Value is elusive. It is your opinion of your house’s worth to you based on the way you use it now and plan to use it in the future. Interesting – the words “you” and “your” both appear twice in the preceding sentence. Because your opinion is subjective the features you value may not be the standard for all people.
Two factors affect value:
Cost is history. Cost measure past expenditures. But that was then, and this is now. What you paid for your house then or the cost of maintaining it doesn’t mean anything as far as the present or future value of your house is concerned.
Why? Markets can and do change dramatically. During the 70’s and 80’s property values soared in Atlanta and people made huge profits upon resale because demand (due to relocation) was so great. During the early 90’s prices leveled off or in some cases even declined. Unfortunately, many sellers realized little to no profit upon selling. Some even lost money. Your potential profit or loss as a seller doesn’t enter the equation when determining your house’s present value.
Price is here and now. You put an asking price on your house. The buyer puts an offering price in their offer. You and the buyer negotiate back and forth until you arrive at a mutually acceptable purchase price. Today’s purchase price becomes tomorrow’s cost.
Remember, cost is past, price is present, and value is in the eye of the beholder. Neither the price you paid nor the price you want to get matters to the buyer. Not understanding this often causes sellers to make a very common mistake – overpricing