is a pricier home better? {the game of perception in real estate}

We’re thrilled to be back with another real estate post today, and thought we’d tackle this little topic: The Game of Perception {in Real Estate!}

We’re tackling the question: is a pricier home better?

Perception has a lot to do with life. A lot.

If you think about it in terms of real estate, the same home sitting on 20 acres, one person might describe it as ideal and worth every penny. While their friend thinks, “Yuck why would you want to manage that much property?”. Another person swoons over black trim on black walls on black tile, on black, on black. Another more reasonable person {kidding, not kidding} sees it as a trend and a detriment to a property’s value.

But there is one perception that most people seem to blindly hold, and really have no idea that there’s an alternative way of thinking. It’s simply that a home that is higher in price, is inherently better.

before

A realtor friend commented the other day, that “the next level up” when it comes to homes, is more often than not, disappointing. And we agreed. Then it made us think. 

It plays out differently in every market, but as an agent, I’ve noticed that there are price groups, and within those groups, are grades of homes.

Let me break it down.

To do so, we’ll use the Franklin, Tn {where we’re located} market price groups. For argument’s sake, we won’t deal with anything under $700k because in the Franklin market these either need extensive work done, the bed/bath ratio is not favorable, or the sq ft is not favorable. Not always true, but for the most part…

Price Groups: 

• Price Group 1 {PG1}: You’ll find homes valued at $700,000 to $1.5 million.
• Price Group 2 {PG2}: You’ll find homes valued at $1.6 million to $2.5 million
• Price Group 3 {PG3}: You’ll find homes valued at $2.6 million to $6 million

A few Notes:

1. We won’t deal with anything above $6 million, because these are generally custom homes or on larger tracts of land.
2. Most people don’t even realize these levels exist.
3. These price groups will vary from location to location, and your location might have 5 price groups instead of the three we’re discussing here. 

The next time you view a home, see if you can put it into categories and notice the differences we’re mentioning here. 

So here’s the fallacy in that school of thought: a $2 million {PG2} home is better than a $1.4 million {PG1}. And a $2.5 million {PG2} home is not better for you than a $4 million {PG3} home. This seems super logical and I will admit true in some instances, but it is not the rule. 

In fact, the rule is just the opposite.

To help understand this fallacy let’s break each group into 4 tiers {1-4}
• 1 being the lower-end finishes and building quality for a group 
• 4 being the higher-en finishes and building quality for a group

Here’s where it gets tricky and people aren’t really paying attention:
As a general rule of thumb, homes at the top end of their bracket {tier 4} are better built, with better finishes and better design, than homes in the mid-to-lower tiers of the same bracket {tiers 1 & 2}.

Another thing to understand about real estate:
There’s a trigger point or motivation for people to make the move and jump to that next group.
So {for instance} from the PG1: tier 4 to PG2: tier 1, there will be elements like a lot size increase, sq ft size increase, or there might even be a secondary building.

But there is something that separates the top of one group from the mid-to-bottom of the other group. Simply put, the trigger point is what separates the groups. But once they’re separated by lot size, sq ft, or whatever else, they essentially start the hierarchy all over again.

So think of it like this: all tier 1 homes are relatively equal to other tier ones from other groups.

Why does this matter?

Well, if you are PG1 Tier 4, and you start looking, you might not feel that a home is vastly better and worth the move until you get to PG2 Tier 3. 

Generally speaking, in our market, I advise clients to only move if they can jump over at least two tiers.
If not, keep saving and paying down that current mortgage. Otherwise, you really might not be getting the bang for your design buck that you actually want.

Your PG1 T4 might be just as good as the two tiers above it, because essentially, they are at the bottom for design and building for that group, and the true driving factor for its price is the trigger, not the quality. A true-to-life example: We walked through a 4 million dollar home the other day. It would be a jump for us. But at this point we’ve put so much work into new-to-us our home, that the only difference in that home and ours, was the house size, and the lot size. {See: a would-be motivating trigger point.} The rest really brought things into perspective. 

We realized while it’s easy to become starstruck by pricey homes and larger sizes, we weren’t. Most of our clients and friends here are really feeling that way when it comes to homes in the area. The game of perception in real estate is everything. It takes a lot of motivation to pay so much more, when there isn’t much to leap for, on the market.

So the moral of the story? A pricier home isn’t always better.
Don’t be dazzled by a home’s price. Pay attention to the details.

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Real Estate is an interesting beast and having an agent that can pull the curtains back and help navigate what will most likely be the biggest purchase of your life, is essential. As they say, you don’t know what you don’t know, and that’s where a good realtor comes in. {If you need help in hiring a Realtor, check out our post here.}

If you’re in the Nashville area I’d love to help you and even if you aren’t, let us know we might be able to point you to someone great!

Be sure to check out the rest of our real estate series, here.
Contact us here to work with us + here to talk all things renovations! 

Have an inspired day!