January 9, 2008

The Value Of A 3rd Bedroom In A Condo

One of my customers recently asked me if there is a significant value difference for a condo with 2 bedrooms vs. a condo with 3 bedrooms in Valencia.

His condo is a significant size, almost 1600 sq.ft, but has 2 bedrooms. Here’s the data I pulled from the MLS over the past year:

There were 22 condo sales in the Valencia area with similar characteristics as the subject. The average selling price was $436,000.

When I pulled the data using the same parameters, except searching for 3 bedrooms only, there were 32 condos sold with the average selling price at $500,000.

Now I am not saying that the value of an extra bedroom is $64,000, but the marketability of a 3 bedroom is greater than a 2 bedroom. The value will differ from neighborhood to neighborhood.

To figure out the true value of a 3rd bedroom, appraisers use a similar process called match pair analysis. We would look at what a 2 bedroom recently sold in the subject’s complex and see what a 3 bedroom sold for; Subtract the difference. Then look at competing tracts/ other condo complexes and arrive at a good estimate for the value to use in the report.