, discussed some important aspects regarding a home’s worth.
“Price is what the home should be worth today. But sometimes people don’t price it right, so what you really want to look at is fair market value,” says Herman. This is what the seller should reasonably be asking for. Recently sold properties are used to help determine fair market value. These sales should be recent, preferably within the last six months, and should be similar in size and upkeep to the property you are considering. Unfortunately, this Comparative Market Analysis, or CMA, may not include all of the details. Keep in mind that the current condition, location and surroundings, as well as the view from the property, can all affect the price of a house.
The value of a property is established by the prospective buyer. Herman states that, when it comes to value, “It’s an opinion of what you think the home is worth, based on how you’re going to use it.” Value is calculated based on a person’s lifestyle, so it is different for everyone. For example, a home near public transportation could be more valuable for someone who does not drive than it would be for someone who does.
According to Herman, sellers believe a house is worth what they paid for it plus how much was spent on improvements and other things. In reality, when a seller improves a home, the value of the property is increased, not the cost. Since value is based on the buyer’s preferences, improvements and other extras are all subjective. A seller could receive dissimilar offers from potential buyers because they have made personal decisions about the home’s value.
For more information, visit www.elliman.com.
Price, Value and Cost: the Complicated Components of a Home’s Worth.