Home Buying in 37909>Question Details

Ashley Merri…, Both Buyer and Seller in Knoxville, TN

Bought in 2001 for 155,000 per KGIS. Now on market for 260,000. Too high for 2% appreciation rate in Knox?

Asked by Ashley Merritt, Knoxville, TN Fri Nov 14, 2008

Looking at a property...interested in purchasing. This house is in the 37909 zip code of Knoxville and is 2,355 sq. ft. It was purchased in 2001 for 155,000 per KGIS.org owner card. I realize this may not reflect downpayments, but, I feel that now asking 260,000 is a little steep? That's like an appreciation rate of about 8%! I'm sure they've done some updates...Anyone know much about the zip 37909 to know if we should offer anywhere close to 260,000 or take advantage of today's market and offer 220,000-240,000?

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Hi again Ashley,

If you are talking about the property I'm thinking about, then $260,000 is overpriced. You are correct that they purcased it for $155,000 in 2001, and they got a VA loan. After researching it further, I also found out that the past owners started their listing price at $169,900 and obviously let it go for $155,000--BUT, it stayed on the market a total of 237 days--virtually 8 months.

It looks like a great location to be in, close to West Knox, Downtown, and virtually anywhere. Also, I see that it has almost an acre and has a cool contemporary design. However, based on my research, I'm also noticing a house very similar to it with similar acreage in the cul-de-sac close by the house you're talking about. It sold in August for $180,000. Granted, contemporary design houses usually sell for more in this market--however, I just don't see $80,000, ya know?

However, further researching the area, I also found a pretty similar home that sold for $275,000 in January 2007. It was a 2,470 SF home with .75 acres completely restored and upgraded. So, that tells me that in the immediate area, prices have appreciated quite a bit. Now, it totally depends on the condition, floor plan, privacy, etc. of the house you're looking at to see what it's really worth.

Find out what upgrades they have, what systems have been replaced, how old the is the roof, exterior material, etc. Also, think about the floorplan: does it have 3 bedrooms or 3 bedrooms plus a room designated for office space/study...3 bedroom homes in this price are a nightmare to resale. Everyone wants an extra room for office space, guest bedroom, playroom, etcccc. Also, how is this house positioned? Do you have any highway noise, other neighborhood nusances? Is the property sitting close to the road, or does it have a private front yard? All of these items affect the value of a home. Once I know, or you know, the answer to these questions, then you know whether that property's value is closer to the $180K range or closer to the $275K.

When a house is in a cookie-cutter n'hood, prices are generally the same within the same floor plans. Now when you are dealing with custom built homes, especially with acreage, it's more difficult to establish a market value without seeing the property. I'm not sure I would personally pay $260,000--but then again, I'm the type of girl that always likes to get something off the price :)

Best of luck to you!

Adelina Rotar
Realty Executives
0 votes Thank Flag Link Fri Nov 14, 2008
Hi Ashley,
It is difficult to say without knowing the specific location of the home. Some West knoxville neighborhoods appreciate 2-3 times more quickly than other neighborhoods in Knox County. The current condition of the home is critical at this point when considering making an offer. The age and maitenance issues are also important criteria. If there have been recent upgrades, what percentage of the cost can be added as appreciation value if any? Finally, If there were no change in condition of the subject property since its last resale, a 2% appreciation rate In my opinion is a good conservative rate to use in West Knox County and maybe to generous considering current market conditions in our area. Based on appreciation only , this home is overpriced, unless the square ft has been significantly increased. You should be able to purchase a home in our area for a good 10-25% less than its appraisal value, if you shop around.
0 votes Thank Flag Link Fri Nov 14, 2008
In today's market it's all about comps. The appraisers are only going back 90 days. What ever the comps say for the previous 90 days is what you have to go by. It doesn't matter what it sells for if it doesn't appraise out.
0 votes Thank Flag Link Fri Nov 14, 2008
the key to know is what was the situation at purchase in 2001. It's possible it was bought as a foreclosure. If other homes in the area are selling for more than or near that price, I would say yes. The best resource for you is to work with your Buyer's Agent. He/She should provide you with all the info you need. As a Buyer, you would not be charged any commissions. The Seller Agent pays the cooperating compensation.
0 votes Thank Flag Link Fri Nov 14, 2008
Ashley,
Appreciation Rates per KAAR MLS stats since 01
2001 4.0%
2002 4.3%
2003 4.6%
2004 5.9%
2005 11.1%
2006 6.25%
2007 3.8%
2008 (.7%)
This gives you a total appreciation since 2001 of 39.25%. Multiply the $155,000 by 1.3925 and you get $215,837.50. Of course this is the appreciation method only, but in today's market I would be inclined to start the ball rolling around $215,000.
0 votes Thank Flag Link Fri Nov 14, 2008
Do you have a real estate agent to represent you in the purchase? If so, ask for him/her to run find comparables that have sold within the 6-8 months - preferably in the same neighborhood but at least in the 37909 area of Knoxville. The Knoxville area has maintained a sound appreciation rate that has avoided spikes - both up and down - but the value of any home can be based on several factors however 8% per year does seem unlikely for the area. For example, was the home purchased for below market value in 2001 and has major renovations been done since that time?
Either have your agent ask or you can ask to see the Tennessee Residential Property Disclosure which may answer some of you questions about renovations done.
Ask lots of questions from the seller and or listing agent.
Hope that helps
Deanna Mendenhall-Miller
RE/MAX Preferred Properties
0 votes Thank Flag Link Fri Nov 14, 2008
Hi Ashley,

Can you provide an address or list number and I can look up the info for you?


Thanks,
Renee
Web Reference: http://www.RealtyRenee.com
0 votes Thank Flag Link Fri Nov 14, 2008
Wait a few years, it will be probably be 155K again. Good Luck
0 votes Thank Flag Link Fri Nov 14, 2008
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