Why properties have no definite value

Value is not an exact science. Simply put, what a property is worth to you based on your needs, wants and lifestyle is going to be different to what a property is worth to me. Your husband likes to build things and you like to create. You both like to spend your weekends at home. So that house in need of a reno and the enormous overgrown garden that needs landscaping is perfect for the two of you.

My days of doing up a house are long gone. We did it with our first home and enjoyed every minute of it, but these days I’m quite happy spending my free time with the family. So, of course this house is going to be worth more to you than to me. It’s probably worth more to you than it is to an investor because investors generally want something low maintenance.

Your comment about “$550k for the house and $3k for my sanity” actually makes this point beautifully. There is so much more than the bricks and mortar involved when you’re looking at home values.

How do you know if you’ve paid too much?

Do you have any regrets? If you could rewind the clock by 48 hours, would you make a different decision? If the other bidder came in with an offer for $554k would you have walked away from this property or would you have gone higher?

Most buyers have a price they would love to get it for. If they did they would be ecstatic, but this almost never happens. Therefore what they move to is “what do we actually believe is a fair price?” And when they’re making that decision, they’re thinking about the money they need to spend here or renovate there. Quite often that number is still below what they’re actually willing to pay for it.

Value becomes “what is the market willing to pay for this?” and remember, you were only one bid above someone else. And the difference between your bids was not huge. If the agent has told you there was a big in the high $540s and you jumped in with a bid of $640k then you might have an issue. But no one actually does that because buyers want the best price they can get.

How do people who don’t work in property do this?

You definitely have an advantage working in a building full of agents. But there is so much data out there that any buyer can get a good understanding of what the home might go for with a little bit of online research. Just be warned that this data does not include any upgrades that have been done to the house since it was bought.

Also, buyers are going to plenty of open homes and plenty of auctions. Auctions are great - that’s the best way of determining ‘value’ because you can see people win, but also not win by very much. Market value is pretty well established. 

It’s almost impossible for someone who has worn out the shoe leather traipsing along to open homes and auction to get it really wrong.

Ultimately, once they’ve moved in, no one ever lays awake at night wondering if they have paid too much. This is a temporary worry, I promise. When you’re in and you’re loving every bit of owning your own home, this isn’t going to cross your mind again.