Every sarcastic, lightly written blog could use some backup from a straight to business counterpart. While I’ll admit I was tempted to do this analysis in sharpie on my kitchen window, I knew Jackson Healy would tell me to get straight down to it.
I started the spreadsheet off by gathering information on all the listings our potential clients area, Oakridge. There were several key metrics that I had to determine about each of these listings to make an assessment, they are as follows:
- Cost Per Square Foot – list price divided by the square footage of the house.
- Estimate Percent Renovated – Rough estimate based on pictures and renovation quality.
- Baseline Value – Essentially the equal playing field number as it strips away two large value differences (garages and bathrooms) and value improvements from renovations.
These parameters helped me to create the following chart:
The chart shows the trendline of home values as the perceived amount and quality of the renovations on the home increase. The chart tells us the following:
- The average cost per square foot of a non-renovated house in the area is roughly $313. This differs from the baseline value of $283 per square foot as it includes items such as garages and bathrooms in the calculation*.
- The increase of value for a complete renovation is $118 per square foot.
* To valuate a home it would be more accurate to use the baseline and then assign values to items like the garage (~25,000 for a double detached) and bathrooms (~$10,000 for a full bath) before applying the renovation factor.
As with any research there are some limitations to this chart that should be considered. Three items will primarily affect the accuracy:
- As I am not a realtor I only have access to the current listed prices and not actual sales data. Listed prices are generally inflated versus actual sales values, especially in the current market.
- Judging the completion level and quality of renovations us subjective as is, nevermind doing it through pictures alone.
- The sample size is relatively small.
With theses factors in mind I still believe that the chart displays the value of selling a renovated product. Value added may be nothing but a great marketing theme, but it is one that has been pitched to buyers and sellers alike.
If you have any thoughts, questions, or a neighbourhood you would like analyzed please contact me at firstname.lastname@example.org!