Real Estate Math

I showed clients an upper bracket Edina home yesterday that’s been languishing on the market — at ever-lower prices — for 3(!) years.

mathThe reason(s) became apparent literally 10 steps in the door:  every square foot of the very large home needs updating (the online photos nicely camouflaged that).

Given the home’s size — well over 4,000 square feet — the ballpark cost to do that would easily be $200k – $300k (or more).

Considering that nearby, new homes cost that much, it’s hard to see why Buyers would opt for the dated home instead.

Caught in the Middle (“Pricing Purgatory?”)

While dated, the home was otherwise in good condition, and therefore still worth more than the underlying land.

Call that, “List Price – Updates > Land Value â‰  Tear-down.”

See also, “Tear-Down Economics, Circa 2012″; “From Worst to First, or ‘Housing Leapfrog‘”; and, “I Guess it Really Was a Tear-Down (I mean, “New Construction Opportunity”).”

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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