Would it be reasonable for me to expect almost $250,000 more than the surrounding houses on the same street?

Asked by To Sell Or Not, Squirrel Hill, PA Sun Dec 28, 2008

The house is truly exceptional and is a labor of love, but like I said all the other houses on that street and the neighboring streets are smaller and go for much less. The neighborhood is in Squirrel Hill.

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Jeffrey Benn…, Agent, Pittsburgh, PA
Sun Dec 28, 2008
Even without seeing it, I can fairly confidently say no, especially in this market. I suppose anything's possible -- prices in Squirrel Hill actually can vary that much on a single street (e.g. Northumberland). There at least a couple factors to consider.

It sounds like you've put a lot of effort into home improvements. The main purpose of these should be your own enjoyment; describing the work as "a labor of love" suggests that you understand this. Even the highest value improvements (e.g., updating kitchens and bathrooms) generally only return 80% of their cost. Some can be negative (e.g., pools in Pittsburgh). A very few can pay back more than you put in (e.g., adding a second bath to a 4-bedroom house that only has one), but those cases are rare.

Buyers' tastes vary widely, and individual buyers may be indifferent or even actively dislike your most treasured alterations. Buyers don't care what you paid or how bad the house was before you go it; they just look at how it is now and compare it to their particular needs and wants.

The neighborhood (and perhaps the school district) is always important. Location, Location, Location is not just a cliche; a large part of a home's value derives from where it is located (particularly in higher-priced neighborhoods, where it may matter which street or even which side of a street you're on).

Within a neighborhood, there is a phenomenon called price regression (or its opposite, price promotion). A house that might be worth $500,000 -- when surrounded by other $500,000 houses -- might be worth substantially less when surrounded by $200,000 houses. The lower values around it will tend to bring it down.

This is closely related to a concept in appraisal called "highest and best use." If you have a $250,000 house surrounded by $350,000 houses, price promotion might tend to raise its value a bit -- up to a point. But if your home is not the "highest and best use" of the land it occupies, it's value will be reduced.

If you have a small, $100,000 house on a large lot, surrounded by $500,000 houses, it won't suddently be worth $350,000 -- because the best thing for a developer to do would be tear it down and put up another $500,000 home on the lot. In that case, the house itself would be nearly worthless, and the price would be driven by the land value.

Pricing in Squirrel Hill can be difficult, in any case. What I do in difficult cases is take a team from the office through first, usually including the broker. That generates a good internal consensus. Then, I'd do a Realtor-only tour that includes agents from other companies. Given enough cookies or other snacks, they can be induced to vote on whether they think the current price is too high, too low or just right. (These are the actual people who will be advising your potential buyers, so their opinions are valuable indeed.)

Finally, if all that's not enough, a professional appraisal is only $300 or so. Buyers are going to get one for financing anyway, and the bank won't let them pay more than the appraised value in any case, so that's a hard upper limit.

Given all this information, plus whatever other factors are motivating you to consider a sale, you can make a very informed decision about whether it's in your interest to sell. Let me know if you'd like to pursue this further.
2 votes
Sll, Home Buyer, Pittsburgh, PA
Wed Apr 15, 2009
Your house is worth as much as someone is willing to pay for it. period.
You can price it whatever you feel it is worth, but that's not going to mean its going to sell. My prediction is that all of your unique improvements are only worth 250k to you and not to anyone else. Price it what you'd like, and wait, and wait, and wait for an offer.
Just don't sell it and live in it. If you like the house so much then you should stay put.
Houses in Sq. Hill are already overinflated in price. Single income professionals such as myself can't even pray to be able to buy a decent and liveable house as they all seem to start in the 200's for something just decent, not great or good. I've seen houses like the one on Wightman and Forbes or one on Beacon between Wightman and Schenley park sit on the market for YEARS b/c they are overpriced and the sellers have dug their heels in and won't budge on the price. They made their improvements and guess what? The potential buyers don't give a darn (some of the "unique" and expensive improvements in some houses are so ugly that I can't understand why anyone would have paid for them in the first place)
You sound like you won't be able to sell your house so I hope you can afford to live there for the long run.
1 vote
Tammy Sorco, Agent, Pittsburgh, PA
Wed Feb 6, 2013
That is quite a bit higher than the surrounding homes that you described. I would recommend getting an appraiser to do a full appraisal. You want to make sure that you are not in a transaction and then it appraises too low for the buyer to get the mortgage. It is best to have the information at hand and t you can make a decision based on facts and how the bank may view your property as an investment when lending on a mortgage.
0 votes
James Vandeck, Agent, Pittsburgh, PA
Thu Apr 19, 2012
Without seeing the property I might conclude the answer is generally 'no' For sure , that higher price will get you less exposure....
0 votes
Pat Rose, , Pittsburgh, PA
Sun Apr 24, 2011
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0 votes

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Flag Thu Apr 19, 2012
Jeffrey Benn…, Agent, Pittsburgh, PA
Sun Dec 28, 2008
We probably should take this off the public forum at this level of detail (my email is jeff.bennett@pittsburghmoves.com).

There are a lot of questions in your question :-)

Appraisers are going to look at primarly at comparable sales -- considering location, number of bedrooms and baths, yard size, parking availablility, and general condition. Appraisers do not generally care about artistic touches or non-utilitarian improvements.

