One of the most important questions people are asking themselves these days when buying a house is, “Will I lose money if I have to sell it?” Fair question for sure. The most likely answer is yes, if you are going to need to sell it in the not too distant future. Stay in it for a decade, is more the order of the day these days.
Of course some people will still be buying houses, regardless. For those people who are buying a house, I say “Don’t buy a house that YOU like!” I know that seems like an odd statement, but it is very important that you buy a house that MOST people will like.
1) Spend hours in a house before you buy it; not minutes.
Don’t you think it’s odd that some people spend less time in a house before they buy it, than I spend picking out a pair of earrings or stockings at Nordstrom’s Rack?
2) Write down what you like and what you don’t like.
If there is nothing on the list that you don’t like, you probably aren’t looking hard enough. There is no such thing as a house without pros and cons. Bring some people with you, including your buyer’s agent. Have everyone quietly write down the pros and cons. Don’t discuss with each other until everyone is finished. If your buyer’s agent has no cons on their list, fire them. Now compare everyone’s lists while still inside the house. One at a time, each can explain why they do or don’t like various aspects of the house. It is more likely that you won’t miss something if you take the time to do this.
3) Ask your buyer’s agent what things they might ask you to do to this house, if you called them back to sell it.
Make a list, before you make an offer, of all of the cons and note which can be corrected and which can not. Traffic noise is not something you can correct when the windows are open in summer. Seeing cars go by, might be something you can correct with landscaping. Bright gold switchplates changed out is simple, cheap and takes little time. Take the time to go through all of the cons to determine if there are any that cannot be corrected. Then try to like something without things that cannot be corrected.
4) Be careful of homes that are just over a price break point
Everyone knows that an asking price of $599,950 is better than one priced at $609,950. In these times when people view property on the internet they put in a “cap price” such as $600,000. Consequently, you have a better chance of “breaking even” if you have to sell the house, if you buy it at $580,000 than if you pay $610,000. Just is. Don’t argue that point. Just is.
5) Let the majority rule
Don’t buy a house if you are the only one who likes it. If it is a vacant house, it’s easier to get a lot of people to come over and spend a bit of time in it. If 2 people like it, including you, and 10 people hate it…keep looking. The more you overlook what other people think about the house…the harder it will be to sell it if and when you have to sell it.
Agents often say Price will fix any Problem…but that is NOT true! In a market in which only 3 of every 10 homes readily sell, you don’t want to be one of the 3 that no one wants at any price. 10 houses for sale = 3 sell because everyone likes them…4 sell because they are a good value…3 get passed over repeatedly. You don’t want to own one of those last 3 houses.
Test what you like against what MOST people like. Better to pay a few dollars more for a house that is generally appealing, then to get a great buy on the house with the most negatives.
Great advice! I hadn’t thought of bringing in a committee to help value a house, but that could sure help the people who can’t see past the emotionally attractive furnishings or decorating. I think you have said before that the way to make money on a house is to buy it right to start with!
Back in the last recession we used to send a team to every home we listed, with a checklist, before it went on market.
Excellent advice! I hope all homebuyers read this.
I’m keeping the same philosophy in mind as I furnish my home: Making sure that I meet any possible checklist, and then adding a few universally-appealing “wow” factors that will make the home irresistible if I ever decide to sell.
I think a lot of buyers don’t take into consideration the resale factor, since most people are not going to be in a home their whole life it is important to consider a home that you can sell easily down the road. Great points !
Ardell is right, there is no perfect house out there.
Think about what you can and can’t change with a house. If something can be changed, and is not hugely expensive, then it really is not an issue. If it’s just the carpet, for example, not a huge deal.
However, if you pick a home on either a busy road, near high tension wires, backing to a highway or commercial area, go find another house. Don’t settle for a home with issues that cannot be changed. There’s no reason to do so in any market.
People tend to forget that markets fluctuate. Even if today were a sellers’ market and you were buying, there would still be no reason to settle for a home that would not be easy to sell later. This is one thing a lot of buyers forgot in the frenzy of our past sellers’ market.
If you’re buying a home, make a smart home purchase that will be a good home to sell later. You never know what the market will be like when you sell, so don’t make an unwise purchase. Pick the best of the best.
Debra,
First, Happy New Year! I’m working on Sunday Night Stats and saw your comment whiz by. I agreed up to the last sentence.
I’m sure everyone would like “the best of the best”. My point here is to pick “the worst of the best”. Something with minor correctable issues, but no major negatives.”
I am amazed how many times when I force someone to go through and tell me what they like (about a house I don’t think they should buy) and they come back and say the furniture or this picture. They really don’t know why they like it, unless you force them to go name the things they are liking.
