How real estate values are determined

gray siding yellow doors
Curb appeal and the front door

The price that was paid for a property isn’t a number that is used to determine the current value. Home improvements may add value to a home but the value does not go up a dollar for every dollar spent.

The value of real estate is determined by location, size, and condition. An appraiser determines the value by looking at three comparable properties that are close by, and similar to the subject property.

Ideally, the comparable properties have been sold in the last year and are similar in size and located nearby.

Since no two properties are exactly the same the appraiser makes adjustments. Adjustments are made for differences in the number of bathrooms, bedrooms, fireplaces, garage stalls and any other difference in the properties.

The overall condition of a property is important. Even landscaping and curb appeal counts.

A three-bedroom rambler with 1200 finished square feet of livable space that is in great condition with updated kitchen and baths can be worth twice as much in one St. Paul neighborhood than it is in another and won’t have the same value in Maplewood that it has in Mendota Heights.

Also see  Because mine has bigger nails and When do I need to get an appraisal?

There is always something broken at my house

Things break and they are more likely to break shortly after new homeowners move in. A few years ago a couple bought a house and discovered that the veggie sprayer wasn’t working. The new homeowners threatened to sue the sellers over it and demanded an amount of money that far exceeded the cost of installing a new sprayer.

Elderly appliances can break down as soon as a new home buyer touches them. It is like appliances know the house has changed hands. That old washer will work for decades but as soon as it changes hands it breaks. Most of the appliances that are sold with houses are considered personal property and are not real estate. I like to think of working appliances as a bonus.

Plumbing leaks happen and sometimes electrical problems too.

In my house, there is always something broken. So far this year we have had an electrician restore power to the electrical outlets in the kitchen and we have had our washer repaired and it looks like I’ll be buying another one soon. We had water leaking in around a window and repaired it by recaulking. Our elderly dehumidifier broke down last week and leaked all over the floor.  I ended up buying a new one.

I am not trying to scare anyone off but if you own a home you will need to make repairs and replace appliances. That is just part of the bargain.

If you buy or sell a house something will go wrong I promise. Be prepared and stay calm.

Even curious neighbors need appointments

Sometimes when I am entering a home for sale with my clients people will see us and ask if they can see the house too. Unfortunately, I have to say no.

When I tour a house with a buyer that is because the seller has given me permission to do so. That permission does not extend to anyone who walks in off the street.

Newer agents do not always understand this and neither do people who see homes for sale and are curious about them.

The best way to see homes for sale is to call your real estate agent and set up a private showing or attend an open house if there is an open house.

A for sale sign is not the same thing as an open house sign.

I have had people knock on the door while I was showing a house. They had been wanting to see the house. I had them call the number on the for sale sign in front. I would have been happy to work with them but they were looking for a house for their son.

Often people tell me they are looking for houses for their sons or daughters but the sons or daughters usually are not at all interested in the house.

busy open houses

milkweed
honey bee and milkweed – happy July!

A house that is for sale gets the most attention the first day and week it is on the market. If a house is priced right and by right I don’t mean underpriced it will sell with multiple offers in a weekend. with or without an open house.

If the house is listed as “coming soon” and there is an open house the day the house becomes an active listing the open house is likely to be well attended. That is part of the point of having a home for sale “coming soon”.

Do not judge a house by how many people attend the first open house. Try not to pay too much attention to what others who are attending the open house are saying.

If at all possible ask your REALTOR for a private showing instead of attending an open house. Often it is easier to look a house when it isn’t full of people.

I could write a whole post about the people who are not planning on buying a house who go through open houses. They include neighbors and mothers who wish their children would buy a house in the neighborhood.

The demand for houses in St. Paul remains strong and they do sell quickly. The inventory of homes on the market is at historic lows but slowly increasing.

Don’t let your security system send the wrong message

BarsA security system can make a home more desirable or it can scare buyers away.

I showed some buyers a home where there were bars on the door and the bars were locked. The front door had a couple locks on it and they were both locked.

The home had a security system and it was armed.  I received a complicated set of instructions on how to disarm it.  The alarm system was set so that it would go off if not deactivated within 15 seconds of the time that the door opened. 

Having never been in the house, I had to hope that I would immediately see the panel because there would not be enough time to hunt for it and deactivate it.

My buyers were left with the impression that the home is in a high crime area and that the owners could not leave it even for an hour on a Sunday afternoon without locking all the locks and arming the security system.

Maybe there is a good reason that a security system needs to be left on but the buyers don’t know that and so they imagine the worst.

In general homes for sale should be as easy to see as possible. If security is a big concern you can ask the agent who is listing your house to be present for showings and ask that they set the alarm when they leave.

Open houses and home sellers

Open houses have probably been around for as long as there have been houses. I am not referring to graduation open houses but to the kind of open house that real estate agents have so that buyers can see the house.

It isn’t necessary to have an open house in order to sell a house. Everyone knows a story about how someone went to an open house, fell in love with the house and bought it.

That is a rare occurrence it could be that it just happened a few times and everyone knows the story.

Houses will sell without an open house but real estate agents like to do opens so that they can meet potential home buyers who may be looking for a home and an agent to help them buy a house.

New agents, in particular, need to have open houses so that they can meet people and start building a client base. As visitors sign-in, they become “leads”.

There are some things sellers should do before an open house:

  1. Lock up any drugs.
  2. Remove pictures of small children.
  3. Remove valuables from the home or lock them up.
  4. Lock up important and confidential documents.
  5. Make sure that wall calendars and notes on the fridge don’t have any confidential information in them.

It isn’t just potential home buyers who show up at open houses. There are curious neighbors and people who have friends or children who might be interested in the house.

There are people who would like to buy the house but they are not able to. Sometimes people who used to live in the house show up to look it over.

I sometimes go through open houses with my buyers or I go because I know the agent and I want to say hi.

Sometimes your own agent will do the open sometimes other agents with the same company will do it. It is fairly common to run into inexperienced agents at open houses who can not answer simple questions about the house.

Open houses can be dangerous for agents who are in the house all alone.

Buyers should keep in mind that the agent in the open house is representing the sellers and should refrain from saying anything that might give the homeowner the upper hand in negotiating an offer. . . although now that I think about it owners already have the upper hand.