Value is what a buyer will pay

#62 in a series of true experiences in real estate
July 1994, Hills Newspapers

A few weeks ago a seller asked us to tell him what his house is worth. We did not get the listing. It showed up on the multiple listing computer priced quite a bit higher than what we thought it would sell for.
The house has some unusual aspects which we gave quite a lot of thought, and although we can never be positive about the prices we come to, we still feel pretty confident about what we told the seller.

While it makes little sense for any agent to take a listing at just any price, it is possible that the agent who will be marketing this house suggested the higher price herself. Or she may have suggested a lower price and then been urged higher by the seller.

There are a number of possible explanations for why one agent thinks a house is worth more than another agent does, or is willing to market a house even though it may be listed too high.

Some houses are much easier to price (and often to sell) than others. There may be a number of “good comps” (similar houses that have recently sold), or there may be no comparable sales at all.

Often different agents look at different sales date and so come to different conclusions. This usually occurs when one of them is unfamiliar with a particular neighborhood, but sometimes it’s a matter of interpretation. Guessing about value before a buyer is at hand is not an exact science.

Also, there are houses that are so distinctive that there is nothing quite like them, nothing to compare them to. It’s hard to figure who the buyer will be.

Some years ago, there was a large brown shingle house for sale in Rockridge on a popular street. The exterior was what many buyers were looking for, but inside the house had been dramatically changed. Wall-to-wall carpeting covered the hardwood floors. In the dining room was a large built-in bar that was covered with mirror squares, and the kitchen had been redone in orange formica.

In another area, at another time, this house might have had wide appeal, but on this street at that time, it was difficult to price the house because it was going to be hard to find a buyer.

Location and condition, of course, have much to do with the appeal of any house. Location includes what is going on with neighboring houses (if the house next door looks like a junkyard, buyers will be reluctant to buy there), how much crime the neighborhood is perceived as having (actual or not), trees, views, proximity to shopping, parks, and freeways, and so on.

The size of the lot, how the house sits on the lot, and how well the exterior fits in with the other houses around it are also important. If there is traffic noise or the house is next to a commercial use, there will be fewer interested buyers. And if the area is not a named neighborhood (“Where is that?” people ask when they get around to asking) or is on a very short street, it can be harder to sell. Agents and buyers don’t recognize the street in advertising and not many people drive past and see the sign.

Sometimes an agent is willing to market a house even if the price seems high because she particularly likes the house and/or the seller. Maybe the house is in a neighborhood where “everyone” wants to live, so it is sure to attract attention. Or the house is unusually desirable in some other way – it sits on a large, level, sunny lot with many trees, for instance. Such a house may sell for more than the comparable sales indicate due to its one-of-a-kind aspects.

While thinking about pricing and marketing any house, a good agent does several things. The first is to confirm who the owner is. It occasionally happens that the person trying to sell the house isn’t the owner. Or he is on title, but so are several other people. There is no point in pursuing business with someone who may not be able to offer it.

The agent also considers factors that will influence a successful sale. Is it likely that the house will appraise for enough?

What kinds of things may come up in a physical inspection that could discourage a buyer? Can anything be done about them now?

There may be an easement that will present a problem, or extensive asbestos, or even no heating system. Easy access for showing the house, and how soon a buyer can expect to move in, are also important.

If the house is in a flood, earthquake, or slide area, or if there has been crime in or around the house, these must be disclosed to buyers. Any of these, as well as many other things, can affect the number of potential buyers, the length of time to sell, and price.

Obviously, an agent prefers to have listings she feels she can sell in a reasonable amount of time. Marketing is expensive, both in terms of time and money.

It’s hard on the seller, too. Having your house available to show every day of the week is stressful at best, a horror for some.

Figuring out an appropriate price for any house is complicated, a combination of hard information, experience, and intuition, but even when all of these is available, it is only a good guess. That’s the trouble with dealing with unique things.

Whether it’s jewelry, artwork, a champion dog, or a car, it’s value – by definition – is what a buyer will actually pay.

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