As a home inspector, I don’t typically pay any attention to what the house I am inspecting costs. Most of the time I don’t even know—it is pretty much not material to the job of inspecting. You can take two identical houses and give one a mountain-view or a waterfront location; and put the other one next to a shooting range or a crematorium and the prices will vary dramatically—so why concern myself with what they cost.
The other day, “value” came up when my buyer asked me about the value of the house in relation to its price. I had already had a conversation with the agent about the value and price. Typically I don’t offer either the buyer or the agent my opinion on these issues—-I think the agent is in the best position to do this—-it is their job after all. I do not pretend to understand the complexities of house values in any market—especially in today’s market.
That said, in relation to most things, I think it is safe to say that “things” are worth what you can sell them for. I am not talking about the things we value that have no price—-like family & love. I am just talking about physical objects that are typically bought and sold or otherwise “transferred.”
What is the basis of this “value?” Isn’t it all about “trust” and “faith” and “confidence?” Without these elements—-things loose value. With them they gain value. To say that the current market is experiencing lack of trust; and loss of faith and confidence, would be an understatement of bailout proportions.
In these conversations I had with the agent and the buyer, I got to see how differently “value” can be looked at depending on who is doing the looking.
This was what I would consider a “distressed” sale. The builder had put together a home with dozens of high-end extras—-envisioned selling it for around $750,000. It was now selling for $450,000 (Some hyperbole with the numbers).
The Agent sees the situation as a “gold mine” of opportunity for our buyer. After all, the buyer would be getting a $750,000 home for only $450,000—-that is almost HALF-PRICE.
The buyer on the other hand, wants to know, if when they buy this beautiful home for $450,000, is the level of “trust, faith and confidence” on its way up—-or on its way down. They are thinking that if they buy it for $350,000 and the value is still on the way down and in five years they can only sell it for $300,000 then that amount is the “real” value of the home and what they perhaps should pay for it right now!
We have been living for so long under the illusion of never ending rising “trust, faith and confidence” that it is hard figuring out where the bottom of the trough of the wave actually is.
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Charles Buell, Seattle Home Inspector
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Charlie, the financial markets often speak of “future value” and the value of a stream of periodic deposits.
The buyer may well consider what they will have if they rent a home for any specific number of years, when that time is up, and then do a calculation of what the home will be worth in any number of appreciation/depreciation scenarios.
I’ve not heard any renter proclaim that rents have gone consistently down over the years. But when interest rates go down, a home owner can refinance and lock in a lower rate, therefore a lower payment.
All of that said, most non-homeowners are like sheep. Most won’t buy a home until everyone else they know is buying and there is no way to convince them they should do otherwise. Most will be content to say, “I should have bought back in 2012 when interest rates were under 4% for a 30 year fixed, and prices had been in decline for over 4 years. It was a no-brainer.”
Great post. Thanks for sharing and posting!