I've been checking out existing comps in a desirable area of my city. The highest ones aren't new rehabs, though--although well-maintained, they're pretty dated (probably older, original owners).
Is it possible to beat existing comps if you rehab a home into better condition than anything currently on the market there (assuming that it's a desirable or "hot" neighborhood)?
The problem will be the comps. While your house may very well be more updated/upgraded, etc., your end buyer will likely run into appraisal issues when applying for a mortgage due to the other sold comps in the area. You may run into a situation where you'd have to either A. lower your sale price to align with appraised value, or B. have the buyer bring cash to closing to make up the difference between appraised value and sale price.
Yes it is possible to beat existing comps- If it wasn't then the market would never ever move and houses wouldn't sell higher today than they did the year before or the month before- All houses would sell for the same price for infinity.
The market works because you have comp A and someone comes in and says okay this house was similar to mine and I did a pretty good rehab or maybe my house is in better or same shape but they sold for 250k so I'm going to list mine a little higher and they list for 255 or 260k. The next person comes along and goes hmm its at 255k or 260k then maybe I have a deck I can get 262 and that's how the market inches up. Comps are great but there is no rule that says you have to sell for the exact same price as the person before you- once you rehab a house you sometimes try to get it to sell for higher than the comps you saw when you purchased- Sometimes you are right sometimes not.
From my experience you are taking a risk. I would attempt to keep your improvements in line with the comps. Getting a higher appraisal is risky, if your willing to take the chance document the work you performed and provide the appraiser with the documentation and before and after pictures to give them something to work with in order to get the number you are looking for, and it is still going to be risky. Good luck
@Vonetta Booker Run your remodel costs based on the existing comps, and then try selling at the higher price. I just had one appraise about 15K higher than anything around it based on the remodel. But I had one last month appraise 8K low because that appraiser did not take into account the upgraded remodel. The buyer actually covered the entire 8K deficiency.
That is why it is best to use numbers based off existing comps and then try to push the market.
The best eye opener I saw was a small ranch (in an $80k post war ranch neighborhood) that had an addition built across the back of it on a crawl space.
They added a large master bedroom with ensuite bath & laundry, his/hers walk-in closets. Then they blew out the old kitchen as an open concept into the d/rm. Added a large l/rm with an impressive fireplace (gas insert). Off the back entrance was a small Den.
The old bathroom, bedrooms & living room was basically freshened up but left as is. It sold in a week for $154k.
I am not sure what they paid for their addition (~600 sq ft), but when I added 1800 sq ft to our home (7 years ago) it was $68k finished, with a full basement.
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