Buyer A and Buyer B buy House A and House B. We’re assuming the houses are the same in every aspect, and the “value” is $300,000 and that House C is the same too. Each house needs a $10,000 roof. All the seller cares about is the net in their pocket when the transaction closes. There are no transaction costs involved.
Buyer A offers $290,000 as is and the buyer replaces the roof the day after closing.
Buyer B offers $305,000 with the seller to put on a new roof and pay $5000 in closing costs.
The houses have the exact same “value” the day after closing but a recorded sales price difference of 5% even though the net to the seller was the same. A year later the “value” of the houses is $325,000. House A went up 11% in “value” and House B went up 6.2%.
Does volume average this out or do we put too much stock in using a gross sales price as a market indicator?