A buyer recently asked me the question as to whether an updated home had more value than one which hadn’t been updated. Specifically, his interest concerned updated electrical wiring, plumbing, windows, and updated kitchen and bathroom fixtures. My response was:
From a theoretical point of view, the cost approach estimates the reproduction cost to create a duplicate improvement as if it were new. The depreciation present and observed is then subtracted and finally, the value of the land is added. However, from a more practical standpoint, replacements cost estimates are the standard used today. The difference between the two is significant in that replacement cost relies on current building practices rather than the sometimes more expensive techniques found in many older homes and buildings.
As to the hardware or the extent to which an older home has been well maintained or modernized, those items do become critical in determining depreciation. As an example, if you had two identical homes build in 1900 situated next door to one another. In both instances the actual age of each home would be 109 years. Now , in this example, let’s assume that one home had been updated with new electrical wiring, new plumbing, a modernized kitchen and new windows while, except for the roof having been replaced several times, the original components of the other home had just been well maintained and are in good working order. In this example an appraiser would say that the effective age of the modernized home might be 10 to 15 years. However, the home which had just been well maintained might have an effective age of 25 to 30 years.
The issue here is maintenance and modernization extends the life of an improvement. So, to answer your question directly, yes those updated components both extend the life of that home and decrease the amount of depreciation which would be subtracted from the estimated replacement cost; again adding value to the property.
Another point, most insurance companies have become totally paranoid of older homes which do not have updated electrical wiring beyond new electrical panels. The insurance companies are, in many instances, totally unwilling to bind coverage if it can’t be shown that the original knob-and-tube wiring has been replaced. Again, that is a distinct advantage of a homebuyer considering the purchase of an older home.
The point here is, if you are buying a home which lacks updates which would be considered common to the marketplace where you reside, that home is worth less when compared to a home which already has those updates in place. However, do beware of homeowners who have done the update work themselves. I say this not as a knock on those who wish to benefit from sweat-equity, but more from the point of view that some owners do work which is beyond their capabilities or experience. Electrical wiring and plumbing might fall into those categories. Buyers do need to be aware of what they are buying.
Wednesday, May 13, 2009
Friday, April 3, 2009
Timeless opportunities abound
Perhaps it’s a sense of springtime or maybe it’s the economy but all of a sudden I get the sense that there are a number of truly unique, one-of-a-kind Gig Harbor waterfront properties on the market. In fact, I toured some of them yesterday. And, while one of them felt new and hardly lived-in, I got the sense that in each of them, there was a great family history and a rich tradition; that each had been held in a family for many years and passed from generation-to-generation.
As I toured these masterpieces, I couldn’t help but wonder if there was something common with each property and their owners or was it purely coincidental that they had come on the market at the same time. I speculated, “Could it be a concern about the failing economy? Or was it the effects of the recession on those families?”
While it may be interesting to ponder, nonetheless each of those properties now represents a unique opportunity for a new family to establish their own customs and traditions and make their own mark on those waterfront homes.
I suppose it’s fair to say, “Timeless opportunities abound!”
As I toured these masterpieces, I couldn’t help but wonder if there was something common with each property and their owners or was it purely coincidental that they had come on the market at the same time. I speculated, “Could it be a concern about the failing economy? Or was it the effects of the recession on those families?”
While it may be interesting to ponder, nonetheless each of those properties now represents a unique opportunity for a new family to establish their own customs and traditions and make their own mark on those waterfront homes.
I suppose it’s fair to say, “Timeless opportunities abound!”
Thursday, March 19, 2009
Short Sale Offers- More Confusion
Yesterday, in response to questions about the Purchase & Sale forms concerning an short sale offer, I submitted the following question to the Board of Realtor's attorney.
"I am confused about the 22SS Addendum relative to 'Offers from other Buyers.' Legal Bulletin 178 states, 'The parties must decide whether Seller will be permitted to accept offers from other Buyers.' However, NW MLS Form 22SS clearly states, 'This offer is contingent upon the Seller obtaining written consent from Seller(s) creditors for the Short Sale and Seller’s acceptance of any condition imposed by Seller’s Creditor(s).' Doesn’t that unambiguously and explicitly state that it doesn’t really matter what the Buyer and Seller agree upon, it’s ultimately the decision of the lender provided the seller agrees?
"Based on this, it would seem that the section 'Offers from other Buyers' is, at the very least, misleading and while it might seem to give an advantage to a Buyer, it’s still the lender who has the final say as to what the lender wants and is willing to accept. Don’t you agree?"
Hopefully others, including our lender friends, will speak out on this issue.
