Price, Value, Worth…to Whom?

In many “problem solving” meetings conducted by real estate brokers and salesmen, a property will be presented and inevitably someone will say, “What’s it worth?”

Insofar as the writer is concerned, this is a meaningless question. Price, value and worth have to be connected to a person. The same property will have a different value and a different worth; hence, a different price to different people. The mere existence of a parcel of property has nothing to do with price, value or worth.

These words become meaningful only when some person will sacrifice something to become the owner of that parcel of property. This follows the California Supreme Court’s definition of fair market value- the buyer who is not under pressure to buy and the seller who is not under pressure to sell, and considering the best uses to which the property may be put, then the amount of what a buyer is willing to sacrifice sets the price.

The question always should be, “What will that certain parcel of property do for an individual?” The investor who might be able to increase his depreciation deduction without increasing his equity investment might be willing to “take” the property. In other words, the investor would consider an overvalued price. Still another person paying taxes in the highest bracket might turn down high-income, low-depreciation property even at what might seem to others to be a bargain price.

Therefore, what one is willing to sacrifice to obtain a certain parcel of property depends upon that acquirer’s circumstances. In our complicated life of today, particularly with the many complications of the ownership of real estate, the writer believes it is only good business and to the benefit of the client that all of the client’s circumstances be learned through counseling. No action should be taken to acquire and/or dispose of property for this person until both the counselor and the client understand his full circumstances. It is only after a thorough understanding of the problem, or problems, of the person that any action can be taken to solve this problem.

Too many practitioners of real estate get so involved they forget that a property is an inanimate thing and cannot do anything for itself. Who can talk to a house and get any answers? I find that most brokers and salesmen are so physical in their thinking and operate by logical deductions that they become lost in the mundane details surrounding a property. This attitude only serves to possibly hurt a client because of not considering the personal circumstances of his requirements for better benefits for himself and family.

Comments are closed.