How Can a House Not Sell at $325k with a Recent Appraisal for $410k??

Being a Realtor and all, I am always in the mood to move.  Not so much so with my wife.  We went out Saturday to see a house that I really liked, and suspected that she would too.  Guess I know her pretty well because now she is kind of in the mood to move too.

That had me coming home, pulling some comps, and trying to see what I thought the place was really worth.  This is where it gets kind of interesting.  See, it is owned by a relocation company.  The prior seller got transferred, and the “Relo” company bought it from them.  The Relo company had two appraisals done, one came in at $390k and the other at $410k.  So they met in the middle and gave the very lucky seller $400k for the house.  Problem is, it never was a $400k house.  The price has been reduced and reduced, and is now at $325k.  How do I know it wasn’t a $400k house?  I have had 3 clients this year who have looked in that neighborhood and I have been in just about everything for sale out there.  This one is no match for those.

I guess this is really about me running the comps and the contrast of market value to appraised value.  Appraised value is purely science.  They cut and paste values mainly for features and size.  Market Value is about what somebody will pay for it.  It is based on decisions a buyer makes about things they like/dislike about the house.  This house has the garage in the basement.  To an appraiser, it has the same 2 car garage as any other house, and he deducts a value per square footage since there is less space in the rest of basement.  To most buyers, they don’t want a basement in the garage.  This house also has no pantry and has the washer and dryer in a closet in the kitchen.  Both of those are deal killers for a lot of buyers, but don’t even get mentioned on an appraisal.  Starting to see how market value differs from appraised value?  I don’t mean to knock appraisers, but I would love to have asked these two what they would have paid for this house…..especially the guy that pegged it at $410k.   Maybe I should buy it and sell it to him!

Okay….I’m running the comps.  There are a lot of similar sized houses that have sold for much more than this one.  Not really good since those were updated.  I find two that are similar in size and still look like the set from “Knot’s Landing” inside.  A house that hasn’t been updated doesn’t need to be comped to one that has.   The less adjustments you have to make when looking at comps the more realistic a number you’ll end up with.

Now I am into the gut-feeling part of the comps.  My house only has hardwood in the dining room and foyer.  One of the comps had hardwood throughout the main level.  What I usually do is deduct the cost of making it equal from the sold comp.  Then there is that kitchen with no pantry and a washer/dryer closet!  I need to figure out what I think most people would want knocked off for those items.  I am thinking in this price range, that is a pretty big thing to try to look past.   If two houses were side by side and identical except for laundry/pantry facilities, how much less would you want to pay for the one that didn’t have a laundry room?  I’m thinking $4-5k in this price range.  Then there is the difference of kitchen layout.  The color of the cabinets.  It just really goes on and on with these little things that really do make a difference in value to a buyer. 

There you have it.  Now you know a little more about how a realtor goes about comping a house he might make an offer on.  The good thing about me is that I do the exact same thing for my people when we get ready to write an offer.  I always giggle a little inside when people ask me what I think the house they want to buy is worth.  I really wish I could just spit out a number for them, but I always tell them to let me look at the comps.   I did it for myself too!

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