Why an old home that needs TLC is priced at a level that would never be appraised by a bank appraiser even if a buyer would consider this home?

Asked by salbarzini, Queens, NY Thu Apr 26, 2012

A 2 family with estimated payments of $4,522 monthly expenses to be added to, makes for a difficult investment in my opinion. So if it needs work, besides the asking price, renovation expenses must be considered besides the large down payment and closing costs incurred. And what kind of rent can be attained to offset the monthly burden? Maybe $1500-$1600 in rent? Think about it.
Leaving about $3,000 left in monthly mtge. payment, heat, insurance, electric, water/sewar taxes, which may bring this figure back up to $4,000 monthly. Now add food expenses,etc..
and you then need approximately $5,000 minimum monthly. I can't understand the asking price on this one at all.
I just saw a 2 family, in Modern condition, new wiring,new furnace, all detached, private driveway, a 2 car garage, nothing to do inside, asking $739k, 6 bedrooms total, and it is a flexible price I was told. Guess this property at $769k helped me indirectly go back to the other more valuable property. Thanks!

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This question is about this property: http://www.trulia.com/property/3082782804--70th-St-Queens-NY-11379

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6
Nida Kabbaj, Agent, Plainview, NY
Thu Apr 26, 2012
BEST ANSWER
Upon being engaged by a client to facilitate the sale of a property, a good Real Estate Professional will perform and provide a Comparative Market Analysis (CMA). The CMA is a tool which provides pricing guidance based upon recent sales of similar properties in and around the area, existing homes along with other market forces. The two operative terms in this case are similar and guidance. The term similar is important because no two properties are the same. A good Real Estate professional will be quick to point out that while the CMA provides pricing based upon general location, size, and condition of the property, etc... there are property specific criteria that can impact pricing. For example, recent renovation within the property - most popular renovations that provide the greatest return on investment (ROI) are kitchen and bathroom upgrades. Specific location within the neighborhood - i.e. property is districted within a specific school or is closer to the park, further from a noisy main strip etc. These are just a few of the property specific items that a Real Estate Professional should review with the seller. I respectfully submit that a Real Estate Professional who only prices based upon the CMA is doing a disservice, not only to the client but to our profession as a whole.

With respect to the other term of guidance, it is a Real Estate Professional's job to guide the seller towards properly and responsibly pricing a property. However, each seller is unique and should be treated as such. Each unique seller will have a set of specific reasons and goals towards selling a property. For example, a couple whom may have owned there home for a long time may not have the same pricing criteria as a younger couple whom may have purchased the property during the peak price points during the market. That being said while a good Real Estate Professional will provide all the tools, guidance, and advice that is required, at the end of the day the final arbitrator of pricing is the client. It is our duty to assist our client in achieving all of their goals towards the sale of their property.

I trust that this corrects some of the misconceptions set forth by the frustrated buyer. However, to the extent that there are any other further questions and/or required clarifications kindly contact me and I will be more than happy to be of assistance. It is also my pleasure to advise you that a Real Estate Professional may also serve as the buyer's agent to assist him in achieving his goals of finding the right property at the right price.
0 votes
Dear Nida, You are a bright Professional who impressed me to no end with your explanation and your evaluating every aspect possible sounding mature, knowledgeable, and forthright in a curteous manner. Thank you!
Flag Fri Apr 27, 2012
First Last, , 90002
Fri Apr 27, 2012
First of all, if you're not a licensed appraiser, then you don't know what an appraiser would say about the value of the property. It takes many hours of classroom work, passing a licensing exam, and on-the-job experience to become an appraiser. I have the greatest respect for their expertise and responsibility.

A larger down payment on the part of the seller will usually solve any problems obtaining financing caused by a low appraisal, if that should happen.

In addition to the factors you mention, what buyers are willing to pay may be affected by the usefulness of the yard, whether it has garden or patio space, the size of the lot(s), and of course, the specific location of the house.

A house needing TLC on a great block is often of keen interest to buyer-investors, because the long term investment prospects of such a house can be quite good. All investments must be evaluated in the context of the holding period. If the time frame is long, 10-20 years, a lot of things that don't make sense for "flippers" suddenly make a lot of sense for an investor.

