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Value of completed HT (when selling turn key)?


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20 replies to this topic

#1 of 21 OFFLINE   Charles Elliot

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Posted January 13 2004 - 08:39 AM

I am selling my house and wanted to invite some feedback / opinions on what it might add to the value of the house to leave the room set up as-is. The room is a little over 14x19 by the way.

The entire room has been painted a deep brown and there are full length velvet(?) curtains on front and rear walls in an accenting color (dark brown/green) except for the screen opening. The screen is fixed 92" diagonal (homemade) and the ceiling mounted (very clean install) PJ is a Sony CRT 1270Q. The room demo's very well (remote control dimmer for lights, hidden 4 x Dayton 15" isobaric sub has more output than anyone can stand, etc.)

All components are in a custom 19" rack (with rails) flushed into the wall, trimmed out nicely, etc. I cleaned out the rack to allow for DVD / CD storage and here is what I left in there:

DVD Video / DVD Audio player (Mits)
VHS / S-VHS VCR (Mits)
7.1 Receiver (Denon 3801)
DVDO Iscan Line doubler (V2)
Dish Network receiver (only for showing... I don't own it)
Sony SACD changer
Anthem MCA 2 Amp for Sub
CRT Projector
4 x 15" Sub
Dynaudio main speakers
In-wall center channel behind screen
In-wall surrounds (x4)

Two full leather couches with recliners on each end and a separate recliner (all matching). No riser, couches are not behind each other.

Just curious on what the opinions are on what this is all worth in a turn-key room.

Thanks

#2 of 21 OFFLINE   Dan_Whip

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Posted January 13 2004 - 08:46 AM

I saw an article a few months ago about this. The main factor is the area of the country you live in. If you are in an area with a lot of high-tech companies, then the employees of these companies find high value in completed home theaters. But other areas comprised of low-tech jobs, the value is decreased. The article elaborated a bit by saying some homes in upper New Jersey are seeing HT increase the home's sales price by up to 50% more than the HT cost in the first place. They said it's better on the East coast, where for the most part you can expect about the same return you would expect for a major kitchen remodel (which is very good news for you east coast folks). California is also very good, but in between it is hit-and-miss.

#3 of 21 OFFLINE   JohnnyN

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Posted January 13 2004 - 11:31 AM

depends on how well you sell? avoid any immoral practices, you could focus on the intangible benefits of hours upon hours of safe wholesome family enjoyment, instead of boring equipment costs...

#4 of 21 OFFLINE   Richard Little

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Posted January 13 2004 - 12:03 PM

I would think that for the average person, the contents of the room would be valued at slightly more than a good "home theater in a box" that they might find at Best Buy. Anybody who understands what "higher end" audio/video is all about, probably already has a system that they are very proud of. Anyway, thats how I think it would go down.

#5 of 21 OFFLINE   TonyGricar

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Posted January 13 2004 - 12:17 PM

if it were me, and i plan on being in this situation in the next couple of years, i have thought about pricing the house a bit higher and then negotiate from there. if the price comes down too much, the equipment may come out. i would position it more as a "Home Theater equipment stays!", and if a prospective buyer says, "Whatever, but the price needs to come down.", i'd decide from there. i'll probably try for a 50-75% of my cost. since i finished my basement myself, at much less than what it would cost a contractor to do it, i'll stand to make more regardless and the equip could become a throw-in to sell quickly.

howabout looking at it as a glorified pool table, which is the only thing i can think of, besides a hottub that would be a home feature that may or may not be negotiated in the deal. i know when i bought my last house, they tried to price the pool table in, we said no, "by all means, please take it." knowing it would cost them a few hundred to have it broken down and moved. they threw it in...

tony

#6 of 21 OFFLINE   RichardHOS

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Posted January 13 2004 - 12:46 PM

I think something like this is hard to pin down to an "average" or "blue book" type of value. For some home owners, it might be worth $1000, or perhaps even detract from the value of the home if they view it as a room that will have to undergo major remodeling to use for whatever non-HT purpose they might have in mind. For another home owner it might be worth fair market value of the equipment plus a fair install charge for having it all setup, wired, treated, and decorated properly.

It depends so much on the particular homeowner. When I was considering facing the same situation (which I am no longer facing, as I will not install my HT in the house before selling it), I settled on the solution of offering the house with a slight premium to leave the HT intact, or the "stock" price and you would remove the HT and return the room to near-normal (meaning that it might still require minor patching of holes in wall and a new coat of paint, but columns/risers/etc. would be gone).

#7 of 21 OFFLINE   Tony C.

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Posted January 13 2004 - 01:11 PM

My brother in law is a home appraiser and he told me that only extra sf add to property value. Poperty value is calculated by houses in your area. Althoughit will not add to the value of the home it can add to the selling point of the home. Lets say you are selling your house for 300k and
its appraised at 290 the buyer might want to sped the extra 10k to buy your house because of the upgrade.

