Well, they will look at houses that have recently sold in the general area that are near your house's sq footage, acreage and general shape (poor, average, good, etc). Then, there are value addeds. In your case, the shop might be construed as an additional value item to be added to the comp prices. However, if the comps have a pool, three more bathrooms, extra sq footage, more acreage, etc., that might not make your shop worth as much in comparison as you think it is worth.

Let's say Houses A, B and C all have the same amenities and was in the same shape as your house. They all sold for $245K. You are comparing your house to the same houses BUT you have a bonus - the shop. Someone now has to assign a value to the shop. If you've had three appraisals and they all gave you the same ball park figure, then they did place an extra value on your shop. Whether or not the market will agree is the twenty-five thousand dollar question.

One thing to remember - just because the shop cost you $50K to build doesn't mean it is worth $50K to someone else. Sometimes home improvements are just for our pleasure/use and valueless for resale. You may be fortunate and someone is looking for a shop, knows what the cost to build would be and thinks your price is very reasonable.

Was the price you listed for your idea, or did the Realtor suggest it? Or, was the list price strictly off the appraisal numbers?

Heyharris-
I totally agree with you. However, I'm not sure who set the standards. Perhaps realtors?

Unfortunately, the way it works is that all houses are batched together with some minor adjustments. It's always beneficial to the smallest, cheapest house.
If your house is the largest or has the most amenities, you will not recoupe all of your money (generally). Every so often, you will find a buyer who appreciates what you have & will pay more, but that's rare.

I think that it is high time that homes should be comped with a fine toothed comb. Whether you've built the biggest home, or remodeled with the best materials, or added a shop, you should be compensated accordingly. It is stupid to be compared to a house that is nothing like yours, other than the style...i.e.a colonial & a colonial.

I had a nitwit REA tell me that my house should be listed for the same price as a house down the street. I told him, other than the STYLE, the two homes were not comps. I was right. He was wrong. I got 85k more for my house.

He tried to compare my house, 500sqft larger, semi-custom built, loaded with amenities, on the quiet end of the street, with a spectacular view (here,views are worth 50-100k more !) with a house down the street, with cheap or no amenities, on a busy road. Unbelievable.

I do blame the real estate agents for that. They have pretty much told the buyers that this & this house is a comp...Buyers set the prices, but REA NUDGE them.

This a direct quote from our lender " I hate appraisals, they are basically an opinion of that appraiser. They liked it... they didn't...the price THEY might buy it for...or not! Funny but the house we're buying appraised at $500 more than the listing. Our house we're selling, $500 less than what we listed. Amazing how it all comes together. Some farmland we bought... appraiser and lender say we'll work it out so you can get it. Price it for what you want for it and the appraiser for a buyer can make it work. Cynical but true.

hello, no the price came by the realtor, said it put us in the middle of the ballpark, i think she is doing an excellent job. lets look at this different.lets say car dealers were the same way, you go to the lot, and the guy tells you all mustangs go for about 25-30 k, you say ya but this 1 has a 4 cylinder, no AC or power breaks, he replies ya but to bad that how we price them, you might as well get a loaded mustang cause your paying for 1.you wouldnt shop there and they would'nt sell any, thats why there is a msrp. + there mark up, you gotta be able to put a price on a house, for the house not what the neighbor,s house sold for. there should be a way to calculate square footage + ammeneties. lets take 2 house both 1500 square feet, both put new carpet, 1 put 1.00 sq ft carpet, thats 1500 dollars correct, well his neighbor puts in 5.00 sq ft carpet that cost him 7500, for alot beter quality carpet, but if he sells he should get the same as the guy with cheaper carpet.
i know im crazy but i just believe you should get whats its worth, not because someone says its worth this.

"I do blame the real estate agents for that. They have pretty much told the buyers that this & this house is a comp...Buyers set the prices, but REA NUDGE them."

I wish it was true, that we (REALTORS) have an influence on value, however, appraisers have the final word about value where I work, regardless of contract price.

"I do blame the real estate agents for that. They have pretty much told the buyers that this & this house is a comp...Buyers set the prices, but REA NUDGE them."

I wish it was true, that we (REALTORS) have an influence on value, however, appraisers have the final word about value where I work, regardless of contract price.

This is some-what true. We count on agents to pull comps for similar houses in our area to give us an idea of what to list at. The agents I interviewed brought pretty much the same comps, each for ranchers but priced lower then ours. On one that closed I asked if there were any photos other then the house front, they all said no; of course I told them why. The inside was pretty trashed, the master may have had sheet rock, but the bathroom wasn't in, only framed out.

