New York, NY – July 13, 2012 – (RealEstateRama) — Dottie Herman hosts “Eye On Real Estate with Dottie Herman” and she extols the virtue of being an “educated buyer.” You can’t have too much knowledge when you decide to take on the task of purchasing a new home. Not long ago, Herman, CEO of Prudential Douglas Elliman Real Estate, did an episode called “The Art of Negotiations”. She talked about three ideas that comprise “worth.” While seemingly similar, they each have very different meanings: value, cost, and price.
Every person will put different value on different amenities. In a cold climate, a two-car garage would often afford more value than the typical single-car unit. This may seem slight, but on a snowy morning, when neither person has to shovel off their car, the difference in value is not subtle. Herman says, “Value is an opinion of what you think that home is worth, based on how you are going to use it.” A home that has a greater number of amenities the buyer is looking for will obviously have more value than a similar home with less of them.
Herman says that sellers often believe “the cost of the house is what they paid for it plus all of the improvements and money that they put into it thereafter.” To them, she feels, “Cost is a measure of the past.” Actually, when a seller makes improvements to their house, what they are doing is increasing the value of their home. Each buyer is going to assess value on a house differently and so they will make offer prices to reflect that value. Therefore, if the seller has improved his house to a quality that is pleasing to the buyer, then that buyer will be willing to pay a higher cost in order to get the value he feels the house is worth.
“Price is what the home should be worth today. But sometimes people don’t price it right, so what you really want to look at is fair market value,” says Herman in regards to pricing a home correctly. Your real estate broker can determine “Fair Market Value” on the houses that you are most interested in. They use comparable properties in that immediate area that are also listed or have recently sold. Finding out what other houses in the area are worth gives you a good idea about whether the seller is asking a realistic price and how you can bargain with him.
Once you understand these three components, you will better understand the worth of the home you want to purchase. Your offer will be motivated, and if you need to haggle with the seller, you will know where your bottom line is. And that’s very important. There is no point in dealing with a seller that is convinced that his shack is a castle. That is a waste of time for everyone involved. It’s better to just go find another house that better meets your criteria and your budget.
Megan Gates is an active blogger who provides written work pertaining to home improvement, the latest architecture, design and fashion. She also writes on behalf of Elliman Real Estate. Follow her on twitter @MEGatesDesign.