I had an interesting conversation with one of my buyers recently. He had interest in a home that is priced at $250,000. It's been on the market for a few months now.
The home itself is in an area he likes, but it does need some cosmetic updates. By cosmetic I mean a fresh coat of paint throughout and some wall paper removed.
When we were discussing the offer he asked me what I thought the home was actually worth.
Knowing the area well, I told him that if he got the home in the $235,000 - $240,000 price range, he would be getting a fair deal.
"I'm not paying a penny over $225,000 for it. That's what I think it's worth" said my buyer.
I asked him what he based his price on.
"Nothing. I didn't base it on anything. I'm just saying that I won't pay a penny more than $225,000."
We wrote the offer at $225,000 with a few seller concessions. I told the listing agent that our offer was a "take it or leave" it offer and that my buyer wouldn't go a penny more.
They rejected it.
My buyer was 100% okay with them rejecting it and we moved forward and found him another home that was the right fit.
The home he made an offer on later sold for $242,500.
This story got me thinking... How much is a home actually worth, and who decides on that number?
When we list a home or write an offer on a home, we do a market analysis to determine our opinion of price.
That consists of looking at comparable homes that are active and pending, and comparable sold homes in the area of the home in question.
Our opinion may be slightly different than another agent.
That other agent's opinion may be different than the seller's opinion.
That seller's opinion may be different than a buyer's opinion.
That buyer's opinion may be different than an appraiser's opinion.
Overall the market dictates what a home's value is, but everybody has their own opinion.