Tuesday, November 13, 2007
Putting a value on your home
One of the more difficult things to do these days is getting the right value (price) on homes that are going on the market. Even appraisers are having some difficulty getting value right. A part of the problem is caused by the slow turn-over in the market. It may be hard to find a comparable home that has sold within a reasonable period of time and close to the home in question. Realtors and appraisers like to find "comps" within a mile or two, preferably in the same neighborhood or sub. Obviously finding some sold homes that are almost exactly like the one in question is the best case scenario; however, even that case goes out the window if more than 3-4 months have passed since the sales. The market has been too dynamic (unfortunately in a downward direction) to use comps that more than 1-2 months old.
So, I depend quite a bit on statistics to help me guide sellers. If I can find comparable houses, that's great; otherwise, I look at what has sold in the last 2-3 months (6 months at the outside), even if not exactly comparable, and then calculate what people have been paying on a cost per square foot basis in the area of interest. It's a pretty good bet that if the area average is $100/Sq Ft that putting a house on the market in the same area for $150/Sq Ft is going to be a tough sell.
Now, it's certainly possible that the owners have put the upgrades and updates into the house to justify trying to get the price uplift; however, many times it ends up that owners just can't get back what they think they should for a place, because the surrounding neighborhood just doesn't justify the premium. I've seen that quite often lately with house-flippers (people who buy houses in need of repair/updating, do the work quickly and then try to sell them). Many house-flippers have been badly burned by the cu rent market and some have even slipped into foreclosure on properties that they were sure that they could flip with a few updates. It's actually not good to be the most expensive home in your neighborhood.
If you're considering selling within the next 6 months, it would be a good idea to call a good Realtor (and you already know one from reading this blog) and having him/her come in and give you an analysis of the current value of your home and make suggestions about what you could do to improve it and get it ready for the market.