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As a house hunter and potential imminent buyer, I look at price history of any home I'm interested in. For me, a checkered history of ownership, much like a resume with several quick work history jumps, looks bad. My first thought is something is severely wrong with the home, my second thought is it's a flip job. Did they do the work well? Is the house perfect now? Does what they did justify the price jump?
We just looked at a house today that sold this past summer for 389K, and 10 days later was listed for 480K! Almost 100K of work in 10 days???!? And it's still not perfect. It still needs CAC, the basement is unfinished and there's only one bathroom (not a great one at that.) Despite this swift seller's market, it's been on the market for almost a month and they've had to lower the price by 10K. I doubt they did more than a few cosmetic changes in 10 days and therefore I don't see how they can justify such a huge price spike. I like the house and would buy it for a reasonable price, but don't see their asking price as reasonable. How does a flipper expect to find a buyer interested in paying top dollar for a house that was *just* sold for almost 100K less??
well, first - when you say the "price history", I assume you're looking at Zillow. If I'm wrong, skip ahead a paragraph.
Zillow is notorious for incorrect information. Anything that is a deed transfer shows as a "sale" to Zillow. If I bought a house 5 years ago for $250K, then get married and add my wife today, Zillow says it "sold" today for $250K. Which of course, is false.
Now, there are also a fleet of "iBuyers" - think of "We Buy Ugly Houses", whose business model relies on getting less-savvy folks to sell on the cheap - because it's easy fat money, they don't know the value, and they don't have to do anything to sell (no repairs, improvements, cleaning, etc).
So, it is indeed possible to buy a house well below market value, clean it in 10 days, maybe slap a coat of fresh paint on it, and put it back on the market quickly.
So, the question becomes - how did this home compare in price to OTHERS that you've seen in that price range? Do most high-$300's homes have all the things you mentioned? Would all those things cost more than $20K?
I don't know the answer, because I don't know your market. But whether a home is bought last week or last decade, what matters is today's market value and how it compares to other homes.
well, first - when you say the "price history", I assume you're looking at Zillow. If I'm wrong, skip ahead a paragraph.
Zillow is notorious for incorrect information. Anything that is a deed transfer shows as a "sale" to Zillow. If I bought a house 5 years ago for $250K, then get married and add my wife today, Zillow says it "sold" today for $250K. Which of course, is false.
Now, there are also a fleet of "iBuyers" - think of "We Buy Ugly Houses", whose business model relies on getting less-savvy folks to sell on the cheap - because it's easy fat money, they don't know the value, and they don't have to do anything to sell (no repairs, improvements, cleaning, etc).
So, it is indeed possible to buy a house well below market value, clean it in 10 days, maybe slap a coat of fresh paint on it, and put it back on the market quickly.
So, the question becomes - how did this home compare in price to OTHERS that you've seen in that price range? Do most high-$300's homes have all the things you mentioned? Would all those things cost more than $20K?
I don't know the answer, because I don't know your market. But whether a home is bought last week or last decade, what matters is today's market value and how it compares to other homes.
Yes, I checked the recently sold list. Homes that sold for mid-400K in the same neighborhood have 2 bathrooms and 2 usually levels (or at least a cape). So it does seem a bit aggressively priced. But at the end of the day, regardless of what a builder thinks market value should be, homes are only worth what buyers are willing to pay. I'm not interested in paying more than $430 for a one story, 1 bath home.
You should only pay what you think the house is worth. Don't get caught up in price history, just look at the comps. Some buyers have a problem with what the seller paid for the house, some don't.
Yeah it should really just be based on current comps, but technically, assuming the previous transaction was arms-length, wouldn't that be a comp also?
I'm not interested in paying more than $430 for a one story, 1 bath home.
Homes are not worth what only one buyer would pay.
If your budget is $430K max, then that's the price range you should look in. You would need to judge a market by multiple comps. Markets vary, and homes in not-so-great condition can seem overpriced in a very hot market, like mine.
You'd be surprised by what cosmetic changes can placate buyers looking to get into a certain area for school, work or other location-based issues. Flippers know this, and they often hope to take advantage of it.
Most people don't have the skill to do basic things themselves, the time to do them nor the desire to do it. Most don't want to live in a construction zone and most don't have the money for barely more then their current weekly bills.
All that taken together means little things can net you good returns. Things like changing cabinet doors, adding wood work, painting, some lights and continuous matching flooring can easily see double spent and more in returns to the owner especially if they do the work themselves.
As for price history, most folks are ignorant of it and quite frankly it is irrelevant. Market will either pay or it won't. The previous owners profit or lack there of isn't important. If the work is done well and the price is appropriate it is going to sell.
Yes, I checked the recently sold list. Homes that sold for mid-400K in the same neighborhood have 2 bathrooms and 2 usually levels (or at least a cape). So it does seem a bit aggressively priced. But at the end of the day, regardless of what a builder thinks market value should be, homes are only worth what buyers are willing to pay. I'm not interested in paying more than $430 for a one story, 1 bath home.
First, you're looking at Zillow, or not? Or you have some non-Zillow source that told you the current owner actually paid $100K less just 10 days ago (MLS, tax records, etc)?
So you know - single story (aka ranch) homes sell for more than similar size 2-stories/1.5 story homes, especially if the others have upstairs master bedrooms.
If you're not looking for a single story home, then don't look at single story homes.
I will add this - if you're getting a FHA loan, then that property doesn't qualify anyway right now. Any flip has to be owned...90 days? (someone will correct me, as I'm not 100% sure on the # of days) before it can be resold to a FHA buyer. It's called the "anti-flip" rule.
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