Home value: why it’s a range

What is the value of my property?

The first question prospective home sellers usually ask me is “What is my home worth?” The answer to that question is never a specific number, but rather a range. And that range reflects this truth: value is in the eye of the beholder. The value of certain features of the property may be of more or less value depending on the buyer.

Specific property characteristics

Certain buyers may place more emphasis than others on aspects including square footage, layout, number beds and baths, convertibility/flexibility of space, storage, parking, size/shape/privacy of the lot and more. Someone with four kids who wants a guest room might be willing to bid higher on a 6-bedroom house than a family of four people. Those extra bedrooms carry less value to the second buyer than the first. Similarly, someone who wants a swimming pool will pay much more for a house with a pool than a buyer who either doesn’t want one or could take it or leave it.

Condition

Many buyers are looking for a turnkey property that requires no remodeling nor replacement of systems (like a roof, windows, or HVAC system). Others don’t mind some updating  (particularly if money doesn’t need to be spent inmmediately and a kitchen or bath renovation could wait a few years). For people in the first group (who from either a financial or time perspective can’t easily buy a house and update it in the near future), a turnkey house is worth more than it would be to someone who is hoping to put their personal stamp on the house.

Location

Location affects several important facets of a property

• What the neigborhood is like–if it’s very family-friendly with a babysitting coop, a book club, July 4th block party, someone with young kids might put a higher value on it than a single 50 year-old.
• The quality of the school district–see above!
• The work commute–what if an interested buyer happens to work around the corner in an office 2/10 of a mile from the house? That home’s value just went up significantly to that particular buyer.
• Access to preferred services/destinations–if your favorite shops, restaurants and services are a stone’s throw away, you might pay more for that house than if they weren’t.

Wildcards

“Wildcards” is the term I use to describe this situation: “My best friend lives in the house next door!” or “My grandmother used to live in this house.” or “This is the same street name and number of the house I lived in as a kid in another state.” Believe it or not, I’ve heard comments like these and for “wildcard” buyers, the value of the property very likely exceeds what a typical buyer might pay for the house.

Buyer profile

Another crucial factor in how high someone will bid for a house is what I call the buyer desperation quotient. To illustrate this idea, consider these two buyers: Buyer #1 has just begun looking for a house and has the luxury of being able to move any time in the next 15 months. They don’t have to sell to buy and have flexibility as far as staying with relatives if they do sell before they find a place. Buyer #2 is a family of seven, with two rottweilers. They are moving here to start a job and need to move in somewhere within 60 days. No one will rent to them because of the dogs, and, besides, they haven’t seen a single rental with five or more bedrooms. They  have already bid on and lost four houses. Buyer #2 is much more likely to bid higher on a six bedroom house in good condition and in a nice neighborhood than buyer #1.

Property appeal is a continuum

While every property has certain characteristics which help determine its value, that value will always be a range, because various buyers will care more about specific aspects of that property than other. From the size to the commutability, condition and school district, there will be buyers who ascribe more or less value to each of those features. Throw in less tangible property traits like “neighborhood feel” or one of the wildcards and you can easily see why there is a range. Now add in the fact that different buyers are in different situations and that idea of a range of value makes even more sense.

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If you are relocating to the Philadelphia/Main Line area, please go to my blog page and search for posts using the relocation tag. Contact me to discuss your Philadelphia area relocation! jen@jenniferlebow.com/610 308-5973