Calculating Home Values

Posted by Mrs Money on September 24th, 2010

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Our neighbor’s house is for sale.  Because I was curious, I looked up what they have the list price set at online.  It’s a 2800 square foot beautiful old farmhouse located on a little over an acre.  I have been in love with this house since we moved here.  Well, the price is now low enough that we could realistically buy this house and be able to afford it.  They’ve got it listed at about $70,000 than I thought they would list it for.  I almost threw up when I saw that.  I think they have listed the house at a much lower price than what it is worth.  I do know they are extremely motivated to sell.

I’ve thought about us buying that house and moving next door.  How convenient would that be?!  We’d have a little more property, a much bigger garden, and a garage.  However, with the age and size of the house, I’ll bet the utilities on it would scare the pants off me.  Plus, we really don’t need 2800 square feet.  That would be a little extravagant.

What really worries me is that our house value is going to drop as a result of how much their house sells for. I calculated the price per square foot, which comes out about $85.68 a square foot.  If I multiply that by 1500 (approximately the size of our house) that comes out to $128,517.  OUCH.  When we had the realtor out a few months ago, he thought that we’d probably come out the net proceeds around what we paid for the house.  That I would be okay with.  $128,000, however, I would not.  That’s a lot less than what we paid for it.

I don’t know if I am worrying unnecessarily or I am being realistic.  I can’t see how our house value would drop that much in  few months, especially in the area we live in.  I don’t know if I should worry about it or not.  When calculating home values, surely they would not just factor in the price per square foot in our area.  They would also go by other homes similar to ours that have sold in the last few months or so, right?

I think it’s really unfortunate they are selling their house at all because we really liked them as neighbors, but I’m even more concerned that we will loose our butts when we try to sell our house.  I’m hoping that’s not the case. :)

What do you think- should I be calculating our home’s value based on the house next door?  Or is it like comparing apples to oranges?

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21 Responses to “Calculating Home Values”


  1. Catherine says:

    Seems like apples to oranges to me! Also, I think figuring out the value of your house every few months is kinda like watching the stock ticker – things fluctuate and you can’t do anything about it. Concentrating on that number that you can’t control isn’t doing anything for you. The best thing you can do is continue to keep your house in good shape and enjoy it while you live there.

    [Reply]

    Mrs Money Reply:

    Catherine- I like your point of view. :) I think I’m just going to keep enjoying my house and making it into a place we love to live. :)

    [Reply]

  2. Tracey says:

    Don’t worry about what your house may be worth right now. The only time you have to worry about it is when you are selling it. Even if it is lower right now, that’s ok, by the time you sell, hopefully the markets will be better and the price will be up again.

    I apply the same thoughts to my retirement savings, with the low market, all of my accounts are down. I try not to worry about it because it is there for my retirement. By the time I need the money, hopefully it will be on an upswing again.

    [Reply]

    Mrs Money Reply:

    Tracey- I really hope that by the time we sell we at least get what we paid for it in 2007. Of course, I’d like to make some money off it, but who knows.

    I don’t check my retirement account too often because it drives me crazy as well. I just try to let it ride. :)

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  3. Deedee says:

    You know, there could be something wrong with that old farmhouse that causes them to list it so low. Like major structural problems, or needing new plumbing or electrical or something along those lines. If it needs a lot of work then that definitely affects the asking price. Which would not necessarily affect the value of your home.

    [Reply]

    Mrs Money Reply:

    Deedee- Good point. I know the house does not have air conditioning. I think it will be interesting to see how long the house is on the market.

    [Reply]

  4. Becky R says:

    When they want to list your house they will do comps of what houses in area recently sold as, so it could lower the value of your house.

    Years ago my brother bought a condo for an awesome deal of $80,000, when the condo was worth about $120,000 (he knew the owner.) Well, when the neighbor tried to sell her condo, his
    was the only one that had sold in a year, so no one wanted to pay the $112,000 she listed it for.

    But if you are not planning on selling in next 6 months I would not worry at all.