Another comp across the street was $40k lower then us, again, no inside pics and "needs TLC" which means it's in rough shape. The last comp, while it had interior pics, and was priced similar to ours was next to a basketball court. We also have more Sq footage.

If we sell, hopefully the appraiser will do his homework.

my house is listed for 269950. The most expensive house in a .5 mile radius sold for about 245000, ok so i am 25 k more than them, but on the other hand i got a shop that costed 50 k to build

While the shop may be a selling point, it may not. It could depend on the area and what type of shop you're talking about.

Oh-oh, you have a "unique" house. This isn't as bad as having an "interesting" disease, but you may have to wait for a buyer who is your clone -- who also values that big, expensive shop.

This problem comes up more often on the forum when a property has a swimming pool. It may have cost the seller $50K but not everyone wants a pool (small children, cost of maintenance, whatever). So, the pool adds zero to the value of the home except to the buyer who does want one.

If you can wait for your clone to come looking, fine. If not, the shop won't return its cost in your selling price AS A SHOP. Can it be living space -- for the buyer who wants more square footage of living space?

I have been having this argument for months with my RE agent. She gives me comps that are all over the place and insists that they do not price per sq. foot in this area.

In my opinion you have to have a benchmark and price per sq. foot is the best way to start. Then you can add or subtract, for granite counters, a swimming pool, high end finishes and appliances, location (good and bad), etc.

I can't wait to hear what she has to say tomorrow. I finally got a house we like, and a recent sale on the same street. The houses are the same size, style, age and location - but the sold house is 40K less than the unsold house, had an updated kitchen, more bedrooms, two full baths and a more level lot.

The unsold house is same style, one less bedroom, one and one half baths (last done in the 50s), old appliances, the lot gets steeper and the driveway is narrower. It has a barn out behind, that is not good for much other than storage - not a garage and the unsold house is 100 sq. ft. larger (not enough to explain the higher price).

I can't wait to see how she spins this to try to convince me that the unsold house is worth more than the one that sold last month for 40K less.

In short, I'm not sure how a CMA is helpful with so many varying interpretations at least 'round here. Back where I moved from, they made more sense. I didn't always like them, but it was a lot easier to apply the numbers.

:) MP

Heyharris1, when you say 'appraisals' do you mean actual paid for appraisals? or CMA's by a Realtor? We have been in this situation before, and were lucky enough to find 'Mr. Right buyer' on the first day. Hopefully it will happen to you as well!

Not to hijack but...
Comps are a concern of mine as well, not from a 'how much will we sell for' but from a 'how much will we appraise for' point of view.
We just sold our home FSBO and the appraisal was on Friday. The appraiser's comment was "I've got my work cut out for me". Most houses with similar sq footage in our very small city have been selling for around $330k over the summer. Ours just sold for $365k. The 330k houses are split levels scattered around in various neighborhoods and ours is a 2 story traditional in one of the most desirable neighborhoods. Many of our neighbors are original owners...25 plus year residents. On our street houses don't go up for sale very often. It seems like the ones that do are the same few homes. We are completely updated, have more amenities and a higher quality of construction than the splits that have sold recently. Our house is one that people always say..."If you ever sell, call me first". We sort of did that and that is how we got our buyer. I used to work as an assistant to a realtor and called her for a 'price opinion' and we were also approached by 2 agents that had a potential buyer (we were never 'on the market'). The agents all concurred on a price of $360k...my opinion as well. The buyer offered a little more to cover their closing costs. The homes currently on the market most similar to ours are listed from $360-$370k. The thing is, we have a willing buyer and a willing seller and the 'desirability' of our home factors into the price, but will the appraiser see it that way? There are 3 homes that sold from $360k to $380k in the last 6 months so I am hoping he will use those...they are the most similar to our home IMO. We will just have to wait and see...

the appraisals were done by actual apraisals, you guys are probably right, for someone looking for a house with a shop in town you could'nt go wrong, just gotta wait for the person to come along, or the person doing a home business, thats needs the room to work.
thank you, the info was great.

heyharris1,

If you look at your appraisal (towards the mid-section), you'll see where the appraiser has compared your home to 3 others that he/she views as comparable. In that section, the appraiser makes cost adjustments for various features that one property has & another may not. You'll see adjustments for such things as view, fireplace, square footage, basement, garage, workshop, in-ground swimming pool, in-law apartment, etc. By applying a set value to each of those factors one is able to reasonably compare dissimilar properties & arrive at a pretty good market value for the subject property.

