A couple years ago my family bought a 2012 Camry. Let me tell you, being a guy that is 6’0″ tall, it sure is nice to have more leg room compared to a tiny Sentra we also own. Though I’ll admit I gave up my truck when we got the Camry, and it’s just not the same thing trying to transport 2x4s in a sedan from Home Depot for my building projects.
A Relevant Analogy: Anyway, I have an analogy to share today about new homes and new cars. As new construction has been taking off again in the Sacramento area and many other places, I’m finding some home owners and even some real estate agents aren’t in tune with the difference in value between new homes and ones that are even just one year old. Let’s take a look below.
As you can see, there is a striking difference in value (price) between a brand new Camry and one that is just two years old. Just as buyers pay less for older cars, the same is true in real estate. The moment a house is built and occupied, it loses that fresh “never been lived in” premium that buyers pay more for.
A Conversation About New Construction and a “Low” Appraisal:
Owner: I live in a new neighborhood and I’m frustrated the appraisal came in low at $360K. I was expecting it to be $400K.
Me: Tell me about your situation.
Owner: The appraiser didn’t use the newest comps. I even walked over to the sales office and there are several recent sales at $400K. My house is only one year old and we spent about $10,000 in rear landscaping too. The 2013 models don’t even have rear landscaping.
Me: What are 2012 models like yours selling for? That might give you a good picture of value.
Owner: [ Silence ]
Me: Real estate is sort of like buying a car. The moment you drive the car off the lot, it depreciates in value. You just cannot sell a car built in 2012 for as much as a brand new model. Just as buyers pay more for a car that has never been driven, they also pay more for a home that has never been lived in. There is usually a striking value difference between brand new homes and model matches that sold even one year ago. The value difference can sometimes easily be 10% or more.
If you’re in a similar situation, I hope this helps give some context. At the same time, if you think the appraiser still got your value wrong, check out how to challenge a low appraisal. On the other hand, if your Assessor is valuing your home at the same level as brand new homes, it may be worth appealing your property taxes.
Question: Any thoughts, insight or stories to share? I’d love to hear your take.