Where are those bargains?

[photopress:kit.jpg,thumb,alignright]In the last six months, two of my clients purchased homes that were real bargains in a hot market.  That was earlier in the year of course, when the market was stronger than it is now in the last quarter.

To me a bargain is a house where I can be confident that if the new owner calls me to sell the place in a short period of time, I can resell it at a higher price, regardless of market conditions.

I find that my definition of bargain is not a one size fits all definition.  Often when someone tells me they got a real bargain on a house, I have to zip my lip (no easy feat for me).  Their definition of a bargain is something that sold for way less than other homes in the neighborhood, you know, the bargain that will always be a bargain, both when they buy it AND when they sell it.  That’s not a bargain to me, that’s the bottom of the barrel choice that will always be cheaper in any market, and will go down the furthest in a tough market and up the smallest percentage in a good market.

While everyone wants a real bargain and everyone wants some assurances that if the bubble bursts they won’t lose money, I find that most people will not buy a true bargain.  Wanting anything you buy to go up in value always and indefinitely, is not realistic.  Often agents and flippers end up with the houses with the most profit potential, because people who are buying homes to live in them take a pass on the best values.  That’s what makes them bargains, most people won’t buy them.

Take a good hard look at the photo above.  Now that’s a real bargain!  I look at that and foam at the mouth.  A 72 hour do it yourself (mostly) makeover would improve the price overnight!…well, over two nights to be more accurate.  A weekend project.  Let’s remake just what we can see in that photo together.  Let’s make this a real “how to” demonstration.

There are three things there that I would need to hire someone to do.  By quickly defining which things I need someone to come and do, and scheduling that work before I begin, they can be finished by the time I am finished the do it yourself part.  It needs new flooring (whether it is in good shape or not…it has to go!)  It needs a six panel white door over on the right there and it needs a new light fixture.  I can’t lay a floor or hang a door or switch out a light fixture.  Maybe I could do that last one, but I prefer that owners not touch wiring if they don’t really know how to do that well.

1)  The first job is simply going out to buy the new floor, purchase it at the installed price and schedule a date and time for the install.  In this place the floor is so busy and awful, just a new one piece floor or lowest cost more neutral alternative is sufficent.  The change in appearance will be dramtic at a low cost.  Instant increase in potential sale price of home.

2) YOU go out and buy a light fixture and six panel door.  This is where people make their biggest mistake.  They hire a handyman at the lowest possible price, and then pay him to go to the store!  $25.00 an hour is a great price to get someone to change out a light fixture or hang a door.  But it is too high a price to pay someone to get stuck in traffic on the way to Home Depot, Lowes or Fred Mayer, or all three looking for just the right light fixture.  Buy the two items and anything needed to install them, like new hinges and door knob, and have them ready and waiting for the handyman you hire for the switchout of the two items.

3) Now for your part, which you can do while you are waiting for the floor install appointment and while the handyman is doing his two jobs.  Always work with the handyman, doing other things.  He’ll be more productive if you are taking down that wall paper while he is changing out the light fixture and hanging the door.  Just is…don’t ask why 🙂

Your part is to wet down that wall paper really well with wall paper stripping solution BEFORE you start peeling it, so you don’t damage the drywall.  A lot of people start gouging with scrapers and ripping dry strips that pull at the drywall, without wetting it down well.  Stripping rule is the same as hanging rule.  Wet three strips well, one at a time.  When you are done the third, go back to the first and take it off, wet the fourth then go back to the second, etc…  (My next door neighbor when I was a kid was Mr. Vitale…the wallpaper hanger.)  If you are lucky, that is “strippable paper” and the wall behind it was painted several times with semi gloss or “sized” before the paper was hung, and the wall will be ready to paint when you are done.  Wash off all of that glue before you start painting!  You don’t want a muddy paint job because some of the paint is mixed with old wallpaper glue.

Now let’s look hard at that photo one more time.  Doorway on left has no wood, just wall paper, so we’re done with that.  Back door is already white, but with a thin dark wood trim like the baseboard.  OK, let’s paint the back door trim only (not door), the base trim around the room and the door trim around the brown door on the right.  What color?  The same color as the back door and new interior six panel door, which is white. The new light fixture is hung and it’s tight to the ceiling now, so you don’t HAVE TO put your table exactly under it like you do with a hanging light.

