In the USA, we tend to buy based on price. We go into a grocery store, a gas station, even a doctor's office and we tend to decide to buy based upon a posted price. We don't haggle with the cashier, the pump jockey, or the doctor either. If we don't have it, we don't buy it. Oh, we shop around, but we don't try to negotiate at the retail level.
Except for a few things. One of those is Real Estate. And, its the reason why the terms 'price', 'value', "appraised value", "assessed value", and other terms lead to a certain amount of confusion and/or hard feelings. Is there an OBJECTIVE value for Real Estate?
Well, we keep trying. People like Objectivity. It means we didn't overpay for something. One of the ways that appraisers evaluate the 'price' of a property, is by figuring out, how much it would take to DUPLICATE the home, starting with a bare lot, and building from scratch (or near scratch). But, that is hard to do, in a limited area like the District, where there are few, if any, bare lots to build from. And, to duplicate a home, does that include the costs to build it to Today's building codes, as opposed to the codes of yesteryear?
See the problem? Another way that appraisers determine 'value' is to look at other properties, hopefully identical in terms of location, condition, quality, size, etc. that sold recently, making adjustments for any differences, and using those sales to get an 'objective' value. See the qualifiers there? 'Location', 'condition', 'quality', 'size', 'recently', and 'adjustments' ALL require the appraiser to make a subjective decision. <Yes, even size: to wit; is a house that has a certain square footage, with x bedrooms, equate to one that has the same square footage, but x+1 bedrooms?> There are some rules about this, but they flex. A garage next to the Capitol, seems to me, is obviously of more utility, than one out in the wilds. For one thing, you can actually park your car!
Personally, I would prefer to have to criticize a teenagers poetry, than be an appraiser. They are brave and hardy souls, with an impossibly difficult task. Because, in my humble opinion, <and it is humble. I know how little I know.> The Value of a property is more than 50% Subjective criteria, and applies individually to the buyers involved. Buyer A is looking for a money-making investment; Buyer B, a home in a certain location or district, Buyer C found her dream house, Buyer D is so tired of paying rent, etc.
The only real objective value for a home, is what someone is willing to pay for it. If someone is ready, willing, and able to pay for it, then Adam Smith rules! <no relation> Thus, the value of a home may be anywhere from Nil, to Gazillions, all for the same home. The only real question is; how much is it worth to YOU; and, if forced to sell, could you recoup your investment. Since markets change, styles change, NEEDS of the Market Change, at best, all you can get is a guess, an educated one, to be sure, but just a guess. Crystal Balls are cloudy, Fortunes are obscure, and the Future is unwritten. All Real Estate is a Gamble. Don't forget that. ~aws
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