[WestieJeff]

That's pretty much the case. The new "standardized" appraisals make it even harder to get more value out of renovations.

The new govt appraisal standards which rolled out late last year would rate the quality of the upgrades in the home. The options are C5 (poor, no home rates at this since lenders wont even finance them) through C1 (basically new). Most homes rate at C3 which is "good". All the foreclosures in terrible condition with no flooring, holes in the wall, etc. will generally rate at C4 which is "fair". An upgraded home will rate at C2 "excellent", which is probably what this house you're talking about will rate at.

Bottom line, it's bumped up one "level". The dollar allowance for that will vary based on sq ft and age, but for my mid 90's 2000sf house the C2 to C3 dollar comp adjustment was $10,000. I just had an appraisal done in Jan.

As to your original question, homes are selling under replacement cost, which means generally speaking renovations do not pay for themselves since renovations are done at replacement cost (obviously). That said, you're looking for a unique type of home (the older style) which may be hard to find. Dollar wise I don't think you'll be able to make it make sense, but it may still be the right home for you.

Originally Posted by 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.

[Diane Sells Las Vegas]

More and more agents are requesting a buyer's contract, mostly because of the amount of work it takes to close a short sale. Also, say the agent takes you out, drives you around....months and months of looking...lots of gas and no upfront compensation. One day, you're out driving around, see a new home development and even though it's in an area you told your realtor you weren't interested, you go in to look. You buy the house. Your realtor, who has spent hours and hours working on your behalf is now out. No compensation for the time and money spent working for you. Is that fair? No. You wouldn't work for free, and neither should they. The idea behind the contract is a commitment on both sides - I will work for you if you work with me. And any good agent will tear up the contract if you find you are not suited for each other - just do it before you buy a house without them. As far as making up the amount of commission - usually the only time a commission gets reduced is in a short sale, where the bank decides they aren't going to pay it, but most times, the bank will pay. Buyer's contracts are to guarantee fair compensation for work provided. There is a lot of behind-the-scenes work that your realtor does for you, and many have no idea how time-consuming that can be.

[airics]

Especially the desperation realtors trolling on cd for clients

[luckpants]

Originally Posted by airics

Especially the desperation realtors trolling on cd for clients

lol!

[TheAdmiral]

Originally Posted by airics

Especially the desperation realtors trolling on cd for clients

Does that include part time licensees?

[yellowsnow]

If I was a realtor, I would sure be on CD. It's a treasure trove of people wanting to move here...or leave here.

There's no doubt the commission on a 130K SS isn't viable for the amount of work a realtor has to do. I think they are just trying to get a decent paycheck. But just the same, I would shop for an agent just like I shop for a house. They don't all ask for exclusive contracts with the minimum commission spelled out.

Renovations. My experience is you get almost nothing back on your investment. All that matters is that the general condition is OK and the square footage. Your home is worth what your neighbor's home is worth. Not much more and not much less.

If you know you are going to sell beware of renovating beyond mid-market. If you know you are not going to sell and wish to renovate for your own comfort, have at it. Just know it's money down the drain if you ever need to sell.

[jbov]

Thanks everyone for the replies. The agent is doing a good job so I am okay with the guaranteed commission.

Very interesting stuff about the house condition levels, WestieJeff.

I understand what everyone is saying about renovations not adding face vale to the home, but wouldnt that apply more to someone who renovated and then continued to live in the home? That seems different than something that was renovated and has been unlived in - brand new to the buyer. There has to be some increase or else no one would ever flip properties.

I think part of my problem here is that the flipper appears to have made a mistake (purchased the home at $100,000, and putting in what my realtor estimates to be at least $30k of work).

[yellowsnow]

Originally Posted by jbov

Thanks everyone for the replies. The agent is doing a good job so I am okay with the guaranteed commission.

Very interesting stuff about the house condition levels, WestieJeff.

I understand what everyone is saying about renovations not adding face vale to the home, but wouldnt that apply more to someone who renovated and then continued to live in the home? That seems different than something that was renovated and has been unlived in - brand new to the buyer. There has to be some increase or else no one would ever flip properties.

I think part of my problem here is that the flipper appears to have made a mistake (purchased the home at $100,000, and putting in what my realtor estimates to be at least $30k of work).

The real way to add value to a home is add square footage. Doesn't make a difference if it's been lived in or not. Condos are easy to value because there are a bunch of pretty identical units at the same location. Your unit is worth about the same as the other units.

Flipping was easy money for anyone handy when the market was good. Housing was in high demand. Flipping today is a different animal. You have to be able to buy the property for less than today's market value. Go in and do the cosmetics and a little updating cheap and quick. Your profit is the difference between what you paid and market value minus the renovation. If you make a mistake, you wind up eating the difference because you won't get more than market value on the appraisal. Prospective buyers are not likely to be willing to pay more than market value because there are so many properties out there for sale. Buyers are looking for fire sale prices.

A prospective buyer has to be willing to walk away if they can't get a property for market value. There are all kinds of reasons why people think their home is worth more than market but 99% of them aren't valid in today's housing market. Yes, I feel bad the seller is losing money but so are most other sellers. It's not up to the buyer to make it right.

[jbov]

Originally Posted by yellowsnow

The real way to add value to a home is add square footage.

That brings up another anomaly about this property... it has a "casita" which does not factor into the square footage (but must be at least 500 sq ft). Before renovations the property had two rental units attached to the main house (there is still a separate electric meter).

Those two units were renovated into the casita and a two car garage. So the flipper put considerable renovation money into a part of the house that won't even show up in the price per square foot. This seems to be a big part of the mistake they made.

The thing is the casita and garage are very appealing to me as a work studio so it does have value for me. But I understand that the value won't show up in the appraisal.

[bayview6]

Originally Posted by yellowsnow

If I was a realtor, I would sure be on CD. It's a treasure trove of people wanting to move here...or leave here.

There's no doubt the commission on a 130K SS isn't viable for the amount of work a realtor has to do. I think they are just trying to get a decent paycheck. But just the same, I would shop for an agent just like I shop for a house. They don't all ask for exclusive contracts with the minimum commission spelled out.

Renovations. My experience is you get almost nothing back on your investment. All that matters is that the general condition is OK and the square footage. Your home is worth what your neighbor's home is worth. Not much more and not much less.

If you know you are going to sell beware of renovating beyond mid-market. If you know you are not going to sell and wish to renovate for your own comfort, have at it. Just know it's money down the drain if you ever need to sell.

Eventually, the Vegas housing market is going to swing back to being a sellers market (hard to believe, isn't it?) and then all those renovations will recoup some of their cost. Folks who buy at today's low prices can break-even on their renovations if they live in the house for 10 or 15 years since inflation will continue to push replacement value higher.