[photopress:new.jpg,thumb,alignright]You have now transformed the 80s look into a “bright, light and airy” updated and clean look…all in 72 hours!  And if you call me and say, we want to move, I can sell the house for more than you just paid for it. 

Don’t walk away from the house that looks like the photo at the top.  You’ll pay at least $10,000 more for a house where the owner put in 72 hours worth of work and a few quick work projects.  Buy the true bargain.  Good location.  Good floorplan.  Ugly floor, ugly wallpaper and dark brown trim.

Buy the really good, well maintained, but really UGLY house.  It’s the bargain of the marketplace in any market.  Simple definition of this type of house is a “cosmetic” fixer. 

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ARDELL is a Managing Broker with Better Properties METRO King County. ARDELL was named one of the Most Influential Real Estate Bloggers in the U.S. by Inman News and has 33+ years experience in Real Estate up and down both Coasts, representing both buyers and sellers of homes in Seattle and on The Eastside. email: ardelld@gmail.com cell: 206-910-1000

7 thoughts on “Where are those bargains?

  1. Bring on the ugly! That is exactly what we’d prefer. I’d rather fix a place up the way we like, rather than pay for someone else’s idea of cool. As long as the main bits are all good, the uglier the better!

  2. I was really hoping that you had purchased that ugly house yourself, and would post an “after” photo for us!

    Also, great advice about working side-by-side with the handyman. Not only does he know that you are keeping an eye on his work, but you are also available to make quick decisions if unforseen problems come up and you need to make any adjustments to your plans.

  3. OK Adrianna!


    I still have a hard time with agents making profit on homes, other than my personal residences, rather than passing on those great deals do clients. But I think I am going to do one to three myself, if for no other reason that a realistic, real life, how to! Maybe I’ll do a two week condo flip in the fall when it’s slower.

    Of course I’ve done these over the years in my own homes, but didn’t take step by step photos and the cost considerations have changed. Doing one now would make a lot of sense for proving out the numbers.

  4. Ah…now you’re talking my language! Of course, the bargains I pick up require a little more than 72 hours work, but you’re right, it’s so hard for buyers to see through the mess. However, before a buyer can pick up a bargain, the seller has got to price it to move in its condition. I assume this is a denial/anger/acceptance process for the seller to get to the point where they price it correctly to move.

  5. “I assume this is a denial/anger/acceptance process for the seller”

    The seller will actually be “realistic”, by discounting price for the actual cost of improvements needed. But that is not how the market works.

    Say a house would sell for $550,000 if it had $15,000 worth of work done in it. The seller wants to price that at $15,000 less or $535,000. His math is correct, but a buyer wants that to be at $499,000 and not $5xx,xxx anything, because it doesn’t look good.

    So yes, the seller is angry that his house will sell for $35,000 less than it should because of $15,000 worth of work not done. But that’s just how it is if you don’t get your property in its best showing condition. That doesn’t mean new kitchen, but it does mean stripping that wallpaper and painting the dark wood trim and replacing that floor.

    Cosmetic improvements can bring two to three times their cost in sale price, but they will conversely do the same negatively on price, if the seller does not do them.

    That’s the denial/anger/acceptance process. Why should a buyer get a $25,000 discount for a $5,000 improvement needed? That makes them angry. But apparently not angry enough to put in that new floor and replace that light fixture 🙂

    A good agent will keep fighting with the seller to make small improvements, and roll up their sleeves and help them do it, before they list the house. A not so good agent will just put a sign up front as fast as possible and let the seller take the hit.

    Sometimes the agent who fights with the seller and makes them see this hard truth, is not the one who gets the listing. The seller hates that agent, makes the improvements that agent recommended, and then hires someone else to sell it. That’s why agents are afraid to tell clients the truth. They “get it” and shoot the messenger at the same time.

  6. Pingback: Seattle’s Rain City Real Estate Guide » Light Fixers - Before and After

  7. Ardell,

    Your response to SeattleEric’s comments are sooooooo true! I really appriciated your comments about the value differential for work not done. That is something I have know for sometime, but not ever been able to articulate as clearly as you did. Thanks! Also I totally hear you about the the seller shooting the messenger, not fun, but true.

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