As an active agent in a busy Edmonton real estate market I’m often asked to provide home owners with the valuation of their home. I’m honored! Really, it’s an honor to be invited into someone’s home to provide an evaluation of value – something these folks will use to make monumental decisions concerning housing for their future and family.
Most have an opinion of value and hope for me to offer them the highest valuation possible, while others simply have no idea of value and trust that I’ll be accurate. But almost all people make the mistake of thinking that I (as the Realtor) am determining the value of their home. I don’t! As a Realtor I can offer an informed opinion of what I think the buyers will be willing to pay for a home like theirs at this time. And some sellers (regardless of what I say) have strong opinions of what their home will be worth on the open market. These people put a line in the sand saying something like “I won’t take a penny less than __”.
But it’s important to understand that this discussion between me (as Realtor) and any seller is absent the one person that really matters – the buyer! Regardless of what I think, or what the seller wants, the property will sell for what a buyer is willing to pay, period.
The buyers’ opinion of value is really the only opinion that needs to be discussed, really – it’s their money and no one is going to tell them (nor should they) what to pay for a given property. So a solid understanding of how a buyer attaches value to a home, will give sellers a better chance to sell quickly and maximize home value.
Home buyers will go through a process. While most don’t start with looking at what they can afford (most start by looking at what’s on the market) they will eventually consider what they can afford in terms of monthly payments; or by examining the current value of their existing home. Then using this information, buyers enter the market in their most preferred geographic area armed with the knowledge of what they can spend for a home. Most buyers will see a handful of homes that match their buying criteria (8 – 10 is typical) and their price range before making a buying decision. Then, assuming the find one they like, buyers will chose to make an offer on the home that represents the best value – not the cheapest, just the home that has the best value. Imagine being a buyer. You see 2 identical houses, on the same side of the street – same everything including the asking price, except house 2 needs a whole new kitchen, roof, and new bathrooms. Clearly house 1 is better value and it will sell first. But if house 2 is priced $40,000 less than house 1 some buyers will see an opportunity to create value by making the improvements on their own thus in that case house 2 might sell first.
When making their offer, (most) buyers will hope to save some money off the asking price, but not at the expense of losing the house they want! Normally buyers will make an offer by first considering what other homes in the area have been selling for, and by looking at how long your home has been for sale. If your home has been for sale less than a week the buyers perception will be that your price is still quite firm. But if your home has been for sale for 60 days or more, buyers who want it will always feel more empowered to make an offer for far lower than your asking price. Negotiating only benefits the buyer.
Price your home by demonstrating good value to the buyer and you’ll sell faster – for more money – with far less complications.