Since the bank loan approval is based on the appraised value, trying to sell much over that is extremely difficult. To most buyers, housing is more of a commodity (4br/2ba in this school district), which they prefer to decorate and customize to their own tastes.

As for the Squirrel Hill market, Pittsburgh has been relatively more stable than other markets during the downturn, and it's true that the higher-end market is *somewhat* above the fray, and less likely to be affected by unemployment or interest rates. I wouldn't say Squirrel Hill is completely unaffected, but it's held up better than most.

Last year about 300 homes sold in Squirrel Hill at a median price of $230,000. This year, 250 sold at roughly the same median value. It's a little dip, but not drastic; usually 275-300 have sold over the last several years (e.g., 305 in 2005). If you look closer, I think somewhat less house is being sold these days for the same average price. Also, Squirrel Hill includes diverse regions (like Swisshelm park), and everything from small 2-bedrooms and row houses to outright $2 million mansions, so it's very hard to generalize. And low interest rates at the moment (even for jumbo loans) can't hurt.

Shady and Beacon are main thoroughfares, and can be devalued by that for buyers who value more private streets (like Darlington or Marlborough -- very close to Forbes but not right on it, with mostly only local traffic in the case of Marlborough). In Squirrel Hill there's a large premium on setback (yard space) and garages. A house on Shady and Solway, with parking and a yard, sells for $350K, while a similar house further toward Shadyside without parking or a yard might go for under $200K. A row house rental property on Wilkins might be $130K or $150K. (I sold a $150K investment property on Shady not long ago.)

I think that accounts for most of the price discrepancies; it's not that parts of Squirrel Hill are "good" or "bad" (though there may be some value placed on things like Minadeo district, proximity to Allderdice, etc.). It's all "good" -- but different areas tend to have more or less space, more or less traffic, etc.

It sounds like you're focusing on the unique improvements you've made to the house: things like doors, fixtures, and restored Victorian woodwork. Doors and fixtures -- and anything non-functional or primarily artistic -- are unfortunately among the improvements least valued by potential buyers. If you have elaborate gold bathroom fixtures that cost $15,000, but which aren't to the buyer's taste, the buyer will see them as a drawback (he has to remove the fixtures and replace them with what he likes).

Victorian woodwork is very common in Squirrel Hill, and though yours may be much better or more authentic than that in other homes, few buyers can tell the difference. To most, if it's looks dark, heavy and basically intact, that's good enough for them.

If you have expensive improvements you love that are removable (like chandeliers, some fixtures, doors), you might consider removing them before the sale and reusing them on your next house (if this makes sense given your future plans). Then you wouldn't "lose" them to buyers who don't value them as highly.

There are as many opinions as there are Realtors :-) Each one has had different experiences, and so each one will give you slightly different advice. They are all trying to help, and I doubt anyone's intentionally misleading you.

It's true that some agents will price it wherever you want just to get the listing. However, overpricing helps no one. When it doesn't sell, nobody's happy -- not you the frustrated seller, not the agent (who's done a lot of work for nothing), and especially not the buyers who might buy the property at a reasonable price -- but whose agents didn't show it to them when they saw it was overpriced!

I urge you to consider your entire situation: what is motivating you to sell? Do you need to sell at all? If so, how quickly? What are your future plans (another home? bigger? smaller? in a different market?). That kind of analysis, coupled with a very realistic idea of your home's value *to current buyers*, will enable you to make the best possible decision.

If there is a large disparity between what you're hearing from Realtors and your own opinion of value (and $250K would be considered a large disparity :-), the best way to resolve it is to get a professional appraisal (or two). That is the number buyers and buyers' agents will be working from.
0 votes
To Sell Or N…, Home Seller, Squirrel Hill, PA
Sun Dec 28, 2008
Thanks Jeffrey.
I have spoken to a couple of real estate agents and have got varying responses. I understand what you tell me about Northumberland... but one of the realtors told me that the other realtor didn't quite understand and pricing it high based on the money put into the house would only be detrimental in the long run because no other house within a mile radius of my house has been sold or put on the market for that price. In essence I was told that in order to obtain my listing the other realtor was not telling me the truth. Though those houses are considerably smaller and have cheap doors, fixtures and improvements. I have a lot of original woodwark true to the victorian period - it is truly one of a kind house and stands out compared to the rest. It is breaking my heart that simply because of where it is located the house will fetch a lower price... Isn't all of squirrel hill a price location? Why should it matter if my house is on Shady or Darlington verses Beacon? I was under the impression that the housing market in Squirrel Hill, Shadyside was not affected at all because of its prime location. Is that not true?
0 votes
Terrence Cha…, Home Owner, Allentown, PA
Sun Dec 28, 2008
That's a very broad question which would require further information in order to give an appropriate answer. You need to get in touch with a professional real estate agent or even an appraiser from your area. An agent can give you a market value for free while the appraiser will cost you.

A real estate agent can tell you what the market is actually doing in your area. Also, you need to realize that selling your exceptional home in an average neighborhood will take exceptional marketing skills to sell it. Interview several agents before picking one.

Hope that helps.
0 votes
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