[jbov]

I probably should have asked this community BEFORE I signed the contract. But I recently made an offer on a house and my agent had me sign a contract that stated I will use him exclusively for 6 months.

I believe this is standard, and I have no problem working with him as he is very experienced in the neighborhood I am looking to buy in.

But the contract also stated that he would be guaranteed 3% commission or $3000 - whichever is greater.

The property I am most interested in is over $130k, and I doubt I would purchase a place for less than $100,000 so i thought that the $3000 minimum was no big deal. However now I am worried that the seller might be offering less than 3% to the buyers agent, and I will potentially have to make up the difference.

Is the agreement I signed common or typical or am I get hosed? Is 3% to the buyers agent the typical going rate here in Las Vegas?

My other question involves the value of renovations. The property I am looking at is located in an older neighborhood but has been completely renovated by a flipper: new roof, new plumbing, new wood flooring in living room, new carpets in the bedroom, new tile flooring the garage, new kitchen, new bathrooms, pool is in like new condition etc.

However the asking price is 40% more per sq ft than other houses on the block. It is clearly much nicer than most and on a huge lot, and has a casita with bathroom that I believe is not a part of the square footage calculations. I made an offer with a 20% premium on the square footage of neighboring houses, ie the houses in the neighborhood average around 50/sqft, and my offer is around 61/sqft.

On the counter offer the seller split the difference (70/sq ft), but I still believe the house is overpriced.

I know it is generally advisable not to buy a house that has been "over-improved" but I would be living in it myself and can live with paying a premium for a "new" home as long as I am not getting completely screwed.

Is there a rule of thumb about the value of a complete makeover per square foot?

[MadManofBethesda]

Originally Posted by jbov

Is the agreement I signed common or typical or am I get hosed? Is 3% to the buyers agent the typical going rate here in Las Vegas?

I didn't sign a buyer's agent agreement with either of the Las Vegas real estate agents I worked with over a two-year period before moving here. In fact, I've never signed a buyer's agent agreement in any locale, although I am aware that some agents require them before they'll commit to working with a client.

[jbov]

Originally Posted by MadManofBethesda

I didn't sign a buyer's agent agreement with either of the Las Vegas real estate agents I worked with over a two-year period before moving here. In fact, I've never signed a buyer's agent agreement in any locale, although I am aware that some agents require them before they'll commit to working with a client.

Thanks for the info, but...

I don't mind being bound to him as I am satisified with the service he has provided, and is clearly the top guy in the neighborhood (seemed to know and have sold a house to someone working on their front lawn on just about every block we drove through).

He also claimed that he would never pursue something like this if we weren't getting along. That might be naive of me to believe, but my takeaway impression was that if we had a falling out as long as I wasn't trying to buy a house he had shown me or hunting in his specific neighborhoods, he would let me walk.

What I am worried is 3% or $3000 guarantee. Is it possible or likely that extra commission would come out of my pocket?

[Jalhop]

Originally Posted by jbov

Is the agreement I signed common or typical or am I get hosed? Is 3% to the buyers agent the typical going rate here in Las Vegas?

Unless LV is a different universe than Seattle (where I am), sellers almost always pay a 3% buyer's agent fee. The buyer's agent commission, chosen in advance by the seller, should be stated in the MLS details (for each house) that your agent can see. You could just ask your agent the latter question.

Is there a rule of thumb about the value of a complete makeover per square foot?

Makeovers are of various quality and appeal, so any rule of thumb would be suspect. Both buyer and seller negotiate on their own perceived value. Determine your upper limit, negotiate on price alone (don't explain your reasons) and walk if you can't get below or at your limit.

[jbov]

Perhaps rule of thumb was a poor choice of phrase. I should have asked if there is a range or guidelines.

I see what you are saying about setting my own price comfort level but I am curious how much value an appraiser would add for a home makeover. Is the same home renovated ever worth 45% more? Cause that is what they are asking in their counter offer... They bought for 100k one year ago.

BTW it is not a question of affordability but rather not getting burned if something unforeseen happens and I have to sell in a few years.

[observer53]

If they are trying to recoup the cost of their makeover, or make a profit on those costs after a year, many renovations are well known not to add even the equivalent value to the price of the house, much less some higher number. I don't know that there's a particular percentage that an appraiser would add for a complete makeover, either. When I had my house appraised several years ago, I didn't get the feeling that the renovation I had done (range replaced with a modern cooktop one, tile virtually throughout, all new paint, vaulted popcorn ceilings removed and replastered/repainted (which really made the house harder to "date" and look much newer) made that much difference at all. The house was 18 years old at the time. The carpet and other floor coverings make it more saleable, but not necessarily worth thousands more. I don't think the like new condition of the pool would be reflected in the appraisal either. Not sure about the roof and plumbing. New bathrooms and kitchen DO add real value in terms of a somewhat higher price, as I understand it. How old is the house???

[jbov]

The house was built in the 50s. I love the old style of homes and to see one with all new internals and externals must be worth something significant.

But if, as it seems to me, appraisers look at square footage as the primary tool for valuation and this house is the only one in blocks to be on the market in this condition how can i possibly purchase this house and have it not be technically "overvalued"?

[airics]

If you're financing, the appraisal will come in the same or slightly more than the comps. As a previous poster stated, the makeover sells the home.. Never adds 100% of the cost to the value. If you add a pool that costs 50k, you're lucky to see a 20k bump to the value the next day.. Kind of like buying a car, loses half when you drive off the lot.

[observer53]

Originally Posted by jbov

The house was built in the 50s. I love the old style of homes and to see one with all new internals and externals must be worth something significant.

But if, as it seems to me, appraisers look at square footage as the primary tool for valuation and this house is the only one in blocks to be on the market in this condition how can i possibly purchase this house and have it not be technically "overvalued"?

This is another example of something I remember hearing when I was very young, because we had the only custom home in blocks of tract homes. Large ones, mind you, but still tract homes. My parents were told it was not a good thing to have the most expensive house in the neighborhood.

Right now, at the price they are asking, the house you're looking at is technically overvalued. And, doesn't the house look the same on the outside as every other house in the area? (except for maybe the new roof, which really doesn't change the style of the house much, I assume)

[ScoopLV]

Originally Posted by observer53

This is another example of something I remember hearing when I was very young, because we had the only custom home in blocks of tract homes. Large ones, mind you, but still tract homes. My parents were told it was not a good thing to have the most expensive house in the neighborhood.

That's an old and generally-accepted rule. It's not good to have the best house on the block. It's not good to have the sore-thumb on the block, either. But it's a rule that my wife and I broke with impunity.

It all depends on how long the owners wants to stay in the house. If this is a quick, live there, sell, buy another, I'd keep to the middle of the road. But if the owners are going to live in a house long-term, I'm of the mind it doesn't matter -- it's the owner's house, after all. Do it right.