Profile picture for taylor1t

Home value question

We are bidding on a home listed at $325K that is priced $60K over fair market value and $40K over the comps.  The seller claims that the reason for the inflated price is due to the upgrades they did themselves like finished bonus room above garage, patio with fence/masonry and built in grill, a lawn sprinkler system, and landscaping.  In all they are claiming the upgrades are worth $55K but there was no building permits pulled since the home was built in 2005.  My question is: what percent of the upgrades should the seller expect to get back in the sale of the home and why?
  • July 20 2011 - Oshkosh
  • 0
    0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Be a Good Neighbor. Be respectful and on-topic. No spam or self-promotion! See our Good Neighbor Policy.

 
 

Answers (6)

When the difference in 'opinion' is material, I often recommend that the buyer hire an independent, licensed Bank appraiser to come in and do a thorough appraisal.  This serves as an objective third party expert analysis that can be used as a negotiating tool, and also a pre-emptive indication of what a bank would be willing to lend on the given property.
Hope this helps..
  • July 21 2011
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for sunnyview
You should not be giving the seller anything for illegal space without considering the full cost of making that space completely legal. If that property gets flagged with the building department, you would be responsible for all cost associated with either bringing the house up to code or for tearing out all the unpermitted work. Ask the local building department what type of "upgrades" need a permit and which ones don't. Typically fences, sprinkler extensions and outdoor patios do not require permits, but each community is different.

There is no reason to pay over market value for any house and if the house does not have comps to support the sales price. Besides the house would not finance for your contract price without money out of pocket because the lender would refuse to finance for over the appraisal amount.

The truth is a bitter pill to swallow sometimes. Make your offer based on the comps and do not offer a penny for their illegal space or the owners sentimental value of the work done.
  • July 21 2011
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

My biggest concern would be the unpermitted 'space'.  Depending upon how your MLS advertises sf, unpermitted space 'should' not be considered in the same manner as 'regular' above grade finished square footage.

I would personally find out how much sf that bonus room is, and if it is unpermitted, only give it half the value of the rest of the home.  That is as long as it is 'finished' in the same manner as the rest of the home. 

Are you willing to buy a home and inherit a problem that you will have to fix with the city/county?
  • July 21 2011
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for B Mike West
Any upgrades done without permits will not add much to a home's value.  Do it yourself upgrades are highly suspicious in the lending community.  It sounds like these sellers are in La La land. If you buy a home with unpermitted improvements the county or city may require you to have the work redone-with inspections- before they will issue permits. That means paying to tear out the improvements and having the work done all over again. (Not a good thing for buyers.)  And you will have a difficult time selling it if you don't have permits for the work that was done.

If you need a loan to complete your purchase the lender is not going to attach much value to the upgrades and are likely not approve a loan because of the unpermitted work.

You might be better off finding another property where the sellers are in touch with reality and have permits for any work they have had done.  Good luck with it.
  • July 20 2011
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Anyone's guess, between 0 to 65%. 

An offer will get accepted at what a seller is willing to sell it at and what a buyer is willing to pay. What a seller paid for a house or what improvements they put in does not dictate what someone is willing to pay for house.

Based on your comments I would make sure you have an appraisal contingency in your offer.  Even if you do agree on a price the loan will be based upon on the lower of the accepted offer price and the appraisal value.  Realtors, buyer, and seller should be planning accordingly.  

"The nicest" house in the neighborhood is tough to sell.
  • July 20 2011
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for kielharton

It really depends on the are you are looking and how the other houses compare to the one you are bidding on. A room above the garage would have to be the same like and style material as the rest of the house to even consider it as living square feet. There is no set percentage a seller should get back on upgrades to a house. It all depends on what they do and where. If you added a $20k Indian marble tub to your bathroom you would never get that back in equity. If you updated a kitchen you might get back the money invested plus some. What some view as important upgrades to a house doesn't necessarily mean it is something that would bring value to a house for someone else. How important is a sprinkler system, fence, patio, built in grill, and landscaped yard to you?

  • July 20 2011
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.