“I want a great deal”, says the new buyer. Throughout my career I’ve heard this phrase hundreds of times. A home purchase is possibly the largest transaction a buyer will ever endeavor. If they make a wrong move they’ll be stuck with the decision for a long time. Real Estate isn’t a liquid asset which you can simply trade in and get your money back. Closing costs on both sides of the transaction are involved and it’s a large investment decision not to be taken lightly. Do your due diligence but decide what’s most important; deal or value?
A ‘deal’ is exclusive to price or other related item which makes your acquisition cost much lower than the norm. If you have a house that’s listed for $250,000 but can get it for $180,000 would you take advantage? It could be considered a great deal. Or a seller who has a house listed at $250k but is willing to sell at 210k and offer to pay your closing costs. That would be a great deal as well.
I describe to my clients/buyers who are considering a house purchase to list what’s important to them. In fact, I describe to them that if I gave you 10 blocks for a graph and one side had 10 slots for Deal and the other had 10 slots for Value, which would you put your blocks? Most buyers are so focused on a great deal that they’ll put most of the weight to the ‘Deal’ side.
The above bar graph is representative of most of my buyers on our initial visit. They want a deal. They are aware of the market conditions, good or bad, and they want something below market price. Sometimes the phrase “wine tastes with a beer budget” applies. They want a lot for their money. Can you blame them? We were taught to get the best deal possible.
What about value? Value becomes evident once I start working with a client. It’s usually not very long before a client figures out the meaning of ‘value’. Value is found in items such as a location; close to a school, off the busy street, or a house on a quiet cul-de-sac. Value-related items are reflected in price because they offer attributes other properties might not enjoy.
The above graph is reflective of most of my buyers once they choose the right house for them. A house is to enjoy and live and its location determines which school your children will attend, how far you have to commute and other factors which might affect your lifestyle.
You really want that large yard but the only one available backs to a busy street. Not the best value for your family? The 3,000 square foot fixer-upper can be taken at a great price but the 2,600 square foot house which backs to a nature reserve and is walking distance to school might be a better value? What about that 250k house you can get for 180k. You just learned it has foundation issues, a bad roof, and adds 20 minutes to your commute. Still a great deal?
Deal vs Value is exclusive to each individual buyer but as a Real Estate professional it’s important to give buyers ideas to allow for a sound and methodical approach for their decision-making. Ultimately they’ll choose the best house for them and they can rest easy knowing they made the best decision for their family. Real Estate professionals don’t just show houses, they offer you advice, ideas on how to approach your decision making, negotiate on your behalf, assist during the inspection phase, and see it all the way through closing. A good Realtor on your side is a valuable asset.
Deal vs Value; an approach to make your search more efficient and enjoyable.
-James DeLaGarza, Realtor and Broker since 1992
Real estate 101 