Hope this helps a bit

#8 of 21 OFFLINE   Wayne A. Pflughaupt

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Posted January 14 2004 - 12:09 AM

I tend to agree with the others here. The value of the HT room will depend on the individual seller, whether or not they would want a HT room. It's not unlike other improvement, like having the house networked. Or a pool. Many consider one to be a great selling point, but it would be a deal breaker for me.


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#9 of 21 OFFLINE   MikeWh

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Posted January 14 2004 - 02:44 AM

I also agree with the others, but I think there are two additional things to consider: the base market value of the home and the overall quality of the HT's construction. Yes, it is true from an appraisal standpoint, the value will most likely be calculated only in terms of additional square footage (I was also told this by two different appraisers). The issue though is that an HT can add (or detract) from the marketability of the house, depending on comparable homes in your immediate area and on whether you are lucky enough to have a prospective buyer who finds the idea of an HT as a bonus.

I know that many people build HTs in an otherwise "average" home. If a buyer in your base market range would never expect to see an HT in such a home, you'll be gambling on whether they find this as a premium (upgrade) or as something that is too frivolous, impractical, or an otherwise waste of space. In higher end housing markets, however, you are more likely to find a buyer, who will pay a premium for a well executed HT.

If your home is not an "executive" home, I think it just comes down to a gamble. As suggested previously, I would offer the HT as-is, but be prepared to negotiate, even down to individual components. The fact that your HT "demos well" is also a major plus, IMHO. I would do everything possible to go for a "wow-factor". Also, if you have the flexibility to stay in the market, until you find the "right" buyer, then this will (obviously) increase the real market value of the HT.

As a side note-- Wouldn't it be nice to hide a video camera in the HT to record the look on a prospective buyer's face when they first enter the HT? When it comes to negotiation time, if they start whining about how much they'll have to rip out, you'll at least know if they were lying. Posted Image

#10 of 21 OFFLINE   Charles Elliot

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Posted January 14 2004 - 03:00 AM

Thanks for all the replies guys. I guess I am learning that not everyone in the world wants a home theater... I am hoping to find a buyer who does want one, and who has at least walked into a good A/V store to realize what they are looking at... and doesn't have everything already... if all that happens (I can dream can't I?) I was figuring 5k-10k add to a comparable house in the neighborhood. Maybe I am smoking something. Hope not.

A few variables that affect answers:
Home is 3150+ square feet
Converted bonus room is HT (still leaves four bedrooms, family room, formal living, formal dining and a study, so it didn't take any critical space)
The install looks professional

It is in Plano, TX where high tech is a major employer.

Thanks!

#11 of 21 OFFLINE   Erik Farstad

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Posted January 14 2004 - 03:11 AM

Charles, just an FYI...as appraisals go for Dedicated Home Theaters, they usually do not receive any additional sq/ft cost. For instance, if in Plano average appraisal cost is $125 sq/ft...your 3150 house might appraise at $393,750, if the bonus room is a converted home theater or not. So that's just talking appraised value...but buyer value is something altogether different. Posted Image

All my best on selling your home!

P.S. Before I built my house, we had a townhouse I had wired for surround sound, even speakers in the garage. Part of the purchase agreement was that the surround speakers stayed! Posted Image So as many here have mentioned, it will come down to the individual, as is the case with most things!

#12 of 21 OFFLINE   Chad_Henry

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Posted January 14 2004 - 03:36 AM

Scratch that, just noticed it's a V2

#13 of 21 OFFLINE   RAF

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Posted January 14 2004 - 04:25 AM

Just to add my own experiences here -

I basically agree with everything that's been said here. Having a "modest" home theater myself, and having gone through appraisals 2 times since it was completed in 1999 (to take advantage of declining mortgage rates) I can verify what others have stated.

There is an "appraised" value and a "selling" value. The appraiser looks at square footage and a few other basic things (quality of kitchen appliances, home location, etc.) and then follows a formula to arrive at a value in conjunction with getting a mortgage. This is quite cut and dry with not too much latitude.

On the other hand, if you have "amenities" that don't add to the value of the house for appraisal consideration other than adding square footage (for example I have a Home Theater, a wine cellar and a walk in cedar closet), you have a very nice bargaining chip when and if you decide to sell your house - assuming that the person buying your house considers these enhancements valuable to him/her.

The last time I had an appraisal done I was a little surprised when the appraiser prefaced his closing remarks to me with, "Don't be shocked at the number I am going to be reporting to the bank. If you ever decide to sell your house, make sure you ask much more than the appraised value." He then proceeded to explain to me many of the same things that I'm relating in this message.

The bottom line: What your house officially appraises at and what it sells for are very often not one and the same. Appraisals are related to financing considerations - selling prices are keyed to what a buyer is willing to pay. While you can probably recoup some of your HT investment if you sell, you can't go into it rationalizing that it adds to the value of your house. That's up to the buyer to decide.
RAF
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#14 of 21 OFFLINE   Charles Elliot

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Posted January 14 2004 - 05:14 AM

Thanks again all for the feedback... very enlightening!

Funny thing is, I am buying a home with a dedicated home theater, and I wouldn't have thought about buying a house that did not have one. Of course there is no equipment in the home I am buying...

