Idle Conversation - Value in Resale of a Home Theater? - AVS Forum
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post #1 of 26 Old 05-11-2013, 03:58 AM - Thread Starter
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I was having a conversation with some friends at work yesterday and they wanted to know if I thought that a custom home theater room would increase or decrease the resale value of my home.

My first answer was that I don't care. smile.gif

But then I thought about it and I think if anything it might actually be a decrease because there would be literally nothing else you could do with that room. It can't really convert easily to a play space or a bedroom or any other space because most of us have risers in our theater designs which can't be easily removed. So your target audience is limited to people who are bonkers about movies like us. And from the box office receipt numbers, that might be a pretty big crowd but there are still people who wouldn't want that in their house.

What do you think?
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post #2 of 26 Old 05-11-2013, 04:13 AM
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I think it will average to zero.

I think it also depends on where the theater is and how homes in your area are typically laid out.

There is almost always a basement in the homes near me. However, 1 out of 10 are actually finished. So when people go downstairs they're expecting to see cobwebs and mechanical equipment.

If they have no expectation of using the space, the theater is just a nice addition. In my experience it is not a selling point. People typically just say, "oh that's nice" and move on. Some people say they could rip it out and do something else. I never had somebody be disappointed because it's not utilized in a different manner.

That being said, I don' think it adds any dollar value. If it's a space that would otherwise be unused, I think it may be a small plus for somebody to lean towards your house rather than another.

I don't think you will ever find a person that just "has to have" a theater and is going to increase an offer just to get it.

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post #3 of 26 Old 05-11-2013, 09:09 PM
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I am hoping for it working as a selling feature.

My house goes on the market June 15ht, we will see how it goes.

I do agree though, this room serves no purpose other than to be for a dedicated theater, would take a good bit of reno to get it back to a functional den / bedroom , etc.

I have long said though, for the right person, this house will be a dream, hard part is getting the right person to come through here...

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post #4 of 26 Old 05-12-2013, 03:39 AM
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Quote:
Originally Posted by cofn42 View Post

I am hoping for it working as a selling feature.

My house goes on the market June 15ht, we will see how it goes.

I do agree though, this room serves no purpose other than to be for a dedicated theater, would take a good bit of reno to get it back to a functional den / bedroom , etc.

I have long said though, for the right person, this house will be a dream, hard part is getting the right person to come through here...

In my experience it's a selling feature inasmuch as a burglar alarm, central vac, irrigation et al are selling features. Buyers can take it or leave it. It won't be a deciding factor.

You may find that one-in-a-thousand buyer that really wants the house because of the theater. I have yet to find them. Your agent is going to be pushing location, lot size, living area. They are not going to push a theater to people that don't care. They'll show them the room and move on.

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post #5 of 26 Old 05-12-2013, 04:36 AM
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Couple of things, The quality of the room is a big issue. Well done rooms can be an asset Handyman specials can be a turn off.. This topic has come up at least every 6 months since I've been on this forum. There have been severalf antidotes of sellers saying that the feedback from a buyer on why they picked their house over another was the theater. Finishing a basement adds value. If some of it is a theater, it doesn't add more value than a recreation room would.
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post #6 of 26 Old 05-12-2013, 04:44 AM
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I've seen the thread come up a few times but I don't recall anybody saying a theater sold their house.. but admittedly I usually don't read them. I happen to be in the situation right now, so I chimed in.

As with anything, a pro looking job is going to sell over a handyman special. A solid granite countertop will push a sale; 12x12 granite tiles on the countertop will likely work against you.

Speaking from a purely "help sell my home" standpoint, I imagine some of the larger, high quality spaces like Big or Mario would undoubtedly be plus. Would it be a deal-maker? Who knows, depends on the buyer.

If you got into dollar values, well I think it's a losing proposition, but it would depend on the overall value of your home I suppose.

