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To give some perspective, we are in contract on a home in Chappaqua in the mid-700k range, and the purchase price is $20k less than what the sellers paid in 2007. House is not huge (3/2) but already has plans and plumbed for adding 2 bedrooms and a bath upstairs, and it's in move-in condition on a nice lot/street. We got very lucky as we are renting in the area and were able to jump on it fast, and we already had our mortgage situation lined up (this is huge - mortgages are much harder to get these days than even 1-2 years ago).
From dma1250: I totally disagree with you about the wisdom of buying a house in need of work. Now is definitely a great time to buy a "fixer" and invest 100K in a house--in this market homes that are in "mint" condition are going for an absurd premium over houses in need of work. I see houses for sale for 600K that could easily go for 800K if someone spent some money on them. We have friends who sold their house in the fall. Their house was on the market for a long time and then, at their realtor's suggestion, they spent 20K sprucing up the house and then relisted it for 100K more than it had been asking. It sold for 30K under asking--so their 20K in renovation got the place sold and netted them additional profit! (They bought a bigger fixer down the road.)
I think this was true in the past. Buy, renovate and get 100% investment back within 2 years. I don't think that is the case now. Two houses sitting side by side, one with a new 40K kitchen, one with the old kitchen, doesn't get justified on the apprasial report. The new kitchen house apprasial won't be high enough to justify the cost of the kitchen. Just a sign of the times, for now. The question is for how long. Could be 10 years, could be 2 years. It also depends on whether, as a buyer, you intend to live in a house for 10 to 20 years or if your job requires transferring to a different area every 3 to 5 years. Lots to consider.
I am thinking about taking a look at one of the historical homes on the market now. I don't think that I'm up for a total renovation of a 1950's split or ranch, but it might be alot of fun to renovate a real historic home. Of course, I'm not looking for a total money pit either. It's hard to tell what you are getting up front. Could be fun though.
To give some perspective, we are in contract on a home in Chappaqua in the mid-700k range, and the purchase price is $20k less than what the sellers paid in 2007. House is not huge (3/2) but already has plans and plumbed for adding 2 bedrooms and a bath upstairs, and it's in move-in condition on a nice lot/street. We got very lucky as we are renting in the area and were able to jump on it fast, and we already had our mortgage situation lined up (this is huge - mortgages are much harder to get these days than even 1-2 years ago).
Congratulations on the house Cali. I know you've been looking for a while. Good luck with the addition and the new school district too. I think you'll be happy in Chappaqua. I think the schools look great (and they have busing, something you will appreciate when you have different kids in different schools, all staying for a variety of after school activities). Hopefully we will be neighbors by summer!
cali, congrats. as someone who is in the middle of this craziness as a potential home-buyer, i congratulate you on finding a choice you were happy with
I think this was true in the past. Buy, renovate and get 100% investment back within 2 years. I don't think that is the case now. Two houses sitting side by side, one with a new 40K kitchen, one with the old kitchen, doesn't get justified on the apprasial report. The new kitchen house apprasial won't be high enough to justify the cost of the kitchen. Just a sign of the times, for now. The question is for how long. Could be 10 years, could be 2 years. It also depends on whether, as a buyer, you intend to live in a house for 10 to 20 years or if your job requires transferring to a different area every 3 to 5 years. Lots to consider.
From what I see watching what sells and what doesn't in the area, the house with the 40K kitchen will sell for at least 80K more than--and much faster than--the one without a new kitchen (assuming the rest of the house is "comparable"). The appraisal report may not reflect the difference, but no one buys a house based on the appraisal report. People today buy the house that feels "special" and like "a good deal"--and the house with the unique kitchen and in overall mint condition feels like a better deal than the one without, even if that one is cheaper. Our friends who I mentioned above sold their house for well over the appraisal from both their bank and from the buyer's bank. The appraisal only matters if the buyer is trying to get an 80% or more mortgage--which is practically impossible nowadays anyway. Again, this is just what I see as an armchair real-estate addict.
dma- I tend to agree with you on this point (a "done" house is very attractive, perhaps even slightly more than the actual "value" of such repairs), but there is another factor to consider. if the house is already renovated, these costs are built into the purchase price, which has both a cash and a financing component. however, renovations are largely a "cash" transaction, and the purchase itself is already a cash drain.
Thanks for the well wishes everyone, and yes Eagle it is absolute CRAZINESS. This was the third house we had made an offer on, and we went through the ringer on the first 2. All things considered, I do think we ended up with the best house for us. Once we made peace with the fact that my daughter will change schools (at least she will already know a few girls from gymnastics and will be close enough to P-ville to keep those friends), it was easy to embrace Chappaqua with the great schools, busing, more frequent express trains, and allows my son to remain in preschool in P-ville.
But this one has been a roller coaster ride as well - we made our initial offer in NOVEMBER, and are finally set to close in a few weeks. Coming from CA where the escrow period is 30-45 days, no attorneys, etc. to this convoluted process was quite a shock.
I do also think that a house with newer baths, kitchen, etc. is really only an advantage if the updates are done to your taste (we got lucky with that as well). Otherwise you are paying the premium of what the sellers put into the house for something you're not 100% happy with and will likely lay out $$ to change before you need to.
The appraisal only matters if the buyer is trying to get an 80% or more mortgage--which is practically impossible nowadays anyway. Again, this is just what I see as an armchair real-estate addict.
I appreciate your armchair real-estate addict perspective - I'm one too! I'm now following 3 markets based on our particular situation, which is unusual. However, based on what I'm seeing banks aren't giving out money above appraisal values even with more than 20% down. They are holding tight to their money and they are not giving out loans to the new kitchen house that appraises the same as the old kitchen house. Appraisals do matter in today's market.
I'm just hoping that some nice homes come on the market in our price range just at the time we are ready to buy........
This has been our experience as well. We were told the appraisal had to come in at the purchase price regardless of the financing arrangement.
That's interesting. I only know of the one seller (mentioned above) who definitely sold their house for above the bank appraisal. He said that since the appraisal was well over the mortgage amount the seller's bank didn't care that the purchase price was over the appraisal. My understanding from him was that the bank needed some safety zone between the mortgage amount and the appraisal, but didn't care about the purchase price. Perhaps that isn't the current norm... Any realtors know what the current norm is?
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