#15 of 21 OFFLINE   Pat Kellett

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Posted January 16 2004 - 04:59 AM

Charles, I agree with what has previously been said - but I would like to add a few points. I am a real estate broker and would suggest you market the house as having a dedicated home theater and then mention that the home theater equipment "may be negotiable". This will allow you to discuss its inclusion or exclusion depending on the purchase price offered. I did the same with my own residence recently and decided to exclude the items on a counteroffer as the interest in the property was strong enough that I did not need to throw it in.
Too often I see sellers throw in items of personal property into a purchase agreement when it is NOT even on the radar screen of the potetial buyers. (In November I had a client throw in $10,000 worth of teak patio furniture without the buyer even asking!)
Lastly, a couple of items on appraisals. Appraisers work for THE LENDER not for you.(You just get the priviledge of paying them). Home theater equipment will not add significantly to an appraisal - it is personal property not real property. This becomes an issue when you accept an offer with little money down as the loan to value ratio will not cover the added $'s for the home theater equipment and the buyer will be unable to get the loan! If you decide to convey the home theater equipment I would suggest you NOT mention it in the purchase agreement - it just muddies the water. It would be better to reach a contractual agreement with the buyer OUTSIDE of escrow for the personal property that is to remain. Just my two cents... Pat

#16 of 21 OFFLINE   MikeWh

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Posted January 16 2004 - 02:56 PM

Excellent post, Pat. After reading Robert's quote from his appraiser ("If you ever decide to sell your house, make sure you ask much more than the appraised value"), I would think the loan-to-value issue is going to be a potential problem for many people. I wasn't aware that people sometimes commit to contracts outside of the escrow.... it hadn't dawned on me. VERY useful info.

#17 of 21 OFFLINE   Bill Fletcher

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Posted January 17 2004 - 12:12 AM

Charles, very timely thread for me. I just put my house on the market. We factored into our asking price the finished square footage of the HT only (It's in an otherwise unfinished basement). I considered other HT room amenities (wall to wall cherry wood cabinet, two level seating, double drywall, etc)to be something that would help attract certain buyers and we are marketing the house with the HT as a selling point. Basically we are hoping that it just helps the house sell faster. My plan for the electronics was to try and sell them separately from the house sale. Everything fits in with the room so well, I'm hoping to find a buyer with more money than time. It would offer me a great chance to upgrade in my new house.

If you have any learnings from your experience I would love to hear them. Just send me an e-mail. I will do the same.

Thanks. Bill billchrisfletcher@comcast.net

#18 of 21 OFFLINE   Charles Elliot

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Posted January 17 2004 - 02:32 AM

Again, thanks everyone for the feedback. Pat, I think your approach is better than the one I took which is to state that all equipment is included. I was thinking if someone said they weren't interested in the A/V stuff then I would negotiate it out, but much like Bill, I do not want to undo what took me so long to do, plus I want to shop for new stuff in the new house!

Bill, I'll let you know how it goes. I am taking the advice offered above and starting Shrek on DVD before each showing, and I have written up a one page fact sheet (with a picture of the receiver with arrows pointing to volume and selector) so they can switch over to DBS to see what it looks like, and have an idea of reference volume setting (stated as "please do not adjust above..."). The last viewer took that sheet with them, which I interperet as good news.

Any other feedback is welcome!

Charles

#19 of 21 OFFLINE   Charles Elliot

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Posted January 29 2004 - 03:32 AM

Got a contract on the house. The buyer dickered with me on price, so I said fine, I'll take less, but all the components come with me (except the projector and in-wall speakers). He said Ok, but I think he is completely unaware of what this stuff costs because he said he wanted a list of the stuff he would need to buy to make it work again at closing.

I think he is in for a shock when he gets the list of stuff he will need. He may try to go cheap and just hook up the PJ to an S-Video source (the cable is already run to the PJ) but it is pretty disappointing without the line doubler. Who knows, maybe he'll be happy with it.

Anyway, we showed the house a ton, and got an offer 5 days after it went on the market. It sold for the very high end of $/sq ft in our neighborhood, and we don't have granite countertops, or upgraded mouldings and such. I am inclined to think the HT was a differentiator, as there are several houses in our neighborhood priced much less that have been on the market for months. I am told the house does show like a model, which may have helped.

Hope this helps.

#20 of 21 OFFLINE   Tim Bargar

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Posted January 29 2004 - 04:19 AM

The HT is a finished room, nothing more or less, to a lender. If the appraiser agrees with the asking price for the house, then the bank will give a loan based on the appraiser's opinion. If the appraiser assesses the value lower than what you think the house is worth, and the difference is your added value for the HT equipment, the buyer will have to come up with extra cash to cover the equipment cost. Unless the buyer can come up with the cash, or they are willing to buy replacement equipment, that could be a deal breaker as far as leaving behind the equipment and makes the HT just another finished room with other potential uses less likely. I ran into that with a home I sold. Most of the people looking at the house liked the home theater but would not pay for the extra equipment. They were then left wondering what they could do with the room since it wouldn't be an HT to them. Fortunately, a couple that eventually wanted an HT bought the place. They will sometime down the line put in their own equipment.