Which seller did better?

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.

Don’t do this to your house

I showed a house yesterday.  Nice place.  It was all original except the kitchen.

It wasn’t that old of a house, so it wasn’t what I would call outdated.  Since it wasn’t that old, nothing was worn out either.  I would call it neutrally nice-not bad and not great at the same time.

But that kitchen was super nice, and that was the problem with this house.

Yeah, you read that right.  The remodeled kitchen was a negative.

Why?

Because the people who are attracted to the house due to that super nice kitchen will be disappointed that the rest of the house isn’t as nice.  They leave thinking they would have to “Finish” the rest of the remodeling.

The people who won’t mind the rest of the house don’t care about that super nice kitchen and won’t want to pay for it through the higher list price.  They leave thinking the house is overpriced.

It would have been better for this seller to have spent less on the kitchen and updated all of the house evenly.

That has always been my advice after observing how buyers react to houses.  All of your house should be consistently nice if you want your updates to add value.  If they aren’t, then you are usually giving away that one space where you spent the most money.

Why a price reduction is usually better

I practically wrote this post in my head last night.  I woke up just before 3 and never really went back to sleep.  Then riiiight when I was about to fall asleep, the dog barked at 5:AM and wanted to go out.

As I was lying there, hoping to fall asleep, I got to thinking about those houses that get the same negative feedback from showings and how sellers sometimes respond.

Let’s say a house is getting showings but no offers.  The feedback you get is something such as the buyer didn’t like the kitchen.  The kitchen is plain.

I often get asked by my sellers if they should do something like spend money getting granite.  I probably disappoint them because I usually say it isn’t a good idea.  It is better to reduce the price.

To a seller, this one thing is what appears to be holding back the sale so it only makes sense to remove the negative that has been a common thread in the feedback.

Having done this for a while, I know how it works.

See, the buyer walks in the house hoping it is THE one.  They look around until there is something they cannot live with.  Once they have made the decision that they will not be making an offer, they quit looking at the house.  Sure, they may walk around the rest of the house but they don’t really think about it any more because they know it isn’t the one.  They’ve checked out.

Then you get the feedback that they didn’t like that certain feature.

You spend a lot of time and money fixing that feature.  You turn that frown upside down.  You get a new batch of showings expecting it to sell because well, you’ve resolved the only problem previous buyers had with the house…..then you get feedback and there is a NEW problem.

See, what happened is that the buyers got past whatever problem you fixed.  You did a good job.  They kept looking at the house with serious buyer eyes.  They made it further into the showing this time before the next big negative became the issue.

IF that happens, then you’ve really wasted the money you spent because now your house isn’t selling for some other reason.  That is why I think it is safer to reduce the price verses spending a lot of money.

There has only been one time in the past 12 years where I was wrong on this.  I gave my client this same advice that you have read.  She insisted on getting granite.  LOL, the very next buyer bought the house……So if you’re reading this Tammy M, I hope I have made your day!

 

The hardest houses to sell

I’ve been at this for a long time.  I’ve sold a lot of houses.  In a good market.  In a bad market.  In Lexington.  Outside of Lexington.  In neighborhoods.  In the country.

Want to know the houses that are the absolute hardest to sell?

The ones that are partially updated.

Why?

You would think that a buyer would view a house that has some parts really nice to be a big bonus.  They don’t.  The nice part of the house just makes the rest of the house look worse to a buyer.  Too much contrast between the nice and the average bits of the house.

Who comes to see these houses?

  1.  The buyer who sees the nice new stuff in the pictures.  They get excited but almost always say that the rest of the house needs too much work.
  2. The buyer who see the part of the house that needs updated.  They get excited because they want to renovate the rest of the house, but not give any credit for the work that has been done……meaning they want it for free.
  3.  All the other buyers who come mainly because it meets some or all of their search criteria.  They don’t buy it because they say it needs too much work.

What you have to do with a house like this is try to make the non-updated bits look as good as possible.  You want to minimize that contrast.  You don’t want the buyer to walk in one room and be unhappy, then walk in the next and fall in love, then walk in the next and be unhappy.  The goal is to make them at least feel neutral, then love, then neutral as they walk through the house.  Less contrast is good.

You also have to really emphasis the other features of the house, hoping that the right buyer will see all the other pluses and feel like they can live with the house like it is or take on the updating.  If the house is the best bargain in the neighborhood, walking distance to trendy places, has a park nearby, a desirable school district, is the most square footage for the money…..whatever the house excels at, and all houses have something unique, that is what you want to emphasize.  Anybody looking for one or more of those unique features is usually the one who buys the house.  Why?  Because they don’t have as many choices

Why isn’t that house selling? I thought it was a HOT market?

You’d think in a time where there are not a lot of houses on the market, buyers would be less picky.

Not the case at all.

Back when the market and economy were bad, few people were updating or renovating their homes.  I mean, why would they when they didn’t know if they were going to remain gainfully employed as they watched the value of their home decrease?

Flash forward a few years and people are feeling great about the economy, home values have gone up, all is swell.  After all those years of watching HGTV, it’s time to pull out some cash on a refi or HELOC and spend spend spend.

Not so long ago, most of the houses for sale were just very ho-hum.

Now it seems like most of the houses I show have been updated or extensively renovated…..cooler, lighter colors, lots of white cabinets.  Marble and quartz have replaced granite.

So where does that leave the house that needs paint, flooring, has too much travertine or has that Tuscan vibe that was so popular earlier this century?  It leaves them sitting on the market, collecting dust each and every day as they get overlooked online.  The ones in more desirable neighborhoods do better because a good location can make a buyer more forgiving.

You’d think in a time where there are not a lot of houses on the market, buyers would be less picky.

Not the case at all.