    [Reply]

    Mrs Money Reply:

    Becky R- We just decided that we’re going to stay here for awhile longer, which I think is probably a good thing for our finances. Hopefully by the time we sell the market will have picked up a little and our house will be worth more than we paid for it in 2007. :)

    [Reply]

  5. Deirdre says:

    What if you bought the neighbor’s house and rented out your current house for income, instead of selling it?

    [Reply]

    Mrs Money Reply:

    Deirdre- That is a good idea! I just don’t know if we’d be approved for a mortgage on the new house then though. I’d love for my parents to buy it! That would be the ideal situation. :)

    [Reply]

  6. Heather says:

    Yes, what they sell it for will impact what you can sell yours for. But worrying about it is useless — won’t change the asking or selling price of either place.

    [Reply]

    Mrs Money Reply:

    Heather- I think you’ve hit the nail right on the head. :) Thanks for your great insight! xoxo

    [Reply]

  7. AJ says:

    The real estate market worries me a lot. We just had a son and do NOT want to stay in this area. The crime is getting worse and the school systems are in the toilet. There are lots of foreclosures in our neighborhood with investors scooping them up and renting them out to scumbags who have done nothing but disrupt our once beautiful, quiet neighborhood. Now we have 5 homes for sale listed at $33k and under!! That’s a new car!! So we owe three times what our home is now worth. No way could we sell it. :( Sometimes I just want to say screw it and walk away, but I’m way to paranoid when it comes to finances/credit and I don’t want that on our history. In one year our home went from $134k to $30k….WHAT?! It’s a mess. So yeah, I worry a lot about the neighbors and their selling prices these days.

    [Reply]

    Mrs Money Reply:

    AJ- Oh my gosh!! Where do you live? That is really crazy. I hope the house prices there get better so you can sell and move!

    [Reply]

    AJ Reply:

    I’m in metro Atlanta. :( Not a good place to be these days. I hope prices go back to “normal” sooner rather than later. It just hurts everyone in the long run that owns a home.

    [Reply]

    Mrs Money Reply:

    AJ- I know what you mean. I’ll keep you in my thoughts- hopefully home values will start to rise soon!
    xoxo

  8. Little House says:

    I don’t think you need to worry about what the neighbor’s house is selling for unless you’re thinking of selling yours any time soon. Also, if their house is older, it might need some repairs which is bringing the value of that house down a bit. If you could stick it out for a few more years in your house, you might see the market turn around in your favor.

    [Reply]

    Mrs Money Reply:

    Little House- We’ve been kicking it around, but not doing anything serious until we are 100% sure on what we want to do. I hate feeling like we’re stuck without options, though! That’s the worst feeling.

    [Reply]

  9. Jenny says:

    I’m not an expert, but I’d say apples to oranges. We once rented a “beautiful” old historical home. It was beautiful only on the surface. The outside was white and freshly re-roofed and lovely. It had hardwood floors, pretty gingerbread work right above the entrance, and 12-foot ceilings. We fell in love. Then we realized there was no subflooring and fleas came up through the floor to torture us. We called an exterminator a couple of times and I don’t know if they ever knocked the infestation out. The water had some sort of sediment in it and there was mold in one of the bathrooms. The worst part was winter. Several times the pipes froze and we had to go to my mom’s for a shower. It was so cold we were paying $100 a month for natural gas (levelized, all year long), had a space heater on either side of our bed, and were still cold. The walls had no insulation in them. That thing was a money pit. Some old houses have been renovated and kept in wonderful shape, but some of them require a lot of work and I think that’s reflected in the value. I do sometimes worry about the value of our house, which we had built in 2007, but we probably aren’t going to sell. It’ll be small for a family of five, but I don’t mind too much, and it’s nice that hardly anything has gone wrong in it because everything is new!

    [Reply]

    Mrs Money Reply:

    Jenny- Wow, what a crazy story! I totally understand why you would want to build a new house after that!
    xoxo

    [Reply]


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