Cohousing-L Mailing List: RE: How much of a premium will you pay for cohousing ?

[Rob Sandelin (robsan]

 Jim Salem  asks:

>Few would argue that cohousing provides a benefit not yet accounted for by
>most appraisers.  However, I would like to understand how much of a premium
>potential cohousers would be willing to pay.

>Would you be willing to pay 5% over appraised value ?  10% ?
>In dollars, would you be willing to pay $10,000 more ? $20,000 more ?

The difference between the appraisal value and the actual cost must be 
made up by the buyer.  This difference can usually be used as a 
downpayment amount.  In a $120,000 home, the typical downpayment amount 
is 10% or $12,000.  Many groups I am familiar with charge at least that 
amount, if not more ($25-35K) for pre-development costs per person.  
This is usually cash upfront for planning, land acquistion or site 
control,  architects, lawyers etc and is required before a bank will 
loan a nickel on the project.  These cost risks are what separate out 
the theoretical  groups from  the real projects.  Having this sort of 
financial commitment is also one of the factors of success of the 
project.  When all you have invested is meeting time it is easy to walk 
away from a project when the going gets sticky.  When each member has 
$15-20K invested the commitment level to seeing the project happen is 
an order of magnitude higher.

If you are doing a commonhouse it should be added to the value of your 
appraisal (sometimes it is not and banks need to have this explained to 
them, using the recreation facilities of a condo as an example that 
they are familiar with).

Since the cash required to make up the difference has to made up by the 
buyer ( the bank will only loan the appraised amount) the question 
often becomes not will you, but can you.  Although there are perhaps 
lots of folks who would like to and want to live in cohousing, often 
the upfront financial costs are beyond their means.

As to what would you be willing to pay, my personal financial 
investment in Sharingwood is around 15% over market value.  If I sold 
my house tommorrow I would probably lose about $25,000.  However the 
answer to what I would be WILLING to pay is whatever I had.  The actual 
dollar amount or percentage amount is immaterial to me, although if it 
was more than I had, then obviously I could not.  I have given tours to 
folks who look at housing as investments, and when ever I meet them I 
tell them that cohousing is a bad financial investment.  It is a 
limited resale market, often has undesirable architectural elements 
(small units, no personal garage, limited ability to remodel, limited 
personal control, etc.), and requires enormous time comitments not 
required from other real estate investments.  I have successfully 
scared such folks away and hope we have continued success doing so, as 
we prefer to recruit folks who are looking to commit to a community, 
not invest in real estate.

Rob Sandelin
Sharingwood Cohousing