"I am confused about the 22SS Addendum relative to 'Offers from other Buyers.' Legal Bulletin 178 states, 'The parties must decide whether Seller will be permitted to accept offers from other Buyers.' However, NW MLS Form 22SS clearly states, 'This offer is contingent upon the Seller obtaining written consent from Seller(s) creditors for the Short Sale and Seller’s acceptance of any condition imposed by Seller’s Creditor(s).' Doesn’t that unambiguously and explicitly state that it doesn’t really matter what the Buyer and Seller agree upon, it’s ultimately the decision of the lender provided the seller agrees?
"Based on this, it would seem that the section 'Offers from other Buyers' is, at the very least, misleading and while it might seem to give an advantage to a Buyer, it’s still the lender who has the final say as to what the lender wants and is willing to accept. Don’t you agree?"
Hopefully others, including our lender friends, will speak out on this issue.
Friday, March 13, 2009
Assessed Value Differences
Concerning “improper tax inspections” by the Assessor’s Office, Madsen is correct, it does depend on what you mean by physical inspection. However, simply inspecting the outside physical appearance of a property misses the point. What about the new kitchen and bathrooms with granite slab countertops and the new stainless steel appliance or the remodeled interior where walls were moved or removed to make the space more open? Being a professional Realtor, I can tell you that such interior modifications and updates likely had more of an impact on value than did most exterior improvements.
As an example, when my neighbor’s home with interior updates sold, the assessed value of my similar home without updates was positively affected. Except the problem is, my house doesn’t have granite slab countertops or new kitchen cabinets and none of my interior walls have been adjusted or removed. Yet, despite those differences the assessed value of my home likely increased because of the sale of a nearby property, similar in style and size to my home. Yet no one took into consideration the interior differences between the two homes.
When market prices were accelerating and assessed values were typically less than a home’s market value, this situation probably wasn’t a problem. But, now that the assessed values of many properties is often more than what actual homes are being selling for, this could make for a devastating problem. Physical inspections of both the interior and exterior of a home is really the only way that true differences between otherwise similar homes can accurately be made. If I was the assessor, physical inspections including both an interior and exterior inspection would be mandatory. Let’s make the system fair for everyone.
Madsen’s comments were contained in a front page article written by David Wickert and published today in The News Tribune in Tacoma, Washington . The article was titled, “Assessor: County broke state law.”
As an example, when my neighbor’s home with interior updates sold, the assessed value of my similar home without updates was positively affected. Except the problem is, my house doesn’t have granite slab countertops or new kitchen cabinets and none of my interior walls have been adjusted or removed. Yet, despite those differences the assessed value of my home likely increased because of the sale of a nearby property, similar in style and size to my home. Yet no one took into consideration the interior differences between the two homes.
When market prices were accelerating and assessed values were typically less than a home’s market value, this situation probably wasn’t a problem. But, now that the assessed values of many properties is often more than what actual homes are being selling for, this could make for a devastating problem. Physical inspections of both the interior and exterior of a home is really the only way that true differences between otherwise similar homes can accurately be made. If I was the assessor, physical inspections including both an interior and exterior inspection would be mandatory. Let’s make the system fair for everyone.
Madsen’s comments were contained in a front page article written by David Wickert and published today in The News Tribune in Tacoma, Washington . The article was titled, “Assessor: County broke state law.”
Friday, February 20, 2009
"Let's Make a Deal"
I had an interesting call from another real estate agent yesterday. Although I don’t specifically recall her name, I do recall that she asked if a new listing I have in the town of Fircrest was still available. “Of course,” was my response and I asked “how can I help you?”
She indicated that she was working with a group of investors and, before pursuing the home any further, she wanted to check to see if my seller would consider their offer.
Going further, she stipulated that her investors’ offer would not include any contingencies. Furthermore, their cash offer would be at 65% of value less the cost of any needed repairs or modifications.
Of course my reaction was, “No, I don’t think that would work for my sellers.” Nonetheless, it is important to recognize that there are many types of investor type buyers hoping to “let’s make a deal.” With real estate, where it has always been “Buyer Beware,” perhaps it’s time for the saying to include, “Seller Beware.”
Of course, this is another time where those homeowners hoping to sell their property need to have the best Realtor working for them. Please also know that not all real estate agents are Realtors. There is a distinction.
Very briefly, a Realtor, by virtue of ones membership in the National Association of Realtors, has ascribed to a higher set of standards than nonmember agents. Firms like Windermere require all of their agents to be Realtor members. In order to hold down costs, many smaller firms do not make the same requirement. By a natural extension, “Seller Beware” should also include the agent or Realtor selected to assist them.
For the record, I am a professional Realtor and I’ve included the description “Real Property Specialist & Consultant / Associate Broker” as a further distinction my qualifications and the work that I do.
