As many of you know I started this blog with an idea that a house can be fixed well as an alternative to buying new. After gutting a house down to the studs and rebuilding it inside and out it sat on the market with a ridiculously low asking price. I was told it needed to be painted and staged. It was white walls with beige carpet. Yuk was the term, but did I mention the low price? Back in the day you wanted people to use their imagination for how the place could look. Today we have stagers.
One of the first with the staging business was a Real Estate marketeer of extraordinary talent. She changed the face of how we promoted ourselves as professionals. Staging was a natural off shoot of making a home look professional.
After spending the last couple of years as a disciple who had seen the light it’s starting to wear on me that people look at furniture more than seeing a house. A house should be the focal point for a buyer. Buyers should be looking at all the flaws and how they will be living. Once you move in your stuff it looks different than the stuff that no one ever sits on.
I’ll also mention scale. Did you know you have condo and house scaled furniture? How about when a stager brings in the smaller dining room set to make the room look bigger? How about that well placed chair that shows a use for a corner but you would never want to sit there? The best is the blow up bed that is just a bit smaller than normal. When you add in pictures or pottery, things of luxury, in a utilitarian house or put a screen in a questionable corner of a room is that showing a buyer the home or an image?
People may make any conclusions they want from what they see, but in my business we see the house after the staging is gone and the reality sets in. Room dividers are the most deceiving thing to compensate for. Screening can be up and make sense in staging but practical day to day living has those screens in the way and put into a corner.
I’ll never say a stager or agent would deliberately cover a defect with staging. There may be times when the eye is diverted from a draw back, other times the illusion may be a distraction from space use challenges. The purpose of staging is to give the buyer some sense of how to live in a property.
What I have been thinking the past few years is that a house should be able to stand on it’s own merits. A buyer should be able to see the house and the agent should be able to draw the conclusions of what the house has to offer. It bothers me when agents open the door and let the furniture be the conversation. People actually talk about how nicely a place is staged, or refer to a house as the house with the red couch. It’s a sales technique.
People very rarely refer to the systems of a house, or the foundation. More attention is given to the roof rather than what’s underneath it. People talk about counter tops rather than the cabinets. Many houses have cheap fall apart cabinets with granite on top.
The paint part I understand now. People don’t want to do anything other than move into the house. I think money spent on a high quality paint job is money better spent than cheap paint and staging. Actually a lot can be done by concentrating on making the house livable rather than presentable.
The appearance Barrack Obama had on Jay Leno impressed me. He said we need to do more work on education, energy, and health care. It is a point well taken by me as my business shifts. Those three areas of our economy have stagnated for decades while we rely on them more.
I started this blog to talk about buying and selling properties. It has an under current of home renovation. My goal was to consult. My thinking was that people would want to have a forum about their homes. In two very short years that business idea went from hot topic to declining home prices with no money to do repairs let alone remodel.
With the help of an on line business networking site I saw that many people have started in business for themselves. Being in business is far different from what we learn in school. Some of the new business people worked in a corporate structure where money was no object. There has been some resistance to the down and dirty grit of small business.
Other people who I am talking with are slow to find that the world of Real Estate will never go back to normal, for them. Real Estate has had it’s ups and downs, but nothing like what we have seen lately. In that way the Real Estate Industry is like education, energy, and health care. It is an industry that has been doing business the same way for decades.
The computer has changed things but most of our core business still operates the same. We’ve added tools. Innovation seems to stop at the monitor screen. The tools are more sophisticated yet we try to make them work according to a tired business plan. Real Estate is a good example.
Real Estate agents, now web sites, give a potential buyer a list of properties, the buyer picks one, and the agent tells them what they want to hear. Sellers get a whole set of great pictures to put on line, stage the house for showings, but they need to list the property at a price that is below market value to make it a hot deal. The tools change, but the technique is the same.
There are a lot of examples that I could use, but the point is business needs innovation for future development. Connecting the consumer with products like Amazon did was a huge step forward. I was against it at the beginning because the things I ordered were crap for a full retail price. Nordstrom’s then started selling crap at a higher price. In the end it made more sense to just shop on line and take your chances.
We look at profits as a given right to having a business. We have heard less about business failure and more about profit potential. There are a thousand slick business formulas for sale. If you want you can buy a franchise as an investment. Everything you need to know is there is a package like assembling a bicycle.
