Can a home have 5 different values? - 09/21/2009

The one great truth about home value that I have learned in my many years in the real estate industry, is that no matter how you cut it, a home is only worth “what someone is willing to pay for it.”

I had a friend that lived high up on a mountainside in Woodstock. His home was a simple 1400 square foot somewhat dated ranch, but his 6 acre property was literally a park with long beautifully hand-laid stone walls, lush lawns, a waterfall and pond, and a huge 1600 square foot deck that looked out over the entire Hudson Valley. The 90 mile views were astounding. People that attended his many parties, sat on his deck gazing out over the valley and raved about his “million dollar” views.

When I received a call from him to list his home I did my usual research and factored in the view and other items and concluded that, stretching it, the property was worth at most $800,000. He was horrified. He told me he had an agent that had agreed to list the property for 1.4 million. His indignation was punctuated by the “million dollar views” line at least 10 times. I told him that in good conscience I could not list it at that price. He went with the other Realtor.

I don’t blame him. It‘s human nature that his ego wouldn’t let him list for less, after all, his friends told him he’d be crazy to sell this spectacular property for under 1.5 million.

A year passed and his property didn’t sell. In fact, it was hardly shown. He called me again and this time complained bitterly that the agent he had chosen “did a lousy job.”

Sadly, the agent he originally listed with bought into the knowledge-less advice of his well-meaning friends. The listing offering was destined to fail from day one.

Once again I did the research and told him what I truly believed it would sell for. “But everyone says…” he protested. I suggested that he offer to sell the house to his friends at a substantial discount and see how many takers he got.

I’ve heard it said; “it’s best to be a first lover, a second spouse, and a third Realtor,” and how true that often is.

I did list the house for 1.1 million, at his insistence, with the proviso that he would lower the price in stages periodically, after a review of the number of showings each month, and the feedback I received.

It still didn’t sell, although I had many, many, showings. By the time the listing expired it was priced at $959,000. Several more months passed and I got a call from a person who had seen the amazing views from the house pictures on my website. I called the owner and confirmed that the house was still for sale. I showed it to the prospective buyer and they made an offer in the low $700’s. Needless to say I spent several weeks negotiating the transaction and the final price was about $750,000.

Fortunately the offer was 60% in cash, because I was certain that the property would not appraise. The appraisal came in at only $520,000 and the seller just couldn’t understand it, “but the million dollar views…” Once again I explained that the land and the view only had a partial impact on the value, the appraisal was mostly predicated on the value of a 1400 square foot dated ranch.

To this day, however untrue, he insists the buyer “stole” his property.

I’m a firm believer that each home can have several very different values; an assessed value; that taxes are based on… an appraised value; that a bank considers in their investment decision… a sales value; based on the area market and comparative properties… and an emotional value; placed on it by the owner however unsupported.

They may all differ greatly, each having their purpose and place, but without a doubt, the only truly accurate value of a property is what someone is willing to pay for it.

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