Understanding Home Values: Episode Three – What’s My Home Worth
How much is your home worth? Theoretically, your home is worth what someone is willing to pay for it.
Hey, Zach McDonald, your real estate agent here with Real Property Associates and we’re going to continue the discussion of understanding home values. And in the previous video, I talked about comparable sales. And in this video I want to talk about this question, how much is my home worth? I asked that question in the previous video and I think it’s important to jump into this now in the discussion.
Your home is worth what someone’s willing to pay for it. Period. There’s nothing else and a lot of sellers I find, or homeowners, have a history in their house. They might have lived there, they might have raised a family or had a couple pets. They might have lived there for five to 10 years, but what happens is you have a story that builds up there. There’s a sentimental value that a person might attach to their home that isn’t necessarily adding value to the house. It might add value for you, but it doesn’t necessarily add value for somebody else.
So what we’re trying to do here, in this evaluation process, is come up with a more logical systematic value for your house that takes some of that emotion out of the process. So it’s great if you have a powerful story and lots of memories in your house. Those are super important and valuable and I don’t want to discredit those in any way, but as a real estate professional and as somebody that has to have conversations like this with sellers a lot, you want to be realistic about the value of your house because it might end up hurting you in the long run if you’re not.
So again, the home is worth, this is going to be the mantra, the home is worth what somebody’s willing to pay for it.
All right, I totally messed up my train of thought and lost it. So it was so bad I’m going to cut in and add this piece in, but the other piece along with your home is worth what somebody’s willing to pay for it is this idea that your house is worth not a specific number but more there’s more of a generic value range. So this value range, and we’ve talked about, there’s going to be a high side of it, right? That top number that somebody is willing to stretch and pay for it and then there’s that lower number that, man, it’s almost a steal if they get it for that price, but it’s still kind of in the ballpark. And as a real estate professional, my job is to educate you on, okay, this is the range, right? Maybe your home’s worth somewhere between, and it depends on the house. Maybe this range is wider, but let’s just say for the sake of this video, your house is worth between 600 thousand and 625 thousand, and that’s $25,000.
That’s an important number, you have to think about that. That’s $25,000. So for me, it seems like a small number because some of those value ranges are even broader, but what I want you to do is when we’re deciding where we price a house, you have to have that in your mind. It’s not an exact number. There is a little bit of a gap. It’s more of an art, not a science. Right? And so we have those discussions. There’s that top number that somebody might stretch for, but you also might not get that number and now you might be dropping your price.
And we’re seeing that right now in the Seattle market as … I hear market shift, there’s more inventory, there’s more selection. So you don’t have people stretching to buy that house. They’re going to be thinking more about the comparables, right? Well, what are these other houses selling for? They’re not going to just jump at the first one they see. There’s kind of a sweet spot. Right? And that’s where what I’d say the market value is and it’s usually in the middle somewhere. That’s the number where you know that you’re going to be able to at least attract one buyer, hopefully, multiple if there’s, it’s a hot market.
And then there’s that lower end that that bottom side where you’re maybe trying to stir up a bidding frenzy and get a lot of attention on your house. There’s a risk though, right? If you price on the lower side that you miss out and you get one offer at that lower price, you left $25,000 on the table. Maybe that same buyer that bought the house would have paid that extra 25 because he really liked it. But you reduced your price because you were trying to get a bidding frenzy and maybe you’re in a slower time in the market or you’re in a slower market in general.
Now, you just missed out on $25,000, which is $25,000. Let’s say that again. So as a seller it’s important to weigh the pros and cons of each of the different pricing strategies. And as a real estate professional, I find it that it’s my duty to educate you on those different pricing strategies, but ultimately you get to decide the list price. I don’t tell clients, you have to list your house for this price. What I like to do is give advice, give options, educate people right on this strategy of pricing, and ultimately your house is worth what somebody’s willing to pay for it. So let’s find out what that price is and let’s stick with it.