ok looking at another possible my buddies rented a house out in the country bout 3-4 miles outside town the area is improving and lots of new homes and subdivisions are popping up…
its a really large house infact it used to be a duplex that shared a bathroom and a kitchen (infact one of the bed rooms has a door that has siding right over it on the outside which used to lead to the front porch) anyways my friends lived there for awhile and it was a party house (totally trashed) and will prolly need a lot of improvements but i think the landlord would be motivated to sell because of its condition(infact i think he was going to tear it down at one point) but im not sure what to set my offer at…
how do u guys do comps for an area that does not have a lot of houses to compare to? also in getting an idea on repair costs how does one go about this? do u just call up a contractor and ask for an estimate? any input would be great im trying to get that first deal but ive been working with some properties that are a lil diffrent than what i usually see on here but if its a deal id like to do it…
thanks -brian
Hello Brian,
Comparables have to be like for like. It sounds as if you have an undordinary property in that the floor plan and use may have been altered. In addition, you have a severe condition problem that probably rates the property in poor condition at best. You would have to find sales that suffer from the same problems to get an accurate value.
In a case where the house is so poor that the improvement on the land is, or approaches no value (sometimes abandoned and forgotten homes will cost money to remove) we look at the straight lot value when we negotiate. If the owner was thinking of knocking down, then they may be of the mind that the value is in the land/lot and not the improvement.
We are working with a gentleman on an example of this. He is buying a 9 acre parcel. It really is a fine parcel with a 2 acre private lake and an abandon house and an additional abandon foundation. His purpose for buying is not to redevelop but he needs the acres for density to use an attached parcel for commercial purposes. He needs about $75K to buy the parcel which can be liquidated very quickly to a custom home builders for $300-$350K (seller does not know that the property is grandfathered because of the foundations and believes it cannot be built on. It is in a highly regulated area that would not allow development unless there is pre-existing foundations that predate the regulation.). The lake itself is a valuable thing but without a comparable there is no way of knowing how to assign a value to it. The lake is unique and though there are some River front parcels to look at, it is impossible to assign a value to the influence of the lake. So, we looked at it as straight 9 acre building lot. If there is no supporting data then we generally will be conservative with our value estimates. Especially in a rural area where you see subdivisions and new construction, it may be that you have a strong new home market but not a strong existing home sale market. Subdivisions tend to have the ability to stand alone and sometimes create their own little markets. The same marketability and desirability may not flow over to the rest of the area.
sounds intersting ill have to do some comps on the the plot its self and maybe i coudl market it that way the only thing i think that would make this house so difficult to justify rehabbing is the odd floor plan but then again ive seen a lot of farm houses laid out like this one (must go through one room to get to another) i really think this is one that is gonna take a specific buyer but im thinking that if i can approach the owner while the house is still in bad shape and sitting there he might be more apt to accept a low ball offer…
That type of floor plan is interesting. If it is a bedroom that you go through to get to the other, it is best converted to a master suite with a private office or dressing room. The property suffers from internal obsolesence and it is a detractor of value.
A few examples that I have seen in certain areas:
In Providence Rhode Island and surrounding areas I have seen a lot of bathrooms and bedrooms off a centrally located kitchen. Compared to modern houses this is very awkward and it detracts from the value when compared to modern homes in the market place.
In Philadelphia, and probably other areas, you will find bedrooms in row homes that you have to walk through to get to another bedroom. These cannot hold the same value as modern bedroom layouts and are detractors of value.
We have a 138 year old Victorian house. Up the street there are two built just like ours. Ours is two bedrooms as the floor plan was changed to create a bigger bath on the second floor and bigger bedrooms. Many old homes like this have that 7X7 bedroom or 8x8 bedroom that are not comparable to modern size bedrooms. We live in an area that is dominated by 3 bedroom, 1 bath homes. Even though our house only has two bedrooms, it will still comp out at the same value or higher than the other two just like it that have three bedrooms. Here is why: We have a detraction of value because of the lack of a third bedroom. In the other houses, the third bedroom is a walk through room and you need to go through it to get to the only bathroom in the house. They suffer from internal obsolesence because of that floor plan. In addition, the othe two bedrooms that are left are much smaller than the ones we have because space was added when the third bedroom was eliminated. Because the third bedroom cannot function as a modern bedroom, and the others are small, our two bedroom home very well might comp out at a higher value than that three bedroom home.
Also think of this, the rural area already does not afford a large buyer base and the percentage of the market that would buy an old home for the charm is even more limited. You might find that the interested buyers are few and far between even with it cleaned up.
yeah thats looking like the problem with this place…but the bathroom does connect to a central kithcen just like u said i keep looking around for buyers but unless i find the right one im not going to put it under contract i dont think