Why is This House Priced $58,000 More Than it was in 2012?

By
Real Estate Broker/Owner with Franklin Homes Realty LLC

Why is this House Priced $58,000 More than it was in 2012?Today, I received the following email from a buyer.

I like this home very much. I saw a YouTube video of this house from Feb. 2012. The asking price then was $189,500. I can see that the seller made upgrades to the kitchen, flooring, etc. but did he make $58,000 of improvements to justify his $248,000 list price?

Here is the response I sent to this buyer: 

First of all, let's address the improvements. I'm not the listing agent so this assessment is based upon my visual observation. The sellers made several cosmetic improvements including hardwood floors throughout much of the first level, new ceramic tile flooring in the kitchen and baths, painting kitchen cabinets and installing granite countertops, re-carpeting bonus and bedrooms and painting. The master bath was upgraded to a tile surround shower. I'm guessing they may have spent $10,000 to $20,000 on these.

The difference between now and 2012 is two-fold: 

1.  They made improvements that buyers desire. Buyers now want turn-key homes. They don't want to make any improvements and are willing to pay top dollar for a home that is move-in ready.

2.  The housing market is a different market than it was three years ago. There is a shortage of inventory in many Franklin neighborhoods but the demand for move-in ready homes is high. When the demand is high and the inventory is low, prices go up. In 2012, when the seller tried to previously sell, the demand was low and the inventory was high. Consequently, he was never able to sell. That same house listed $58,000 higher is already under contract.

Franklin home buyers are growing frustrated. Homes that are move-in ready are going under contract the first day on the market. In some cases, homes that come on the market at 8 a.m. are already under contract by noon. It's likely buyers are offering prices in excess of the listing price to get the house.

A small 1,600 square foot house priced at $250K in historic Franklin came on the market a few weeks back. It had over 50 showings and recently closed for $300K, 20% over asking price. It was a cash buyer who waived the appraisal contingency.

This type of behavior is making it hard for buyers. There are three pieces of advice that I give to home buyers:

1.  Get pre-approved. It's very likely you'll be up against multiple offers. Having a pre-approval in hand can make a difference.

2.  Hire a real estate agent. These homes are moving so quickly, it's unlikely you'll get in to see it before it sells. Hire an agent who can watch the market for you and get you in for a showing quickly. Hesitate a day and a house of interest may already be gone.

3.  Don't research previous home prices. What a house was listed for in 2012 has absolutely no bearing on our current housing market. The only comparables that matter are homes that have sold within the last 3 months. It does you no good to lament over what prices were in previous years. Likely all it will do is frustrate you at the current state of our market.

Why is this House Priced $58,000 More Than it was in 2012?I moved here in 2006. The housing market then was much like it is now. Although I paid fair market value for my house, some might say I over-paid for the house I bought. However, I would have had to wait five years to get a house at it's lowest in our market. That would have been crazy. Who waits five years just to buy at the lowest time? Not to mention, we don't recognize the lowest time until we've already passed it.

Prices aren't determined by real estate agents. Prices are determined by home buyers and right now, home buyers are willing to pay a premium to get the homes they want.

When you're ready to buy a Franklin TN home, contact Tammie White of Franklin Homes Realty LLC at (615) 495-0752.

Posted by
Tammie White, Managing Broker/Owner
CLHMS, CRS, GRI, SFR
Franklin Homes Realty LLC
Franklin, TN
(615) 495-0752 
GET REAL. GET LOCAL.
 
This posting with the content written here and photographs displayed are the intellectual property and opinions of Tammie White of Franklin Homes Realty LLC. Any party who uses this material without the written permission of Tammie White is subject to copyright infringement and possible lawsuit.
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Dick Greenberg
New Paradigm Partners LLC - Fort Collins, CO
Northern Colorado Residential Real Estate

Hi Tammie - That's a great explanation for what's going on in many markets right now. Buyers who want to achieve their goals would be very wise to enlist your expert guidance to negotiate these challenging conditions.

Jun 04, 2015 04:59 AM #1
Rainmaker
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Karen Butler
RE/MAX Coastal Properties - Fort Walton Beach, FL
Destin/Fort Walton Relocation Specialist

Thank you ...Thank you... Thank you! I get that same scenario asked quite a bit. You are absolutely correct, that price has no bearing on todays values.  Great post.

Jun 04, 2015 05:23 AM #2
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Debb Janes EcoBroker and Bernie Stea JD
ViewHomes of Clark County - Nature As Neighbors - Camas, WA
REALTORS® in Clark County, WA

2012 doesn't compare at all to today's market. You explained this very well Tammie. And, all of your advice is sound. 

Jun 04, 2015 05:33 AM #3
Rainmaker
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Ron and Alexandra Seigel
Napa Consultants - Carpinteria, CA
Luxury Real Estate Branding, Marketing & Strategy

Tammie,

You gave an excellent explanation and time has passed since 2012.  I hope this buyer listens to you, and this makes an excellent point as to why old videos and listings need to be removed from the Internet.  A

Jun 04, 2015 10:16 AM #4
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Liz and Bill Spear
RE/MAX Elite 513.520.5305 www.LizTour.com - Mason, OH
RE/MAX Elite Warren County OH (Cincinnati/Dayton)

Tammie, Right on the mark with your explanation!  So much factors into a current price, and upgrades made are just a portion of that.

Jun 04, 2015 12:03 PM #5
Rainmaker
625,199
Claude Labbe
Real Living | At Home - Washington, DC
Realty for Your Busy Life

That's a nice response, not trying to be the know it all, but speaking with confidence.  What it sold for in 2012 is essentially as relevant to the price as the color of the socks I am wearing is to the price.  But, you spoke very well to it.

Now, let's go find that buyer a home within their budget and to their tastes.

Jun 04, 2015 12:05 PM #6
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Tammie White, Broker
Franklin Homes Realty LLC - Franklin, TN
Franklin TN Homes for Sale

Dick - It shows how little consumers really understand about the housing market.

Karen - It's useless to look at prices from three years ago.

Debb - Hopefully she'll take it.

A - If she had contacted the first listing agent, that agent would be happy she'd left that video up.

BLiz - It's wrong for buyers to think that higher prices are always tied to improvements. Many times it's just different market conditions.

Claude - My thoughts exactly.

Jun 04, 2015 02:04 PM #7
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Katerina Gasset
Get It Done For Me Virtual Services - Wellington, FL
Get It Done For Me Virtual Services

Excellent advice, Tammie. Buyers of Franklin TN homes will surely benefit from reading this. Thanks for sharing!

Jun 05, 2015 01:56 AM #8
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William Johnson
Retired - La Jolla, CA
Retired Real Estate Professional

Hi Tammie White , I would bet that Buyer wouldn't have offered more if the values had slipped downward, . It is one of the perks of hownerownership when the values increase. 

Jun 09, 2015 05:53 PM #9
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Tammie White, Broker
Franklin Homes Realty LLC - Franklin, TN
Franklin TN Homes for Sale

Katerina - Thanks for stopping by.

William - Excellent point.

Jun 09, 2015 11:30 PM #10
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