How Low Can You Go...Pricing to Sell

LocrianAugust 14, 2012

All of our comps are changing suddenly. What sold this Spring at short sale/foreclosure is coming back into the market with completely refurbished interior amenities.

Gone is the trad starter home with laminate counters, vanilla appliances, w/w carpet & wood foyer/entryway, a phone jack in kitchen & laundry room, cable (maybe) family room...etc.

Took a peek at one across the street earlier this evening and WoW. Same sq-ft as ours (1368) reverse layout. Blonde bamboo flooring throughout, including bathrooms. Jetted tub in hall bath (termed "guest"). Pale granite counters throughout including bathrooms. White cabinets, too (buyers choice of pulls). Stainless steel appliances w/ OTR microwave. All rooms with phone/cable (including master bath). Sold in May 108; asking 389.

Another one is coming up next week; same scenario. Sold in May 120; asking 399. (May be same investment group from what i've seen.)

And a third, different floor plan w/ 1280 sq-ft is projected for early Sept. Sold April 129; asking probably 350-375. (Ah, the info you can learn walking a dog and visiting with folks!)

Our REA has recommended upgrade the kitchen and lay hardwood on all 3-levels; keeping ceramic tile in baths. And, choosing BM paint from her Neutral Collection. The kitchen had been replaced in 2005/06/07 with black appliances and Formica counters. Cabinets stained/sealed in walnut. Relatively new carpet (less than year old) and refreshed bathrooms. We just finished painting in a lovely, literally neutral white-on-white. (Know how hard it is to find neutral whites *grin*.)

She believes our current appraised value 306 will increase adding new appliances, counters, sink/faucet (current faucet is newish from nov 11, but not fancy), flooring and neutral paint. We passed a pre-list inspection with one hit (no GFI in one bathroom) which was corrected. The property tax assessment is 286.

Honestly, will upgrading the kitchen and hardwood flooring throughout increase an appraised value? We paid to have an Indy appraiser for our own peace of mind. Not we don't trust REAs; it does seem as if they over-value, even based on comps, in this area.

And, honest opinions please, is it that important to home-buyers to have stoned counters, undermount sink w/ high arc fauct & soap dispenser, SS appliances, and three floors of hardwood? Let's not discuss rewiring the house for phone/cable in every room...even our perky REA was subdued by "The Squint" over that recommendation ;-)

At this point we're inclined to ask assessed value and provide clean, clean, squeeeeeeeeeky clean, and 99.9999999...-percent structurally functional.

If you read this far, thank you! I could really use another perspective. The fumes from white vinegar & baking soda have addled my one remaining brain cell...

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Comps are not asking prices. Comps are sold prices. At this point, they can ask 1M for those renovated homes or they can ask 50K for them. Neither means anything until one of them sells.

Property tax assessment also means nothing, except when it comes to your bill. It usually doesn't correlate well with market value of the home.

What you are saying has sold is unrenovated homes in the 110K-130K range. Those are your current comps, especially since you describe your home as unrenovated. IF (and that's a big if) the newly renovated homes sell, the price that they sell at will establish new comps for the neighborhood for newly renovated homes, not older homes like yours that haven't been renovated.

It would be the very rare case of putting in a new 40K kitchen in an older home and getting more than about 20K in added value back for a home. The rest of the home would have to be in similar updated shape, yes, with all new wiring and similar structural updates, to be able to even get that 20K back. Putting in a brand new 40K kitchen in a nonupdated older home that will need another 75K worth of updates will not make it any more appealing. In fact, it's much more likely to make it more unappealing to the segment that might actually be interested in purchasing your home and doing a gut renovation on it.

    Bookmark   August 15, 2012 at 7:36AM
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I see equally odd things around here. I've been following a townhouse complex where the average sale has been between $50 and $65K (all arms length sales), with one or two outliers in the 80s-90s for highly renovated units.

Right now I'm puzzling over one that sold for $25K last winter (definitely was never listed on the MLS), had some trashy cosmetic upgrades (Lowes grab and go kitchen, lumber liquidators floor, HD cheapest tile specials, etc.) and was listed last week for $123K, about double the average price. This week the listing is gone. Did they find a sucker? Who knows? It's a puzzlement. The unit still needed wiring, a roof, plumbing--really you'd have had to rip out most of what they did to get a sound home, but I guess there are people who don't think about those things.

    Bookmark   August 15, 2012 at 10:44AM
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The owners are balancing the carrying costs against the improvement costs.

It costs them money out of pocket every month they own the place.

A faster sale has real hard value to them.

The only thing you can do is use actual comps (recently closed sales) of like properties.

If they are paying out $5,000 a month, selling in 2 months instead of 6 months is worth $20,000 to them.

    Bookmark   August 15, 2012 at 11:01AM
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AhHa, GreenDesigns, thank you for the clarification. That is very helpful! Our neighbourhood, unfortunately, ranges from SOLD prices of low foreclosure 108 to high conventional 525... I'm guessing here ;-) that's how our Appraiser came up with an estimate of what a bank would write someone a VA/FHA mortgage on our property, based on SqFt, Bed, Baths, Functional, Overall Condition, Age, and what ever else goes into VA/FHA appraisals.

