Thursday, September 1, 2011

Is A Rejected Offer A Reliable Pricing Benchmark?

Two years ago, Matt Townsend put his 16-acre complex in rural Delaware on the market for $550,000. He was offered $540,000.

He turned it down.

Is that rejected offer still a valid pricing benchmark, given how slow the real estate market is in Delaware (as it is in most everywhere)?

Finding out was one of Townsend’s motivations for entering the “Is Your House Priced Right?” contest, which invited Americans to submit short essays about their homegrown methodologies for estimating home value. The Townsend story was chosen as one of the four winners because the family's real estate situation mirrors that of many other Americans who re-invested in their houses during the property bubble -- and now wonder, was it worth it?

The Townsends had sunk over $100,000 into the modern log home they bought for $340,000. Besides replacing basics like the roof, they added a three-car garage with an office and bathroom, updated the kitchen, and customized the space to accommodate the needs of their many children.

Townsend knows that an unusual property like his is hard to compare to recently sold properties precisely because it’s unlikely that any recently sold properties would be sufficiently similar. But, he figured that the rejected 2009 offer set a pretty good baseline.

A local appraiser wasn’t so sure. Tune in tomorrow for the last installment of the Townsend tale of home valuation. Or, check out all the stories of  the contest winners.

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