Twice in the last week I looked at rehabbed property for sale with a client and twice I found asking values completely out of line with the market. These properties were each priced 20 to 25 percent above market. Apparently these rehabbers have been in a time warp; it IS NOT 2004. By the time you read this, it is already 2010. It is a fragile real estate market where buyers as well as lenders and appraisers are concerned with value more than ever.
The rehab work was well done and the properties showed very nicely. But, that is not going to command an extra 20-percent. The best you might hope for is 10-percent extra for the excellent condition of the property. Even that will require the luck of the buyer getting an appraiser who will appreciate the difference.
If you want to rehab a property, use a fine-grained data analysis tool like FinestExpert.com that provides the comps to support their property value estimate. Then use the trend charts, also broken down to the bedroom count, to make sure the values in the neighborhood are not still in decline.
Hold time makes all the difference in your annual revenues because you can’t get on to the next project if you’re anchored with funds tied up in an over-priced listing.
Knowing the true ARV (after repair value) is as critical as being able to estimate and control your costs. Do not expect inflation or the extended and expanded first-time homebuyer tax credit to bail you out of a troubled asset. This is not a forgiving real estate market for over-estimating.
