Why do people buy a house?

In my years of practice, I occasionally come across a home that will “never” sell, but that is simply wrong. The fact is EVERY home will sell as long as the value proposition is correct for a given buyer.  To get the very best return on any home it is important to consider how the value proposition will be computed for the average buyer in any given price range. The elements of the value proposition are nearly constant, but the key to remember is that value proposition changes as the price range changes.

The elements of the value proposition are:

  • Location – Where a home is located affects the other factors, but it is quantifiable alone.
  • Utility – Does the property “Work”. This encompasses floor plans, room counts, and flow.
  • Features – This includes things such as yard size, square footage, parking, room size, etc.
  • Lifestyle – What does the community offer?  How do people live in this home?
  • Status – What will my friends think? Nothing more than that, but frequently masked by terms such as curb appeal, landscaping and decor.
  • Asterisk – These are the weird ones.

I have tried to come up with other elements, but they eventually all fit into one of these elements. The Asterisk category is NOT a copout.  It is just the cases in which a SINGLE factor overcomes all others, such as when someone buys a house next door to a family member because they want to be close, or the house is bought to be torn down for a parking lot. Usually this overwhelming factor is location or intensely sentimental reasons.

The point is that these factors adjust unpredictably in their importance to the individual buyer, but systematically depending on price range. For example consider the extremes; 2 families of 4, one who will spend $100,000 and one who will spend $1,000,000.

1m values 100k Values

 

As represented above, all of the factors are considered by every buyer, but the ones that become paramount depend on constraints.  For example, it is almost impossible to find a million dollar home with less than 3 bedrooms, and it is equally difficult to find a $100,000 home that has 3 bedrooms. So the lower priced shopper must consider a minimal set of utility and feature requirements that are automatic in a higher price range.

Most people do not even know what their own value proposition looks like.  As a buyer’s agent, you need to decipher any given buyer’s criteria and understand the criteria better than they themselves do.  As a listing agent, you must be aware of a given home’s value proposition to the average buyer in order to price a home correctly.  I love this process and have been helped greatly by quantifying this concept in my business.