Your $50K shop will, in all liklihood, not return your full investment anymore than a complete kitchen renovation will. A kitchen renovation is widely considered to be the best investment into your home & yet the average return is 85%. Yes, you might eventually stumble across a potential purchaser who likes your shop & feels it has value above neighboring properties without that particular improvement but it's still unlikely someone will pay what you put into the improvement. Real estate just doesn't work like that.

Now, in a downturn market the value of your improvement is even more difficult to ascertain because the overall market value of the entire property is declining. Unique properties are always more difficult to appraise but the open, free market place is extremely efficient. Buyers will tell YOU what the value of your shop is represented by their purchase offers. You do not decide what the market value of your property is...buyer(s) will make that decision.

Another example of how appraisals work...you can't carry a property on your Balance Sheet for $250K if it only appraised for $200K even though you may have the higher amount invested. It's not about what you "think" it should be worth. It's all about what the "Market" is willing to pay.

If you need to sell, you'll need to adjust your thinking regarding your cost basis. If you do not need to sell & are just wishing to sell...then list at whatever number you want, wait, & see what happens. But, if you choose the later, don't blame your realtor. Properly priced houses sell in both up & down markets.

Wishing you fair winds & safe harbor.
Tricia

I understand what you all are saying, maybe i didnt come across correctly,let me try this again. what im saying is there should be a way to put a price on a house not using comps. looking at the house itself, not the neighbor's house. everybody know's the price of lumber, sheetrock ect. add it up to get a cost. I do agree your house is only worth what someone will pay regardless what you have done to it. but for a initial price, i think the house needs to be looked at, not the 1 across the street that sold. unless you know the 1 across the street had the same carpet, counters ect. like i said im not the smartest guy in the world, and i know i am looking at it wrong. it just seems like some houses are overpriced because of the neighborhood, and some are also sold less than what they should be worth.
thanks for lissening to me complain,

What you've described in your last post is known as the "Cost Approach". Also in that appraisal you have (usually page 2) you will find exactly what you're looking for. It will be given in a price per square foot. The square footage price is derived from other properties with similar characteristics as yours from a construction aspect as well as size.

The "Cost Approach" is what your insurance company uses to determine the amount of homeowner's insurance you should carry; but, they do not include the value of your site, of course. Your insurance company will compute their own cost per square foot based on what constitutes your particular property.

/Tricia

OP-
I am the only one understaniding you & agreeing with you.
I, too believe that your house should be worth based on what you have put (cost & quality etc) into it.

Let me tell you all about appraisers. Many of them have no clue what they are doing. We had an interesting experience when we were refinancing 7-8 years ago. The appraiser basically made the figures work. He used incorrect comps. The neighborhodd wasn't even built up. The builder was about a third done. This appraiser used a house across the street, which sold for 70k less(less amenities, sqft, tiny kitchen)...Then he used a comp from another neigborhood-not a comp. Even today that neighborhood is selling for 80-100k less than my previous neigborhood (I just sold recently).
I let it go because I figured the bank didn't want to appraise it high.

However, if I got that apprasal now , I would be livid. After all, homes usually go up a certain percentage yearly, so if someone made 20% in 10 years down the road, I feel that I too should have made 20% from what I paid for the house. I wouldn't expect in an appreciating market to come in at less than I paid for the house! But I have seen some crazy moves by appraisers & realtors.

Bottom line: I blame REA & Appraisers for stupidity.

"i know im crazy but i just believe you should get whats its worth, not because someone says its worth this."

There is - just list as your selling price whatever you think is fair. Either the market will agree and you get a sale, or your house will get no reasonable offers, which ought to tell you to reconsider your price.

The fly in the ointment would be if a potential buyer can't borrow enough because the bank says the house isn't worth that much. At the end of the day, that's still "the market" signaling that your house would be overpriced though, assuming the buyer attempted financing through multiple banks and did what he or she could to not take no for an answer.

Oh and about the workshop - a general rule of thumb is that for every $1.00 you spend upgrading the property, resale value only goes up about 50 cents. Sometimes more, sometimes less, but in any event I'd be mighty surprised if you really get an extra $50K for it. Probably something in the $20K to $30K range is added to the value by having a $50K workshop.