I am always sad when I see a house sell that has been sitting on the market forever.
Sometimes a house will stay on the market for a long time because the initial listing price was too high, or the house didn’t show well. Both of those can happen to perfectly good homes. The reason those don’t sell is because of the seller, not the house. Often these houses sell once the list price gets reduced into the realm of reality, or the seller does some cosmetic repairs that make it easier for a buyer to want the house.
Any time I show a house like this, my client usually asks me why the house hasn’t sold yet. If I check the listing history and see that they started out asking a crazy high price and have reduced it, I tell them it is okay to buy it. If I look through old pictures or see fresh paint, new flooring, etc, I tell them it is okay to buy the house. Sometimes sellers just need to learn how the market works at the expense of their days on market.
Then there are those houses that don’t sell because of the property itself. Those are the ones that I advise my clients to not buy. These houses usually have some odd feature like a crazy floor plan, a poorly done addition, a neighbor whose yard is full of junk or has a dozen dog kennels in their backyard, the house backs to commercial or industrial zoned properties, etc. These houses eventually sell to somebody who doesn’t mind that particular negative. Whenever I show one of these houses, I like to tell my client that while they might not mind the negative feature that has kept the house from selling, it will be extremely difficult for them to sell it when it is their turn. The past 8 years have been a pretty strong Seller’s Market. If a house took a long time to sell in a hot market, can you imagine how long it would take in a Buyer’s Market?
I have lived through lots of markets. I have seen seller’s who paid too much in a hot market lose money when they needed to sell. I have seen people get their dream job and move out of town, only to have to make two mortgage payments until their old house sells. I have seen people who felt lucky to have gotten their house in multiple offers struggle to sell it in a Buyer’s Market.
I don’t want to see any of my clients go through any of this. In real estate, you often don’t see the consequences of a mistake until years later when you go to sell. Helping people avoid this mess is one of the greatest joys of my career.
It happens. More than you’d think.
I showed a house about a month ago to a client. There was a line to see it. It got multiple offers that same day.
My client didn’t like it. I didn’t like it.
Why? The floor plan sucked. It had a big two story foyer as soon as you walked in. The living/dining/kitchen area was open. All this sounds great, but the issue was that this was a 1733 square feet home that had no more usable space than a 1300 square foot home. The upstairs hall was wide. The hall from the front door to the living room was wide. The dining area was small but nobody could tell since it was vacant. All the rest of the rooms were equal to what you’d find in a 1300 square foot house.
It made a good first impression though. You walk in that foyer and see space. You walk down that wide hall and see the open living/dining/kitchen. You go upstairs and see that wide hall. The house felt bigger than it was just because when you are viewing a house, you are going through every room in about 15 minutes.
It sold for over $6k more than the list price.
It closed today. The new owners are probably moving in and glad it quit raining. Once they live there for a while, they will probably realize that much of their square footage isn’t usable. They will realize that what they have is a 1300 square foot home with 400 extra square feet of hallways and foyer.
Don’t know if you’ve noticed, but there are more and more houses being extensively renovated in medium priced neighborhoods that sell for waaaaaay more than anything else in the same neighborhood.
I think this is happening because of two things. One is that there just aren’t a lot of houses for sale. That will eventually change. The other is because we’ve just about run out of room to build new houses. That means the only choice for most people will be an existing home. People love new stuff in a house, so it only makes sense that an older home in a closer-in location that has been totally renovated is appealing. This won’t change.
The thing to watch out for is that you are not the first or even the second person in the neighborhood to drop $100,000 or more than what the same non-renovated house might be worth. Why? What if the house you buy ends up being the only on that gets that type of renovation? You’ll have the most expensive house in the neighborhood in a big way. What happens when those trendy finishes get a few years of wear and tear and start to go out of style? Well, you will have a house that is worth no more than any other house in the neighborhood that needs updating. None of these are good things.
Before you pull the trigger on one of these whole house renovations, look around and make sure there is a trend of this happening in the neighborhood.
What is the type of house that is the riskiest to buy?
(I’ll pause to give you a minute to think.)
I bet you didn’t come up with a brand new house as an answer, did you?
Now, new homes are built every day all around the country. Most of the time everything goes well. Probably like 98% of the time, but there are some risks involved that I always like to check out before a client decides to build a house. So, why is new construction risky?