The stock market made corporations invincible. People day traded, hedge funds plopped down billions of dollars, and when the profits came rolling in venture capital funds threw money at what looked good. How fancy is your website? Do you have all the charts and graphs to prove you make money? By golly, if you do there was a very willing public to throw money your way.
Today people are watching their money. There are questions about some very major American Institutions. My thinking is that if you want to stay in business you will need to produce that better mouse trap. Staying ahead of the curve is more than a catch phrase. Your product and service will need to match the scrutiny of a skeptical consumer.
I want this to be as generic as possible, but charter schools are a great example. Having school age children was an eye opener for me. Both public and private schools are run down, have tired teachers, there is a lack of motivation in students, and it all stays the same year after year. I saw a charter school profiled and it made good financial sense that for the same money, with less bureaucracy, students and teachers could have an adventure in learning.
In that regard I think small business will have to be the innovators. Small business will also have to fund themselves in this process. The days of hoping to sell your innovation to the highest bidder are over. As much as corporate America needs the next big idea they will be less willing to gamble. Corporations answer to stock holders. Stock holders want a sure thing even though they pretend to be risk takers.
So fixer fixer will take on a new direction. I have been in business my entire life. Many of the things written here on this blog are about my businesses. It’s all a matter of making money. some of the best business owners are confused by today’s market place. There is a lot of fear.
Maybe if we share some ideas on promoting business, management style, and ideas for future business needs, we can get rid of some of the fear.
I’ve been thinking that there is very bad information about Real Estate filtered through the internet. Many Real Estate agents have only been in Real Estate during the good times. A very large majority of agents have been in the business less than ten years.
Real Estate changed in that time dramatically.
A Real Estate professional lives by the numbers. A property is worth what it will rent for. There is a return on investment. Dollars go in to make a profit. Investment in Real Estate can off set regular income by tax advatage. By tax advatage I mean deducting mortgage payments as business expenses.
Real Estate is a business. Real Estate is a multi trillion dollar business. I would venture it is the biggest business in the world, because I think every inch of the world is owned by somebody.
By now some of you must have figured that I’m a lousy real estate agent. I have opinions and express them freely. Yes, the price of Real Estate was unsustainable in 2006 and I told everybody to sell. By 2007 it was beyond comprehension. People held out, wanted more money, but I sold, and investors sold. Lot’s of investors unloaded in 2005, 2006, 2007.
The amazing part is that Real Estate Professionals didn’t hammer at the basics of Real Estate. There were good purchases in all of those years.
We forget that at the time if a property was on the market more than a month it was a “dog” listing. It was over looked by agents who were making comments about not looking at anything over a week old, or was it a day on the market. Two investor I know got very good deals by making low, low, low offers that were accepted. One guy was offer 50% of asking price. Today he doesn’t seem so stupid because some people needed to sell for a variety of reasons.
Real Estate is a business, not a sales job. You’re either addicted to the business or not. I can tell you what most Real estate addicts will tell you that Real Estate is a great business except you have to deal with real estate agents.
Yes you need an agent and the agent should be working in your best interest. I am a pit bull. When you hire me I work for you. I take my job very seriously. My analysis is complete. i refuse to write bad deals for my clients, Writing bad deals is what radfun is for.
When I market a home it is a serious business of getting it to look like a bargain. I only list properties i personally believe in. it has to have value. If you have trouble seeing the value I can explain it to you in depth. It’s more than statistics or data. In many cases it’s an intangible.
A buyer or seller, for the money paid in commisions should get value from an agent. A commision is really pretty cheap for what a good agent can probvide you in negotiating skills. There are many good agents. You would need to look for them and get them to agree to work with you. Most good agents are interviewing you as much as you are interviewing them.
I’m sorry things got so far out of whack. They never should have by all that is the basics of Real Estate. There are rules that got broken, but it was a time of mass hysteria.
OK, I used the word redfin in a post. I resist doing that because in my opinion it gives this company credibility. To me this company is a larger swindle than it currently appears.
The spokesman for redfin worked on the expedia.com campaign. expedia allows you to book hotel and airline travel arrangements directly with the hotels and airlines. The airlines wanted to by pass paying commissions to travel agents and the same principle is being applied to Real Estate.
In the airline industry there are a limited number of providers. Most “sales” are driven by price and or perceived value. In my opinion what we have seen is an increase in fares, lower customer care, and increased profits for the airlines. They routinely over book flights, are now charging for sandwiches, and blaming the unions for them going bankrupt.
