Has seller inflated house value? Agent can check
07/26/2008 12:00 AM
07/24/2008 7:50 PM
Q. My friend wants to buy a house in a very upscale area of Washington, D.C. The asking price is $1.5 million. I advised her against buying the home because of significant repairs that need to be made. There is an (erosion) problem that threatens the very foundation of the home. Some might describe this erosion as a “sinkhole” if it were on a street. Because of this erosion, I advised my friend against purchasing the property. The seller has reduced the price by $100,000 to mitigate the situation. However, I wonder if the sale price was artificially set at the current price in order to give the seller the option to discount or negotiate with a prospective buyer. What do you think my friend should do?
A: The easy way to find out if the seller had arbitrarily raised the price is to have the buyers' agent prepare a comprehensive survey of homes that are similar that have sold in the past few months in the neighborhood. That will tell you if the house is fairly priced at $1.5 million, or should actually be priced a lot lower.
But I agree with you that your friend should explore more fully the ramifications of the erosion and what, if anything, can be done to protect the property against further erosion. To that end, she may need to find a landscape contractor with extensive experience in shoring up eroding land, or perhaps a structural engineer, who can tell her how the property can be shored up.
Whether the fix will cost $100,000 or $1 million, I don't know. But until your friend does know the answer to these and other questions, she would be foolish to make an offer on the property.
Q. In a townhouse community (where units are owned as condominiums), does a community pool automatically raise the sales price of individual units?
That's a great question, but there's no easy answer. That's because adding a significant community improvement like a pool, workout facility or other freestanding structure has significant upfront and then ongoing costs that will add something to everyone's monthly maintenance fee.
If the condo association takes on debt to pay for a $150,000 to $200,000 pool with beautiful landscaping surrounding it, outdoor furniture and a restroom, paying off that debt can involve instituting a special assessment or simply raising ongoing monthly maintenance costs.
While having an amenity like a pool might make the community more attractive to other buyers, and thus raise prices somewhat (or hold them steady in a falling market), some buyers will be unable to afford the special assessment or an increased assessment.
The question you have to ask is will the benefits of building the pool more than offset the costs of installing and maintaining it down the line?
I hope this helps.
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