What is a Los Angeles home worth? Well that depends in which corner you are standing, the seller’s, the buyer’s or the lender’s. And the meaning of “worth” changes depending on your corner and the market in which you find yourself – a sellers’ or a buyers’. For the purpose of this discussion we will assume it is a balanced market with a note at the end of each section covering today’s sellers’ market.
If you are considering selling your Los Angeles home may be thinking, “what is my home worth?” This is probably not the way to look at it. The question should be “what will my home sell for?”
As a seller you have an extremely subjective opinion of your home, and that opinion often translates into an over inflated idea of its “worth”. You factor in how much you bought it for, the money you put into it, the happy times you spent there, etc., and you feel it is worth x amount. That way you will cover your closing costs and make a nice profit. Sounds good. But it doesn’t work that way.
The value of your home will bear what the market dictates. Your Los Angeles Realtor® will show you comparable sales in the neighborhood of your home. They will be similar homes which sold within the past few months – similar square footage, bed and bath count, condition, upgrades, etc. (Homes which are currently on the market are not a comp as what they will actually sell for is an unknown factor). Those comps will indicate what your home should sell for – its “worth”.
Even in this sellers’ market your home needs to be priced right (for what its “worth” – market price). Price it too low, you will get multiple offers but may not reach the market price. Price it too high and you may not get offers and end up selling below market after it sits for a while.
If you are considering buying a Los Angeles home your idea is to find a deal and you generally view the list price of a home as “overpriced”. “Worth” has a different meaning to you. If you love the home it is almost certainly worth the price, but you just don’t want to pay it. Your Realtor® will have looked at comparable sales in the area and will know whether the home is priced right. If it is, and you want the home, you are going to have to be close to or at asking price.
This is a sellers’ market. A home that you love is almost definitely going to have others who love it and who will be making offers. In a multiple offer situation nothing less than asking price is acceptable. In many cases, buyers are going over asking to start. When the counter comes, which it inevitably will, is when you decide how much that home is “worth” to you. With a scarcity of homes and a glut of buyers your view may change.
If you are getting a loan then your lender is going to want to know that the home is “worth” the money they are lending. They will send out an appraiser. Like the Realtors®, an appraiser will look at recent comps, with an additional set of criteria and will determine the “worth” of the home. Right or wrong, there is no arguing with the final word of the appraiser and underwriter.
If the home does not appraise, this is where “worth” takes on a life of its own:
For a buyer with a loan you may ask the seller for a reduction in price, or you may cancel the contract. But, depending on how much the home is “worth” to you, you may pay the difference between the appraised price and the price you offered
For the seller you may agree to lower the price or risk losing a buyer. However, if the home does not appraise for your listing price you no longer have control over its “worth”.
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