In addition we have seen an increase in hotel accommodations everywhere. My family and I have booked the Hotel air fare “packages” only to find ourselves miles from where we want to be. One example is Disney Land. Disney Land is surrounded by hotels with only a couple of entrances to the park. You can be “right across the street” from the park but a half mile from the entrance. The price is the same, the facility really crummy, and there is no recourse because you booked the hotel.
Now let’s apply those same tactics to Real Estate. Who would benefit? The technology used for a redfin operation is expensive. It’s marketing, that they went to Congress to get, is based on rebates. Rebate marketing for Real Estate related items was pushed by Sears in the 1980s when they bought Coldwell Banker. At that time Congress, the public, and Real Estate community thought that was a bad idea. Today, twenty years later, we have several very large Real Estate companies.
In my opinion these large Real Estate companies would like to reduce the number of agents they baby sit and do online, rebate marketing to have the consumers do the “leg work” while the company makes more profit. To me the same will happen that has happened to travel. The consumer gets less, may even be swindled, and pay more in added fees.
redfin is just the beginning. Rebates can be used for mortgages, escrow, title insurance, repairs, and house hold goods. That was the Sears vision of one stop shopping in Real Estate. Large companies though are based on profit. The commission system we currently have is individual based. Companies will take the service parts, research, and transaction pieces and make them into departments. You may see an individual during your transaction, but the components will be farmed out. You will hear what the company wants you to hear.
I agree that the way things are is bad. You can end up with an agent with very little working knowledge of Real Estate and pay the same as expert advice research and negotiating skill. It’s your choice. I think that rather than the “transparent” transaction every one is talking about it will be just the opposite. The company with the best web site, or collection of companies with the best web sites will direct the market place. I can see a variety of consultants clamoring for fees.
The solution that I have is a small group based set of services under the umbrella of a larger company. I have a saying that Real Estate, a Real Estate transaction, is a snap shot in time. Conditions are constantly fluid. Unlike travel the decision you make in a Real Estate purchase has long reaching effects. Zoning, market conditions, development planning, the property, the neighbors, and a very long list of factors go into a decision. There again that decision is highly personal.
I just think individuals need to connect in a personal way for something like a property purchase.
It’s been a long cold winter here in Seattle. Lot’s of snow has the streets covered with sand. Dust will be a major factor this year.
Usually our company A Spring Cleaning would be lining up work for home owners preparing for the Spring Home Selling Season, but the phone is silent. My thought is that every one is waiting to see what change a new president brings.
In the mean time let me share with you what we would typically do at this time of the year. First we would bleach a house. We have a large orchard sprayer, but a hand held sprayer can work or even a bucket and roller. We mix a bleach with water and a little, very little, detergent to spray onto a house, patio, deck, or any place there maybe moss or mildew. You can add a commercial mildew killer if you like.
We mix between 25% to 50% bleach to water with maybe a quarter cup of detergent. I like the orange cleaning solution myself. It smells good and has a great wetting agent. We spray down the whole house on a cold winter day without rain. We let it sit for at least thirty minutes or reapply. I usually go around a house twice and it takes me about an hour. Some times I leave it over night depending on the plant life around the house. Then I rinse.
Some people pressure wash after bleaching. This is a good time to do that. The basis of pressure washing is the gallons per minute. Some people think it’s the pounds per square inch of pressure, but gallons per minute is what get the job done. In terms of the bleaching you can just leave it. It will turn to salt water. I rinse to keep the soil around the house diluted. I also just use a spray nozzle to get some crud off the house and “sweep” the patio or deck.
This is the time to get some clean up done, like old weeding, or pick up around the house. January is best for this or after your snow season ends. It’s to early for pruning, but dead stuff can be removed. This also means around the exterior of the house so you can get to the windows and siding. Without leaves on the trees or bushes in a dormant state it’s easier to get in close to the house for cleaning siding. You should do the whole house and get all the nooks and crannies.
The plant life being less impacted is one reason to do this now and the second is that moss and mildew are in a weakened state. The cold has these spores hunkered down for the winter. In the Spring the more you kill or remove today means less that will “blossum” in the Spring.
This is the first day of a new year. Many of the problems we faced in 2008 had to do with credit. Some of the things I’ve written about during the course of the year had to do with our travels to Spain and Peru. When you see other countries deal with credit by comparison to the United states it makes things much more clear. We live a life style based on buying today and paying tomorrow.
