Linda Humphrey, M.D., Broker/Owner HHC Realty

Here in Northern Nevada, we are blessed with an abundance of scenic beauty. We are circled by mountains, including the spectacular, snow-capped Sierra Nevada range to the west. From many areas of town, one enjoys sweeping views of the Truckee Meadows and the twinkling lights of downtown Reno and Sparks. When it comes time to list your home for sale, how much value is added by that breathtaking view?

This can be a tough, emotional question to answer. Most sellers, of course, would like to believe that their view borders on priceless, but will settle for a large premium added to their listing price. While buyers often enjoy and even seek out view properties, in this market they may be inclined to discount some or all of that premium. Unfortunately, if you want to sell your house, the view is worth exactly what a buyer is willing to pay for it, and not one penny more. And if the buyer is getting a loan, the appraiser will also weigh in.

What methods might a seller use to determine the listing price they want on a property with a dynamite view?

Option 1 - Fantasy Optimal Method. Start by finding two recent sales in your neighborhood that are similar in almost every respect: age, size, floorplan, general condition, etc., except that one of them has a view and the other one does not. Next verify that neither had any special conditions of sale; arms-length transactions, not distressed properties, no seller concessions. Then make the (still possibly incorrect) assumption that the remaining price differential is due to the view.

Option 2 - Lot Premium Method. Find two vacant building lots in your area, again one with and one without a view. Assume the lot premium applied to the view lot (as a percentage) is the amount of premium that could be applied to the land portion of your property's value.

If many of the recent sales in your neighborhood are distressed, either short sales or bank-owned properties (common in neighborhoods in all price ranges here in Reno and Sparks), and/or you can't find two recent sales that are otherwise similar enough (likely), and there are no vacant lots in your area, then we move on to:

Option 3 - Gut Instinct Method. Spend some time looking at recent sales throughout your area, preferably on Zillow. Get a general sense of how much more was paid for homes with views. Zero in on the data that supports your preconceived notions. Pay no attention to those pesky differences from one neighborhood to the next (Zillow doesn't).

Option 4 - Arbitrary Increase in Listing Price Method. Look at comparable sales in your neighborhood and then tack on an arbitrary XX% more to your listing price because your view home is so clearly superior to those others.

And finally...drum roll, please...

Option 5 - Professional Method. Have your REALTOR® help you fine tune your listing price; he or she will have extensive experience with the local housing market, including the current value of homes in your neighborhood and the traditional premium placed on a view, all backed by hard data. (S)He will also be tuned in to the recent behavior of the buyers in your market.

Something to keep in mind if you overvalue that view: you will limit showings and offers to only those buyers not put off by your inflated price. And even if you find a buyer crazy excited enough to offer you that premium, if the appraiser can't support the contract price with any comparable sales, you may well find yourself out of a deal.

Dear Mary,

We have been working together for many months now to find you a new home. I'd like to share some thoughts that have been running through my head lately. I've chosen to do so in a letter, so that you can't interrupt me to object, correct, or rationalize; you can do those things the next time we are together! What I want is for you to just listen to what I have to say and reflect on it a bit, keeping in mind that my motivation is solely to help you define where you are headed on this journey.

We have driven back and forth across Northern Nevada, from Reno to Sparks to Verdi and have seen many lovely homes for sale. A few of them have been darn near perfect, exactly what you have told me you are looking for, and we have come close to writing offers on them. But each time, just as we are about to get down to business, I see that look in your eye and something changes.

Maybe a brand-new need emerges, something that has never come up in the close to a year we have been looking. Remember the beautiful home in the desirable neighborhood? Just the right size, exactly what you wanted, within your budget? But oops, it didn't have a butler's pantry. Huh? Since when is that something you REALLY REALLY can't live without. Or the fabulous home on the golf course, with the small, no-maintenance yard. Oops! Your avocado washer and dryer clash with the paint in the laundry room? Gosh, how hard is that to remedy? Or maybe a new concern suddenly pops up. Recall the brand new home with the spectacular city views, perfect floor plan, in fact practically perfect in every way, just like Mary Poppins? Well yes, you would have to shovel the driveway. This is Northern Nevada, we are in the mountains and it snows here. And in case that fact slipped your mind, recall that we walked through snow up that driveway all ten of the times we went back to see it "one more time". Never mind that you or a neighborhood kid with a snowblower could whip through it in about 15 minutes.

People buying and selling homes often have a great deal of anxiety. It is totally normal to feel anxious, probably the rule rather than the exception. Lots of scary stuff: Is this the one? Will I regret my decision later? What if real estate prices drop further after I buy? Will my family look down their noses at me if I pay close to market value? What if there might be another house out there that I would have liked better, or gotten a better deal on? Many thoughts race through their minds.

I'm guessing that one or more of these anxiety-producing thoughts may be slinking around in your head, either consciously or subconsciously. That the easiest, most comfortable way to deal with the anxiety is to avoid making a decision. To find a seemingly rational reason not to make a decision. Although you were disappointed when those houses sold to someone else, weren't you also just the teensiest bit relieved? No need to face that anxiety head-on this time!

I guess what I am suggesting is that you might benefit at this point from a bit of introspection into your own motivations and fears. Maybe you'll discover that you don't really want to buy a home right now. That's ok! Or maybe we just need to spend some time discussing the issues you and/or your subconscious are actually worried about so that you are ready and confident to move forward the next time we find a perfect match.

I look forward to hearing your thoughts.

My very best regards,

Linda

Note to readers: Although this is loosely based on several actual clients, I was inspired in part by the "Six Fears" series of YouTube videos by REIC Coaching. http://www.youtube.com/watch?v=4fOOP3RBg1E

It's a great time to buy! Low interest rates! First-time buyer tax credit! Loads of affordable inventory!

Buyers are bombarded with that message, and, not surprisingly, they have responded. What doesn't make the news, is that much of the "affordable inventory" is bank-owned foreclosure properties. And if you are an FHA buyer, at least some of those banks and/or their asset managers don't want to hear from you.

My partner and I recently helped a young couple buy their first home. They were well qualified, had their 3.5% in hand, and were excited and eager to begin the search. We soon found a home in their price range that was not totally thrashed and quickly submitted a full asking price offer....no go. They were disappointed, but we reassured them that, although the competition is fierce, the inventory was plentiful.

On to the next property...above the asking price offer this time...no go. And the next...and the next...and the next... Seven unaccepted offers later, we finally cornered one of the local REO agents to ask what was up. She sighed, then told us she had just listed a nice little home in Reno, Nevada, perfect for first-timers, and immediately had ten FHA offers on her desk. The asset manager refused to look at any of them. She went on to say that often buyers' agents up the ante with higher and higher above the ask offers, but it doesn't matter. None of them are reviewed. Eventually, a cash-holding investor appears on the scene to buy the property, usually at a price lower than asking.

Fortunately, the story has a happy ending. Not all asset managers refuse FHA buyers, and we eventually found a very cute home that had actually been upgraded with new paint and carpet. We closed escrow Friday and they are almost certainly moving in as we speak.

Why are asset managers so reluctant to deal with FHA? Only they know the answer to that one, but I can think of several possible reasons: longer closing times, more deals that fall apart, and FHA appraisals that are really inspections, with appraisers requiring repairs to fund.

Regardless of the reasons, we have learned our lesson. Confirm first that the home can go FHA before you a)waste your time showing and writing an offer, and b)get your buyers excited only to be disappointed in the end.