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VALUE: Let’s Talk About It!

So Let’s Talk About Value

One of the most confusing terms you will hear getting bandied about in any Real Estate transaction these days has to do with VALUE. The Assessor has their ideas and the Insurance Broker has theirs. Then we have the appraiser, and let’s not forget the buyer and seller who render their opinions and before you know it, we don’t know what the hell we are talking about. In fact, there are at least 7 different definitions of value here. So let’s try to sort them all out and address the subject more intelligently and minimize the confusion.
  1. Assessed Value: This is the dollar value the assessor assigns a property to measure applicable taxes. “Assessed valuation determines the value of a residence for tax purposes and takes comparable home sales and inspections into consideration.” In many municipalities, the gap between market value and assessed value can be staggering and this causes tremendous confusion with buyers and sellers.
  2. Market Value: This is the value that is established by a willing buyer and seller in what is called an “arms length transaction.” There is little argument these days that we are currently experiencing a very strong seller’s market in the world of 716.The extreme dearth of housing inventory  and the simple law of supply and demand is driving market values up to the point where some people are afraid to over pay. The consequence of this thought process is someone else will frequently just step up and pay more. That’s what makes a market.
  3. Appraised Value: Ok, there’s this guy and he comes out and looks at the house after you sign the paperwork and after you have applied for your mortgage. He magically states in his report that the house is worth X. When a house sells for significantly over the asking price, many agents and sellers alike breathe a major sigh of relief if that number (value} exceeds the purchase price. If it is less, “Houston we have a problem.” In multiple offers, we hear agents reciting the following mantra. “It still has to appraise.” This is why sometimes the highest price is not the best or accepted offer.
  4. Replacement Value: This is an easy one. God forbid the place burns down.  What will it cost to build it again and replace it? Where the problem arises here is that you may have your property underinsured and your carrier won’t reimburse you enough to cover the total cost. You should always over insure your house. If you have a mortgage on your property the bank will insist that you insure the property for at least the purchase price. More times than not, it will cost more to replace the home than you might think. Don’t get caught short. And this leads us to the next value.on your house.
  5. Insured Value: This is what the insurance carrier is going to pay you after that infamous fire we alluded to in the last paragraph.. Again, don’t confuse this with replacement or market value. They can be completely different numbers
  6. Comparable Value: We hear a lot of agents doing what they call a CMA or a Comparative Market Analysis. This can be a lengthy report, many pages long that compare your house (the subject property) to other houses that are deemed similar to yours. They are not the same as yours. They are similar in location, number of bedrooms, square footage and other comparable amenities. The agent will consider these properties and compare what they sold for and render an opinion that yours will go for about the same price. The report should have lots of information in it and not be what is referred to as a PFA appraisal (plucked from air) . It weighs the information of past sales more heavily than current properties on the market and is very similar to Appraised Value. 
  7. Competitive Value: This is the value I personally prefer when I do that CMA and I call it a Competitive Market Analyses. Past sales are certainly interesting but I want to know what is currently on the market. What is the competition? That’s what’s most important. If your house is on for 350,000 and there is a similar house around the corner priced at 300,000, you are in a less competitive position then they are right now. Take that into consideration when your price your house.


Hopefully, this sorts the whole value thing out for you. But remember, the respective value in most of these scenarios is nothing more than an opinion and opinions can be wildly divergent and sometimes they are proven incorrect with hindsight.  So the question here might actually be best expressed by asking the following:
       ” So what’s it worth to YOU? What value does it have for YOU?”




About the Author: 

Brendan J. Cunningham (SFR®), (SRES®)
Associate Broker. The “Platinum Team”His first book, (He is currently working on his 5th) TRICKS OF THE TRADE: A REAL ESTATE BROKER’S INSIDE ADVICE INTO BUYING AND SELLING A HOME (Adams, Media Corporation, Avon Ma. 2004) is a must read for any savvy real estate investor.

Brendan is a member of:
National Association of Realtors
New York State Association of Realtors
And he is also a member of the Buffalo Niagara Association of Realtors….

….where he has been quite active as Director, Treasurer and Vice President. He has served on over 30 committees over the years. He is a member of their faculty and the author of “Selling Real Estate in Volatile Times.” He holds The Seniors Real Estate Specialist® (SRES®) and Short Sale and Foreclosure Specialist Designations (SFR®), and as the point person for the 716 Realty Group’s Platinum Team.

Brendan J. Cunningham

e. |  p. 716-818-2526

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