Here in the United States we can afford anything. If you work hard and pay your bills you can have everything, and anything. In most other countries you need to be a politician, doctor, or lawyer to drive a Subaru and live in a big house. In the United States a two income family can do that. If you have a good job you can have almost anything. This has been especially true in the past five years. Credit ran like water to every household in America. The bigger problem is that this financial system was exported and readily adopted elsewhere in the world. The people in Peru have Visa Cards and don’t leave home without American Express.
You may recall news reports in 2001 talking about people in Peru living on a $1.35 per day, about $400 per month. In China it’s about the same. These are the “emerging market” that our financial markets have been leaning on. The theory was that if each of the over a billion people in China spent $1 a day that was over a billion dollars a day to tap into. This theory was promoted at a tech seminar that Bill Gates attended and he’s the one that made the comment about wages being about $1 a day.
As ridiculous and sad as the financial markets are it’s even harder to believe that the stock market went along with it. We are seeing that there are many people who have pushed the stock market to incredible heights with lies, false data, and extremely wishful thinking. Some of those stock market mavens are going to jail. Even more sad is the number of people who bought into the stock market through IRAs, 401Ks, and company directed pension plans. There are a lot of examples that I could use today because I talk with people two of three times a week who made these risky investments believing they were safe.
Most of the investors I talk with regularly are cash people. They buy things with cash. They are all land owners and own the land free and clear or as close to free and clear as makes sense. A gentleman I was talking with the other day has a hundred thousand dollar loan at an adjustable rate of I think he said 4%. He said he couldn’t pass up the money and he was looking at a property to buy, but decided not to. He’ll travel instead, and yes he has a hundred thousand dollars in the bank to pay off the debt or else he would have never taken the money.
All that being said let’s talk about you. Maybe you have consumer credit debt or a mortgage. Many people are talking about foreclosure or bankruptcy because they are losing jobs. God Bless those people and my hope is our system works the way it’s supposed to. We are supposed to be able to walk away from most debt and start over. That’s what makes America great. We can risk, lose, and start again. Risk is what makes profit. If you are afraid of the risk you remain forever in a holding pattern. I talk about owning your own business and making financial investments on tangibles. Those things are high risk. Leveraging properties is high risk. What makes America great is that you can take those risks without physical consequence.
It’s only money. You borrowed and now it’s time to pay it back. Some people take a second job and dedicate that job’s income to debt. Many people I talk with who are in that situations share rent or rent rooms. You’re not home anyway so why not. A couple with children can work a schedule with an in house sitter, or make arrangements for shared child care. If you have one child you can handle six, it might even be fun. Stop spending money and start making it.
It’s a simple economic principle to make more than you spend. A woman I know started knitting while she watched TV in the evening. During the day she waited tables and in the evening she knitted. She started knitting with silk ribbon one time, I think, I don’t remember why. Knitting is not what I do, but remembering she sold her ribbon knits to a store struck me as a bold move. It’s an example of hope that I will clarify was easier for her than it may be for you. She made enough to save money. She lived with a boy friend, she was always frugal, and when she started she was just passing the time. Your situation may be far different, but there is hope.
The income is the first thing. Getting to where you can live well is an important step. By well we each have a different point of view. I love to work. The day to day problems are a challenge. Owning a business for me is a great reward. That gives me fun and joy. Being out with a team of workers, laughing about nothing, doing the best job possible, and getting paid for it, it’s unbelievable to me. Even when I had a job, which I look at as a vacation, it’s a great thing to go in, do the very best possible, do more than anyone ever expected, and get paid. You may get tired, bored, or discouraged, but what else are you going to do unless you have the money to do it.
Second is to live within your means and save money. We all look at Wal Mart, or Costco as some experience in our lives. It’s very hard for me to see the saving at those big stores. I go in for a gallon of milk and spend fifty bucks on stuff I don’t need. For a long while I went to a restaurant supply store once a month and bought pasta, tomato product, cheese, spices, and oil at wholesale. I would pay cash and no one ever questioned me. During the week I bought fresh every day on my way home from work. I went to the local grocery and bought meat and vegetables. It seems like a lot of bother but I bought what was on sale that day. You’re spending the time waiting to go to work anyway, so why not?
