What Will Drive Home Values in the Future?
Think about resale when you buy your home - at the time of sale, a home
becomes a commodity. Market value is determined by the amount well informed
buyers have agreed to pay today on comparable properties. The seller's
investment in and/or emotional attachment to the home are not determining
factors.
Terms affect price - The more liberal the terms, the higher the
price the seller will obtain. The more restrictive the terms, the lower
the price.
Location, location, location - Convenience to employment centers,
schools, transportation, for example, as well as lifestyle opportunities,
drive buyer demand.
Buyers typically pay more for new construction - At the time of
resale; newer occupied homes may have to compete directly with new
construction by discounting price.
The cost of capital improvements may not be fully recovered -
Although future buyers may find improvements appealing, they seldom pay
what they actually cost.
Deferred maintenance negatively impacts value - Buyers expect a
property to be well maintained. The typical buyer will discount the value
more than the actual cost of repairs.
Buyers seldom pay for the seller's decorating - The seller's decorating
choices should be viewed as a cost of personal enjoyment. Neutral decorating
appeals to most buyers and will typically shorten market time for the seller.
Buyers expect specific features and amenities within each price
range - Buyers quickly discount the price if room spaces, quality and
features are lacking for the price range.
Incurable defects have a dramatic impact on value - Buyers resist
busy streets, unpopular floor plans, and properties that are inconsistent
with the character of the neighborhood. Sellers of these properties should
allow for expensive market time or price below market to sell within an
average market time.
Asking price drives value - Knowledgeable buyers respond quickly
to inspect a new listing. An overpriced property suggests that the seller
is unrealistic, which makes buyers reluctant to negotiate. Over time, when
the price is reduced, buyers lose interest or are concerned that no one else
desires the property. This puts the seller at a disadvantage and can cause a
below market sale price.
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