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.
Yeah yeah yeah. We’ve all been told by real estate professionals for years that the single most important thing when picking a house is it’s location. I’m telling you right now that there is something even more critical than that.
Let me tell you a few things about location first. It’s subjective. People pick where they want to live for lots of reasons: Proximity to main roads, their job, schools, parks, low crime, etc. It’s always a compromise too. One buyer may be willing to be far from parks if their kid can be in a better rated school. Another buyer may be willing to put up with a higher crime rate if it is super close to their job…..so, one person’s great location may not be as great to other buyers. Also, locations are sort of price dependent. What is considered a good location for somebody with a $100k budget will definitely be a bad location for a $400k buyer.
What do ALL buyers have in common though when picking a house? They all want as good of a lot as they can get. In all 15 years of my career, I have never had somebody say they wanted a house that backed to a busy road, had a steep driveway, lacked privacy or had a backyard that was unusable due to a slope.
Why is the lot so important? For starters, it is often a buyers first impression. If a buyer tries to pull in the driveway and their car scrapes the pavement, bad sign. If they are out of breath before they get to the front door, bad sign. If they step out of their car and can hear New Circle Road or the Interstate that is behind the house, bad sign. Additionally, the lot affects just about anything you do with the property.
What should you look for in a lot?
- As flat as possible is the biggest thing around here. Lexington is pretty flat. The severely sloping lot is unusual here. Go to Richmond or parts of Scott County and it is more common. For what’s it is worth, nobody has ever told me they didn’t like a house I showed them because the lot was too flat.
- A nice view is always a plus. If you can’t get a good view, then no view at all is safe. We don’t have a lot of greenspace views and even fewer water views in Lexington. It is totally okay to just have a flat backyard that backs to other houses. I would avoid backing to anything than other houses, such as businesses, apartments or a road…..and ideally it backs to houses that are equal or higher in value than the one you’re viewing.
- Get a lot size and shape that is normal for the neighborhood. If you are looking at a house that has a tiny or oddly shaped lot unlike any other in the neighborhood, don’t buy it. The same doesn’t always apply for lots that are bigger. Most of the time the biggest lot in the neighborhood is the most desirable unless it is in a neighborhood where the most likely buyer will be a retiree or somebody downsizing to get away from a lot of maintenance.
- I would avoid a corner lot if possible. There are a few buyers who prefer a corner lot but most people view them as twice as much sidewalk to deal with. Plus, most neighborhoods only allow you to fence a corner lot from the rear edge of the house, meaning that you have much less space if you want to fence it in. (I’ve got a good friend who looooves his corner lot and will likely find out I said this…..sorry Peter!)
Want to know my absolute favorite thing about getting a good lot? It never needs updating and never goes out of style.
Just gonna jump right into this:
Gen Z will have a harder time getting a house than the Millennials did. They are the biggest generation ever. They will be entering the real estate market at about the time Millennials are selling their starter homes. Great news if you own a 1300 square foot house in Masterson. Times will be tough for them, but they will keep the market going strong. Every seller of a starter home needs a first time buyer so they can move up. That first time buyer is the oil that lubricates the whole market.
The Millennials will be moving up to their 4 bedroom houses on a cul de sac in a good school district because that is just a natural progression once you start a family. This is great news for Gen X sellers who will be downsizing to medium sized houses in upscale neighborhoods.
What makes me think all this? It’s not really crystal ball as much as it is history. Everything I just described happens with every generation. You buy a smaller house you eventually outgrow, you move up at least once to the house you raise your family in, then you downsize.
So what does all this look like for Lexington? More gentrification as it becomes expensive to live anywhere in Fayette County. I know it sounds unheard of, but the neighborhoods that nobody wants to live in like Cardinal Valley and Winburn may become the budget choice as similar neighborhoods with better locations become too expensive. I know it sounds crazy, but when I was in high school, people didn’t want to live in Kenwick and now those houses equal Chevy Chase for price per square foot……yesterday’s bad neighborhood can easily become a tomorrow’s good location. Plus, it isn’t like we are ever going to see brand new starter homes ever again. All that can be done is update/remodel existing houses. The people that flip houses need some margin to do this so they will buy distressed houses in whatever neighborhoods are affordable, just like they are doing now in downtown, Melrose, The Meadows and all those streets that begin with D around Pasta Garage.
Before long, I don’t think there will be any new construction in Lexington. We are already filling in every spot big enough to stick a short row of townhouses. This means that being in Fayette County will be even more expensive, and people will go to surrounding towns like Nicholasville and Georgetown even more. One day, people will discover that Winchester is only 15 minutes from Hamburg and the interstate passes right through it. I’ve never understood why more people don’t move to Winchester?
Remodeling will be hot too. With not much new construction, people will start remodeling existing houses more and more.
Sort of some majorly huge economic melt down, I think housing is going to be strong for quite some time.
Two houses on the same street. One is smaller and has been renovated. The other is bigger and has had a few minor updates.
The smaller renovated one sells for more money that the larger one with mild updates is worth.
Which owner would you want to be?
You are probably thinking that the renovated house that sold for more would be the owner who comes out better than the other, but you’d be wrong.
That’s because the cost of a remodeled kitchen with a tiled backsplash and stainless appliances, remodeled bathrooms and new flooring greatly exceed the difference in values.
Back when the market was slow, it could have been harder to sell a house that hadn’t seen any big ticket updates like a new kitchen and/or baths. That’s cause there were more houses for sale than there were buyers. The problem is the opposite today. There are more buyers than houses for sale, especially in the sub $200k range.
Sure, everybody loves a renovated house with all the trendy finishes. Buyers will pay top dollar for that look, but for the person who wrote the check for the work, it is a little bit of a bummer because most of the time a seller is lucky to get half back in the increased value. Great for the buyer. Bad for the seller.
I had to tell a seller not too long ago that her house was worth about the same as she paid for it nearly 10 years ago. On paper, you’d think that wasn’t possible. She hasn’t done anything to the house other than enjoy living there. Everything is nearly 10 years older now. Sure, her house could potentially be worth another $15k, but she would have to spend over $20k to add that value. She is actually coming out ahead by selling for about the same as she paid for verses getting a high sale price that lost money to achieve.
They don’t tell you all this stuff on HGTV.
The best bang for your buck on updates are paint, flooring and lighting.