She indicated that she was working with a group of investors and, before pursuing the home any further, she wanted to check to see if my seller would consider their offer.
Going further, she stipulated that her investors’ offer would not include any contingencies. Furthermore, their cash offer would be at 65% of value less the cost of any needed repairs or modifications.
Of course my reaction was, “No, I don’t think that would work for my sellers.” Nonetheless, it is important to recognize that there are many types of investor type buyers hoping to “let’s make a deal.” With real estate, where it has always been “Buyer Beware,” perhaps it’s time for the saying to include, “Seller Beware.”
Of course, this is another time where those homeowners hoping to sell their property need to have the best Realtor working for them. Please also know that not all real estate agents are Realtors. There is a distinction.
Very briefly, a Realtor, by virtue of ones membership in the National Association of Realtors, has ascribed to a higher set of standards than nonmember agents. Firms like Windermere require all of their agents to be Realtor members. In order to hold down costs, many smaller firms do not make the same requirement. By a natural extension, “Seller Beware” should also include the agent or Realtor selected to assist them.
For the record, I am a professional Realtor and I’ve included the description “Real Property Specialist & Consultant / Associate Broker” as a further distinction my qualifications and the work that I do.
Wednesday, February 18, 2009
Brief Real Estate Market Stats for Wednesday Feb. 18, 2009
Pierce County, Washington
Single family residential (SFR) active listing and pending sales were up slightly from last week. The medium sale price of the unsold listings remained virtually unchanged. For the period ending 02/11/09, the medium price of sold listings was down 8.65% as compared to the same period last year. Please note that, due to late reporting of closed sales, the medium sale price of closed sales is usually a week behind.
Another interesting note is new SFR construction in Pierce County, homes built in 2008 and 2009, represents 16.2% of the active unsold listings and 13.5% of the listings with pending sales.
Whereas active condominium listings were up slightly and pending condominium sales were down slightly from last week. For the period ending 02/11/09, the medium price of sold condominium listings was up 15.5% as compared to the same period last year. We have seen positive increases in the medium sale price of condominiums, as compared to the previous year, since the first of the year. However, it’s still too early to speculate that the condo market has bottomed yet.
In contrast, new condo construction in Pierce County, units built in 2008 and 2009, represents 23.5% of the active unsold listings and 19.4% of the listings with pending sales.
Thurston County, Washington
New construction in Thurston County, homes built in 2008 and 2009, represents 28.3% of the active unsold listings and 29.0% of the listings with pending sales.
King County, Washington
In King County, new SFR construction, homes built in 2008 and 2009, represents 21.0% of the active unsold listings and 48.5% of the listings with pending sales.
Single family residential (SFR) active listing and pending sales were up slightly from last week. The medium sale price of the unsold listings remained virtually unchanged. For the period ending 02/11/09, the medium price of sold listings was down 8.65% as compared to the same period last year. Please note that, due to late reporting of closed sales, the medium sale price of closed sales is usually a week behind.
Another interesting note is new SFR construction in Pierce County, homes built in 2008 and 2009, represents 16.2% of the active unsold listings and 13.5% of the listings with pending sales.
Whereas active condominium listings were up slightly and pending condominium sales were down slightly from last week. For the period ending 02/11/09, the medium price of sold condominium listings was up 15.5% as compared to the same period last year. We have seen positive increases in the medium sale price of condominiums, as compared to the previous year, since the first of the year. However, it’s still too early to speculate that the condo market has bottomed yet.
In contrast, new condo construction in Pierce County, units built in 2008 and 2009, represents 23.5% of the active unsold listings and 19.4% of the listings with pending sales.
Thurston County, Washington
New construction in Thurston County, homes built in 2008 and 2009, represents 28.3% of the active unsold listings and 29.0% of the listings with pending sales.
King County, Washington
In King County, new SFR construction, homes built in 2008 and 2009, represents 21.0% of the active unsold listings and 48.5% of the listings with pending sales.
Wednesday, February 4, 2009
Affordable Rambler
What could be better than a Rambler in UP's Park Royal; located in the prestigious University Place School District. Situated among newer more expensive homes, this property offers great living areas w/1 gas FP & 1 wood burning FP, spacious formal living areas, efficient kitchen w/built-in booth seating, family room, 3 large bedrooms & 2 baths. A monkey & a gingko tree greet visitors in the front yard. The back patio is an enclosed solarium & there is a full functioning backyard greenhouse and shed. The yard is partially fenced. You can view a complete photo gallery of this property at http://windermere.com/tid244236. Additional information can also be obtained on my personal website at KenThiemann.mywindermere.com.
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