I'll admit I've been out of the habit of taking buyers out, but recently we had some relocation clients and not enough buyers agents to take care of their time frame. In steps Jim.
Now I'm baffled. Seroiusly - and I'm hoping perhaps an appraiser will step in and correct some of the assumptions I'm going to make.
When I price a home I take into consideration the style of home, total square feet, lot size and garage capacity. Then on a slightly lesser note - with values attached to each - the number of bedrooms, baths and any other specialty rooms in the home. Then I account for special features - a barn, pool, etc. Then finally I look at the age and condition of the package as a whole. With specific upgrades and quality of finishes getting less value as they go up. That said - poor condition (carpets that clearly need replaced, or original 1968 kitchen cabinets) get perhaps exagerated discounts.
What I typically advise sellers is that replacing carpet doesn't automatically increase the value, but increasing the appeal could result in a higher sales price. I also only advise replacing when it's completely worn out - otherwise I suggest discounting the price about half the cost of replacing...If they need $5000 in new carpet I typically advice reducing by $2500 to account for it (buyers see $10,000).
Now I'm back out walking through homes with buyers and where asking price is concerned I see no adjustments for condition or quality.
Consider this scenario. I have been showing homes ranging from 3800 - 4400 square feet. Roughly. Price ranges are $375,000 - $425,000, When I'm showing three homes in the same area - about the same size and price - I anticipate similar quality and condition. If all three were build between 1993-1995 and one of the three has never had the gold color knobs and hinges, light fixtures or plumbing fixtures replaced. They have never replaced carpet or kitchen/bath floors. If the house has never been updated and looks and feels worn out I would expect the price to reflect that. What I'm finding is the opposite. I'm finding everything of similar age, size and location priced similarly regardless of quality of upgrades or state of repair.
So the question is. How do you discount? Then how do you account for features in the yard? One of the three had a very unique and well designed yard with gardens, water features and even electrical outlets. The others had yards.
The whole process is very different with buyers than sellers, and in a theoretical sense (what you see from pure numbers inside the office) the processes aren't even close.
I've always said buyers see repairs and over estimate the cost of making them while sellers discount the small things (oh that carpet is only ten years old).
Very curious how the rest of the industry makes some of these adjustment. I'm admittedly quite conservative with buyers and sellers. Realistic is a word I like to use if only to make myself feel better.