Agent view: Don't overlook emotion in determining house prices
When I started my career in Lisney 15 years ago I was asked a simple question by a wiser, longer-in-the-tooth colleague: what is the value of a house? Fresh out of college and eager to impress, I enthusiastically stated that the value of a house is based on comparable evidence of similar properties recently sold in an area. Wrong, he said, the value of a house is what someone is prepared to pay for it.
Some 15 years later, and I see in practice almost every day that the value of a house is exactly what someone is prepared to pay for it. It is also of course - critically - what someone is prepared to accept for it.
In many cities around the world it is commonplace to apply an accepted price per square foot to calculate the value of a house, yet this is not a commonly used practice in the valuation of second-hand homes in Ireland. Why not? Because, while on paper this seems logical, it doesn't capture the subjectivity involved in someone's opinion on value.
For most, the buying and selling of houses is inherently emotive, and even the most rational find it difficult to be dispassionate about their home, whether buying or selling.
A simple price per square foot calculation doesn't capture the influence of emotion - why some will pay a premium to be close to their family and others will pay a premium to be far removed from theirs. Or why some owners find it difficult to let go of a house that holds so many memories, even though they know deep down it is time to move on.
I recently had cause to think about the value of my own house and, knowing full well what the 'value' was, I immediately decided I wouldn't sell it for that, not because it is worth more but clearly it is worth more to me.
The truth is, we can all have an opinion on the value of a house, but ultimately the value is exactly what, in a particular moment in time, a willing buyer is willing to pay a willing seller.
And, for all the subjective reasons in between, there is often a wide gulf between the two. In so many ways, the role of the agent is to bring these two parties together on this emotional roller-coaster, to where buyer and seller feel their particular opinion of value has not been compromised, to arrive at this magic number that will end up shortly thereafter as a cold hard fact on a property price register.
David Byrne is a director with Lisney