What is a property really worth?
Special to the Tribune
As real estate prices in Incline Village and Crystal Bay continue their trend upward, it seems that some property owners have inflated opinions about what their property is really worth.
In a nutshell, your property is worth what a bona fide buyer is willing to pay, not what you think it should sell for. Whether you have debts to pay off, an expensive wedding to contend with or need some extra cash to take that once-in-a-lifetime vacation, none of that matters to buyers who are shopping for real estate.
While you might see prices of individual stocks soaring dramatically higher in just a day or two based on some good news or rumors, that is not true for houses or condos.
Occasionally, a highly desirable property that is priced well under fair market value might receive multiple offers that drive the final sale price significantly above the initial asking price. But when viewed from an objective perspective, had the property been priced more accurately in the first place such disparities would rarely occur.
Trying to determine the value of a property by searching some of the major internet portals such as Zillow, Trulia or House Values will only add a layer of confusion to the process of determining what a property is really worth. These so-called proprietary algorithms might have a little bit of relevance in a market made of tract homes. But in a community of custom homes such as Incline Village and Crystal Bay, these estimated valuations are nothing more than an interesting exercise in hypothetical research.
Many buyers miss out on purchasing their dream home at Lake Tahoe because they put too much faith in these internet valuation services. What you will not find contained within these algorithms are many important factors such as the type of view, lot size, sun exposure, proximity of the neighbors, steepness of the driveway, floor plan and a host of other critical issues that affect property prices.
The only way to really get an objective evaluation of what a particular house, condo or freestanding condo will bring in today’s market is to do a thorough objective analysis that looks at similar properties in escrow, recently closed sales, and the current competition.
In addition to these commonly used criteria, it’s important to analyze all of the features and attributes of each property and compare the positives and negatives with the statistics generated from the usual comparative market analysis.
Before pricing your property for sale it’s imperative that sellers fully understand who they are competing with. While two properties may have many similar attributes such as lot size, square footage and type of floor plan, one of the great intangibles that also can be an unknown variable is the motivation of the other sellers you are up against.
Sometimes, your property might take longer to sell even if it has a lot of great features. If your competitor down the street has a smaller mortgage, bigger bank account and does not need to get top dollar, they may have more flexibility when it comes to the price and terms.
It’s impossible to get perfect knowledge about each one of your competitors, but learning as much as you can about your most direct competition can help you price your property more accurately.
It can be difficult for buyers and sellers to retain objectivity if there is even a hint of emotion involved with the decision-making process in a real estate transaction.
In the end, each property is worth what a bona fide buyer is willing to pay and what a realistic seller is willing to accept. Sometimes it takes losing out on a couple of deals before understanding the difference between what the realistic fair market value of a property is and what you think it is worth.
Sabrina Belleci and Don Kanare are the owners of RE/MAX North Lake. Read their blog and find weekly stats on their website at http://www.InsideIncline.com.