By Jonathan Bodeen · 16 April 2018
Pun Intended.
When it comes to Real Estate, my dad (the illustrious Mike Bodeen) and I don’t always agree on everything. Unfortunately for me, this last week, on two separate occasions, I was forced to realize that my dad, as he too often is, was right again.
Our first disagreement was on valuating our new listing at on 2125 N 119th Ave in Avondale. I felt the house was worth around $235,000 to $245,000 based on the comps (comparable properties) that we were looking at. My dad was convinced that the uniquely large lot, with ample space and great big RV Gate and Pad would push the value up to the mid 250s. I was skeptical to say the least, and when we ended up listing it at $259,500 I was worried we had overpriced it, which could cost the seller valuable market time and lose the best window to get the best price (first one to five weeks – depending on who you ask). You’ll notice that we already have it under contract, and at full list price I might add. And this was the first time last week I had to eat crow.
To find the value of a home, Realtors and Appraisers alike will usually use the comparable method. The concept is simple but is not necessarily easy. The first step is to find three to five properties that are as similar as possible to the home in question and have sold recently. Next, we evaluate where they differ, and adjust the values accordingly. This is where it gets tricky because valuating those individual features is much trickier than just comparing price per square foot and averaging them out.
For example, usually a home backing up to a busy street will end up selling for at least 5-10% below the comps, but if the buyer happens to be from a place like Chicago or New York, where road noise is a part of life everyday-all day, they might not even notice and be we willing to pay full price (Hopefully they have a good agent that can advise them accordingly)!
Corner lots are another interesting example. Many assume that corner lots are worth more, but the reality is some buyers love them and some hate them. Those that love them, it’s because they have more space, one less neighbor to the left or right of them, and those that hate them, because they feel more exposed, to the neighbors, or have small children and are worried about the perceived danger of another street. So usually it’s a wash, and the value of the corner lot is unaffected by it’s position.
The second crow-eating came about when we speculated on the value of a new listing that had popped up around the corner from my dad’s house with his same floor plan. The comps were selling between $355,000 and $380,000, but this home was listed at $450,000 and the inside was nothing special to boot. I was flabbergasted, I thought it had been way overpriced! Bodeen the elder wasn’t so sure. “The lot,” he said, “is one in a thousand!” Yes it was a great lot I acknowledged, but not $75,000 great! Well short story even shorter, it’s pending at $440,000, the other agent told us, with a back up offer at $450,000! Apparently, the original owners of this property had camped at the sale office for this complex for two days before the sales began so they could get this lot!
Most don’t realize how truly subjective home value can be. If I ordered three independent appraisals on a property, I’d be surprised if any of them came back the same. The more unique a home is, the more true this becomes. If it has certain features, like a great pool, or the perfect lot, this can add value to the home, but determining how much value is never an exact science.
The moral of the story? I’m learning to trust my dad’s gut level experience he has built up from 40+ years of real estate, because a lot of this stuff is almost impossible to measure with certitude.