New construction resell - improvements don't add value?

[residentialguy]

kgfstl
You've heard both sides. The problem is that we have no way of knowing whether the house was over improved for the neighborhood and could not support the upgrades or it was a flunky appraiser. From what it sounds like, I have a hard time believing that the upgrades you mentioned wouldn't be valued. It is not like you have a 5,000 sq ft home in a neighborhood of 1,000 sq ft homes. They seem like typical upgrades that most people would appreciate and pay more for. I think you got a bad appraiser, but I don't know for sure.

As far as the "Maybe they don't really want your house that badly after all. If they did, they'd come up with the money" comment....please. Most buyers are in a limit cash position. That doesn't mean they aren't the market and that your original should have been the market price. My guess is that if they had the money, they would have paid it. Too many unknowns to be sure, though.

Anyway, now you've learned a lesson for the future. Sorry the lesson cost you $17,500.

Good luck and thanks for stopping by. I'm glad you were able to get a little better understanding off the appraisal world. You are welcome anytime!

 

[TJSum]

Fast forward to last week, when the appraisal on our home comes in $17,500 less than the agreed-upon sales price. In reviewing the appraisal, the items listed above garnered us adjustments of $4k for the finished basement, $1k for the patio, and $2k for the fence (NOTHING even for the second half bath?).

Did they miss a half bath completely, or did the above grade baths and basement baths total what you really have?



In our neighborhood, it's common to have a patio and about half have hardwood floors, but NONE of the other improvements are common. We're the first home with a finished basement to sell at all. In fact, we're the first home that wasn't entirely builder-grade (full of vinyl, cheap carpet, formica, paint-grade cabinets) to sell. We've been inside most of the homes and have seen the MLS pictures. There were 7 comps, all in the immediate few blocks: 2 were 8 months old, 2 were still on the market. Two other sales were not included that could have helped to support the sales price.

We need to hear more about these two other sales? How would they have helped support? Were they close to your original sales price, but larger with fewer upgrades, etc? More details are needed.


I'm flummoxed by this. How can it be said that all of these improvements have no affect on value (as demonstrated by comps), when no house with these improvements has sold before? Maybe that's my real question -- sorry it took me so long to get there.

How would these two other sales have helped? What makes them supportable? If they sold at prices similar to your original sales price or above, it would be hard to say your home is over improved?

Please elaborate?

 

[CanadianAppr]

Excellent post, Sutphid!

 

[Michigan CG]

.......I suggest that sellers who are unsure of the value of their properties have an appraisal completed by a local experienced appraiser. This appraisal can be used as a sales tool and provided to the buyer. The cost is low compared to the risk of loss based on a low listing price or low quality AMC appraisal by the buyers lender.

I have done work for Realtors and home owners willing to pay an appraisal. It is a good marketing tool for sellers. The Realtors like to offer my appraisal to the dumb out of town appraiser showing support of the value.

Mr. Out Of Town Appraiser typically does not know neighborhoods or areas and accepts a copy of the appraisal so he can turn and burn his report in 24 hours from 70 miles away.

It does not hurt that I include a list of recent assignments on the last page of the report that includes all types of appraisals including government work, shopping malls, complex agricultural, commercial and residential properties.

If you are an expert in your market you should be going to the Realtors to offer very comprehensive reports that Skippy does not write. Appraisers can do a very detailed report for $400 that saves the seller thousands when the "appraiser" from out of town comes in $20,000 low.

I have five such reports to complete right now and the total fees are in excess of $3,000.

For those appraisers that do not write detailed, supported reports that include extensive narrative please ignore this post.

kgfstl............I hope that what you have learned here you will pass on to your friends and relatives. The current economic situation demands folks to become educated and it makes me sick to see people getting screwed out of tens of thousands of dollars because of appraisal issues.

 

[kgfstl]

In fact, I just did this a few hours ago. The gas company guy who did our inspection is going to put his house on the market in a few months. I told him that if I had to do it over again, I would definitely hire an appraiser first. He really liked the idea once I explained the implications.

I
kgfstl............I hope that what you have learned here you will pass on to your friends and relatives. The current economic situation demands folks to become educated and it makes me sick to see people getting screwed out of tens of thousands of dollars because of appraisal issues.

 

[David Beasley]

Late to the party, but will add:

AMEN to those that advise against using HGTV as real estate investment advice...I keep it locked out of our satellite tuner at home - not even the wife knows the passcode. I could no longer stand to hear their key phrase "and it adds value to your home!" when what they were doing was plainly cosmetic and/or simply for the benefit of the current occupant/owners. It's appeal to the informed and typically motivated buyer would most likely be less than the highly enthusiastic show hosts were proclaiming - about 98% of the time. And for whatever reason, no one on that network seems to grasp the concept of over-improving a property for its neighborhood. My favorite are pools and new roofs. I've seen pools actually generate negative adjustments instead of adding value to the subject - it is totally market-dependant. And a new roof is typically deferred maintenance...if you go with architectural shingles or standard 3-tabs - the home needs a roof. And chances are, that's why a new roof was installed. I've only been in the biz for 17 years (relative newbie in my area by that measure) but I've never seen a roof installed purely as an "upgrade", it was installed because the old roof was worn out. But don't tell that to any of the HGTV talking heads - a new roof instantly adds value to your home...LOL! Right.

 

[David Mescon]

Perhaps you can use your current selling experience to your advantage when purchasing your new home. Since, at least in your market, it appears as if moderately extensive upgrades are currently characterized by diminished market returns, maybe you can buy a highly upgraded home for little more than an otherwise similar, but more "vanilla" one. Even if those improvements never bring you a proportionately increased return on your future-sale-dollar, you will at least have had the benefit of those improvements throughout the period of your homeownership.

BTW, I had a window blind salesman argue incessantly with me once about how his product would add more value to my home than it would cost. When I told him what I did for a living he stormed off, muttering some sort of expletives.