Shared rent and buying cheap stuff sounds kind of boring. As Americans we find this reprehensible. Just living to work and working to live seems horrible. We are programmed to think this way. Let me ask you this, because it occurred to me when I was in my twenties, where do you have fun? Drinking in the bar, going to car shows, or maybe seeing a sports event people have told me are fun. Spending time with friends or maybe being alone doing things you enjoy like reading a book. We all have an answer. Money isn’t everything. …… The truth is that no matter what you like it costs money…….
Getting to a system of cash is imperative if you ever want to have money. Getting rid of debt is tough, but getting to pay cash for everything is pretty much impossible. Our entire system has been geared toward higher and higher prices. In the coming years prices will be coming down. At the same time the demand for wage earners will increase. That’s a post for another time, but take heart, getting to cash will be easier from now on.
The best way to own Real Estate is to own it free and clear. In that way, and only in that way, is it an asset. A property you own free and clear is salable at any time no matter what the market conditions. It is rentable for cash flow.
The idea of leveraging is to own and control as many properties as possible. The strategy is to be able to have cash flow from multiple properties that can pay down principle balances in other properties. Throwing money at the principle is the only way to pay the property off. It’s best to pay the property down in the first fifteen years of the thirty year mortgage cycle.
There are four types of mortgages, thirty or fifteen year, FHA or conventional. Exotic loans are for turning a property for a profit. The strategy is however to own all of your properties free and clear to live off of the rental income while maintaining the property.
The theory is to own five properties free and clear to retire. One you live in, the second for food, third for living expenses, fourth for essentials, and the fifth for fun. Real Estate and rental income are tied to the Consumer Price Index. They then become a hedge against inflation or deflation. Free and Clear properties are recession proof.
Now back to leveraging. If you own twenty properties it’s easier to pay off the five you need to retire. First and foremost is that every property you own should cash flow or have that potential in the first year. Many people start in more rural or out lying areas for cheap properties. A fourplex in a rural community can cash flow out of the gate. Some sellers may just want the income without the hassle of owning the property any longer. If that sounds strange some owners have moved on. You will move on some day also.
That cash flow can be dedicated to a negative or as a portion of a payment on another property. The only reason to risk owning properties with mortgages is to pay the mortgage off.
An acquaintance of mine began buying properties in low economic areas. He bought mobile homes, with the land, run down houses, duplexes, fourplexes, pretty much anything that showed a positive cash flow.
I should mention that he had a good job when he began buying the properties. He made a profit and loss statement of what he was buying, a cash flow chart, an estimate of appreciation based on 4%, then updated it over the five years it took him to accumulate the properties.
After he quit his job it was possible to live a meager existence while improving these properties. He spent a couple of years in the area living in one place to the next while he fixed up and rented the properties out.
He came back to Seattle, got a job in a warehouse, and had his rental income augment his pay check. On paper this guy looked golden. After seven years of sacrifice he was ready to start owning in city properties by the same principles. He bought a house a year for five years. He’s into the game now twelve years.
He sold off a problem property in his rural portfolio, paid the capital gains, and applied the profit to the principle balance on his first house. That house began to amortize quicker. It became a game of paying off properties to increase his cash flow. Once a property was owned free and clear it was all income. That income was applied to other principle balances. in his over all fifteen years as a Real estate investor he was on his way to being retired.
It became kind of easy to allocate money to living, and maintaining assets. Of course in those fifteen years his net worth was huge. By simple appreciation of what was now twelve properties with high equity positions he looked really good on paper. Income plus equity put him into the category of being rich. Fifteen year to being called rich is pretty quick.
Let’s get back to some basics of fixing houses. One of the things that always put me off was the amount of money contractors charge to redo a kitchen or bathroom.
This started years ago when my buddy Dan and I looked at the kitchen remodel of some friends of mine. It was beautiful. This was back in the days when granite was a new thing, cabinets were still wood, and the price was $80K. Yes, it was extremely expensive.
In all fairness the price included a half bath with pocket door, and it opened two rooms into one. My original thought for this post was how to move or get rid of a wall, but it got too technical. The point of the original post was how cheap and easy it is to get rid of or move a wall. Let me just say that on two occasions with kitchen remodels I’ve looked at the contractor added $10K for removing the wall and putting in a beam.
In both the kitchen and bathroom it’s all about plumb and level. The space, the box, the walls, ceiling, and floor have to be square. That’s the trick and what people pay the big bucks for. People pay thousands of dollars for the contractor to make the box, the space, a set of right angles, or variations there of.
