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Wife and I are house hunting and we noticed that there are 3 houses on the same street but each have a different price attached to it. They are all the same amount of acres, built the same year (1985) but one of them was renovated.
House #1: 4 beds, 3 baths, 2010 square feet. In need of work. Short sale. 399K
House #2: 4 beds, 3 baths, 2010 square feet. In need of work. 410K, although the price has dropped 50K in about a month.
House #3: 4 beds, 3.5 baths, 2356 square feet. Bathrooms were gutted, granite counters etc. It's a reno job. 485K but until I see the house in person, it's hard to tell the quality of the granite.
I live in Maryland for those wondering why everything is priced so high.
So...my wife and I are trying to schedule a visit for House #3. I'm assuming the owners set the price at 485 as a way to get back the money they put into renovating the home. However, if I'm a potential buyer, how would I go about this? It's bigger than the other two and its been renovated, but that's at a cost of an extra 86K or 75K?
My initial reaction was why are there 3 homes on the same street up for sale. And 2, if we do like this home, why should my offer be 485 if the comparable would be those 2 homes for a significantly reduced price.
I've got an e-mail to my agent saved in drafts, but I'm curious to hear thoughts and advice.
I posted something similar on another thread, but here goes. You cannot discount or ignore the cost of labor when someone has done a reno. It's an unrealistic way to look at an improvement—for example, a tile job does not cost only the price of the tile and grout. Without having seen the house it's difficult to tell, but if the workmanship and the finishes are high in quality you have to add a labor figure and a realistic profit cushion in your estimate unless the seller is in a bad position.
No one is going to go through the effort of redoing a house if they don't make any money. Of course, there's the option that someone has overbuilt for the area—and in all honesty, $485k doesn't sound high for Maryland.
I posted something similar on another thread, but here goes. You cannot discount or ignore the cost of labor when someone has done a reno. It's an unrealistic way to look at an improvement—for example, a tile job does not cost only the price of the tile and grout. Without having seen the house it's difficult to tell, but if the workmanship and the finishes are high in quality you have to add a labor figure and a realistic profit cushion in your estimate unless the seller is in a bad position.
No one is going to go through the effort of redoing a house if they don't make any money. Of course, there's the option that someone has overbuilt for the area—and in all honesty, $485k doesn't sound high for Maryland.
It's not high at all, it's a decent sized space and I completely understand that they did a ton of work on this property. But there are comps out there no? I can't imagine what it looked like before they put all that work in, however I can't get past the fact that the other properties are priced significantly lower.
For example, hypothetically...who's to stop someone from getting the 399K property and not doing a reno job of their own (through the years of course) and total $ is still less than the 485K?
The other two homes are not comps for this property from the sound of it. One is a distressed property and the other "needs work," which could mean a variety of things. Expand your circle past what's just on the street.
You're not really comparing comparables. You're talking about a short sale that needs work, a regular sale that needs work, and then a house that is 350 sqft LARGER that has had all the work done for you.
First, you need to look at some houses that have actually sold to see what people are paying for the houses. Second, you need to decide for yourself if you want a house that needs work or if you want a house where all the work has been done. If you want something that has already been done, you need to put a value to the fact that you aren't bothered with having to get 3 estimates for every trade of work they did nor take your time to meet with them and pick out colors and supervise.
Your time should be worth something, and if you're saving the time, that should have a value for that time.
Last edited by FalconheadWest; 06-27-2017 at 03:34 PM..
It's a dance. I look at the price per sq ft. I go up or down, depending upon the improvements, or lack of them.
Here, I use $100. a sq ft. but I know this is a variable.
You're not really comparing comparables. You're talking about a short sale that needs work, a regular sale that needs work, and then a house that is 350 sqft LARGER that has had all the work done for you.
First, you need to look at some houses that have actually sold to see what people are paying for the houses. Second, you need to decide for yourself if you want a house that needs work or if you want a house where all the work has been done. If you want something that has already been done, you need to put a value to the fact that you aren't bothered with having to get 3 estimates for every trade of work they did nor take your time to meet with them and pick out colors and supervise.
Your time should be worth something, and if you're saving the time, that should have a value for that time.
Yep, this. The houses that are less expensive are less because they are smaller and not updated. Of course you need to look at them in person to see what you think and if the updated house is worth more to you. But no sense in setting up a viewing without checking out the others as well. Personally, I'd skip the short sale, those can be a protracted and painful process. But if you are prepared to put in the time and money to renovate, then House 2 could be a good pick.
You need to see what other neighborhood (not just same street) closed sales are to see if House 3 is correctly priced and then decide if you want to try to get a more customized final product and perhaps some built in equity with House 2 or if a ready to move in House 3 is right for you.
And of course since you haven't seen them or the area in person, could be none of them is actually right for you after all.
Wife and I are house hunting and we noticed that there are 3 houses on the same street but each have a different price attached to it. They are all the same amount of acres, built the same year (1985) but one of them was renovated.
House #1: 4 beds, 3 baths, 2010 square feet. In need of work. Short sale. 399K
House #2: 4 beds, 3 baths, 2010 square feet. In need of work. 410K, although the price has dropped 50K in about a month.
House #3: 4 beds, 3.5 baths, 2356 square feet. Bathrooms were gutted, granite counters etc. It's a reno job. 485K but until I see the house in person, it's hard to tell the quality of the granite.
I live in Maryland for those wondering why everything is priced so high.
So...my wife and I are trying to schedule a visit for House #3. I'm assuming the owners set the price at 485 as a way to get back the money they put into renovating the home. However, if I'm a potential buyer, how would I go about this? It's bigger than the other two and its been renovated, but that's at a cost of an extra 86K or 75K?
My initial reaction was why are there 3 homes on the same street up for sale. And 2, if we do like this home, why should my offer be 485 if the comparable would be those 2 homes for a significantly reduced price.
I've got an e-mail to my agent saved in drafts, but I'm curious to hear thoughts and advice.
YES, the square footage is a lot bigger on the third. If you break it down by square footage house #1 is $198 a sq ft. House #2 is $204 a sq ft and house #3 is $206 a sq ft.So price per sq ft IS comparably close and in my opinion house #3 is a bargain compared to the others because it's renovated. Price per sq ft, house #3 is correctly priced.
Now, look at SOLD homes in the area with 2356 sq ft and see what they sold for in comparison to house #3. House 1 & 2 are comparable, but #3 is not.
3.5 renovated baths, new granite, 350 feet more, and who knows what else easily equals the price difference. Baths are pricey, as is granite.
Price per square foot is rarely a good indicator of value. In this case those it might help you understand the price difference.
House 1 and 2 are about $200/sq foot. House 3 is 346 square feet larger. That alone can account for about $70,000 of the price difference. Add in renovated baths and counters--House 3 is a bargain.
AGAIN--I rarely would look at a house based on price/sq ft. but it's illustrative in this case.
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