note on property values in East TN (sales, real estate)

[mbmouse]

Originally Posted by Brax

Like I said, it's more a matter of finance, which all boils down to the ability to sell the house. I have a hard time believing it would not have an effect on the sale price of the home.

I know! This is what I mean. I found it hard to believe at first too, but with what I do, I look at appraisal on a regular basis (no, not Realtor hahahah) and unless the house right next door is just the same as the subject property and has sold in the past year, it has NO effect on the value of your house.
A note about this when buying a property and something to consider if you are looking for a "fixer upper". What has sold in the past year within a 10 mile radius is going to determine what your house is valued at. Nothing else.
This is what happened to me and I have seen it happen with others here in East TN. I owned a 1920 farm house, and in the 5 years I owned it I put over 10 thousand worth of updates to that house. I though it would be a great investment as well as a great place to live. When I had it appraised, three different times, different appraisal companies, once for the original purchase,once for a refi, once for the sale. All three appraisers told me if I could pick up that house and move it 20 miles, I would get at least 100k MORE for the house. Reason being, there were no other over 75 year old houses that have the same square footage in the area that had sold in the past 12 months of the sale. I lost what I thought was going to be a great investment because I didn't look at the market trends in that area. Older homes did not change hands very often. If I knew that and knew how appraisals really worked, I might not have bought the house and put the money into it.
Point: You have to look at WHAT determines the value of a house or property before you buy in a new area than you are used too. Different states have different requirements and regulations for valuing a property.

[Joss]

"All three appraisers told me if I could pick up that house and move it 20 miles, I would get at least 100k MORE for the house. Reason being, there were no other over 75 year old houses that have the same square footage in the area that had sold in the past 12 months of the sale. I lost what I thought was going to be a great investment because I didn't look at the market trends in that area."

I disagree a little bit, but maybe it's mostly semantics.

Over and over, the mantra in real estate is "Location, Location, Location". It is the location that determines the value of property more than the sales activity in the immediate vicinity. Picking up any given house and moving it Beverly Hills will raise it's value.... even if sales are slow there... because it is a more valuable area.

Heavy sales activity may reveal the value... but the lack of activity does not necessarily reduce value. Lots of traffic mostly just makes banks and appraiser's jobs easier.

Low activity is likely to mean a slower sale, sort of by definition. It means you need to wait for that special buyer that wants a unique property. It might also cause a bank to think twice about the loan amount because they will wonder how quickly it can be resold if it is foreclosed. But it seems to me that "value" is technicaly defined as what a "cash buyer" will pay.

Still, I completely agree with your final conclusion that you can get burned if you buy the wrong house, or buy in the wrong place. That's absolutely true.

[Brax]

The way Joss discribed it is what I have been lead to believe. Appraisals are one thing, selling price is another. If the area is hot, many houses will sell for over the appraised value. And the reverse can be true also. How else would you explain houses selling below appraised value?

I have always been told to buy the cheapest house in the neighborhood. So you can recoop on any improvments you make. If you had the most expensive house, your improvments would make your home over valued for the area.

[mbmouse]

I have yet to see a single house in East TN sell above appraised value.
And I have been in the mortgage business for years. Even on a cash deal, one wouldn't pay above appraised value.
My example was about specifically homes over 75 years. It is in a more rural area. However if it was closer to the cities historic district where there are more 75 year old homes to compare it to, it would have brought a higher appraised value.
I will use a better example. If you have a 2500 sq foot, 10 year old house, 3 bedrooms, 2 bath. With Italian marble in the foyer, Jacuzzi tub in each bathroom, huge walk in closets etc. You feel it should be valued at 300k after all that work you put into it. If all the other 2500 sq foot 3/2, 10 year old houses within 10 square miles are valued at 200k, you might get some added value for the extras, but not 100k.
Also a note about this area. There are not near as many subdivisions so there aren't as many homes in a 10 mile radius and the housing market isn't moving near as fast.
My whole point, was do not assume that appraisals and housing market are and work the same as in other states, like FL, NJ, CT, TX, CA and some others. I have seen several out of state investors and or "flippers" end up sitting on property or loosing on them because they assumed it worked the same as the last place they made a good deal.

[Need_affordable_home]

Good post, I learn something everyday. Do you feel your location is next for a price increase? Maybe people will see that your location at $100k cheaper is "undervalued" and flock there, raising prices. I see lots of locations where a few miles makes a huge difference!

[Brax]

I agree Mbmouse, it goes back to "buy the cheapest house in the neighborhood" thing. Now in your example:
"If you have a 2500 sq foot, 10 year old house, 3 bedrooms, 2 bath. With Italian marble in the foyer, Jacuzzi tub in each bathroom, huge walk in closets etc. You feel it should be valued at 300k after all that work you put into it. If all the other 2500 sq foot 3/2, 10 year old houses within 10 square miles are valued at 200k, you might get some added value for the extras, but not 100k."
If you can find a house in that area for $160k and make those improvments, you should receive 100%+ back from your improvements.

[mbmouse]

Originally Posted by Brax

I agree Mbmouse, it goes back to "buy the cheapest house in the neighborhood" thing. Now in your example:
"If you have a 2500 sq foot, 10 year old house, 3 bedrooms, 2 bath. With Italian marble in the foyer, Jacuzzi tub in each bathroom, huge walk in closets etc. You feel it should be valued at 300k after all that work you put into it. If all the other 2500 sq foot 3/2, 10 year old houses within 10 square miles are valued at 200k, you might get some added value for the extras, but not 100k."
If you can find a house in that area for $160k and make those improvments, you should receive 100%+ back from your improvements.

Again, here is my point. You will NOT get 100% back UNLESS others have done the same to a similar house within a 10 miles or less radius.
That in a nut shell is the misconception of investors in this area.

[Brax]

Houses in the area go for $200k, you buy one at $160k. Make $30k of improvements, You house should be worth $200k. 100%+ return on your improvments.

I think we are saying the samething. I agree if you buy a $200k house in that area and improve it, you may have overpriced the house for that area.

[mbmouse]

I am sorry, I misunderstood your post I was responding to, yes you are correct with the above.
My Bad

[J.R.]

My husband has been telling me it would be foolish to build my "perfect house" on 12 acres we own in Florida. The acreage is 2 miles down a dirt road. He feels that with the inflated land prices in FL combined with a large home on a dirt road, we will not be able to sell 5 years from now when we are ready to retire to TN.

We are currently not able to sell the home we live in in FL due to market saturation.

So, if the house in town ever sells, I will build a smaller home on the 12 acres and save the nice house plans for Tennessee.