I’m going to spare you the stories of how I got to this conclusion. Let’s just start with the floor. You want the floor to be perfectly level. If you need to take out the sub floor do that rather than shim the floor that is there. If you are keeping the cabinets you need to cut under the toe kick and level the floor to the level of the cabinet bases that you are keeping. That’s why most contractors want to sell you new cabinets, or take out the ones you have to reuse.
Your floor has to match the level of your working surface. You can shim counter tops, but that adds work and makes things funky. I’m mentioning this to give you an idea of what makes a good project great.
Once again, if in doubt, gut it, and gut it to the studs. You also want to be mindful of the rooms adjacent and how they match up. You’ll notice a little step up, ramp up, from other rooms into kitchens and baths. I also used to think this was for tile or sub floor below vinyl. This was also a factor, but have also learned that it gives the contractor a better transition into a level floor.
OK, enough about the floor, it needs to be level, straight and sturdy. A good second point is that whatever you have to do there should be no spring to the floor. You can add support, or blocking, but I have found that two layers of criss cross plywood, screwed, and glued can add a lot. I like keeping ship lap cross angle sub floors, three quarter inch is good. If the floor will be vinyl we sheath with plywood, if tile we hardi board.
Another thing is about tiling under the cabinets. I have grown to prefer tiling the entire floor. Butting tile into cabinets makes things weird. With vinyl it’s OK, you’re going to replace it anyway.
Once the floor is level we plumb the walls to it and set the angles of the corners. You want a perfect box or set of angles. When the cabinets, and appliances come they are going to be at set angles. You want the fit to be perfect. That perfect fit is what people pay for. Tight is the word, a tight fit. Keep in mind about the drywall, and where the joints are. A drywall joint can add almost a quarter inch if it is on both sides of a cabinet install. We’ll get to the cabinets in a minute.
Now the ceiling is a stupid thing that many people leave alone, when they shouldn’t. Ceilings sag, can be unlevel, you may level the floor in a house that has settled ever so slightly, and you want it all to be new. The ceiling should be level with the floor and not just level. The box needs to be a complete picture. While you are up there figure where the lights, and vent should be.
You’ll notice I haven’t addressed design yet. Another part of my charm is the fact I like to see what’s going on behind the walls before I make a plan. I’ve talked about it before as a way to get cheaper bids by having the contractor see a gutted room. With the whole room exposed it’s easier to see where wires, and plumbing can run in harmony. I also started my career as a painter and rot was always the thing that drove my costs way up.
Now about the cabinets. They come in groupings even if you have them custom made. This is the time to get measurements and start shopping. I would prefer to have the drywall up, but it takes time to get good, high quality cabinets made. You’ll be surprised how cheap a cabinet company is. Look them up, or even go to an outlet store. The cabinets are all anyone is going to see. A lot of talk lately focuses on the counter tops, but as granite falls out of favor, or becomes worn, the cabinets should be able to get a second life. Buy wood if you can.
The design we can keep for another time. Counter tops, sink, stove, and refrigerator should match the lighting. Window placement is important for kitchens, not so much for the bath. In both it’s important to keep the structure level, plumb, and square.
There are three elements to the sale of a property: Location, Price, and Condition.
Lately, and over the past few years, Real Estate agents have made the statement that price is everything in the sale of a property. It is for sure a sales gimmick that allows some agents with absolutely no skill to have a marketing plan. Some of those agents are very successful.
If you read through my articles you know that our companies work on properties. In this past year when the market has been soft we have had the opportunity to work on some homes that were headed to market. A couple of agents are marketing homes that are selling for a higher price than I would have thought. They spend a few weeks before the house goes on the market to get the condition to match the price and location.
The location is set in stone. There are elements to a location such as it’s proximity to amenities. A great cocktail lounge or restaurant can add value. In our city a popular spot is Green Lake. It’s an in city park that features walking, biking, and roller skating paths. In that neighborhood there are pockets of homes near shopping or entertainment. A bakery was a draw for people around the city for many years and it actually attracted buyers who had to live within walking distance.
Location close to job centers, or now public transportation, shopping malls, or medical facilities are common draws. Location is king in terms of value.
Price is a subjective thing. Some properties command a higher price by having expensive features, view, or convenience. Price can over come objections such as location or condition. Traffic is a great objection commonly over come by a lower price.
Last, and the point of my bog, is condition. The holy grail of condition is a well cared for home that has had the same owner for decades who took really good care of the property. Some places who have never had anything done to them in fifty years create the most desire. Many remodels devalue properties.
