When Expectations and Market Reality Collide
To a certain extent, it's always been true ... a buyer's perception of value is generally quite different than a sellers. But in this market, buyers are more bewildered than ever when they begin their home search. They're wondering why THEY can't find those fabulous $400,000 homes for $200,000 or less! And while the reality is that there such extreme values may appear now and then, the majority of what's on the market today, while substantially discounted over what they might have sold for just a few years ago, are generally not nearly that extreme.
There's a reason why parents have reminded their offspring "if it sounds too good to be true, it probably is!" for generations. The reality is, despite the decline in home values that plagues so many communities today, buyers are often very disappointed when they first begin actually looking at homes and compare what they're seeing in their price range to what they thought they would find. Just this weekend, I was showing homes to some very enthusiastic first-time buyers who had scoured through the hundreds of available MLS listings that met their criteria. They'd found several that looked appealing in photos and were very excited to get out to see them in person. This would be their first time actually getting inside homes currently for sale, and the plan was for this to be (unless we found something really SPECTACULAR) basically an "educational" appointment to get an idea of just what the dollars they had planned to spend would bring them in the areas they had chosen. What they found, and what many other buyers are finding, is that there is often a disconnect between the perception of the current market and the reality.
Having realistic expectations is a critical component for a productive home search experience. Imagine that, based on stories you'd heard and the news reporting, that you BELIEVED the dollars you had available to spend could buy you a home like the grand home you see here on the left. And imagine that when you actually got out and began looking at homes in your price range, what you found were more like the one on the right? It's a nice home...nicely manicured lot. And let's even assume that what you saw inside the home was wonderful...well cared for, updated, spacious. But how would you feel? Would you be excited about the one on the right if your expectation was that you could buy the one on the left for the dollars you'd planned on spending????
Chances are you'd be very disappointed! Regardless of whether or not the house on the right was a great home, in a great neighborhood, in great condition, and representing a great value, the reality for you would be that you would feel as though you were getting robbed!
But now let's assume your perspective was different. This time imagine your expectations were reversed and that what you BELIEVE you'll be able to find in your price range looks more like this! With that in mind, now go back to the middle image and think about how you might feel about THAT home? Would you more likely feel disappointed...or pleasantly surprised?
The reality is that the middle house never changed. It had the very same things to offer whether you expected to find more house for your dollar or less! But, based on those expectations, your perception of its value most certainly DID change, right?
So how DO buyers better prepare themselves for the realities of the marketplace? Here are some things you'll want to consider if you're thinking about buying a home and don't want to set yourself up with unrealistic expectations:
- Recognize that the media (online as well as off) does hype and exaggerate. It's how they get the viewer's attention. Accurately representing reality is often not their priority.
- When someone says they just got a house for $200,000 that the seller had purchased just a few years earlier for twice that, recognize that there are many factors that could be at play to create the difference in price...it's not always just a shift in the market. For example, are the home and property in the identical condition they were in when they were purchased earlier for that substantially higher amount? Condition matters!
- When you hear that someone was able to negotiate an outrageous discount from the asking price, try to find out how "realistically" the house was priced in the first place. For example, if you have two identical houses that are valued at, for example, $110,000, one priced at $100,000 and the other at $130,000, might you be able to get a bigger discount off the one priced at $130,000? Undoubtedly. But which would really represent the better deal? How much someone is able to negotiate off an asking price is irrelevant without knowing the other pertinent factors.
What are your expectations of the market?