PRIMEDAILY: EPISODE 569: Too much emphasis on price.

#PRIMEDAILY: EPISODE 579: Too much emphasis on price.

Buyers can get caught looking too closely at the price when what we find is relative value is much more important. Especially when building a new home. One thing, for example, is understanding lot premiums. People are always averse to paying lot premiums. So why is that? What lot premiums are is, they’re essentially placing more value on a particular lot because it has better qualities. It has better characteristics. Either it’s bigger, it has a walkout basement, it backs onto the green space. Typically you would want that. But when price becomes involved, people shy away from the lot premium and say, “Well, I don’t want to pay a lot premium.” The way we look at it and the way we explain it to our clients is that the payment of a lot premium is essentially investment and it’s not a lost cost. Investment goes up in value. So when you purchase a property that has a lot premium, you’re purchasing an additional investment that intends to increase in value along with the property. So one takeaway from this conversation is that lot premiums represent investments, and they’re not sunk costs.

We’ve seen people walk away and say, “You know what? We don’t want a premium lot. We want this one.” And it’s a tiny lot that backs onto another house. And then when you go to resell that house becomes very difficult because the people buying the house feel like they’re encroaching on their neighbors. And if you’re looking at the actual investment numbers and the entire market goes up 17% like London did last year, then that investment in that lot price is going to go up And the other thing that we hear on the back end because we work with a lot of builders would be the fact that lot prices keep going up and land value keeps going up incrementally. So if you’re investing now, which is what you’re doing with your property, make sure you’re doing it the smart way rather than just making an emotional decision, trying to shave 10 grand off a mortgage, which equates to a small amount a month while sacrificing the quality of life.