Do you think this person is PO'd? (square footage, countertop, appraisal)

[garth]

Here's the scenario:

Seller one has had their house on the market going into their 3rd month. It's a nice one story home of 3000 sq feet. It's sits on a nicely landscaped 2 acres with a price of $800,000.

Seller two is their immediate next door neighbor who placed their house on the market in the last week. It's 4500 sq feet. It also sits on a nicely landscaped 2 acres and has a seperate stick-built and matching workshop/RV garage that the other house doesn't have. It has a price of $850,000.

Both houses were built by the same local builder on a long cul-de-sac street of about 8 homes. All the houses were built by the same builder. They're not production homes but I wouldn't call them fully custom homes. Instead, I would call them great quailty, well-built, semi-custom homes.

How's that for competition and listing comps? However, what does that do to the first seller's chances of selling? I think someone is either due for a big haircut or they should be prepared to stay in their house for a long time.

The bottom line is that the first house is priced at $267/ sq ft. The second house is priced at $189/ sq ft. Wow! That's a big difference between two houses that are of the same quality, but the one with the higher sq foot price is missing a big feature (RV garage) offered by the cheaper sq ft price.

I understand that the sq ft price increases as the house gets smaller, but this has to be out of line. The rates produce only a $50,000 difference between the two properties.

Based on the sketchy information I've provided, and assuming that I've been accurate in my description, how much would you value the first house (3000 sq ft)? What would be your total price for the first property (3000 sq ft) or the per sq foot price? Here's my take, so tell me if you think I'm too far off base.

To help determine a value for the first house, I'm figuring that the second home, that's priced at $189/sq ft, will sell for less than listing. If I figure a reasonable disount of 6% from the listing price, that would put the sq ft price for the bigger home at about $178/ sq ft.

So, how much more does the first house's sq ft price (3000 sq ft house) need to be over the second one (4500). If I figure a sq ft value of $190, that gives the first home a price of $570,000. If I figure a sq ft value of $195, that gives the first home a price of $585,000. Do you think that's comparatively too much, or too little?

Based on the competition, which happens to be right next door, I can't see the first house being worth much more than those ranges. That's got to PO the first home's seller.

Also, how the heck does someone present such a scenario to the seller without making them mad? I just don't see much alternative for the first person making an offer other than to make the seller mad and set the stage for the next buyer to be successful after the seller has been brought back to the realities of the market.

BTW, the other factor involved is that there has been absolutely no sales in the comparative area since April 2007. There's lots of things on the market, but they simply haven't sold for a long time. Some are even two years on the market.

The 60-day absorption rate is also a miserly 8% for the larger market. The few sales that make up that 8% reside primarily in the lower end of the market that are not near the involved area. They're elsewhere in the county.

So again, do you think the first seller is going to be PO'd when she discovers her neighbor's listing price?

[PotterGeek]

Yes, I'm sure they will. But business is business and depends on who wants to sell first.

I'm about to be in the same dilemma. A house in our sub just went on the market for $239,000. It has about 2500 sq ft. My house is 3100 sq ft. I will be listing mine at $238-242k. I want to sell my house quickly, and theirs (IMO) is overpriced. I don't want my house to sell theirs, I want theirs to sell mine. They will probably be mad, but I can't help it.

Good luck, though

[Bill Keegan]

Originally Posted by garth

Here's the scenario:

Seller one has had their house on the market going into their 3rd month. It's a nice one story home of 3000 sq feet. It's sits on a nicely landscaped 2 acres with a price of $800,000.

Seller two is their immediate next door neighbor who placed their house on the market in the last week. It's 4500 sq feet. It also sits on a nicely landscaped 2 acres and has a seperate stick-built and matching workshop/RV garage that the other house doesn't have. It has a price of $850,000.

Both houses were built by the same local builder on a long cul-de-sac street of about 8 homes. All the houses were built by the same builder. They're not production homes but I wouldn't call them fully custom homes. Instead, I would call them great quailty, well-built, semi-custom homes.

<SNIP>
Based on the sketchy information I've provided, and assuming that I've been accurate in my description, how much would you value the first house (3000 sq ft)? What would be your total price for the first property (3000 sq ft) or the per sq foot price? Here's my take, so tell me if you think I'm too far off base.

