Tom Inglesby, Broker
RE/MAX Equity Group
Portland, OR 97239
This is called the principle of substitution as buyers seek specific locations, then price...such that your brand new home priced at $X would be investigated by a buyer, as well as the 50 year old house 2 blocks away price at $Y.
I am foremost a State Certified Residential Appraiser of 15 years. I have appraised numerous property types including a significant amount of new(er) construction. There are two approaches to value an appraiser relies upon for single family, owner occupied housing: Market Comparable Approach and Cost Approach.
Given your home is new(er) construction, and likely subject to very little depreciation, the cost approach is a solid approach to valuation. This approach reconciles your costs of construction that would consider the following: 1) site as though vacant based on area lot sales (what would your lot sell for if vacant); 2) costs of above grade living area excluding garage area; 3) costs of below grade living area (basements, either finished or unfinished); 4) costs of appliances, decking, fireplace, and other amenities; 5) garage area. This subtotal is then depreciated which, in your case, is likely zero. If you back up to a rail line, are situated under heavy tension power lines, of your rear yard is location to an Interstate Billboard (traffic) then an appraiser would deduct a % for what we term external obsolescence...which is entirely subjective...and attempts to represent a buyer resistence for such obsolescence...which equates into a deduction in pricing.
Once depreciation is calculated (physical, external, functional (such as a 10 bedroom, 1 bathroom house which obviously could use more bathrooms), that number represents a reproduction or replacment costs new PRIOR to vacant site value AND site development being added. Site development consider concrete flatwork, fencing, landscape, sprinklers, 10 foot waterfall feature...whatever....the total of all these categories is your replacement costs new. Don't forget to add your financing costs as well...such as loan fees and interim construction interest. If you were the general for your home, such that you paid a contractor an overhead fee, you should consider including a 10-15% entrepreneurial profit on hard costs to reward your risk for building...general contractors do it all the time and how they make a living. Your profit of 10-15% should be calculated on hard costs only (costs of living area, below grade area, appliances, decking, garage, site development, etc...) and should not include soft costs (site, lending fees). NOW, read further.
Your immediate neighborhood will have comparable market sales & active offerings. I realize they are older homes, and likely not comparable in age...as well cost less to build years ago when energy costs were not so high as they are today (copper, metal, framing, etc...).
However, an appraiser & lender reading the appraisal will look at market comparables (sold, pending, active) to estimate a market value for your property with adjustments for: site size, view amenity (you have a view, they don't which should be adjusted in site value category as the view site is worth more), quality $/sf (they have vinyl, you have tile which costs more $/sf), effective age (their house is physically 10 years old but effectively is 5 years old as houses do not straight-line depreciate, compared to your house being new and having an effective age of 0-1), bathrooms, living area $/sf, and other categories such as garage area, fireplace amenity, landscape, decking, patio, etc.
In the end, ideally, the market approach indication and cost approach indication (after depreciation) should be relatively close in comparison.
The best, first step is to consider your costs of acquisition: what are the costs you experienced in building your home. And don't forget about that profit either....aka...if you sold the house...you ideally would sell it for more than it costs to build. If a general built the house for speculation, they would charge a profit % on hard costs.
However, I do want to define what it means to be superadequate or overbuilt...if you gold plated your fixtures, added a platinum roof, built a 6,000sf house in an older neighborhood where typical sizes are 2,000sf...you may suffer market resistence...I doubt this is the case for you, but some builders (especially on infill lots) will build what they think will be an amazing home...and is...but a buyer wants to be surrounded by like homes. A majority of buyers do not want to be the big dog on the street....they want to fit into their surrounding community. This affects resale down the road and is what we term incurable obsolescence. Regards!
Forest Heights is a desirable area, but sales of high end homes on your part of the West Side have really slowed down, lately. But truly unique houses always seem to draw buyers. Think of it this way: If a buyer saw ten homes in the perfect neighborhood for $800k, which house would he/she buy and why would he/she choose that one? It won't be because it was the cheapest house, it will be because it was the most special to that buyer.
Great question. A certified real estate appraiser is the only way to determine your value. I recommend calling Beth Cannady of PDX Home Appraisals.
Her Phone number is 503-888-6710 (Office) or email at firstname.lastname@example.org.
Best of Luck,
Realty Trust Group Inc.
Ultimately, the exact value of your house is a figure that a willing buyer and willing seller agree to. A competent Realtor and/or appraiser can provide you with a pretty specific price range - even in an established neighborhood (1-2 mile radius) by making adjustments to the subject property. (your house)
If you need more specific information, just drop me a line.
Best of luck!