You must let go of preconceptions about what someone paid for the property that you are looking to purchase.
A property is worth what a buyer is willing to pay and a seller is willing to let it go for … period.
Just because someone paid $300,000 for the property last year, doesn’t mean crap. That doesn’t determine value or motivation.
Tax records won’t always be able to determine that the new owner spent $100,000 remodeling the kitchen, master suite & back yard. Or that they just took a second and third out on the property & now owe $470,000.
Of course buyers would like to have all the information & ammo necessary to make an educated determination of value. However, what the sellers paid for the property is irrelevant … it may eventually provide false hope to the buyers, and has absolutely nothing to do with value.
The sellers may have gotten a substantial steal because of serious damage that the public never new. They may have purchased the home as a simple flipper and then got in over their heads and had to hire a contractor for $70,000. There’s an infinite amount of scenarios.
Here’s a perfect example: If your grandparents gift you a property. Does that mean that the value is ZERO … because you didn’t have to pay for it? Hell No!
The same goes for properties that were purchased in the peak (When buyers Ego’s were running wild and out of control and people were trying to keep up with their Hoytie Toyie friends) Just because someone paid $950,000 for a property that had an inflated appraised value of 1.2M, that is selling for $490,000 today … doesn’t mean it’s a steal or a deal … Odds are, it’s an OK deal based on today’s market conditions.
Buyers & Realtors both need to wrap their heads around this better & understand this a little bit more clearly. The value is determined by comparable property sales, supply & demand, and what both parties are willing to pay & sell it for … not what the sellers originally paid for it.
Craig Zuber- Story #21 of 100 over the next 100 days
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#20 of 100: Are Your Clients On The Same Page As You?