How much value was added ?

harrup

We are a tad puzzled over the the "added value" of a certain house we are considering to buy.

Vendor bought the property in 2006 for 450 K ( I checked on zoopla). According to the EA the house was a "train wreck", but we aren't entirely conviced by the veracity of this. It may well have been in need of TLC but the property or grounds aren't substiantal enough that someone would have paid nearly 1/2 million for a total wreck given its position, etc.

Still, the house is in immaculate condition now. New bespoke kitchen, new heating, new bathroom/shower, new double glazing, new carpets throughout - all most tastefully done and seemingly no expense in regards to decor or fittings was spared.

We are pretty green behind the ears when it comes to these "adding value" issues...so I'll ask those less naive than us - you guys.

How much do you think did the above improvements add to the actual value of a house? In view that no structural changes have been made, nor any changes to the exterior, and no improvments were made to any adjacent houses, ect?

More than 50 K? 70K? More?

I guess what I'm asking in a rather convoluted way - is it reasonable and/or realistic for the seller to expect not only to recoup the money they spent in it's entirety for the internal improvements.... but that those improvments would have actually added value.

Either way we look at it we just can't see that it would have augmented the value of the house by XXX....but I am not clued in as to what adds value and what doesn't.

We want to make an offer on this property and whilst I don't want to offend the seller I just can't see how this would add up to.....well, I'll tell you what the seller thinks their house is worth now after you tell me what YOU'D think those improvments are worth! :-)

Cheers

G_M

You're asking an irre;levant question. What the previous owners paid, what they did, what they spent.... all irrelevant.

the only question is what is it worth NOW: in today's market (not 2006's); in today's condition; in the position it's in; it's current size/configuration; etc etc.

Compare it to other similar houses in the street/area. ignore the past.

Doozergirl

I agree with G_M you must simply look at what it is worth now in comparison to other properties as this is essentially what judges how much value they added (or indeed didn't). I do think that whilst the paid prices help when the house hasn't changed and the market hasn't either.

If I'm buying a house to renovate then I will look firstly at it's end value and then work backwards, therefore what I've paid and what I've spent is irrelevant, it's whether or not I hit that target that matters to me, ie. whether people agree and buy the house at that price.

Admittedly some people will pay a price, do some work and assume it adds value and that is how you end up with developed houses that are on the market for too much money. The market dictates, not the amount of work done or the £s spent.

Catblue

If the owners forked out £75K for a bespoke kitchen that you do not like then it is not going to be worth £75K to you - especially as it is now effectively second hand.

You need to compare with what other houses on the street/adjacent streets are actually selling for recently.

Stamp duty is 4% at £500K so they'd really need to have done A LOT (and by that I mean added reasonable square footage) to the house to break that threshold.

brit1234

harrup wrote: »

More than 50 K? 70K? More?

The other way round more likely. 2006 was near peak of market and prices fell 20%. Now they are up a little but falling yet again. Despite work £450K has to be your maximum and you should offer less with prices set to carry on falling this year.

harrup

G_M wrote: »

Compare it to other similar houses in the street/area. ignore the past.

I take your and Doozergirl's point. It's a good one - thank you both. Most appreciated.

Our only inherent problem with this is - in regards to comparing this house, we have nothing equivalent to compare it to.

I hope I can explain this so that this makes sense: the property is an individual detached house flanked to the left and right by a row of Victorian terraced houses. None of those adjacent houses in this street have sold for over 380 K...but this is irrelevant since they are one type and style of house( e'g. period & terraced)...and the one we are interested in - the one wedged in the middle - is a different style and type ( chalet style modern, detached).

Other houses in this area are either all larger individual detached homes in roads consisting of ALL individual, detached homes....or much smaller houses on an estate, etc. Unfortuantely the one we looked at -and like a lot - is neither fish nor fowl in tems of comparison.

The asking price for this house now is 600 K.

Thats quite a leap for a house which hasn't increased a single foot in size merely in comfort and interior design/fittings. But being unsavvy about property development, what the heck do I know .

Which is why I asked WHAT specifically increases the value of a house. By 165000, to be specific.

brit1234

Have you a right move link so we can check with property bee

real1314

harrup wrote: »

Which is why I asked WHAT specifically increases the value of a house. By 165000, to be specific.

There is no single specific factor; in no specific order:-

1. The overall market price change
2. The condition of the property
3. Square footage
4. Number of rooms
5. Layout
6. Facilities
7. Imponderables
8. Intangible features
9. Desirability
10. Fantasy

You are asking a question that no-one can give an answer to. YOU have seen the property, YOU know what it means to YOU to buy or pass on it.

Compare it to others in nearby streets full of detatcheds, does it compare in price?

You won't find a list of 165,000 things each valued at £1. Unless you accept that simple rule, there's no point trying to buy a house as you will most likely feel disappointed with what you end up with.

Catblue

Go and have a look at others in the area around the £600K mark and see if you can do "better" locally. Is every other £600K house in the area nicer (potentially), bigger and on a larger plot - even if the condition isn't as pristine as this house? If so, then £600K is too much.

The fact that this house is flanked by terraces either side would probably move the value downwards, compared to having other detached houses (each on a reasonable sized plot) on the road.

harrup

Doozergirl wrote: »

If I'm buying a house to renovate then I will look firstly at it's end value and then work backwards, therefore what I've paid and what I've spent is irrelevant, it's whether or not I hit that target that matters to me, ie. whether people agree and buy the house at that price.

.

Doozergirl, I'm a little hazy on what you mean by that. How can it be irrelevant?

Presumably what you spend on renovation is directly governed by what you judge the finished project will fetch and how much profit you guess you'll make on it.

let me have a mental stab at it: If you transform a previous ramshackle dilapidated property with a jungle garden into a gracious home with a landscaped garden ....I suppose your initial outlay or expenses are irrelavant since the subsequent buyer pays for your vision, expertise, the convenience of moving into a comfortable home, etc, ect.

I presume that's what you meant?

If so - fair enough. But still - there presumably is a "ceiling" in how much a given property will/can augment, right? For instance, regardless of what I'd do to our property, since it is on an estate there will be a finite value what this property is deemed to be worth. Unless I'll buy up ALL the adjacent houses on my road and transform those, too.

Despite my confusion .....subsequent to your message I now KNOW what "bothered" me about the house. It's flawless and pristine in decor - but it isn't & wasn't someones home, despite the EA's statements. It was bought as a property development. Which despite the stellar decor makes it soul less. We just couldn't envisage how someone could live in a house which didn't look lived in at all.

But that's by the by and has nothing to do with adding value :rotfl:

real1314

What it comes down to is this:-

Look at a prospective property. Decide what you could do it it to maximise it's value. Determine what the value would be once you've done that.

Work out the cost of the work, work out the price you'd pay for the property. Decide on what minimum profit you want. Add these up and if they are equal to/below the final vlue, then buy it, do it, sell it.

If the profit is bigger than someone else might think it should be it's irrelevant. Sometimes a developer gets lucky, sometimes they see an angle no-one else did. Other times they lose out - in those cases they can't move the final price up to compensate, so in the cases where they get lucky, they don't move it down either.