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Reconciling expectations

Posted by Rona Fischman May 16, 2011 02:31 PM

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Today, our Monday guy Sam Schneiderman, broker owner of Greater Boston Home Team wonders out loud about the expectations of today's sellers and buyers.

Despite inflation, virtually everything that most of us buy and use frequently goes down in value. No one is surprised when their cars, books, records, furniture, clothes, computers, electronics, exercise equipment, etc. lose value.

On the other hand, many people are surprised and disappointed when the value of their home goes down.

Since past performance is often a reliable indicator of future performance, it should be no surprise to anyone that the value of a home can increase or decrease in value over time because home values are directly affected by supply and demand. Since supply and demand are affected by economic conditions beyond our control such as interest rates, employment and the availability of mortgage financing, I think that it is outstanding that home values increase at all over the long term. (I know that there are other factors to consider, however, that is not the point of today’s post.)

When I bought my first home, I didn't buy it because I expected it to increase in value. (In fact, at that time, Boston’s history of home price appreciation was pretty lackluster and condos were pretty new to the market that I was buying in.) I figured that it was a good deal if I could live there, pay the mortgage down, keep up the property and have some equity in it to sell when I was done with it. I figured that was a better deal than renting and having nothing to sell when I left the property. I realized that my rent was paying down my landlord's mortgage at the time, so it seemed like a good idea to pay down my own mortgage instead. The incentive of getting some tax breaks for the mortgage and property taxes I paid was a nice plus, too.

Many of the sellers that I meet figure that they are losing money if they can't sell their home for the price that they paid, plus the money they spent to replace the home's outdated components, even when some of the replacements were to make the home more fashionable by today's standards (granite counter tops, hardwood floors, etc.) or increase the home’s energy efficiency and/or comfort. They rarely consider the tax breaks that they have received over the years or the value of the public schooling vs. the cost of alternative private schools in their calculations. Is this realistic or unrealistic?

What do you think realistic expectations should for sellers in today's market?
Should those be the same expectations for today's buyers when it's their time to sell?

I understand that different people will have different approaches to these questions. What I am most interested in is if your expectations differ depending on whether you are on the buying or selling side, how do you account for that?

This blog is not written or edited by or the Boston Globe.
The author is solely responsible for the content.

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About boston real estate now
Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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