Exclusive: Purchasing a New Home? Know The Difference Between Value, Cost, & Price

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Know the Difference Between Value, Cost and Price of a Home

It is always recommended that you conduct thorough research before buying a home. Almost all real estate professionals concur that an educated buyer is in a better position to make wise decisions when purchasing a home. You will also have a relatively easier transaction if you have appropriate knowledge of the process and market.

Looking for a real estate broker is among the first important steps in buying a home. Research the local brokers and choose the one you connect with best; the one who understands the market and what you are looking for.

A good real estate broker should:

• Know what your property requirements are
• Understand the market
• Find the right property that will give you a worthwhile investment.
Purchasing a home is a major decision and the real estate broker you choose must remove any guesswork in the process.

Finding a good broker is not the end of the journey, however. You will have to research the particular attributes you want your property to have and then finalize your budget.

Unfortunately, that evaluation is not as simple as it may sound. This is where Dottie Herman’s pieces of advice come in handy. Dottie is the president and CEO of Prudential Douglas Elliman (the first link above).

Dottie Herman touched on the three crucial aspects of home buying in “The Art of Negotiations,” a broadcast that featured in the talk show “Eye on Real Estate with Dottie Herman.”

Dottie interpreted the term “worth” in three different levels: value, cost and price.

Value

Dottie defined value as the “opinion of what you think the home is worth,” which is based on how you plan to use the property. Your lifestyle will help in calculating the value. For instance, a home located close to public transportation is of more value to someone using the service than a buyer who does not need it.
Cost

Herman referred to cost as “a measure of the past” because sellers determine it based on what they paid for the home and any other improvements they have made.

Improvements on a home only increase its “value,” not its actual “cost.” Buyers will offer different prices based on how they value the home, with those who find more value in it being ready to pay more “cost.”

Dottie explained that value and cost do not necessarily determine the right price of a home.

Price

Price refers to the real worth of a home in the present market. Buyers should look for “fair market value” because home prices are not always right.

Find prices of similar homes sold in the past six months, and consider the duration they took in the market. Do not expect to get fair market value from Comparative Market Analysis or Brokers Price Opinion because they will not give you facts like wear and tear, location, view and neighbors.

Brooklyn Real Estate (the second link above) brokers will give you relevant information once you have narrowed down the properties you are interested in. Visit the properties and discuss with them.

Via: Prudential Dottie Herman