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Get Comps to Know the True Value of a House

House ValueOur newest “TGIF” video, found in our Real Estate Investor TV section covers “how to get comps as a real estate investor“.  (click on “RE Investor TV” above, or click here to watch the video on how to get real estate investor comps)

My daughter just got married and they’re starting to look at houses.  They had an appointment to look at one, and it was priced around $30,o00 MORE than the other similar properties in the same area.  The Realtor told them something like “it’s worth more than the rest because they spent $30,000 in upgrades since they bought it”. (of course my daughter now knows better)

The seller bought it two years earlier for the same price that properties in the neighborhood are NOW selling for.  (I ran comps to check it out of course!)  They put $30k into it to bring it UP to the condition standard of the neighborhood… but unfortunately for them, it’s STILL only worth around what they paid for it. (either they paid way too much, the prices fell, they over-renovated for the area or a combination)

They may find a buyer faster because of the upgrades, but just because you put money into a house doesn’t guarantee its value will increase! When you’re calculating the value of a house, you can’t just add what you paid to what you added in renovations… all that truly matters (with the exception of some slight variables) is what comparable houses are selling for NOW!

Sure, in an area where there’s more of a variance in prices (like an area of $450k to $600k homes, for instance) upgrades will add to the value to a degree. (typically 50%-70%) But, in an area where properties run from $100k-$120k, you just will not get as much of a return, if any. Some additions, like a pool for instance may actually hurt your chances of selling for more, while changing an attic or basement from storage to living space may give you the most bang for your buck.

Sure, you’ll enjoy your home more, you’ll have the chance to sell faster, and you’ll have a better living experience, but it won’t always add to your bottom line when selling… especially (like I said above) if you paid too much to begin with.

Click here now to watch a video on where to find comps and how to calculate values, as well as see the email I sent to my daughter explaining in easy to understand terms how houses are priced. It’s a great way to explain values to your sellers or buyers as well!

Your friend and fellow investor,

Nick Cifonie

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photo:missgreenhome.com



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