Hidden Property Value Found In Homes Large Lot
May 19th, 2012
Reader Question: I will be selling a home I received after my Mothers passing. Build in 1952 and having no “upgrades” there are several things needed to bring it into the 21st century. (Kitchen & bathroom upgrades) I am planing to sell it “as is” rather than investing money to bring it up to today standards. (It would be hard for me to change the house where I grew up) There is no structural or mechanical problems and was well maintained. It has good bones and an open floor plan, on acreage which is rare in its neighborhood. My question is how do I determine a selling price when there are no comparable house’s on the market. Is there a price per square foot to remodel or upgrade? Neighboring turn key houses with modest remodels and modern finishes, built in the 1990′s are selling in the mid 300k.
Monty’s Answer: Without knowing more, I suspect your home presents a somewhat out-of-the-ordinary property. Your concern about having “no comparable houses on the market” is less important because those properties may sell for less or not at all. The main focus of the appraisal analysis is comparable homes that have sold and closed. In instances where comparable sales are scarce, appraisers and real estate agents reach out further geographically, go back further in time, and make adjustments for differences between the subject property and the comparable sales.
You also asked if there is a standard square foot price on remodel and upgrades. To the best of my knowledge there is not an accurate price per square standard for remodeling. In addition to defining how square foot costs will be calculated, construction costs vary widely based on geography, quality of materials, the scope of the work and the contractor. However, this is a key issue to understand because determining the cost to update the home could affect your decision to sell it “as is”. As an example, if it cost $40,000 to remodel the kitchen and bath but the home will bring $65,000 more if remodeled, would you still sell “as is”? The point is to have the information, whether acting on it or not, is vital in determining the home’s value. Another less accurate way to acquire this information is with a before and after evaluation. Both appraisers and real estate agents can provide estimates as to potential sales prices both “as is” and “as remodeled”.
You did not ask for advice per se, but, please allow me to make a few observations.
You mention the home is “on acreage which is rare in its neighborhood”. Depending on how much acreage and the configuration, examine the possibility of subdividing the lot to create more lots. This sometimes can occur because covenants expire or through a new subdivision. If the potential to create a lot or lots exists, it may have a sizable effect on the sale proceeds. Again, both appraisers and real estate agents, if they are aware of the question, can address this issue. The caveat on this issue is to get more than one opinion. Also, consider a consultation with a registered land surveyor familiar with the neighborhood. They have a higher level of expertise on this specific issue. Ask the real estate agents you are considering specifically about their experience with new subdivisions. Learn their opinions on the potential value of the to-be-subdivided lots.
You stated in your question that the home has no structural or mechanical problems. How do you know? I recommend any potential home seller handle that subject differently. Whether or not you use an agent, I recommend you locate a competent home inspection company, pay them to inspect the home, fix anything they find wrong and leave a copy of the report on the kitchen counter with the repair invoices for buyers to see. Let someone who offers this service as a career tell the buyer there are no structural or mechanical problems, but I recommend you refrain from doing it. For more information refer to the article about home inspections elsewhere on the web site.
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Lastly, as a person contemplating selling a home, you are a prime candidate to embrace the dearmonty.com website. The site’s goal is to enlighten readers to make more informed decisions on one of their most sizable assets. Credible consumer surveys and thought leaders support my life experiences in real estate that suggest real estate consumers are not well informed about the buying and selling process. In part, one of the root causes is marginal, misleading or incorrect information available to consumers, from a variety of sources. Additionally, consumers are often too casual about the process of choosing a real estate agent. Dearmonty.com addresses the need for unbiased, correct information based on practical experiences. The web site contains significant information pertaining to your particular circumstance. How to choose a contractor, home inspections, how to evaluate a home, how to challenge an appraisal, and more. I encourage you to read on. I will be happy to answer more questions should they arise.
Good luck with selling your home.