- You don’t know what the neighborhood is going to look like until it is done. Ever drive down Wilson-Downing and see that one street with about 12 houses that are much bigger than the rest of Belleau Woods? Those were the first houses in what was going to be a neighborhood similar to Hartland. Until interest rates shot through the roof in the early 80s and the only thing that was selling were small homes. The people who bought their new houses on that street didn’t get what they expected.
- You don’t know what the value is going to be after you build. A brand new sale is a unique sale. It is never going to be brand new again. It will be a “Used” house for each subsequent sale. That is why when I have a client who builds, I like to look at the sales of other “Used” homes in the neighborhood so I can tell them what to expect.
- You don’t know what the builder is like. Building is like most industries where 99% of them are good honest hard working people. The rest are the ones that bring their whole industry down. Many many years ago, there was a custom builder who was flying first class to see every UK basketball game, using his customer’s money to live large instead of you know, building their house. He got arrested because he was telling banks that houses were nearly done so he could get more drawls from the construction loan. There were a few houses that were still vacant lots. This is why I like to check out my client’s builder to see if I think he is going to take their money and run. Usually a long track record of building homes and a good reputation goes a long way with me. I get nervous when the builder has only been around for a short time.
These are just a few things that pop in my mind when a client says they want to build. Like I said, most of the time you never have these issues, but I think it is always a good idea for you to have your own realtor involved.
I can’t count how many houses I have been in over the past 15 years. Old, new, affordable, expensive and just about every neighborhood in the Bluegrass. Seen it.
One of my favorite things to do is watch how buyers react to several things, one of the biggest is the floor plan.
I think we don’t discuss the floor plan of houses often enough. Sure, we think about whether it is open or traditional but there is more to it than that. We usually just focus on the square footage. For example, I will often have buyers get excited about a small house because it has a basement. They will be excited because it is 2400 square feet. Having shown several of these over the years, I like to remind buyers that yes, 2400 square feet is a lot of space, but that house is really a small starter home sitting on a finished basement. 1200 up and 1200 down. The upstairs will always live like a starter home. I tell them this because just about every buyer I’ve known has lost their enthusiasm once they see a house like this.
Floor plans can greatly affect the value in older neighborhoods like Chevy Chase or Kenwick. I have seen far too many houses that sold for far less than similar sized houses that were finished equally. When I go to list an older house, the first thing I do is assess the floor plan. If it has lots of tiny rooms and much of the square footage is wasted in hallways, then I know it will sell for the lower end of the range for the neighborhood. A lot of older houses must have been designed by builders or the first owner on a napkin. You sometimes see some pretty odd things. You also see some odd things done during remodels. My parents house in Kenwick was built as a one bathroom house like pretty much all houses in the 1930s. Somebody at some point thought adding a half bath in an upstairs hall closet was a good idea. Since I lived upstairs, I can say that it was a good idea but it was very tight and very odd. This was before you could go to IKEA and buy those super small sinks. I just remember sucking in my gut to get past the sink.
Even in newer houses there are a few things that buyers seem to not like. I’ve shown some newer small ranch houses that have the living space on the back of the house. You have to walk down a hall and literally find the living room, which doesn’t make a good first impression. I have never sold one of these because a buyer just can’t get past that first impression, similar to split foyer houses where you have to decide immediately whether you are going up or down. Buyers don’t like anxiety as soon as they open the door. Also, a lot of the diagonal walls and plant shelves of the 1990s haven’t aged well. They usually make a room feel small, furniture placement odd and make people feel like they are in an interactive M.C. Escher display.
Another big negative is with houses that have a finished basement. Most people want to use this space for kids to play or for large gatherings of people. Lots of small rooms is a big negative. A lot of times, these basements got finished to suit the needs of the owner, which may not be the same needs as the next potential owner. When I have a client who will be finishing a basement, I ALWAYS tell them to have one big open room and to not make a maze of walls. Just like those ranches with the hallway leading from the front of the house to the back, buyers want to walk down into the basement and see that big open room immediately. They don’t want to get to the bottom of the stairs, turn and walk down a hall that leads to another hall or a small room that you must go through before getting to the main room. It is best to mimic the upstairs floor plan, only make it more open. You can put a spare bedroom under the dining room and a bathroom under the kitchen usually. Be sure to leave a little space for storage too.