Separating "VALUE" from "SALEABILITY

Reblogger Allyson Hoffman
Real Estate Agent with RE/MAX Villager (Chicago North and North Suburbs Real Estate) 471.006264

So what constitutes value and is associated with a higher price?  Steve Roake of McColly Real Estate provides a very clear explanation of the distinction between value-added features in a home and those that ultimately make that home more likely to be sold than competing properties.

Original content by Steve Roake
Separating "VALUE" From "SALEABILITY"

An error commonly made by sellers when pricing their homes is that they fail to distinguish renjith krishnan / FreeDigitalPhotos.net value from saleability.  The value of a home references the factors related to the property to cause it to be worth more or less than other properties.  Saleability references the factors related to the property that cause it to be more or less salable than the competition.

Some factors that create value are : Location, Location, Location.  If you're in a more desirable location, you'll get more money than a similar house in a less desirable location.  Examples of more desirable locations would be lake front, wooded or park view lots.  Less desirable would be homes that back up to the sewage treatment plant, a busy highway or the ugliest house on the block.

The number of bedrooms and baths, square footage of living area, a basement (whether finished or unfinished) and garage size are examples of amenities that will get a seller more money for than other properties that are lacking in those areas.  Generally, more is better.  Except in the case of cockroaches, weeds and repairs that need to be done.

Many sellers incorrectly believe that components of a house may add value.  A new roof is a good example.  The seller believes that because they just spent $8500 on a new roof that the home will be worth more, but this is not the case.  It will make the home more salable, but it adds little value, if any.  Why is this?  Because buyers expect homes to have a roof in good condition.  If the roof is in poor condition, the buyer will de-value the home because they anticipate having that expenditure in the near future, but they will not add value because it is new.  

This would also apply  to updating a kitchen, bathroom, carpeting, new furnace or hot water heater.  Buyers expect these items to be functional.  They make the home more salable.  Some appraisers I've spoken to add only 40% of the cost of additions to the home such as for a fence or finished basement.

"My house has all these upgrades!  We have six panel doors, extra plush carpeting and top notch appliances."  So sorry you paid more for these features when the home was built, but its unlikely you'll recoup the extra cost when you sell.  You might get a little more than your neighbors who don't have these features, but primarily, it just makes the home more salable.

One caveat:  if you're in an area where all your competition has those benefits, you should, too.  That's what buyers expect in homes in that area.  If you have six panel doors, but most homes in your area don't, buyers will not pay you much more, because it's not an expectation.

So when determining your asking price, make a list of all the features and benefits that your home has to offer.  Then, consult with your agent to determine if those features/benefits add value or make the home more salable.  It will save you from having to make a series of price reductions later.  



Tim McColly contributed to this post.

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Steve Roake is a Broker for McColly Real Estate in Shorewood, IL.  Steve serves the real estate needs of buyers and sellers in Shorewood, Plainfield, Joliet, Crest Hill, Romeoville, Bolingbrook, Oswego, Minooka, New Lenox, Manhattan and NW Will County.

View listings for free www.roakehomes.com.  Nationally recognized, easy to use search interface. 

Specializing in Shorewood IL Real EstateEqual housing logo

McColly Real Estate - Shorewood, IL

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Rainmaker
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Yvette Chisholm
Long & Foster Real Estate, Inc. - Rockville, MD
Associate Broker - Rockville, MD 301-758-9500

Thanks for the reblog on this post  - I otherwise would have missed it.

Nov 20, 2011 09:50 AM #1
Rainmaker
186,177
Allyson Hoffman
RE/MAX Villager (Chicago North and North Suburbs Real Estate) - Northbrook, IL
Making Today's Dreams Tomorrow's Reality!

No problem -- great information!!!  Glad to have helped to get the word out!

 

Nov 20, 2011 09:56 AM #2
Rainer
64,104
Bonnie Jean Hart
Home Smart Professionals-La Quinta, Indian Wells, Palm Desert, Indio, CA - Indio, CA
Bonnie J. Hart - 25+ yrs Exp - Real Estate - L

Good article and so true.  In our market today its really difficult to help sellers distinguish between value and salability because most are losing so much anyway that to tell them the $10,000 they put into their home is going to add to the salability and not the value hurts.

Nov 20, 2011 10:00 AM #3
Rainmaker
186,177
Allyson Hoffman
RE/MAX Villager (Chicago North and North Suburbs Real Estate) - Northbrook, IL
Making Today's Dreams Tomorrow's Reality!

Absolutely right, Bonnie!  It does hurt, but for most who need to sell, not doing so, probably hurts more!  At least we can help to keep their eyes open so that there are no disappointments or surprises.

Nov 21, 2011 03:03 AM #4
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Rainmaker
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