Perceived Value

What it is

Buyers don’t price spreadsheets. They price vibes. They walk into a house and something either feels right or it doesn’t. Most of the time they can’t tell you why. But you can manage it.

There are basically three ranges that houses sell for: bombed out, barely bankable, and the range of comps. As a flipper you’re trying to move houses from the lower end into the range of comps. But even inside the range of comps it’s not equal money — you can move a house further into the upper end of that range without spending one-to-one money to do it. That’s where perceived value comes in. You can get a much better return than dollar-for-dollar if you spend in the right places.

Why it matters

The first three things a buyer sees create the filter through which they see the whole rest of the house. The big three — exterior approach, kitchen, and one more thing depending on how they enter — set that filter. If those three feel great, you’ve already won and now your job is just don’t unsell it. If they feel wrong, nothing else can save you.

The most consistent thing I’ve seen is what happens when hardware doesn’t match. Some door knobs are stainless steel, some are chrome — buyers don’t consciously say “oh the hardware doesn’t match.” They say “something just feels wrong about this house.” It’s the same house. Unified hardware package: doorknobs, hinges, cabinet pulls, bath fixtures, light fixtures, all one finish. The cost delta is maybe a few hundred dollars. The perception delta is huge.

Continuous LVP from the front door to the back door with no transitions between rooms — same thing. Buyers don’t know why it feels bigger. They just feel it. No transitions anywhere.

I’ve seen two identical flips on the same block. One had cohesive hardware, one didn’t. One had continuous LVP, one had three transitions. One had a refreshed front porch, one didn’t. They cost almost the same to build. The sale prices didn’t match.

How it shows up

The positive filter and the negative filter work the same way. You work hard to make those big three items nicer than everything else in the house. Then when they walk into that other 80% of the house, they’re seeing it through the lens of the 20% that was great. You might be able to invest heavily in 20% of the house and get buyers to see the other 80% the way you want.

The negative filter works the same direction in reverse. Paint on the door hinges. Trim that’s not caulked and has a little gap. A floor that’s a little slopey. That negative filter makes them think: if that’s what they can see, what is it that they can’t see? And maybe rightfully so. If they skipped painting a closet, did they skip wiring an outlet correctly too?

The other thing is the last 5% of the renovation. You’ve been in there for months and you’re ready to be done. You’re looking at the same walls every day and they start to feel normal to you. But not to the person who just walked in for the first time. They’re seeing your house cold. That last 5% is what gets you from the middle of the range of comps to the top. Don’t start walking those last 0.2 miles.

Related

big three, hardware package, cutesy the front, hgtv dilemma, baseline, range of comps, hodgepodger