So…if we shouldn’t be focusing on Tax Value, how do we determine Market Value? Let’s start by defining Value itself. In Webster’s, one of the key phrases used in defining Value is the phrase, “something…desirable”. Further, value is specific to each individual. So the answer to “What is a good value for this home?” is often “It depends…”
And what is a perfect example of “it depends”? How about swimming pools? One buyer might find a home with a swimming pool to be highly desirable. Another might only see the pool as a hazard or a headache to maintain. So the value of the pool could be a few thousand dollars…or nothing…or even a negative number. It depends on the value that each individual places on the pool itself.
In the sale of residential property, several factors go into determining a home’s value. Stop me if you have heard me say this before. They are Location, Price, Condition and Presentation.
Is this home in a location that you find desirable? And if you find it desirable, will other buyers also find it desirable? Are other homes in this area selling? If so, what are they selling for?
Price per Square Foot is one of the quickest and easiest factors in determining values of homes in a particular area. And it is a good place to start.
A home that sold last week for $200,000 and has 2,000 square feet of living area sold for $100/square foot. If we review several homes in that same neighborhood that sold generally around that price, then our expectation is that we, as buyers, should pay around that same price for the house we are interested in. If there is one lone house in the neighborhood that is priced at $115/per square foot or more, in the buyer’s mind, there must be something really spectacular about that house for us to want to pay more for it than other homes in the same area. What does it have that these other homes do not have? If there is no discernible difference to the buyers and the sellers will not bring the price down, then the buyers will look elsewhere.
Next time: Current Typical Items of Value