A real estate agent asked me this question last week via email, so I thought I would share my response. How would you answer this question?
Question: I was wondering if you could tell me how much value you give a bedroom and full bath. Is there some kind of guideline for us agents to look at?
Answer: There really isn’t a standard bedroom or bathroom adjustment. Well, I will say appraisers often give $5000 for a bathroom and $5,000 to $10,000 for a bedroom, but those are often just filler adjustments that may or may not really reflect the market. Ultimately it depends on the neighborhood as well as the overall square footage. For instance, the difference between a 2-bedroom and 3-bedroom unit can be substantial depending on the neighborhood and sometimes easily $20-30K+ (not just $10,000). The same holds true for the distinction between one and two bathrooms as the price gap is often much wider than just $5,000. It seems like the price variance between three and four bedrooms depends heavily on the size of the property. A four-bedroom unit is usually larger in size than a 3-bedroom house, so it naturally carries a value premium. However, that’s not always the case. For instance, an 1100 square foot 4-bedroom house might not sell for more than a 1100 square foot 3-bedroom house because the 4-bedroom house probably has a tiny Living Room.
I wish I could give an exact answer, but the most honest response is that there is no end-all solution other than to research sales in the neighborhood. What do the competitive sales tell us? It’s also important to look closely at square footage because a price distinction for bedroom count may in part be due to the larger size. Lastly, I try to always compare single story with single story and 2-story with 2-story. That helps promote better adjustments.
Any other thoughts? Feel free to share your insight in the comments below.
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