3 Immutable Laws of Real Estate that Debunks the Myths

There are three laws of real estate that buyers, sellers and even agents don’t always recognize or admit to. Knowing that these laws exist and how they work will make it easier to correctly price your home for sell.

Law #1: It does not matter what your neighbors’ home sold for in the past.

Home prices rise and fall regularly, and they can change daily, seemingly impulsively. What a home was worth five years ago, last month or yesterday is not its value today. This can be a difficult pill for homeowners to swallow.

Sellers should not worry themselves with “woulda, coulda and shoulda” because you didn’t sell your home two years ago when you could have gotten more for it. Todays’ value is todays’ value. Six months from now it will be different. You must do what’s best for your family today without lamenting the past or speculating about the future.

Law #2: A home is worth what a ready, willing and able buyer will pay for it. (In today’s market, “able” is usually the limiting factor. Blame the banks.)

Your real estate agent can’t dictate what a home is worth. We can only give you an approximate price of what home will sale for based on informed analyze. Some of us can get very close; others, not so much.

Automated Valuation Models (AVM) such as those used by Zillow and Trulia certainly can’t tell you what a home is worth. Values determined by algorithms, they are most often incorrect when it comes to the final sales price. Automated valuations are fun to play with and are reasonable ways to look at pricing trends, but they should never be relied on to price a home (the AVM providers will even tell you this).

A home appraiser can’t even tell you; though the bank will listen to an appraiser and not loan you more than what the appraiser reports the home is worth. Surprised! Have five different appraisers give you a report and you will receive…five different valuations.

Don’t get me wrong, appraisers do very good work at drilling down into a home’s value, but my point is, unless you find buyers who are ready, willing and able to buy the home at the price they deem appropriate, it’s not going to sell.

Bottom line, it doesn’t matter what the homeowners think their home is worth. And it certainly doesn’t matter what the agent or owner wishes the home to be worth. What matters is what a buyer thinks it’s worth and/or what the bank will finance.

Law #3: Home improvements will not make a home value increase in an amount equal to or greater than what was paid for the improvements.

The result of the third law of real estate is that money spent to maintain a home adds zero to the home value. That new water heater installed last year, the new roof or that $3,000 air conditioner compressor that was installed last week add zero dollars to your home’s value. Yes, the water heater, air conditioner and roof being new-ish will likely appeal to some buyers; it might well be what triggers their decision to buy your home versus another one, but they do not make the home intrinsically more valuable.

Does it suck to dump $3,000 into an air conditioning repair on a home you’re not even going to live in? Yep, but try selling a home without air conditioning in places where it gets over 80 degrees, or a home anywhere without a water heater or a leaky roof. You’d have to discount the price of the home at a far greater amount than those repairs would cost to sell a home missing such basic functionality, and you’ll limit your potential buyer pool significantly without those mandatory “features.”

If fundamental repairs are needed, the owner has a choice to make them and not expect to recoup any of that money or be prepared to discount the list price to compensate.

Have a $25,000 swimming pool installed, and a home’s value is not automagically increased by $25,000. Depending on the pool, the location, nearby amenities, and the demand for a pool, your $25,000 addition might add $5,000 or $10,000 to the value of the home. Or it might add nothing. Some improvements, especially the kitchen and bathrooms, tend to have higher rates of payback than others. But rare is the improvement that adds equal or more value to a home than what it cost.

A professional Realtor• will advise you and guide you so you do not fall victim to real estate myths, helping you to sell your property as quickly and for the most profit possible for your family. OPR

About Olivia Patterson-Ryans

Olivia is known for her effective negotiating skills and strong work ethics which are attributable to her easy going calm, yet strong demeanor, which enables her successful service to a diverse client base from many backgrounds and economic strata.

Olivia’s partnership with Coldwell Banker Realty aligns her with one of the largest real estate Brokerages worldwide. When you work with a Coldwell Banker agent, you aren’t just working with an agent; you’re hiring a vast network of dedicated real estate professionals. Olivia earned a BS and Master’s Degree from Pepperdine University. In her early years, she taught high school algebra and geometry. “ My philosophy is simple: Clients come
first! Well… after God and family that
is. . .