Buying a home, News, Selling your home

Value vs. Price: finding the sweet spot for the buyer

There are many different tools and considerations in setting the price of a home to sell.  It is a fact that the seller or a real estate agent eager to obtain a listing may believe they get to set the price of a home for sale based on their needs.  The truth is that the buyer gets to set the price.  Anything for sale will only sell for what a buyer will pay, a seller will accept, and what a bank will loan.

To set the market price for a property agents will gather information about comparable properties in the neighborhood, evaluate the condition of the property, and consider the market conditions (supply and demand).  When the lender sends an appraiser out to appraise the property, they do the same thing.  Price is what you pay for a property.

How does the price impact the marketing?  How does marketing a property impact the sale?  Marketing needs to do two things.  First, drive traffic to the property.  Second, showcase the features that add value to a buyer.  Once the buyer gets into the home to view the property, price and value take over.  This is when the house “sells itself” or fails to deliver market value and sends the buyer to another property.

But what about value?  What is the difference between value and price?  If price is what you pay, value is what you get. Value is based on the buyer’s opinion of the functionality of the property.  This is where the seller and the buyer may drift off the same page.  What the seller values, the buyer may not.  An example is a seller putting a new roof on the property last year.  He thinks this has added value, while the buyer may view having a good roof as expected maintenance, and sees no additional value.  The size of the lot can be another example of the seller finding value and the buyer maybe not so much.  An appraiser will give $1 a square foot in value for a bigger lot, yet the buyer may be more interested in the views, location or how the home sits on the lot, not the additional square feet.

In a sellers market, when supply is low and demand is high prices will rise and value will contribute to that rise. When the buyer is paying a higher price, they will be willing to pay for value and expect it!  In a buyer’s market, where supply is high and demand low, prices will decrease.  Getting a great price trumps value for the buyer in this case.

 

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