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post #7 of 26 Old 05-12-2013, 11:19 AM
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I think it all depends on what you do. In my space I am going to have more of an open concept. I will install my back wall cabinets for my wet bar and then carpet the entire room. After that I will install the bartop for seating', the riser and the false wall. So if needed it can all be ripped out fairly easily just converting it to a large open room with a bar in the back.
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post #8 of 26 Old 05-13-2013, 08:41 AM
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I sold my house last September and the theater was definitely a deciding factor in the buyer choosing my house over another. We even were able to use the equipment as a bargaining chip that helped us to get the price we wanted. I will say, however, that our house was in a "high-end" neighborhood where finished basements and media rooms were the norm. Our buyer specifically mentioned that he liked how our theater was dedicated, and not just some speakers in the ceiling and walls, like some of the other homes had.

Our current home is in more of a "middle-end" neighborhood where unfinished basements are the norm, so I don't think I'll get as much resale value out of the theater, but who knows. Media rooms and theaters are more popular than they used to be.

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post #9 of 26 Old 05-13-2013, 09:49 AM
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Most people have different takes on Home Theater, not sure if one man's dream cave will appeal to another. Like Big said, if it's nicely done, it can add some value but don't count on it.
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post #10 of 26 Old 05-13-2013, 01:37 PM
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My next door neighbor is a realtor and I had him come and take a look at my finished theater. When I made the comment that I knew it didn't add much to resale value, he thought I was nuts. He did agree that it all depends on the buyer, but when I go to sell the house the theater will likely draw a lot of interest. I didn't do anything drastic that would be difficult for a future buyer to undo.

There is a house just at the bottom of our hill that someone flipped and added a "home theater". It was nothing more than a small room with a 50" TV on the wall and some HITB speakers.

As I said in another tread on the same topic is that I don't expect any ROI with the theater when I go to sell the house. The ROI for me is the enjoyment I get out of it, along with family and friends.
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post #11 of 26 Old 05-13-2013, 01:47 PM
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I think the size of the house makes a big difference on if a theater adds value or not.

Essentially, is the buyer "sacrificing" space to have the theater? Do they give up a multifunction game-room or a bedroom for a third child?

In my house, I believe my HT would add value to the home. My house is around 3600 sq ft (not a mansion by any means). It has 4 bedrooms, a formal dining room, a family room, a game room, a breakfast area off the kitchen, three and a half baths, a study (which is a bar room for us) and in the backyard is a kids "playhouse" with electricity and a/c. My small theater on the second level is about 9' x 16' with a 11' x 6' computer nook off of it. It was an unfinished attic space that I converted. Since a typical buyer wouldn't be necessarily giving anything up, and since my neighborhood is geared towards families, I think it would be a bones with value. But, that's just my opinion, and I don't believe it carries across to all homes.
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post #12 of 26 Old 05-14-2013, 09:41 PM
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Yes, the size and type of house have a big impact on this question.

What I usually tell folks is this: if the room was "supposed" to be something else, then it will likely hurt resale value. In other words, if you turn a bedroom or living room into a dedicated theater, odds are high that the new buyer will have to pay to covert that space back to what it was originally intended to be. If the room is using extra space, a bonus room, or similar, then it will either have no impact or a potential positive impact.

It is also somewhat (not exactly the same, but somewhat) like a pool. The new owner might see the theater and be thinking: what will it cost me to operate and upkeep that room? how will I learn how to operate the room? What other costs come with owning a theater? And, so on...

If you move up to massive homes, then a theater is essentially a requirement of the home. It might not be a theater of the quality we would think is to be expected (and usually they are not that great), but having a theater is pretty common in large homes.