This is such an odd neighbourhood in Estate Sale just closed at 319 partially furnished, not refurbished since 1978. Was talking with the new family this morning. Cute couple with a tiny baby. The husband said this was a "perfect neighbourhood" as he could jog to work, come home for lunch and not worry about his family on duty days. The wife likes the park & playground plus being less than a mile to market/pharmacy and the unit is carpeted even though old. General agreement: "Better than living in an apartment. And, BAQ/VHA will help build equity before the next transfer..."

It will soon be time to run it up the flag pole and see who salutes LOL

    Bookmark   August 15, 2012 at 11:25AM
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ConchitaFLA, that's sad in a way that the "cosmetics" trump functional/structural. That's where we put all of our money over the years...all the unglamorous stuff. Plumbing isn't sexy LOL and who ever looks at a roof three stories up and wired is what you get with too much coffee ;-) HVAC what the "H" is that?!? (I've chatted with a few new buyers in our neighbourhood who go cockeyed at "technical stuff".) Double-hung, blinds in glass windows sounds so naughty especially French doubles with keyed locks...

Yes...that's where our money went and well spent to have a solid house as a home. BRB...

WooHoo! My Wally World towels & hookless shower curtains are here *happy dancing* Now I can get the two unused bathrooms staged. (Four baths were great for the family. Now just DH & me, four is two too many LOL)

    Bookmark   August 15, 2012 at 12:11PM
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You asked about appraised value specifically. Somewhere else on this site, someone said that the appraised value depends little on the interior upgrades, and more on location, sq ft, number of bedrooms, etc.
I wouldn't follow your REA suggestions -- a lot of us are just looking for clean & functional. Others have pointed out that your tastes may not match buyers -- they may go in and rip out all your new appliances etc & do over. Price your place reasonably with respect to those flips and it will likely sell quickly.

    Bookmark   August 15, 2012 at 12:25PM
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Hi TurtlesHope. Yes, the dollar figure we received from an Appraiser who specialises in VA/FHA mortgages, not from our REA, was 306. The maximum it would be financed under either plan is 306.

We could market it as VA approved property, as the mortgage was originally VA (paid-off). That does have a bearing for other military home buyers needing a mortgage. And tax value in Virginia/Fairfax County, I'd say is very close to actual market value, give or take by a few dollars only.

Usual resale here, other than Flippers, appliances do NOT convey. We're conveying all major appliances that were replaced in 06/07 (including wash/dryer). Not new by any means but good quality Maytags, regularly serviced by the dealer we used.

None of our work is "by homeowner" either. We've contracted with skilled tradesmen: Master Plumber, Master Electrician, Master Finish Carpenter, and Stonemason. We got Roofer through a recommendation by Carpenter. These people are friends, who know their crafts, and I trust them. :-)

What's frustrating is the sheer range of recent SOLD comps and new listing competition. I don't want to price high, hope for an offer, and go through multiple reductions.

One property, next row up is doing this right now and has reduced the asking by 50-thousand since May from 389 to 339. It's a conventional sale, clean, a few refreshes like carpeting & ADA interior door handles. A few visitors, no offers. Older couple, like us. They're hoping with BRACs moving in and elections they'll sell before another reduction.

So glad there's folks on this list to talk with :-) DH is not accustomed to moving turmoil...add in selling and... Retirement ain't for sissies (neither is downsizing & moving). =).

    Bookmark   August 15, 2012 at 3:59PM
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Your RE agent is lazy. Interiors can change your appraise value maybe 5-10000 between a 2 vs. 4 rating but it makes for a big change in appeal to buyers.
Hardwood floors look better than carpet but only because they may sell faster but won't increase value much. Same for stainless steel appliances, etc.
If you need to lower your price so be it but don't be bullied into keeping up with the Jones on improvements if your broker can't do their job. E.g. give the buyer a credit at closing to repair what they want which eliminates all the questions regarding what color works for countertops.

    Bookmark   August 15, 2012 at 4:14PM
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Hi RooseveltL. Thank you for saying out loud what I've been silently seething over. Our REA may not be "the right one" for this particular property...and my temperament. She gets along swimmingly with DH, tho, and I'm loath to suggest a different agent from the brokerage.

We are having the main level done in hardwood. Carpenter is bringing in the timbers ;-). Actually, they're 5-inch white oak planks. He'll put down kitchen, entry hall, living room, dining room week after next, then stain/seal. Hoping for a little cooler/less humid weather! (This was actually planned since the flooring on the main level does take a beating from normal life.)

Part of the problem is: she hasn't "finished making improvement suggestions and determining the perfect marketing strategy and listing price." And we're into Week-3 since she was on Summer holiday for two weeks. Can't say as I blame her...I need a holiday right about now LOL

At least she hasn't suggested replacing kitchen cabinets. They're original builder's oak. I cleaned and restained them myself this Spring. They do look nice with the Formica Antique Marcarella (sp?) counters, Swanstone double sink in Galaxy Black. Guess the Moen plumber's faucet is what's making the kitchen look shabby. Hey, blame it on the faucet ;-)

Our seller's package includes professional photographer and stager consultation. Guess this brokerage does things in increments to not overwhelm sellers. That's a good thing...not so good when a REA keeps wanting to perfect things and have everything perfect.

    Bookmark   August 15, 2012 at 5:43PM
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