When estimating appreciation, I estimate it based on the sales price minus any seller paid contributions (i.e. if it was $240,000 with $5,000 seller paid closing costs, then I use $235,000). I say estimate, because appreciation rates are an average of an entire market and can and do vary house to house. I remove seller paid closing costs because my feeling is that a buyer with a cash down payment would have negotiated the price down by a similar amount.

As for figuring improvements into resale value, very few improvements actually net you 100% return on resale. According to the National Association of REALTORS 2005 Cost vs Value Survey, windows in the midwest are worth approximately 83.7% of their cost at resale. (see http://www.realtor.org/rmomag.NSF/pages/feature1dec05_window?OpenDocument) I also believe it depends on how bad the windows were. If they were original single pane and rotting, the replacement has more benefit than if they were 20 year old double pane windows.

Regardless of what you paid, how much it might have appreciated, and what the cost of your improvements were, the true value of your home is of course whatever a buyer is willing to pay. It sounds obvious but many people focus on the statistics and don’t step back to view the big picture.

In today’s market I counsel my sellers to look closely at how their home compares to the others listed, then make theirs just a little bit more competitive. There’s twice as many homes on the market today as when you purchased, meaning buyers have twice as much to consider.

If there are 15 houses under 2 miles apart from each other that are the same style, beds, and baths and are priced within $10,000, then to get an offer a seller has to have the best combination of price and condition, otherwise the buyer will pick another home to offer on.

Many sellers choose to start the price high and plan to either drop it as the go or negotiate a low offer. In the past that worked just fine but now many buyers will simply skip past overpriced homes!

When I’m pricing a home in today’s market I look to see what has Pended or sold in the last 3-4 months (longer than that is ancient history) and then preview the homes and/or show a couple of them to my sellers.

While it is http://www.ting to price according to what is for sale, just because it is priced at that point doesn’t mean it will sell there, so I use the solds to determine the price and then look at the other actives to make sure my clients are priced competitively to the competition.

It may be hard to look at gaining little or no “profit” from the sale of a home, but if moving up to a higher price bracket, remember that the price you negotiate on the buy side will be lower too.

The historic trend is to see 3%-4% appreciation each year and we were higher than that for a decade and will probably now be below that for a few years or longer as interest rates rise and inventory swells. This is perfectly normal but does require buyers, sellers and agents to re-evaluate their thinking.

So to sum it up, look to your agent to help you review the comparables and competition and focus your pricing around that.

Thanks again!