why do people pay more for a house than what it is worth?

Answer 1

Well, to the buyers, they pay what it's worth to them. And real estate almost always goes up in price over the long term. Real estate is a great investment

Answer 2

And how do we qualify "worth"? To some, it is equated in terms other than monetary value. If a person wants a certain environment, in a certain area; or perhaps wants to live close to certain needs or conveniences, that person might well consider these things as part of the "worth" factor.

Separate from all that, what one individual chooses to do with his money in regard to what he buys with it, is certainly his business. I might purchase a home on a piece of land in exactly the place I wanted to live and pay much more than the existing house is worth monetarily; then spend a couple of hundred thousand remodelling it into exactly the house I want. People with the money to spend will sometimes do that. Rest assured, though, very few people can, or do, blow money on a house that is priced above its market value, for one controlling reason: Most people can only buy a home through a mortgage, and mortgage companies take a direct interest in the price/value relationship. They'll nix you in a New York minute if they see you are wanting to borrow $100,000 to buy a home with a market value of only $75,000... Actually location is a big factor, and people are always advised not to try putting up a home that would have a monetary v alue far greater than those in the immediate area. Some day down the road somebody is probably going to want to sell that house and as nice as it might be, nobody will buy it because the surrounding area is an eyesore.

Actually, it's pretty interesting how many factors really do play into the equation when it comes to the market value on a home, but overall, "value" itself, in the housing industry is whatever the prevailing market will bear and, like a lot of other things that affect our lives these days, that can go up and down on short notice depending on what-all is happening in the world at that moment. It all boils down to what you, the would-be buyer wants, and can afford to pay for.

Answer 3

If the market is competitive, the house may be worth more in 10-20 years than what the people pay for it now. Also, people with money will spend money to be where they really want to live.

Answer 4

Apparently it's "worth" that much to them.

While houses have assessed values for tax purposes, those rarely match a fair market value. And a bank of real estate agent might give an appraisal, but that's not exact science either - what something is worth to a particular person is whatever that person decides they're willing to pay.

Answer 5

I have found that when renting a house or home, most people are looking to remove themselves from a bad situation and are willing to pay more than what it is worth to get away from the place they are currently living.

Answer 6

In a hot market like the one we're in now, people are paying market value, and in some cases, slightly higher. It all boils down to supply and demand. Prices have risen significantly over the past few years...

Answer 7

Bc the available number of houses for sale is lower than the number of ppl wanting to buy a house.