How Property Valuation is performed in Cleveland, OH

Question

I'm looking at BRRRRing properties in Cleveland, OH. However, I'm concerned renovations may not materially improve the value of the home.

While looking through the auto-generated list from my agent, I used Zillow to get an idea of how the surrounding homes are valued and to see if improvements would substantially increase the value of the home. I often saw homes that looked in decent condition, had recent updates or completely renovated, in a good neighborhood, and with a similar build year, square footage, and lot size to surrounding homes, etc. and they were valued $10k~$20k lower than the surrounding homes. That seems odd to me. I would think the properties would be closer in value to one another if they were recently renovated. So...what makes the biggest impact in a home's valuation in the Cleveland area? Is it:

• neighborhood
• interior condition (renovated or 50 years old interior)
• interior square footage
• exterior build condition
• lot size
• access to stores and main roads
• something else?

Thanks! I appreciate your feedback on this.

Bob Collett · Answer

Neighborhood, original square footage and condition above all else.

The only people who pay a premium for improved homes in poor Cleveland area neighborhoods are “out of towners” caught up in the Cleveland investment hype.

I get quite a few out state or out of country investors who pay a 20% to 30% premium to market value for a “turnkey” property only to sell it at a loss a few years later after reality impacts the bottom line.

The other thing that goes on is that otherwise “smart” investors pay cash for a home without the need for an appraisal. When they go to sell, the buyer is getting a loan, so the appraisal comes in 30% below contract price.

Then there is deferred maintenance. Investors forget (as does most everyone else) that housing is a depreciating asset. This is especially true in a place like Cleveland (area) that has seen a population decrease in each of the last six decades. Those left behind are striving to buy in better neighborhoods that would never support more than 3% to 5% return on investment.. if any cash flow at all.

Now, today, financially broke inner ring suburbs and even Cleveland proper are killing rental owners with rental registration fees, violations, construction permits, vacancy permit fees, contractor registration fees, POS fees, POS violations, POS escrow requirements, etc. if this isn’t bad enough, the city just passed an ordinance requiring (investors only) homeowners to PROVE that their properties are “lead safe”, which requires a licensed certified registered lead inspector. On top of that, the city just passed (or is passing) and ordinance stating that renters have a right to free legal counsel in an eviction hearing.

Make sure you are asking the right questions.

Good luck

Bob Collett

Realtor and property manager

William Selig · Answer

@Bob Collett

Very typical of government. There is already a law in place that they didn't enforce and now they want to put the burden on someone else.

Also to note, there aren't that many lead paint inspectors currently in the Cleveland area and not many certified remidiators. Those lists becomes even shorter when you are talking about the inspectors/contractors that respond or call you back.

The backlog for these inspections next fall and Spring 2021 is going to be so long it could even be funny. Unfortunately, they will probably just mail you your fine and citation.  I'm sure they will have that part working like a well oiled machine.

I am not against the idea of making sure the property is "lead safe" but don't like laws for the sake of laws. Enforce those already on the books.

Federico Gutierrez · Answer

@Bob Collett Found the article about tenants getting legal assistance...yay more taxes to cleveland to pay for their services

cleveland-city-council-establishes-program-to-provide-lawyers-for-impoverished-families-facing-eviction

Don Petrasek · Answer

Don’t use Zillow values, they are hit and miss.  Sometimes good directionally but not something you want to rely on for any kind of analysis as they can be really off.  Have your agent pull pending and comparable sales, use that data and see if it changes anything.

Daimian Leslie · Answer

I think a great tool for you are local realtors, they would be best suited to answer that question as they understand the "needs" of that market and what things buyers are looking for and what things they aren't. That's my 2 cents.

Bob Collett · Answer

@Rich Burnside

Cleveland proper passed the lead safe ordinance. This included increasing rental registration fee from $35 to $70 per unit.

Rich Burnside · Answer

@Bob Collett Yikes, sounds like Cleveland is trying to implement ridiculous California laws. Thanks for the info.

I know that many of the cities have POS violation and escrow requirements. Which are/have passed the lead inspection laws?

Federico Gutierrez · Answer

Location, Location and Location.IF you want to get biggest bang for buck then you need to go outside the city of Cleveland and into the neighborhoods BUT then the capital required is going to increase A LOT.

How Property Valuation is performed in Cleveland, OH

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