A Tale of Two Houses

In case you didn’t know this, Tuesdays are the day for broker’s open house tours. We get to view properties new to the market before they are open to the public. The broker gets a head start if they know someone looking to buy. Especially in a tight market like we have now, that head start can head off competing with multiple offers.

I’m saying this to you after this week’s broker’s tour. There is an interesting question – how much is turn-key condition worth? You will pay for all the finishes in your house eventually. Will that be up front as you pay that turn-key premium? Or will that be down the road as you upgrade or renovate your house? There is no single right answer, it depends on what you can afford up front and on what you can tolerate while you wait.

This occupied my reflections after viewing two houses on the tour. One house, built in 2006 and newly renovated, sits on 0.13 acres. The listing price, $884,000 gets you 3 bedrooms, 2 ½ baths in a 2796 sqft house. Totally turn-key? Yes.

Let us contrast that with a “mid-century gem on private, park-like, level, .33-acre lot.” This house clearly needs some updates but could be livable for the buyer that can afford to secure the property but needs to wait on the upgrades. The list price of $647,500 gets you a 4 bed, 2 bath, 2657 sqft house.

To my mind the second house is the best value. Even putting in $100,000 of upgrades brings your all-in cost to $747,500 – well below the $884,000 cost of the first house, and the lot size is over double. The turn-key premium in this case is $136,500.

I leave it to you to decide what turn-key premium you are willing to pay. Remember, you will pay for all your house’s finishes sooner or later. You should make sure you’re not overpaying for them!