It's very difficult to determine the value of a home,
or is it?
photo by Gabriel Robledo
Recently, I had the pleasure of trying to buy a FSBO (for sale by owner).
This property is not listed on the MLS but was on a street that we were
showings homes on. When working with clients I like to show them all the
properties even if the owner is trying to do it on their own.
Most problems with For Sale By Owners is that they list their property
for waaay too much money! And they really don't know the true comparables
of a neighborhood or chose to ignore them. Or they were watching to much
TV and decided to act like a bank or financial institutional and be deaf,
dumb and blind to the truth. Don't get me started...that's another post.
After we made our very fair offer, low but fair, room to negotiate you
know...the owner came back at why he rejected our offer. Here it is...
"I appreciate all the information you have sent on the "comps" in the vicinity.
Its hard to say exactly what a property is worth. Recently I have refinanced
our commercial property in Plano (I know that is a different animal but I want to
make a point) Two appraisals were done. One came in at $1,000,000, the other
at $1,500,000. Some of the same "comps" where used and adjustments made
according to each appraisers judgment. I could not believe the difference in value."
First of all there are 3 types of appraisals:
- for lending purposes
- for appraised tax purposes
- for resale purposes
Also, when you hire an appraiser you are their client so they will be more favorable
to you. However in determining resale value you will take a neighborhood or 1 mile
radius and basically 200 sq ft either way, then you do plus and minus for location,
bedrooms, baths and a pool. There's much more to it then that, but that's all we
Here's what our for sale by owner added for his pool:
Add the amenities that we have for the back yard at today's prices. Add +or - $60,000.
What kind of Kool-Aid have you been drinking?
- Pool $40K
- Gazebo $10K +
- Landscaping $3-5K
- Fence $10K
This mistake is made often when trying to determine the value for a home.
Guess what a pool is worth? Go ahead....pick a number.
Are you sitting down?
$10K to $15K - that's it, maybe $5K it depends.
Adding a retail sales price when your pool is 5 years or older doesn't compute.
When you put in a pool, you build it to enjoy - don't figure making money
on it - real estate does not work that way. There is no line item when you
sell a property - it's sold as a unit - home + land.
I think anyone can dispute the numbers are day long, but with comps you
can get a very close range of value. The other factor that directly determines
value is going in the "competition". For example, I go in 30 homes a week
and when buyers start their house hunt and preview home after home, value
is very easy to determine. They always buy the the most home for the money.
Our buyer really did want the home but not at $40K above market.
And I don't think you'd buy it either.
In closing, a real estate agent needs to be excellent in determining home
value whether it be buying or selling, otherwise a different profession is in order.
Not only knowing the neighborhood comps but area trends are just as important in
predicting where values are going and what a pool is really worth.
[where:75093,West Plano,home value]