I am also amazed at how many people look at the house without looking out at what they can see from the windows.
In the best of circumstances, I agree that it’s important to think of resale value. But sometimes – sometimes – that’s not the only issue. Maybe it’s not that great of a house, but it’s in a desirable neighborhood or near your children’s school. That would trump some undesirable attributues of the house. Or maybe you have an incredible car collection and the house has a 4-car garage plus a carport for two more. That’s happened. I also work with a lot of artists and sometimes the house isn’t as important as the studio that’s attached.
These are case-by-case situations and there’s no hard and fast rule, but even in these situations, I counsel about potential resale value. I would hate to have any client call me an I have to break the news that the house is worth less than they paid.
The amount of time a buyer will be living in a house is very important, both for resale value and for quality of life. Great resale value will not help if the stress of living for years in the wrong/inconvenient location really brings you down!
Agree! People don’t spend near enough time on “Where vs. What”. I have said that many times.
I have an instant gratification nut for a wife. I love her but her, “I want it now” attitude drives me insane. We have just moved to a new city and will be looking for a house in the fall. I love to take risk, but only if they are calculated in my favor. while she wants to feel good now. Her parents are the same way and have NOTHING @ age 60.
I still believe patience is an important virtue. No matter what presure I get, we will be taking our time buying a home. I guggest you do the same.
In 2004 I was single but dating my wife. Her parents and I both bought homes in the same price range in 2004. In April 2008 I sold and made $83,000 profit on my home. In April 2008 my in-laws home was appraised at only $20-25k above what they paid. I spent 6 months looking for my home while they spent 20 days.
The moral, taking your time makes sense for your wallet and future.
These are some great tips – a lot of buyers will fall in love with a house and become set on buying it – I myself was even tempted to do this after absolutely falling in love with a house in a flood zone and with septic problems! (Fortunately, the $20,000 septic repair bill and the seller being upside down on their mortgage talked me out of it!)
I agree having others see the house too – but make sure they’re looking for the buyer, and not themselves – sometimes they might make finding the right house impossible!
And it helps to remember there’s no such thing as the “perfect house” – even when you custom build a home yourself you’ll find there are still things you want to change!)
“I agree having others see the house too – but make sure they’re looking for the buyer, and not themselves – sometimes they might make finding the right house impossible!”
The value of other people seeing it is simply to gather more information from different perspectives. In the end you have to make your own decisions, but having as much info on the table as possible when doing so, prevents you from being blindsided.
At least if those issues come up when you try to sell, you won’t say “If I had only known this when I was buying it.” The value is in the knowledge, moreso than the end result.
Todd,
I was watching the movie “Rudy” for the umpteenth time this weekend. The scene where the girlfriend found a house for them…and they weren’t even talking about getting married yet, hit home. How many men buy houses because the women want a home? Probably a lot.
Unfortunately, housing slow downs tend to exacerbate the negative points of a property. When the market is booming, buyers may be more apt to over look obvious negatives of a house, but when it is slow they will keep on looking. Most of the properties I see that can’t sell have some glaring issues that can’t be corrected except by massive price cuts – busy street, no parking, lack of modern amenities such as central air, horrible views, etc.
I always tell myself that if I notice an issue with a property, the buyer of my property is going to notice it too.
Russ,
Those factors dramatically influenced flippers early on in the slow down. BWHTF – Bought wrong house to Flip!
The benefit of knowing ALL of the home’s weaknesses is to limit the amount you spend on improvements while in it.
A busy road can’t as readily absorb an expensive new kitchen, as example. Buying the worst house in the best school district, may still be the best option for someone. Knowing not to put in costly improvements is invaluable info!
While a house in a great school district, in a great location within the community might return 75% on a new kitchen…a busy road house may only see a 20% return on the same improvement.
Getting real is not necessarily about not buying it at all. It could be about buying it with your eyes wide open. Maybe keep it as a rental property when you move up. Buy it at lot value and squeeze every dime of rental income out of it and make no improvements except patching holes in the roof, has served many an investor well in all markets.
Many first time buyers should buy FHA with the lowest downpayment (even if they have more) and plan to keep it as a rental property when they move up. You can’t buy a rental property FHA…but you can live in it for a year or two and then move on and up.
A busy road house will have an easier time with rental cash flow than just about any other type of property. Knowing your “exit strategy” when you buy, is not all about selling when you leave.
Todd,
Your strategy usually backfires. Trying to hold her back from having a home…usually ends up with you buckling and making a rash purchase decision at some point when she won’t hold out any longer.