For a short while there was a saying in Real Estate that the value was tied to terms. Terms such as mortgage terms in my opinion are what drove up the price of properties. The only reason to mention this now is to prepare you for the response that property values are a function of price and terms. It’s a misconception that diverts attention away from the basic principles of Real Estate.
If you are selling you should sell and take your cash to invest elsewhere. Things like owner finance or lease options are great for a stable or appreciation market, but in a time of doubt cash is king.
The best time to sell is in January. People need to pick a school before February 15th. The most corporate transfers happen in the first of the year. It used to be that bonuses were also paid at the end of the year, but now, not so much. There is also the fact your competition is lower. We can address Spring time in a minute.
To get the most exposure putting your home on the market during the holidays gives people a chance to see it on line or in the news paper. To me the 15th of December is a great time to get a home on the market while most people prefer the 27th of December.
The Spring is when most people think of selling a home. If you put your house on the market right after tax time, or before the first of May, the house can sell and close about the end of the school year. You then have the time when the kids are out of school to settle into your new home. For some this is the time of the most selection so many homes trade hands at this time of year.
The elements of a sale are to create desire while calming fears. In preparing a property for sale we routinely address scary stuff. Lose wires, unsecured siding, rusted pipes, a worn roof, bad paint, or broken windows give the impression that you just don’t care or worse, that you don’t have the money for repairs. Either way it opens a negotiating position.
Many people concentrate on the creating desire portion of presentation by staging. Bringing in furniture or decoration is a great idea. The holidays are a good time to decorate and give a festive impression. As long as the staging fits the home it’s a very good thing. What some people have tried to do is mask the homes draw backs by staging. I worked with one stager who routinely brought in three quarter, condo, furniture to make places look bigger.
I’m more in favor of having places vacant with the ability to imagine yourself in the home, with your own stuff. There used to be a saying in real estate that when people began measuring to see if their couch would fit you had a sale. In that regard I recommend spending the staging budget on getting a place as clean as possible.
I never recommend capital expenditures to sell a place. Things like refinishing floors I deduct for. A bad kitchen or bath remodel can really screw with a sale. Everything needs to flow and fit together. Homogeneous is what most buyers look for. Having the perfect kitchen, bath, floors, or even windows in a lack luster place can be jarring.
Take a whole house approach. get everything to look in proportion to everything else. I do recommend cleaning, everything. As an agent told me one time anything will sell if it’s clean enough.
In the first few weeks of November 2008 there have been lower priced properties on the market. One was listed for below $200K, in city, with a small house. There was one photo of the lot, but the house was on a foundation.
What has happened is people who were holding properties while prices were going up are now selling them to get into something better. There are hundreds of properties owned free and clear or have small first position loans with deferred maintenance. You see these houses in nice neighborhoods that have never changed in years. In some cases there isn’t even a renter, the houses are just sitting there.
Whatever hope of future appreciation is fading and these sellers may even be looking for income. A tactic for controlling those properties could be to make an offer dedicating the rental income to the seller. You could be a property manager to do that, or just a buyer with the promise to cash out within three years.
One of the things I’ll post about later is lending standards. As lenders look at borrowers they will also be looking at the asset, property, they are lending on. In the 1980s I saw deals fall apart over peeling paint. Lenders in the next few years may care more about the condition than they do today, or in the past five years.
If you can present a plan to a seller of bringing a property back into reasonable condition, or improve it, they may consider that a down payment. I have done exactly that on two occasions, and probably should have done more. In the first case the seller started building the house on his lot next door, got old, and never finished. The second house was from an investor who bought side by side properties, rehabbed one, got tired, and out of money, then sold me the second triplex, on contract, no money down.
No money down I have addressed in the past and will again in the future. No money down usually means an investment. It could mean your time, but usually it’s your money, you just allocate it to the property instead of the seller. Back taxes are a good example, or mortgage payments. There is a guy who sells a program of paying back taxes to get a property free and clear for hundreds of dollars. One of those properties had a bright sunny picture but in the winter the entire house is covered with snow for a month or two.
We will address contracts for purchase at a later time. The important thing is that you look at problem properties as an opportunity for both you and the seller. If the seller has seen rampant appreciation in prices they want to capitalize on that. At the same time if they have let the property go in the mean time it’s not fair that some one should come in and pay retail for taking over the problems.
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