House of the Day: 42 Sherman Revisited
We’ve featured this place a couple of times on Open House Picks since it hit the market in the middlle of the summer at $1.35 million and frankly we’re a little surprised that it hasn’t sold yet. Not that it’s a steal at its current price of $1.3 million, but it’s got lovely details and…
We’ve featured this place a couple of times on Open House Picks since it hit the market in the middlle of the summer at $1.35 million and frankly we’re a little surprised that it hasn’t sold yet. Not that it’s a steal at its current price of $1.3 million, but it’s got lovely details and sits on our favorite block in Windsor Terrace. Is it the fact that it’s only three stories high? Or maybe a sign of tougher times for FSBOs in this market? What do you attribute its failure to sell to?
Homepage [42Sherman.com] GMAP P*Shark
Open House Picks 8/4/2006 [Brownstoner]
Open House Picks 10/6/2006 [Brownstoner]
The problem with renovating a house first and then selling it is that you will be guaranteed to alienate some buyers with the choices you have made and the quality of the improvements (or lack thereof), layout, etc.
On the one hand, most buyers don’t want to deal with the risk, hassle, and expense of renovation.
On the other hand, if you do the renovations for them, they probably won’t like some of the colors, features, furnishings you’ve chosen.
There is also risk in renovations.
You can spend 500K renovating a house that you bought for 1.0. But you might NOT be able to sell it for 1.5
The market might drop on you. Or you may overpay the contractor. Or you may perform a kind of renovation that is simply not all that desirable to the prospective buyer.
I wouldn’t even pay 1.2 for it, given the risk of a declining market, the risk of estimating renovation costs, the fact that you probably cannot live in it while renovating, etc.
If you pay 1.2 today, it may only be worth 1 in a year or two, so the buyer bears 100% of the risk of this declining market.
Take a look at what’s happening to real estate nationwide as interest rates rise.
As for how the seller and buyer renovator should split a potential windfall, it should go 100% to the buyer-renovator.
The buyer-renovator is taking a risk that the market value of the property will decline, spending the time and money to fix it up, and taking the risk of cost increases in materials, taking the risk that he has incorrectly estimated the value of the home and the cost and time necessary to renovate.
If a perfect home is worth 1.5. And this home needs 500K in renovations, I might pay 1 for it.
But why would I do all the work, risk all my time and money, and split the future profit with the seller?
Why would I pay 1.3 for it, pay 500K in renovation costs, and then only be able to resell for 1.5.
If I split half the profit with the seller, and pay 100% of the renovation costs, then I have lost money.
This house clearly WASN’T worth 1.3 or it wouldn’t have sat on the market for close to a year. Given that it WASN’T worth 1.3, what do you think it’s worth now ? I’d say market has fallen a good 15%, and if seller wants to use a realtor he’ll lose another, say, 6%. If he waits longer, won’t the price just keep falling (at least for a while) ? Maybe some stubborn relative.
I haven’t seen the house, but if it needs new plumbing and electrical and heating, then everything is going to get torn up, anyone doing this would be crazy not to spend a little extra and complete the gut reno. Renovators are expensive (I just finished a reno). Probably will end up costing $500k. Would even 1.5 (1 mil for the house 500k for the reno) be worth it if you can get a home in PS 321 for close to that now ? (and probably less if you wait 6 months…look at any real estate report, everything falling)
It’s simple. Assuming a competive market and rational buyers and sellers, this home hasn’t sold after sitting on the market for 8 months because it’s OVERPRICED relative to comparable homes. Also, most people would rather pay a slight premium for a ready to move-in home. Renovations aren’t necessarily easy for the average buyer. There is risk involved if you don’t know how to evaluate the cost and time required to renovate.
If it were WORTH 1.35 someone would have paid 1.35. If it were worth 2. Someone would have paid 1.35.
The buyers are asking and expecting too much and haven’t gotten it. In a declining market, the value of the property is going down, period.
I feel compelled to reply to Anon 5:30 11/7 the professional renovator. Folks you call in may be looking for level floors, all-new appliances etc, but there are at least a few folks like my husband and me who expect marbles to roll toward the walls in 90-yr-old houses — that’s why we like them. Cracked plaster can be mended, and we can live with chipped moldings. When we bought our WT house 4 years ago, we budgetted a certain amount over the buying price for immediate renovations, but we knew that we’d be paying for renovations and improvements for as long as we own the house — and that’s okay! We also went into it looking forward to doing a lot of the work ourselves, slowly, with a long learning curve, because for odd eggs like us that’s fun. Don’t know how to factor “fun” into the calculus of home-value, but great housing stock is part of what drew us to WT, and having fun with our house — and having plenty of neighbors who are having the same kind of fun with their houses — is part of what is keeping us here.
if only unlevel floors and bad heating were the worst of it for 1M plus homes in brooklyn. it doesn’t seem sane i understand, but you stop asking why after a while.
Anon 5:30, have you looked at most of the $1M + homes in Brooklyn? At least 90% have old appliances and need some renovations. I dont think Ive seen a single beautifully renovated home that has original details like this one for less than $1.5 in any area, no less a good one.
I respectfully disagree with Anon 9:53am.
I understand people have different standards. But most folk paying 1 million plus, I believe, expect to get something nice for the money.
I’m a professional who has done dozens of renovations. There’s nothing wrong with ballparking a price for arenovation project — 100k a floor is a good (lower priced) number for an average renovation of an old house.
Sure, everybody has different individualy needs, but most sane individuals buying expensive homes (ie hundreds of thousands to millions of dollars) are not going to be happy with unlevel floors, lousy heat, cracked walls, old appliances, etc.
Obviusly, you have not recently purchased an expensive home.