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post #13 of 26 Old 05-15-2013, 09:59 AM
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A search 101 on "appraisal" shows recent threads on this, search link below.
http://www.avsforum.com/newsearch/?search=appraisal&output=all&containingforum%5B0%5D=19&type=all&advanced=1
(forum ettiquete used to be try a search and feed into that thread before randomly starting a new one......oh well)

some recent ones;

ROI on a Dedicated Home Theater - 2012-2013 Edition
http://www.avsforum.com/t/1444910/roi-on-a-dedicated-home-theater-2012-2013-edition

How much higher did you taxes go after you finished your basement?
http://www.avsforum.com/t/1316999/how-much-higher-did-you-taxes-go-after-you-finished-your-basement

One I started back in 2009....Home Theater Appraisal value
http://www.avsforum.com/t/1141813/home-theater-appraisal-value
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post #14 of 26 Old 05-15-2013, 10:45 AM
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I talked to my neighbor who is a realtor with 20+ years of experience in my area about this very thing last week.. He said that the more specialized a home feature is, the less valuable it is to someone else, on average. Said that minimum you will get $12/sqft for finishing a space in the basement, so that would come out to about $2500 in value for my theater area. And my budget is $5500, so there you go. Could be a bonus for some buyers, but for others it would just be a finished space or family room.

I am doing it for me though, and any home value benefits are tertiary. And I think that's the way you need to look at it.
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post #15 of 26 Old 05-15-2013, 12:52 PM
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$12/sq ft sounds crazy low. I am adding 840 sq ft (Theater with bar, bedroom and sitting nooks off each. The tax value construction cost is $63,000. That's just tax value. If you're getting $12/sq ft what are you getting per sq ft for the remainder of the house? Is he saying yours would be less because it wasn't permitted when you finished it? I could see that but that still sounds crazy low but I know real estate varies greatly from market to market.
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post #16 of 26 Old 05-15-2013, 01:11 PM
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The two ladies that bought my house a couple years ago loved my home theater. They asked to leave the equipment in place though, so they coule just hook up a reciever and a dvd player and watch a movie, so I left the projector, screen and speakers hooked up. Then I made a counter offer for $5000 more and they accepted. The projector and speakers were a few years old and the money coverd me to replace that equipment. so I spent that money on speakers for my new basement. So I do know that mine was a selling point for them.
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post #17 of 26 Old 05-15-2013, 01:21 PM
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Quote:
Originally Posted by wraunch View Post

$12/sq ft sounds crazy low. I am adding 840 sq ft (Theater with bar, bedroom and sitting nooks off each. The tax value construction cost is $63,000. That's just tax value. If you're getting $12/sq ft what are you getting per sq ft for the remainder of the house? Is he saying yours would be less because it wasn't permitted when you finished it? I could see that but that still sounds crazy low but I know real estate varies greatly from market to market.

Your appraisal value had nothing to do with what it cost you.
It's what the market value is, and a HT is a poor investment from that viewpoint.
What do you mean by "tax value"?


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post #18 of 26 Old 05-15-2013, 01:22 PM
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Quote:
Originally Posted by wraunch View Post

$12/sq ft sounds crazy low. I am adding 840 sq ft (Theater with bar, bedroom and sitting nooks off each. The tax value construction cost is $63,000. That's just tax value. If you're getting $12/sq ft what are you getting per sq ft for the remainder of the house? Is he saying yours would be less because it wasn't permitted when you finished it? I could see that but that still sounds crazy low but I know real estate varies greatly from market to market.

It does sound crazy low. I'll talk to him again and ask for some clarification. He was saying that based on appraisals they do $20/sqft for unfinished basements and $32/sqft for finished areas.
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post #19 of 26 Old 05-15-2013, 01:58 PM
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Quote:
Originally Posted by mtbdudex View Post

Your appraisal value had nothing to do with what it cost you.
It's what the market value is, and a HT is a poor investment from that viewpoint.
What do you mean by "tax value"?


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When you own a home you pay property taxes. Taxes are assessed on a percentage basis. In order to determine the amount of tax owed municipalities need to determine to value for said property. This is also known as a "tax value". If you take that value and mulitply it times the rate you get the property taxes owed. This has nothing to do with the fair market value for a property. That is what a willing buyer would pay for the property. What I was referencing is when you file for a permit in most places they will assign a value or construction cost. Most of the time that cost is added to the prior tax value to arrive at a new tax value for the improved property.

