Happy days are here again for developers, renovators and, as a result, sellers in various areas around town, including 12South, Hillsboro Village, Hillsboro West End, Green Hills, Belle Meade Highlands, Forest Hills, Oak Hill, Sylvan Park, East Nashville and a few other pockets. Owners there can now sell their houses for more than they are worth.

That seemingly contradicts the adage stating anything is worth whatever someone is willing to pay for it. However, “one person’s trash is another’s treasure” out-adages the prior. That being the case, the land beneath smaller homes is more valuable than the sticks and bricks resting atop the lot.

For example, in the aforementioned areas, the price per square foot could be as high as $225 for well-designed, totally renovated homes. Under normal circumstances, one way of determining a property with outdated systems, appliances, and fixtures is determine what the house would be worth with the improvements and deduct an estimate for those improvements.

For example, a 1,500-square-foot house that has not seen a subcontractor since its 1945 birth would be worth $337,000 at $225 per square foot. In order to update the electrical, plumbing, HVAC, kitchen, bathrooms, refinish floors, paint, landscape, replace the roof, install new gutters, and repair other deficiencies that the renovation uncovers, the cost could be $60,000 to $100,000. Using this approach, the value would be the $337,000 less the repairs ($60,000) or a value of $277,000.

There is no incentive for the seller to make the repairs prior to selling, as the money invested will be recovered, but with no return. In short, if the seller spent the $60,000, the home would be increased only by $60,000. Why bother?

However, if the neighborhood can withstand a price of $900,000, the lot could be worth $350,000 with no improvements. And if the lot is zoned that two buildings can be constructed on the lot, it could be valued at slightly more.

Sales of the Week

This provides the perfect segue to “Sales of the Week.” 2902 and 2904 West Linden, for example, were sold for $280,000 each by Vicky Marchetti of Fridrich and Clark Realty and stated in remarks that the houses were being sold for lot value only.

Even as a lot, the properties brought $215 per square foot. Since both of the houses needed renovation, their respective values to an owner occupant would have been $220,000 at most. According to Marchetti, the renovations would have been even more extensive than that.

The property at 2807 West Linden sold for $605,000 after having been listed for $599,000. Fridrich and Clark Realty’s Ryan Miller, who sold the house, says it was completely renovated from the studs and featured a new addition. Since the seller acquired the property for $238,000, it was possible to sell for $195 per square foot and realize a profit.

The property was bought in January 2012, before the gold rush, which could be a good title for Neil Young’s next album. While anachronistic, it would be suitable for the contrarian Young.

And then there is 2122 West Linden, which sold for $359,000 ($180 per square foot). Nashville buyers are a square-foot oriented group, so this info is baffling to them.

So what does this mean to Nashvillians? Number one, or #1 as we say here, Trulia and Zillow are worthless for West Linden and other similar areas. A national MLS would have the same value: none.

The properties that brought the highest price per square foot, $215, were virtually uninhabitable, while Ryan Miller’s renovated listing, with new, totally-tricked-out construction, sold for 10 percent less.

Besides skewing the market, this phenomenon eliminates certain buyers from certain markets, or price ranges. Now, everything in these areas is worth a minimum of $280,000, regardless of condition.

Chances are a lender would not have made a conventional loan to a buyer of either of Marchetti’s listings, as the appraiser would have cited the deficiencies in the homes, which may have not even withstood codes inspections.

To recap, on one street just last week, four houses sold ranging from $185 per square foot to $215. And to further complicate matters, the $215-per-square-foot property was functionally obsolete, while the $195 was as good as it gets.

This condition has contributed to the rise in condo sales. There, there are homes in the $200,000 to $350,000 range that, though somewhat smaller, have functioning systems, new everything and no maintenance.

All of this adds to increased prices, which are on the rise. Greater Nashville Association of Realtors records show unit sales rose 23 percent and prices continued their ascension into real estate heaven.

But how long can this last? Congressman Jim Cooper says this could go on for quite some time since the Fed must continue to keep interest rates low in order to avert another recession or even a depression. If interest rates reached the seven or eight percent level, sales, rising prices, construction and all things wonderful would cease.

Don’t worry, Trulia won’t know until it’s over. Nor will Zillow.

Richard Courtney is a partner in Christianson, Patterson, Courtney, and Associates and the co-author of Come Together: The Business Wisdom of the Beatles. He can be reached at [email protected].