How do buyers determine home value?

In your mind, your home may be worth $10,000,000. In reality, it’s only worth as much as a buyer is willing to pay for it.

So how do buyers determine home value?

Buyers determine home value by what’s called “comparison shopping.” In essence, buyers look at two elements:

  1. Value; or particulars a home offers a buyer such as a having or not having a pool, tile or shingle roof, hurricane shutters or impact windows, etc., and
  2. Price

Buyers then compare these two elements against other similar properties in the immediate neighborhood to make a decision what gives them the most value for the price.  Hiring the right agent to assess the value of a property is pivotal, perhaps even more than advertising and client service.  Not having the right price on a home can mean the difference between a property selling in 30 to 60 days as opposed to not selling at all.

How do buyers determine home value is an art

There is no exact formula. During a listing presentation, ask your agent; “how did you calculate the price.” If it makes sense, hire them. If it does not, ask questions.

Tip: Need to hire a Realtor? Interview two or three Realtors to compete for the job.

An agent that knows what they are doing will answer all your questions with confidence and ease regardless of how much you may or may not like what you are listening too.

Yes, look out for confidence and ease. Why? Market forces, not an agent, determine home value. If we had that kind of power, we would be sipping margaritas in Tahiti on our private island. Since we have no control over price, we are merely the messengers of this data.

Related: Full price offer? Avoid this brutal mistake!

And because of this notion, there is no reason why a real estate should not be confident and at ease when delivering the price.  Any lack of the latter means two things:

  1. The agent is not telling the truth to get the listing OR
  2. They are not sure how they derived your home price.

Let me know what you think by commenting or asking your questions below.

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