Comparing 30 year old remodel with 10 yr old home for comp

[Kim Clifton]

Hey BP. If I rehab 30 year old house to match a much newer house in same neighborhood, making sure roof, ac,heating .... Are all close in age, cen the age of original build make enough difference that they can't be comps? Asking because house in question was built in 1984 & my Realtor said we shouldn't pull comps in same neighborhood that were built after2000. Because even though 1984 house would be mostly new on inside & close time frames for roof ac heating as newer homes, she said people won't pay same per sq ft. Am I showing just how green I am by being surprised at that? I'm confident in my rehab cost, holding expenses & everything I'm following in @J Scott 's book, but I'm questionning my Realtors view on comps. I know I have still so much to learn. Please enlighten me on this. Thanks everyone!:)

[J Scott]

There are two components to value:

1. What someone will pay for the property;

2. What an appraiser will determine the property is worth.

Each of these components should be evaluated separately when considering a rehab deal, as they may be different numbers but they'll both play an integral part in whether the deal will be a good one or not.

In your example above, someone may or may not pay as much for the property, despite the age difference. This will depend on the area, whether there's a lot of buyer competition or not (seller's market vs buyer's market), how nice the rehab is, how nice the floorplan is, etc. Your agent may be 100% correct that the per-square-foot price that buyers would pay will be less for a 30 year old house than a 10 year old house.

But, just because it's true in your area doesn't mean it's true in all areas. In fact, in some areas, older houses are going to be more desirable, as construction standards were better 30 years ago and certain types of houses that were popular 30 years ago may have an increased appeal among current buyers.

Now, while it's a toss-up whether buyers will pay more, less or the same for different aged properties, it's generally safe to assume that an appraiser will not comp a 30 year old property with something built in the past 10 years. To determine the appraised value of the property, you'll need to run a comp analysis. All things being equal, there's a good chance that the newer build will appraise higher, as appraisers will adjust up for newer construction.

So, the short answer to your question is that you'll need to do some more detailed research to determine the impact age will have on the value and the likely resale price.