Old retired couple have a 6-bedroom house for their former 4-kids (+masters bedroom + guest bedroom). All their kids have moved out, and they're tired of vacuuming so many empty rooms. They want to move to a retirement community.
New up-and-coming couple not only have 4-kids, but one more is on the way. They suddenly got an opportunity to work in... Chicago (or insert any other city here), and are looking for a new home to raise their kids in.
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The old-couple will likely be willing to sell the house below market value, while the younger couple may be stressed out and otherwise willing to pay above market value.
Clearly, value will be created as the new couple buys the home from the old couple. The majority of transactions between rational individuals are of this nature. The only detail remaining is how to proceed with negotiations, but assuming they're rational, the two sides will come to a price point that's favorable to both sides.
Value could have increased for many reasons having nothing to do with labor effectuated by either party.
The neighborhood might have changed, and now there are more restaurants. Or maybe it’s just considered more fashionable for intangible reasons.
The house could be on the beach, and Alice has decided to take up surfing, so values the location more than Bob ever did in the past.
And so on.
There can be an almost infinite combination of reasons why Alice may find more value in the property than Bob.
Edit: my previous version of this comment had Alice and Bob reversed.