<SNIP>

So again, do you think the first seller is going to be PO'd when she discovers her neighbor's listing price?

There's simply not enough information to make a comparison.
The inside of the larger house could be all the builders low end finishings, no upgrades at all, with laminate countertops & discount shop pickled oak floors, and an unfinished basement that smells of mildew because they didn't bother to install sump pumps or dehumidifiers. The smaller house might have upgraded everything, from top of the line windows and the best stainless steel appliances, down to granite counters, mahogony floors, and a basement finished with a media room & wine cellar.
It's not always just about the square footage, and buyers will actually look at the insides and compare everything. I don't know about your market, but here in my market, square footage is about the last thing people ask about, except on new construction.

[8 SNAKE]

I agree completely with Bill. In addition to the factors that he mentioned, the floor plans of each home will play a huge role. A great floor plan could make the smaller home much more appealing than the larger one, and vice versa. Square footage is less important to me than the feel of the home when I'm in it.

[RoaminRed]

All the things previously mentioned, plus...maybe the people with the larger home are just more motivated to sell, thus the "lower" price.

[garth]

I'm going to go inside them today and see how they compare. Just knowing the builder, there's no such thing as low end finishes in anything he does. It just doesn't happen. He doesn't do it. BTW, both were built in 2002 in a slowly developing rural-esque area.

Everything he builds has granite countertops, higher quality cabinets, and some variation of hardwoods mixed with stone and carpet in some rooms. It's just the nature of his building. He's known as a quality builder in the area and has a reputation to protect. So, I'll see what's going on with these two houses later today.

BTW, we don't have basements out here. It's not done, nor is it an attrative option. The water table is about 10 feet down and there's a chance of earthquakes from the Sierra Nevada. So, basement conditions aren't a factor.

I know the info is sketchy, so thanks for the input so far.

[olecapt]

Deal with this all the time.

First off the value of incremental square feet on large homes is relatively small. Figure $40 or $50 a square foot. That would lead to a $60K to 75K differential. The workshop depending on size and ameniities might add another $20 to $40K. Figure half replacement costs.

This is one of those AX + B problems. The site, land, base house, neighborhood etc. all go in B. So you can end up in some areas where the parameter for incremental square feet is quite small.

So an 80K to $115K differential. If I had the smaller guy I would try and talk him down $50K. A 100K differential is sufficient to give the smaller guy a shot. He gets all those who won't go past $750K.

The other solution is to out wait it. A single sale does not a comp make. Normally in this class of home appraisals are not problems. Appraisers don't know what they are worth either and tend to be pretty flexible.

Selling larger, more expensive homes is pretty arty stuff. Takes a long time often and costs a good bit to market. As I have pointed out elsewhere it is far easier to sell four 250K houses than one One million house. On the other side of the coin houses of this class sell when a buyer likes them and that sale has only low economic drive. When the lady likes the house the guy will often buy it even if a 100K out of bed.

[dj32]

I agree with Bill, until you get inside it is hard to make a well informed decision.
We just listed our home on the market, it is in an infill neighborhood, very desirable location with a large lot. The house across the street is almost 400K cheaper, smaller home by about 600 sq feet but a complete fixer upper with little curb appeal. Ours is completely custom and built new 3 years ago. So it is unfair to use that one as a comparable. Ours is priced higher than some, but lower than completely new construction.

[olecapt]

However this exercise was initiated by garth suggesting they are similar in all but size. So for the purpose of the exercise presume that to be true.

[garth]

It's funny, or perhaps skill, that you mention that differential, OleCapt. When that 115K is subtracted from house 1's price, it puts the value right at the county's tax appraisal that was figured a few months ago.

I know that tax appriasals are not accurate to the selling market. They have their own purpose and value that's different than the market. However, I have personally seen other homes sell in this market for less than the tax appraisal, up to 50K less. That's something that I haven't seen in this general area, for the time I've been following it, since 2000.

Oh well, I'll see if one has been trashed and the if the other is pristine. That could be the only motivation for the skew because the outsides are comperable in all ways.