Glad to help.
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post #20 of 26 Old 05-15-2013, 05:45 PM
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Sure, and you can fight what your tax assessor simply adds by that method by getting a true fair market assessment, that's called playing by the rules. Glad I could possibly help you save some un necessary taxes.

What you will find is in general basements and home Theatres rarely appraise for their construction cost.

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post #21 of 26 Old 05-15-2013, 06:10 PM
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In our neighborhood the price per square foot of the homes is about $145, excluding the waterfront properties which are around $250 - $300 per square foot. Using a $145 baseline, they calculate the tax value of improvements at up to 7 different grades (A, B+, B, B-, C, etc.) Fully finished space in the basement is considered "A" grade and goes for $90 per square foot or about 60% of the normal value. It goes down from there to a low of $40 per square foot for completely unfinished space.

Since I drew my own permit and my labor was free, the total cost of materials to get through drywall was just under $9000, so that is what I put on the permit. However, when the yearly tax assessment came around, they ended up not changing my taxes at all because it would open themselves up to an appeal where I could come in and try to argue for my house valuation to be at current market value instead of the "bubble" prices of 2007 when the house was assessed. It's been three years now and my taxes haven't been raised, but that's definitely an anomaly and they have their own self-interested reasoning behind it.

Hopefully when the state-mandated assessment happens next year I will be able to have a fully finished basement while still lowering my tax value by $40k or so. Slimy politicians would probably just raise the tax percentage to compensate, though. mad.gif
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post #22 of 26 Old 05-16-2013, 05:56 AM
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It will add some value, but you'll be lucky if it adds enough to pay for the cost to put it in.

A dedicated theater will probably have the lowest ROI, partly because most buyers can take it or leave it, and partly because you're probably spending more per square foot and going all out on the "theater experience". A big multipurpose room with a wet bar, theater, and more casual seating layout will probably give you better ROI, because it can be used for entertaining, sports, etc as well. Again, the cost will probably outpace the added value, but if you're worried about getting your money back out, a multipurpose room is a much better option, IMO.

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post #23 of 26 Old 05-16-2013, 06:24 AM
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OK, I stayed out as long as I could. I think I replied to every one of the listed older threads.

My opinion is if you are improving your home with the expectation of selling it and getting your money back (or a profit) you are doing it for the wrong reason. You will NEVER be able to guess what the next buyer wants or waht their tastes are.. You should be doing because it's how you want to enjoy your home. Anyone thinking of selling within 5 years probably shouldn't be putting any more money into the house (notice I said "house," not "home" because if you plan to sell that soon it's not going to be a "home") than absolutely necessary. The only exceptions are things to make it comparable to surrounding houses, .ie, if all the other houses have 4 bedrooms and you only have 3, adding a 4th is good, if all the others have 2 1/2 baths and you have 1, adding a bath is good.

So I would say a lot of what you may get back or contributes to helping your home sell over another is the total of your theater project (did you add a bath, a bedroom, an office, a workout room, etc?). The theater, by itself, is like a pool...if someone WANTS a theater, you're gold, if not, then it's just something extra to deal with that they probably don't want to be bothered with. IF you've added other usable space, then they can ignore the theater and use the other spaces.

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post #24 of 26 Old 05-16-2013, 06:44 AM
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I'm not that worried myself about property taxes, they are very low here. And it helps that my house is one of the cheaper ones in the neighborhood. I currently $946.13/year in property taxes, down from a high of $1050/yr. I don't suspect my taxes will go up much if at all. Who lets the registrar know that you have more finished space?
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post #25 of 26 Old 05-16-2013, 06:50 AM
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Quote:
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I currently pay about $900/year ($75/month) in property taxes....

Close to $6k a year for me....eek.gif
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post #26 of 26 Old 05-16-2013, 08:13 AM
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Tim, I do not miss paying those high taxes in your county.

DJKest, that is very low. Odds are they are getting their tax revenue from you in other ways. Sales, fuel, personal property taxes, etc. Nobody will let them know you added square footage but if you didn't get it permitted you most likely won't be allowed to include it as finished space when you go to sell the house either.
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