I spend a lot of time thinking and talking about what homes are worth. This involves studying similar home sales, digging through listing photos and calling other agents to help form an opinion of value. It's the single most important part of my job when a homeowner enlists my help to sell her property
But when I work with someone looking to buy a home I'm sometimes at a loss trying to provide insights on value. This is because a home's value is extremely personal. Homes have intrinsic value that can't be captured with price-per-square-foot analysis. You'd probably agree that some homes are just good homes–others just don't feel right. It might be a result of the construction quality or remodeling through the years, but sometimes it's something you can't change like the neighborhood, the outlook, the way the home is positioned on the lot or the architectural style.
It's crazy that we put so much stock in comparable sales data when you think about the big picture. This data is pulled from the last six months and, in most cases, the nearby sales tell an incomplete story, in part because our region has such unique, storied old homes. It's also a small-minded way of looking at value because these past six months only tell you about this market…right now.
So I always try to back away and look at the big picture to gain perspective. A good home has much more value than what can be gleaned through an analysis because it brings enjoyment to its occupants and it may provide a place to come home to for a decade or more. I sometimes see buyers trying to fit a square peg into a round hole because they just haven't found the right house yet and they start making the wrong compromises. But I can't think of too many decisions more important than where we live (aside from who lives there with us!).
You should, of course, dig into the data and understand what you're buying. You have to consider things like:
- What have similar homes sold for nearby?
- Where does this home fit into the range of sale prices in the neighborhood?
- What was the last sale price of the home?
But more importantly, ask yourself:
- Would I enjoy walking around the neighborhood?
- How long could I live here?
- Where would I put all of my stuff, including my family members?!
- How does the house feel?
- Does the payment make sense considering our financial goals?
- How will this home weather a down real estate market?
Four years ago, when our market was in the toilet, a local blogger (and former co-worker of mine) named Tim Ellis wrote great a post on his blog, Seattle Bubble, about "the right time to buy." In it he wrote:
This sentiment is true for values as well. While we can take a big picture look at neighborhood data and nearby sales, what matters more is whether a home is right for you.