Another set of factors concern the history of the house and its design and construction attributes. You mention a Modern house you saw some where else. I talk with buyers from time to time who specifically do not want a Modern house. They want something old they can restore, and they have the money waiting to invest in their project. Certain architectural details are sought after by clients who have a certain design aesthetic.

All of us, even real estate professionals, are vulnerable to our own biases when it comes to setting prices. The variables you mention are important to consider, for sure, but they are not the only ones. It's possible that some of the factors I've mentioned, or other ones, justify the list price of this particular house.

It sounds to me that you like the house, but resent its price being beyond what you are interested in paying. Well, it's not the house for you, that's all. Move on, but keep an eye on this one, in case the listing price changes.

Karla Harby
Licensed Real Estate Salesperson
Rutenberg Realty
kharby@crrnyc.com
212-688-1000x146
1 vote
Dear karla, good answer except that if a house is old, the wiring is old, the roof is old, the condition resembles Ralph Kramdons T.V. show apartment, how can you say I must like the house? The price doesn't reflect the comps or its current condition period. You are on the defense for another realtor, who in my opinion is an idiot and doesn't know how to be firm with the owners in putting the home where it belongs in todays market. Sounds like you like to post informative stuff from your experiences but it hasn't anything to do do with this specific home, or agent, or Broker.
Flag Fri Apr 27, 2012
Cary Zimbler, , 11375
Thu Apr 26, 2012
It could be a case of a home owner being unrealistic...(now that NEVER happens does it??)
Some agents will price a property at any amount just to get the listing. I tell owners that I would rather turn them down rather than let them down. If you really like the property my advise would be to make an offer...my motto is " After birth death is inevitable..everything in between is negotiable".

Cary Zimbler
Exclusive Agents Realti Inc.
Forest Hills N.Y.
917-652-5150
1 vote
ok
Flag Fri Apr 27, 2012
Anna M Brocco, Agent, Williston Park, NY
Thu Apr 26, 2012
In order to determine value one needs to review comps, recently sold similar properties in the immediate area; after reviewing such data a determination on worth can be made. In some areas, regardless the condition properties are simply worth a little more. However, when it comes to list price, it's the owner that decides price, not the agent, regardless of any data provided nor condition. Keep in mind that regardless property condition, a home is someone's palace with emotions homebound, therefore some over priced sellers may not yet be viewing the sale as a business transaction....
1 vote
Keep in mind that until a signed agreement is in place, there are no fiduciary duties. Generally list price is discussed/decided beforehand when reviewing comparables--sellers decide pricing, it's their property; as the old saying goes, you can lead a horse to water, but you can't force him/her to drink it. Some agents may decide to accept an over priced listings, others not. Similarly one can lead a potential buyer to a great value, but one can't actually force him/her to purchase...
Flag Sun Apr 29, 2012
If you really believe what you said, you will never be a superstar in Real Estate.
It is your fiduciary duty to dictate to a seller as a professional and control from the get go with your worldly experience to set a price. If you needed an operation would you dictate to the surgeon how to do the procedure? No you would do what the specialist tells you to do. otherwise you are no better than any part timer who doesn't know a comp from a bully owner with no common sense.
Flag Fri Apr 27, 2012
Eddie McGowan, Agent, Bellerose Terrace, NY
Thu Apr 26, 2012
Pricing property correctly takes both skill and a lack of emotion. Many times a homeowner "believes" a property is worth more than its market value because they have an emotional attachment to it. A skilled and experienced real estate agent should be able to provide evidence of true market value to the homeowner so the two may work together and set a reasonable asking price.

It is very important to price property correctly, because if it is too far from market value many potential buyers will be turned away, never even making an offer -- which is exactly what happened in your case.

Good luck with your home search!
---Eddie
718-440-4180
1 vote
Nice answer Eddie!
Flag Fri Apr 27, 2012
Your right Eddie, too many agents and brokers do not know what they are doing.Just getting listing after listing appeasing homeowners does not put money in the sellers hand or agent/ or brokers. A total Waste of Time, and a Black Eye for the Agent and Broker involved!
Flag Thu Apr 26, 2012
salbarzini, Home Buyer, Queens, NY
Thu Apr 26, 2012
If the owner set the asking price, the sales agent/ or broker should buy the sellers space helmets to be in vogue with their asking price. If the agent/ or broker set the asking price, they need to go to appraisal school immediately. A total waste of time. And many future buyers will be scratching their heads after inspecting the home.
0 votes
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