Did you ever walk into a home and think, this is really nice. The colors are appealing and the décor is pleasing. The home has order. It makes you happy.
As a Realtor this is the way I wish every home buyer would react to the homes they preview. Wishful thinking.
When I put a Berks County home on the market prospective buyers call to preview it. Some call me and others call the agent they are working with. Either way, the prospective buyer, and agent, have an opinion about the home after they have been there. Normally, this is given in the form of written feedback (email). I review the feedback and communicate it to the seller.
I am often amazed at how different the feedback can be on a given Berks County home. Some rate it an 8 (out of 10) and some a 2? When asked about the price it can vary by tens of thousands of dollars. This is true with both buyers and professional real estate agents.
So why the differences? Is it the difference in the buyers taste, practical needs or expectations at a certain value range? How about the professional agents. Surely they would be grouped closer together in their opinions. Not so.
It is the difference in what makes each of us as individuals happy. This is known as intrinsic value. In the home selling market it is the intangible value of a property. You will never see the phrase “intrinsic” as a value adjustment on a bank appraisal.
Something is said to have intrinsic value if it is good “in and of itself,” i.e., not merely as a means for acquiring something else.
Happiness might be an example of an intrinsic value, because being happy is good just because it’s good to be happy, not because being happy leads to anything else.
This is one reason a 3,000 square foot home with granite counter tops, hardwood flooring & upgraded everything may sell faster and for a much greater price than the same home in the same neighborhood without the upgrades. In actuality it may sell for so much more that it does not appraise.
This is likely because the buyer was happy with the home and it made them feel good. Unfortunately, their lender is not going to live there and the appraiser has no choice but to use the less amenitized home in the appraisal. What makes the lender happy is a different form of intrinsic value that has more to do with making a good investment which leads to their happiness.
The intrinsic nature of a home is a powerful thing. It is one of the main reasons that sellers truly believe their home is worth more than anyone else. They live there and have happy memories. They chose the décor and we all have good taste…right? As a real estate professional it is my job to assess the market value of a Berks County home. Overpricing the home may get me the listing but actually hurt the homes ability to sell for a fair market price.
I often include the homeowner in the pricing process. This not only educates the seller on how the market will react to their home but creates a true understanding on how the value was assessed less its intrinsic value. Afterwards we can consider the intrinsic value and how prospective buyers will feel when they see the home. That should be the pricing variable not the leading indicator of price.
Intrinsic value is only one of 5 evaluative measures I use when assisting a Berks County home seller acquire a ready, willing and able buyer for their property. Needless to say, it is, and will likely always be, the most unpredictable variable in pricing homes.
Jeffrey C. Hogue
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