Perceived Value - What is your home worth

There is always some level of disconnect between what the owner of a home thinks it's worth and what the market (in the form of a buyer making an offer) thinks the house is worth. Often this is a wide gap. The old saw that something is worth what someone else is willing to pay for it is certainly true for real estate. There is no intrinsic value in real estate. The closest you could come would likely be the "value" of the land; however, that,too, is subject to what a buyer would pay. Here are some of most basic mistakes a home owner makes when mentally putting a value on his.her property:

1. My (insert brother, uncle, neighbor, friend, whatever here) sold their house just like this one for $XXX,XXX just last year.

It's obviously impossible to compare condition, evaluate the differences in location or factor hundreds of other things into this argument, much less take into consideration what has happened to the home market in the intervening time. A Realtor will usually go back no more than 6 months and will try very hard to find comparable homes that have sold - homes with similar features and located within reasonable distance from the home being priced.

2. I bought this house for $XXX,XXX 20 years ago and it's been appreciating X.X% per year, so it should be worth $YYY,YYY now.

Well it probably did appreciate X.X% per year for the first few year of the time span that this seller owned it; however, we haven't had any real appreciation in the Michigan market (at least in the Detroit area) for at least the last 5 years. In fact, we've been going the other way - depreciating- in many areas for the last 2 years. The only people continuing to show appreciation on your home are the tax assessors and they get paid by the tax collectors!

3. I went on Zillow and it said my house was worth $XXX,XXX. Why is your number different?

Zillow and all the other Internet real estate valuation sites depend upon the same inaccurate public records that the Counties publish. They do nothing to take condition into consideration, nor do they have a clue about location and any issue that come from that. You are only slightly better off using one of those sites than you would be puttingup a dart board with numbers on it and throwing darts to see what the price should be.

4. My sister (cousin, aunt, uncle, etc.) is a realtor in another state and they tell me that I should be asking more.

First see No. 1 above and then ask yourself what they could possible know about our local market that has somehow eluded your local Realtor. No other state in the Union has undergone the economic problems that we have in Michigan and few others are facing as dim long term prospects as are we facing right now.

5. Well, I owe $XXX,XXX on the place, so I need to ask at lease enough to get that an a little more out of it.

First off, the market doesn't care what you owe. Secondly, you may currently owe more than the place is worth. many people took full advantage of cheap, easy re-finances to take out equity in their homes. effectively their homes became giant piggy banks, to be robbed whenever needed. Many, many people are now "upside-down" on their homes - they would have to bring money to the table to sell the house. Your agent should be able to quickly tell you what your break even point is on a sale.

6. I know that the last three houses in this neighborhood sold for $XXX,XXX, but my house is better than any of those, so it should sell for $YYY,YYY.

First off, how is your house better? Do you know what the condition of those houses was at the time of the sale? Were you familiar with the improvements that those owners might have made? How long ago did those sales take place? Almost every owner wants to believe that they have the best house in the neighborhood. Some do. some have just never been in the other houses that they think they have some advantage over.

7. My home is worth more because I finished the basement, replaced the roof and remodeled the kitchen myself.

Some sellers, quite honestly believe that the do-it-yourself fix-ups or make-over that they did really added value to the homes. In some case it did, but in many cases it was just a schlock job that buyers will look at and figure that they have to tear out and have re-done by a professional. Not only that, but most do-it-yourselfers fail to pull permits, so the job is not only not well done, it is illegal. There is a place on the Seller's Disclosures to look for that.

So, my advice is to get a professional opinion or two from local Realtors and then take their advice. They know the local market and they know what to look for in a home and how it compares with other homes on the market and with what has sold recently. An honest realtor has no reason to inflate the value of your home just to stroke your ego. He/she really doesn't want to be saddled with another overpriced listing.