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A Trend Confirmed

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aprazer

Junior Member
Joined
Feb 27, 2002
Professional Status
Certified Residential Appraiser
State
New York
For the last 6-8 months or so, I have noticed a trend with renovated homes. About a year or two ago I would get probably 1-2 appraisals per week on substantially renovated homes. There were rarely comps of similar renovated homes. Now, I find them all the time.

Contractors have been as busy as we are, and they all seem to be overextended. They take on too many jobs and annoy every homeowner as they run way over schedule. So I have noticed a nice premium being paid for homes that are renovated and eliminates the hassle of dealing with contractors.

I came across two re-sales yesterday and the numbers are astounding. Home #1 is listed for 203 days-sells for $685,000. Renovated by speculator(new kitchen, baths, paint, carpet-no structural changes), goes back on the market 50 days later and sells for $950,000.

The 2nd one is even better. Listed for 155 days sells for $865,000. renovated and back on the market 30 days later(how much work can you do in 30 days?)-sells in one day for $1,450,000. That sale price is completely unsupported by anything available.

Here is one more bit of info. Both homes are listed by a broker, who purchased them using a holding company. He does not indicate on the listing sheets that he is the purchaser or the seller when they are listed the 2nd time.

Another broker in the same area has stopped buying them himself-as he gets the comission on both ends without any of the headaches. He "steers" the sale to speculators with the condition that he gets the second listing once renovated.
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Sniff, sniff....hmmmmmm, are we close to a fish market?????
 

Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
Might the location have something to do with it? I see high-dollar renovations and sales, but only in certain areas.

Roger
 

John Hassler

Senior Member
Joined
Jul 23, 2002
Professional Status
Certified Residential Appraiser
State
California
I'm seeing the same thing out here at the same price levels. These people have the $$$ and are willing to pay what I consider a premium to have it done already. It's just supply conforming to demand. Definately have to compare remodeled with remodeled on the grid.
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
I call it "feet up on the coffee-table effect"...

You nailed it.

Buyers in some markets are willing to pay a significant (tho those examples are pretty darn significant :blink: ) premium percentage for doing nothing but telling the movers where to put the couch and coffee table and then settling in. Forget customizing to their color schemes: close enough got good enough about the time the remodelers' projected completion dates started running over two months.

I started seeing ridiculous percentage value increases for turns - NOT FLIPS - with similar amenity about 1.5 years ago... mostly in the mid to upper mid price ranges in my market areas... the folks in lower end houses were still mostly doing it them selves... the upper end folks were paying through the nose for premium service and pushing the mid folks out well past two months for 'plain remodleing'... Some remodelers sensed opportunity and got into business for themselves.

DO check and see if the realtors are in any way involved: holding company, sister with different sur-name etc :angry:
 

Dee Dee

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
I agree with LeeAnn.

Same thing happened here in the Denver area about 2 years ago, though not so much on the higher end as in older neighborhoods that were due for a face lift.

Particularly in demand were the larger ranch-style homes that were located near major traffic arteries that lead to the downtown areas. The yuppies didn't want to deal with the commute caused by our urban sprawl and would pay a small fortune for a revamped oldie as opposed to a bigger house further out.
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Could it be in areas where there is a lack of new construction competition? We see a lot of people moving up to new homes due to the lower interest rates and affordability of new construction.
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
Mike:

In my area at least, it was folks moving up from the even smaller smaller central city homes... who formed the most noticeable 'premium paying group'.

There IS new construction competition in outlying areas, and in the main city, the commute is not a huge factor for most people, the town isn't all that big and has sufficient crosstown arteries and circle highways.

On the street where I used to live, the local city detective, a sheriff, and two other neighbors, all of whom had done some minor renovations - got top $$ for their little cracker boxes, and moved into places twice as big, that had fresh paint and carpets and maybe a little trim or kitchen/bath remodeling... They ALL cited 'no needed repairs or painting' as a factor in their selection of new domicile! Most of them had done the work themselves on the home they were moving out of...

They all indicated that they had looked at new homes, but decided the premium for the 'new' versus fresh interior was too steep to get them as much house as they were looking for in their moves! Now, these were all fairly financially astute individuals on budgets, who put a premium on savings OR lifestyle issues (the sheriff got a new boat out of the move as well :p ). As they were neighbors for more than 7 years, my interviews with them were pretty in depth, and have been since verified (in part or whole) with other folk I have spoken to in recent months. Anecdotal reports backed by statistical evidence B) : appraiser ideal!
~~~
I DO seriously consider condition in certain sub-markets. It is obvious that adjustments are extractable from the market: DOM is inversely correlated, and significant $$ differences are USUALLY significantly positively correlated with condition. {edited 'cause I skipped inversely :redface: }

Caution: FSBO's are a real wildcard :eek: ... and becoming increasingly prevalent <_< . Sometimes "a bargain ISN'T a bargain..." ;)

AND

The number of 'dream asking prices' on 'schlock remodels' by a certain set of local realtors is happening more often as well :angry: cause there IS a difference.

You can figure it on the subject, but I look close at certain comp sales listings... <_<

Heaven forfend we get many of those sales. Ain't no-body going to be happy then :(
 

Mountain Man

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
Here is one more bit of info. Both homes are listed by a broker, who purchased them using a holding company. He does not indicate on the listing sheets that he is the purchaser or the seller when they are listed the 2nd time.

Failure to disclose being an owner/agent???? :eek:
GA RE commission would march in, and snatch my brokers license off the wall .....in a heart beat ..... for non-disclosure. Even as a CEO or director of a "holding company", I'd disclose it.
 

aprazer

Junior Member
Joined
Feb 27, 2002
Professional Status
Certified Residential Appraiser
State
New York
It's a combination of factors. The neighborhood is pretty "hot" right now, there is no new construction(no land available), and the most significant is the rates. Without the low rates I don't think you would see such dramatic increases.

I did one in this area for a mortgage broker(did not use his own company), and were discussing how young these buyers were-mostly 40's. They have pretty high monthly costs(2 BMW/Mercedes-vacation home, nannies, housekeepers etc)and he was telling me that a lot of them were using balloon mortages or this one product tied into the London exchange. They are basically paying interest only for ten years. A lot of them are not nearly as wealthy as they seem.

Now if values go south..................

It's interesting that there is a car dealer in this same neighborhood, who deals in Rolls Royce, Ferrari etc. But he doesn't sell most of them. He kind of uses the same financing. You pay interest only for 5 years-then there is a balloon payment. Now if you can't afford a $200,000 car now-how likely are you going to be able to come up with the balloon payment? So you roll it over into a new car-and this just keeps going. This guy is so bold he stated in a newspaper interview that once you lease the first car-"I own you for life".
 
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