Managing Expectations of Home Value
Posted May 3rd, 2017 by evotta





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Many homeowners have a great deal of pride of ownership for their homes that have been lovingly tended to for many years. Unfortunately, many of these homes are also in original condition, or updates may have been made some 15-20 years ago. The true market value of these homes, as a result, can fall short of lofty expectations, making it a challenge to convert a prospect to a resident. It’s therefore crucial to carefully and sensitively manage those expectations from the outset. Conveying a sense of what buyers in the owner’s neighborhood are looking for – and what they are willing to pay for it – is a first step that can’t be overlooked. To accomplish this, three important factors should be understood:

1) The Market is Local and Current

Appraisers, real estate agents, and mortgage lenders can predict the likely market value of a home by examining the performance of similar properties within the neighborhood sold within the last 6 to 12 months. Real estate activity is ruled not just by supply and demand, but also by all of the dynamic economic factors that color a buyer’s readiness and ability to purchase. These factors are ever-changing, so reviewing only the most recent activity is relevant to the task at hand.

2) Generalizations About Real Estate are Misleading

News items about a “hot market” seldom deliver useful information. Some markets are active, some types of property are in strong demand, and some price points are appealing to certain segments of the industry. It’s very rare that these stories relate specifically to the customer’s home.

Similarly, the performances of other types of financial holdings are not a reliable indicator of residential real estate prices. Rising and falling prices of gold or stocks and bonds exert no effect on the buying decisions of 99% of the home shoppers active in the market. Accordingly, applying a standard rule or general formula related to historic appreciation rates or the average price-per-square-foot seen in the marketplace fails to predict a buyer’s reaction to the home being offered for sale.

3) Value is Driven by Buyers

The popularity of television programming focused on home buying, selling, and renovations is a reflection of the trends emerging over the past decade toward consumer preferences for the latest in upgrades and updates. Even modestly priced homes often feature high-quality finishes such as granite or marble, stainless steel appliances, luxurious master suite amenities, large closets, and custom decorating.

These “value drivers” aren’t limited to just the quality and cosmetics of the interior. Open floor plans, large family living areas, sufficient garage space, attractive outdoor living amenities, and low-maintenance landscaping are popular in many markets. Not to be forgotten is the importance of location, as well as the overall size, condition, and functionality of the home.

Understanding a neighborhood’s “value drivers” includes an objective assessment of the home’s conformity to the other homes that recently sold nearby. Trends can be identified where most of the sales featured a number of common elements, such as finished basements, pools, or gleaming hardwood floors. These conforming trends establish what prospective buyers find appealing and at what price.

Managing the Homeowner Expectations

The customer usually has a general notion of the value of the home, though typically this is not based on an objective review of the features and condition of the neighborhood market. The best approach is to:

1) Ask the question “for how much do you think the home would sell today?”

2) “Tell me about your house.” How many beds, baths, garage bays?

How much above-grade living space (sq.ft.)? How long have you owned,

what’s been remodeled, and when? Remember that most owners love to talk about their home; they’ve been living there for years. It’s not an interrogation, it’s a conversation.

3) Using the information at hand, invite the homeowner to review some internet market data with you. If the customer said the home was worth $200,000, use a website like Realtor.com or Zillow.com to search for homes in their neighborhood that are currently for sale between 90% and 110% of the target value. Ask them to review the pictures you find and elicit their comments on how their home compares to what else is being offered on the market. Are they bigger or smaller, more updated/upgraded or the same? Do they share a specific style or “curb appeal” with the customer’s home, or not? The same exercise could be done with homes recently sold in that same price range.

4) Ask the question “if 123 Main Street is available for $200,000, do you think a buyer would likely pay more or less for your house, and why?”

5) Practice this with your own home or one you know well so you learn how to navigate the search engines and efficiently filter the results. Time and practice will help build an understanding of how to recognize the “value drivers” among various price points and neighborhoods.

The goal of this exercise is not to establish the property’s value, but to get the customer thinking objectively about their home and see it as a prospective buyer would. It’s worth noting that 95% of all home buyers begin their search for a new home utilizing these very websites – looking at pictures, reading the descriptions, and checking out the locator maps – before they ever call a real estate agent to set up a showing.

The goal of this exercise is not to establish the property’s value, but to get the customer thinking objectively about their home and see it as a prospective buyer would. It’s worth noting that 95% of all home buyers begin their search for a new home utilizing these very websites – looking at pictures, reading the descriptions, and checking out the locator maps – before they ever call a real estate agent to set up a showing.

The short version:

•Value is a buyer’s domain.

•Look at the home and the choices available in the neighborhood market through a

buyer’s eyes.

•If selling the home is crucial to the customer’s decision to move, a realistic

expectation speeds that prospect toward becoming a resident.

Your Moving Station Real Estate Counselor is in place to help you navigate these conversations with your prospective residents. Every day, we have similar discussions with home owners to help them become successful home sellers. Having an honest conversation about home value is not always fun, but it is important toward helping your prospect become your resident, and that is why we are here to serve you.


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