The Market Report: July 2023

Not So Fast

Property valuation is at its core, subjective. Ultimately the market commands the value of a property – A ready and willing buyer shows up, proposes a value that is sometimes near and sometimes far on either side of the seller’s proposed value, they have a joint meeting of the minds with a ready and willing seller, and is able to – and does – complete the transaction (the kicker). Any number of offers or thoughts of offers can be made on a property; but ultimately, it’s the one that completes the transaction that makes the market. Until then, the proposed value is not yet the real value.

There are a lot of armchair pundits on property values. We recently received a message from a buyer about a property we had listed, who was acting on their own without a real estate agent, and who had not yet seen the property they were inquiring about. He proceeded to inform us that the subject property we have on the market is wildly over-priced, and proceeded to tell us how much it is really worth.

The scenario is not uncommon. Being good-natured, we didn’t have the heart to tell him that there was a contract going out on the property for a significantly higher price than the price he educated us on. The sale hasn’t closed yet, so it could fall apart and, ultimately, he could wind up being correct. But a lot of experience tells us what’s more likely is that he is going to continue to mis-calculate real estate values by not accurately considering the driving factors. He based his opinion largely on layout and price per square foot.

Properties are inherently each unique. They are not made like the same shoes in the same size on a store shelf. Instead, there is a host of concerns ranging in complexity. In addition, those concerns range in how they matter to each individual buyer – The view from the second bedroom may not matter much to the couple who will use it for guests but may matter a lot to the writer who wants it as an office to work all day.

Unlike a relatively homogenous housing development, assessing value in New York City based on the size with price per square foot, is a fine factor to consider but trips buyers up without the consideration of the whole. We once had a buyer print a floor plan from a listing, and to help us understand what he was looking for, drew in red an extended, larger bedroom and a kitchen/living room reconfiguration, with the parameter that it have an address nearer a large park, in the same price range.

Location matters. So does the layout, views and exposure, as does floor height, building amenities, condition, services, building financials and upkeep, building monthlies, unit finishes and materials, cachet of the building, as a start. And then taking the sum of those considerations, it’s important as well to consider recent comparable property sales values but understanding those sales happened in the past. They inform pricing, not dictate it.

Assessing real estate value comes with extensive experience, analysis, understanding of the unique market in which a property exists and the pool of likely buyers for that property and their priority of commands. When embarking on a property hunt, find an experienced, knowledgeable real estate agent to help navigate the host of factors you should consider – someone who knows the market you’re in and takes the time to know you and your priorities.