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The most misunderstood term in Real estate!  The stories about seller s failure to understand value costing them tens of thousands of dollars and even hundreds of thousands of dollars I could write a best selling novel about. Simply by grasping the truth and putting aside the wants needs and unrealistic expectations of the day could have changed the fortune of many a would-be seller.  The sad part is, the same mistake is being made to this day by not only people trying to sell a home for more than it s worth, but now by potential buyers whom believe the only good offer is a low ball offer, regardless of asking price and value.  With a better understanding of value, each party has a much better chance of making the best decision possible.

 Value Versus Location

The old Real estate adage about location, location, location being the 3 most important things to consider is incredibly wrong because knowing value regardless of location is much more important.  Take two identical homes one by the tracks and the other nestled between mansions, one is obviously worth more as dictated by location and both have value.  Knowing the location is easy, knowing value takes skill and experience and getting the value correct the first time is paramount to success.   A buyer and seller of the property by the tracks may be sitting on less value but being astute enough to focus on the facts can realize a much better bottom line than being emotional, irrational or uninformed.  Knowing value brings balance all else creates randomness irrationality and volatility, which lead to unpredictability, uncertainty and eventually fear and anger.

Current Value and Trends

One of my favorite quotes of all time, only fools and liars profess they can predict the top or bottom of any market holds true to this day.  Factor in extreme volatility, which has become the major defining element of Real Estate and so many other commodities, predicting the absolute top or bottom of any commodity can be especially foolhardy. Understanding trends can certainly help us understand the direction of future value.  My favorite trend to watch is Supply vs. Demand.  I measure and chart the ratio of new homes to market vs, sold homes.   Knowing current and historic trends gives a window into the future value of Real Estate.   Finding current value, combined with an understanding of the supply/demand trend, positions you to make a sound Real Estate decision whether buying or selling.  Central Oregon Trends 

Realistic Expectations 
After achieving a sound understanding of value and future versus present costs associated with your decisions and current trends, one must consider the importance of setting realistic expectations.  If your home is worth $200,000.00, is putting it on the market for $250,000.00 in a declining and saturated market setting a realistic expectation?  Will this marketing strategy achieve the best possible price for the property? 
7 selling mistakes  What if you want to buy the home in the same market?  Is offering $150,000.00 when someone else is willing to pay $175,000 going to help you achieve your dream of home ownership?  The answer to every one of these questions is, value is what someone is willing to pay for something today!  Believe me, I know from experience that finding value then setting realistic expectations around that value is the only way to assure the highest level of success whether you are buying or selling.  Either way, do you have the tools to understand trends 
Central Oregon Trends and are you taking into consideration all the other variables that should be considered when buying or selling a home? 
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Variables

Up to this point I have focused on market value specific to a home.  Value comes in many other forms that are often overlooked and rarely fully understood.  I refer to these forms of value as variables.  Variables can be tangible as well as non-tangible entities.  Variables can be much harder and even impossible to accurately calculate and just like Real Estate, are constantly subject to change.  We may not be able to set an absolute value on every one of these variables but we can certainly raise our awareness of them and approximate their effect.  One more important note on variables:  variables can increase, just as well as reduce volatility.  In other words, variables drive the value and volatility of Real Estate and other commodities.
 Known Variables 
Current Housing Costs 
Monthly Income 
Monthly payments on a new home 
Current interest rates 
Tax advantages and disadvantages of your current situation 
Potential for long-term appreciation based on historical data 
Cost of commuting calculations (See below) 
Emotional quotient pride of ownership 
Quality of life 
Current supply and demand for Real Estate 
For investors-current cash flow 
Current tax rates 
Current Market Value 
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 Unknown Variables 
Future interest rates 
Landlords payment history to his lender (is foreclosure and eviction imminent?)
Future employment 
Local, national and now global economic conditions 
Future supply and demand for Real Estate 
Government Intervention 
National and International events, moods and perceptions 
Future changes to the neighborhood
Future tax rates 
For investors-future cash flow
Future Market Value 
Take these variables, sum them up, compare to present value and you have taken a disciplined and scientific approach to making a sound Real Estate decision.  Putting a dollar amount on many of these variables can be a daunting and subjective task.  Some of them elude all calculations.  Nonetheless, follow the exercise and you are light years ahead of most folks whom are making decisions based on their own perceptions, emotions, wants, needs and unrealistic expectations; none of which are a true reflection of value. 

Educate yourself on costs associated with your current situation compared to costs of your potential future situation, today s market value, trends and their potential effect on future value, and your ability to make sound rational decisions will lead to a much more successful result than can be achieved by the masses. By developing a plan based on facts and following it, even if it isn t perfect, your chances of successes will increase exponentially whether you are buying, selling or just kibitzing. 
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An Investment in knowledge earns the best interest. 
George Washington 
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