Recently a Pittsburgh, Pennsylvania homeowner asked me to do a pre listing appraisal for them because a friend who is involved in Real Estate said they may have over improved their home, and they should see where they stand by getting an appraisal.
The property was a townhome style dwelling in condominium ownership. I arrived at the home and may I say, the property was beautiful, everything in it brand new and gorgeous. I will not go into great detail about the property because it will be coming onto the market and the actual renovations completed are a mute point.
The homeowner told me her ‘Realtor’ advised her to do this and that it will help her ‘the homeowner’ get the biggest bang for her buck and the buyers will love it. Much of the advice I did agree with and many suggestions can be found on my earlier blog, How To Build Home Equity FAST! However, while compiling the report, I noticed a trend developing. It appeared that the same thing I talked about in my earlier blog post, PUD, Condo, Town, Row, HOA The difference is, seemed to be happening. Just because the style of the home is a town house, this doesn’t mean that is the type of ownership when in fact with this property, it is condominium ownership.
As I researched the property for comparables, I noticed all the sales except 1 or 2 of townhome style dwellings were under the heading of ‘TWN’ in the MLS. This is all well & good, however, all of the condominiums of townhouse style were listed there too when they should have been listed under condominium.
This creates a twofold problem. It is quite possible that many appraisers may not include all the properties in a search because they are listed wrong and hence skews the searches and the data a lender requires. I also go through many of the ‘Lender Requirements’ in an earlier blog post CMA vs. Bank Appraisal. The second as possibly is the case with our subject, when digging deeper, there are separate ceilings for both condominium ownership and fee simple ownership that many of the other townhome style dwellings happened to be.
The ceilings between the two types of ownership were quite significant. In fact, a difference of approximately $35,000 to $45,000 seemed to be in place. Whenever I am counseling anyone on a renovation, the top concern is always not to do too much. The key to maximizing value for most homeowners is to bring the property just up to the level of the majority of the homes around it. It is generally not considered a good idea to improve the property to a higher level than most of the other homes in the area, unless the neighborhood is going thru a major change like gentrification.
So in summary, the case with this particular property is that, either do to ownership confusion, the lack of due diligence on the Realtor’s part, a misunderstanding between owner & the Realtor or a combination, this homeowner significantly over improved their home and most likely, not be able to recapture many of their improvement dollars.
If you have a home that you are thinking of remodeling, I would be happy to consult with you. My answer may be surprising and could save you thousands of dollars. Call or email me anytime.
Did I leave anything out or do you want to join in the conversation? Let me know in the comments below or suggest a topic for an upcoming blog.
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