Sullivan County doesn’t have a deep supply of stylish ‘magazine-ready’ homes, much less many for sale at any given time. Occasionally I come across a house that’s been beautifully designed or renovated that has that extra something that makes a house special and a delight to show. Yesterday I was showing one of those — very Hamptons country-cottage style, bluestone countertops, soapstone sinks and lots of cool little details. But the home was small, without lots of square footage or bedroom and bath count, and lacked a garage. The house is priced about 25% to 30% above other farmhouses of similar size and acreage that have sold lately. Those other houses have been nicely redone, but frankly don’t have the stylish flourishes of this one that gives a house that extra cool boost.
But what’s the premium a buyer is willing to pay for that? At or near its asking price the house will fail an appraisal. Unfortunately, in the case of beautifully done houses, an appraiser can’t add on a ‘beautiful and tasteful’ premium. Expensively renovated houses here are actually at a disadvantage, because on a sale involving financing they’ll ultimately be compared to more pedestrian comps. With a declining number of sales and tightening appraisal standards (for example, some lenders now are only accepting comps within the past 6 months, not the traditional 12), it may become even harder to support the price of ‘better’ houses.
Without a significant price reduction, in the face of a short appraisal, a buyer will be in the position of making up what could be a wide appraisal gap. Buyers right now are very nervous about ‘overpaying’ for a house. I’ve heard of a number of deals recently that have dies because the appraisal gap wasn’t able to be bridged between the buyers and sellers.
This is a tough dilemma. Some well done houses are clearly worth more than some of their comparable counterparts. The question is ‘How much?’, and how does the buyer pay for that extra ‘much’ above what a bank is willing to lend on it?