How do you define worth?

Asked by Aaron Trompeter, Saint Cloud, MN Fri Sep 28, 2012

I have a buyer that is asking me what a particular home is worth. On the surface it is simple, the comps say between 86 & 89 thousand. That said, the asking is 95, it's a short sale, and there's already one offer submitted.

The home is move-in ready, in excellent condition, and fits his every need. Not only that, but when I asked this bachelor which of all the houses he would be most proud to bring a potential wife candidate home to, this was the house.

But he kept asking what he should pay, what it's worth and is stuck on the 95 being not worth it. But when asked if it was worth the 800 a month it would take to pay for it, it was worth that. I told him I will write the offer based on what he wants and feels it's worth.

How do others balance issues of physical worth in regards to emotional worth when a property is exactly what a person wants and needs?

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Susan Hoffla…, Agent, Shoreview, MN
Wed Oct 10, 2012
No amount of talking is going to convince someone who doesn't think it's worth it. It's all VERY individual. If this is the type of property the buyer wants, then the buyer needs to weigh whether or not he/she will find another property this good at this price. And, if they are willing to gamble on that as they keep looking. Since there's already an offer in place, it's the classic "multiple offer" situation. So, the buyer needs to be informed that, with another offer in place, he most likely will not be able to offer less than ask and get it accepted by the bank.

These situations are really hard to explain to someone. I hate to say this, but sometimes buyers have to lose a few deals before they can "get real" about the quality they want and how much that will cost.

Good luck~~
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Chris Block, , Saint Paul, MN
Fri Sep 28, 2012
Very simple real estate is worth what a buyer is willing to pay for it. We realtors look at the market from a black & white picture, which is how it should be. We pull comps in the area and tell a buyer what we believe market value is. Now looking at your zip code maybe the comps are harder to pull than down in the cities? I don't really know, but I never assume that a Realtor is an appraiser or vice versa. We give a professional opinion of value that is unbiased.

But let me ask you a question: Can ANY realtor give the EXACT sales price when they list the home to the penny? Down in the cities I am working with a couple buyers at the 150k price point, which is just absolutely brutal right now. I am losing on multiple offers left and right, and they ARE closing. What am I supposed to tell my buyers? Pretty much that someone else was willing to pay more for this home than you were.

What I tell buyers is that I can give them a "ballpark figure" of value, but I can not give them an exact number. 5-10k should be allocated on smaller homes to the buyer. I say this to avoid the issue you are having right now.

It only took one buyer when I was a rookie to figure it out. We looked at homes for 6 months, and finally found a town-home that was perfect. We wrote an offer and it got accepted only to have a bad appraisal come in. My buyer had the financial capacity to make up the difference, but she could not get over the appraisal number. Now my story is a little different because there were comps to support my view, but nonetheless a month later the home sold to a different buyer 10K MORE THAN WHAT WE PAID FOR IT.

That buyer of mine ended up deciding to wait for another year, and now the area will cost her 20k more to buy the same TH due to the market. The truth is we won't be living in the house or enjoying it the buyer will. What is an extra 10k with interest rates these days $25 bucks/month??

I am not saying we should advise our clients to go the extreme overboard here on value, but I am simply stating the obvious that if you ask 3 realtors what the value is of a home they probably will give you 3 different answers. I then coach my buyer upfront that 5-10k is the range of values.
1 vote
Ron Thomas, Agent, Fresno, CA
Fri Sep 28, 2012
The Seller has his idea of what his house is WORTH.
The Buyer's may have differing ideas of its WORTH.
The Appraiser is paid to give an objective, professional OPINION.
We can do BPO's and CMA's till the cows come home.
Not only this; but the opinions can change in a week.

A couple years ago, that house was probably worth $175,000 and it will be again:
In five years, your Buyer will look back and find it hard to believe that he only paid $95,000!
But today; he is willing to lose the house over a few thousand.

The irony, is that he probably can't have it anyway.
1 vote
Aaron Sims, , Birmingham, AL
Fri Sep 28, 2012
Very interesting question and story. A house is "worth" what the market says it is. However just as your buyer has said its worth 800 a month, but not is it, or isn’t' it? In my area, some homes are selling with a lower monthly payment than a rental home of the same/similar plan. So maybe check and see what it would be to rent the same or similar home. Odds are he'd pay the same or more. So again he has the benefits of owning instead of renting. As rates are so low, the cost of owning is lower now then it has been for the last 20 plus years. Prices are starting to increase so odds are he'll actually be able to see some appreciation.
Now is the bank asking too much? Maybe. It has another offer, he really loves it, so in my opinion its worth is to try for it. What to offer, that’s the question. It is worth the 800/mo, it’s not worth the 95. Well tell him that if he doesn't have the 95, or the 90 to pay in cash, then it doesn’t' really matter. I'd buy a Million dollar home and move in tomorrow if it only cost me $800 a month. So really, the price doesn’t' matter, he's buying good terms, or a good price. He knows it’s a great home. He knows 800 a month is good. So maybe the question is this. It is worth it to lose the home because it i perfect to live, perfect payments, but the asking price is 5k too much? I may have gotten off track but seems he likes it. How would he feel if he didn’t' get it? Odds the other offer is full price, slim. They saw he same comps as you. So take a gamble, put in an offer of just under 195. Try as little contingencies as possible and get the bank to believe that your guy will close, close soon, and they will have the property off their hands. Best of luck; please let us know how it works out!
1 vote
Selling home by how much you can afford a month instead of focusing on the listing price is what got us into a housing bubble mess. Real estate agents make more money. People seem to get as much as they can and not what they only need. Economy tanks and foreclosures go up. As far as I am conserned the Real estate agents shouyld get a fixed amount for selling and the price of homes will not sky rocket. It is pretty bad when one can put a new house up for less than buying a new one. There is something wrong with that equation.
Flag Tue Mar 15, 2016
Mack McCoy, Agent, Seattle, WA
Wed Oct 10, 2012
It doesn't matter what you think it's worth, Aaron - what matters is: can your buyer find a better house for $86,000 or $89,000 or $95,000?

If this is the best house they can buy for $86,000 - it should be worth at least that much to them. If this is the best house they can buy for $95,000 - they shouldn't expect to get it for $86,000.

All the best,
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