Home buyers in Arlington, Virginia have always asked me "how much is this home worth?" And they are usually surprised when I won't tell them. I will give comparable recent sales, I will give them market data to tell them what most houses of this kind are selling for, how much is on the market etc. But exactly what is it worth? Well, what only really matters is what it is worth to you, if you are the buyer. That's what you are willing to pay and only you can answer that question. Now what if someone else thinks it's worth more than you? Guess what - that's what its worth. Maddening, isn't it? There is no "source" on value. Tax assessments, Zillow, your agent, an appraiser - they all have estimates or opinions on value. Is one worth more than the other? Some people get fixated on tax assessments, which right now, are most often 10-20% low. Zestimates? Well they shift by the hour. Is that reliable?
Value is subjective. You know the adage "Beauty is in the Eye of the Beholder?" Same goes for the value of a house. Especially in a rapidly shifting real estate market with low interest rates and severely low inventory. When supply does not meet demand, values rise - Econ 101. If you are buying, thinking of buying or even remotely interested in real estate in Arlington, VA, you have probably heard we are now in a seller's market.
Right now, we have a severe inventory shortage. This makes determining value something like running up a hill, a race, a strength and endurance test. He who wants it the most will win the house. For example, most "hot" homes are getting multiple offers. In a series of multiple offers, we are seeing a range of anywhere from just below list to several thousand above.
Some people argue that the appraiser determines the value. I disagree. Sure, the appraiser can give an opinion of value that differs from the buyer and the seller, but are they correct? Well if the buyer agrees with the appraiser and insists the seller lower to appraised value, and the seller complies, then yes they are. But if the buyer disagrees or has waived appraisal contingency and proceeds to close on the contract price, what the appraiser thinks really does not matter. Or what if the seller refuses to reduce the price, the buyer backs out and the house goes back on the market then the next appraiser agrees with value (this happened to me last fall). That first appraiser was obviously wrong.
So, again, bottom line is there are many factors to consider in determining what you want to pay, but there is no authority on value other than you, the buyer, whichever buyer that may be.
Charlie and Lucy image courtesy of the great Charles Schulz. If you are a buyer, don't be like Charlie and let Lucy steal that dream house out from under you!
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