Giving her five “good” options is usually better than saying “No, not now.”
Just an observation FWIW
It’s worth thinking about what other people will see in your home when it’s time to go, but to my mind, – everything – about a house is a potential “con,” although not everything is a potential “pro.”
Large kitchen? Not for everyone. Formal dining room? Lots of light? Large yard? Big eaves? High-ceilinged basement? Level entry? Potential ADU?
I think that for the potential homeowner, it’s useful to go over what the market may not value. But at the end of the story, the house is going to be the setting for a long period of your life. You already have one job, I don’t see the point of taking on another – living in a house that you don’t like – simply because you might stay a little further ahead in the market.
Chances are, if you’re finding yourself in a house with a lot of negatives, you’re probably stretching for size or location. If that’s the case, consider a smaller house or a less-desirable (to you) neighborhood. Or not – as Le Corbusier said, a house is a machine for living in. If it suits your needs, seven years is over twenty-five hundred nights and mornings. Life is short — try to go to bed and wake up in a place where you’ll be happy.
Hi Ardell,
Happy New Year to you and Kim. I agree, nothing is perfect. This is a very important message to get across to buyers. I still believe buyers can buy the best of the best. This does not mean it’s perfect, it’s just one of the better homes out there.
Ardell, you said:
“While a house in a great school district, in a great location within the community might return 75% on a new kitchen…a busy road house may only see a 20% return on the same improvement.”
This is very true. However, many times these homes on busy roads have to be nicely updated or priced aggressively to compensate for the road issue. I’ve sold homes in the past that were far better than anything else out there because they were great homes that happened to be well priced, but on busy roads. The buyer understood the trade-offs and was willing to accept the road noise, because other homes for sale at the price point did not compare.
I counsel my buyers so they understand these issues. I also tell them they need to have the house looking terrific and priced well when they sell. The buyers have to remember one of the reasons they bought the home was its terrific price and updating. They may have to do the same thing when they sell if many years go by. A road is one strike, but an outdated home on a busy road is two strikes!
good advice, Mack.
Debra,
I sold a fabulous house on Issaquah-Beaverlake Road in the Fall of 2007 that was an enormous house for the price. Big lot with a huge setback and circular driveway. Still, I’m gladd she sold it when she did (and I’m sure she is too.) It was not an easy sell then, and would be twice as diffcult today.
Your seller was lucky to sell back then.
Debra,
Isn’t it insane when people have to make tradeoffs when buying at $1.2 million? It seems there is no price point without tradeoffs, unless someone builds the house for themselves. Perhaps with prices receding this will be less the case, but I remember having a hard time finding a house with 4 bedrooms, with all the bedrooms on one level, for $1.2 million in Kirkland awhile back.
And yet it is hard to get almost any seller to list the cons of their homes. Every negative seems to be a positive from the seller’s standpoint.
Thanks, br.
– It seems there is no price point without tradeoffs, unless someone builds the house for themselves.
Even then. Bill Gates’ house – I remember that, after he built it, he had to remodel it before he moved in!
– Unfortunately, housing slow downs tend to exacerbate the negative points of a property.
Yeah, I think that’s true. When you have people being outbid on a home a week, the list of “must haves” gets shorter.
– And yet it is hard to get almost any seller to list the cons of their homes. Every negative seems to be a positive from the seller’s standpoint.
That’s true of everything that’s for sale. Remember that pharma ad – after the list of side effects (this product may cause runny nose, itchy arms, nausea, IBS, incontinence, impotence) a sprite flashed across the screen with a voice over proclaiming, “A Wise Choice!”
Sellers sell benefits. Cold food, warm beer isn’t a proven winner!
Good points all. This goes a long way to not putting in fixtures in the maser bathroom of a house being sold, that the owner has artistically blown himself in his glassblowing studio – no matter how much everyone else in the Artisan’s Association says he is “the next big thing.”
Mr. Mogul,
Expensive remodels prior to selling are clearly no longer the order of the day in any way, shape or form, unless they improve the “real estate”. Styles change. So “new roof” – yes. That improves “the real estate”. New granite counters? Some like light, some like dark, some like something other than granite.
Limiting the cost of improvements is a wise choice, especially in this market. What we are seeing right now is that buyers may in fact be willing to pay an extra $75,000 for that WOW kitchen remodel, but the banks know in 10 years it will be “dated” and are not willing to finance these improvements. Appraisers are tough…and they are not giving much for these improvements in the appraised value, regardless of how much the buyer is in fact willing to pay.
The buyer will need to have cash to pay for those improvements, over and above the required downpayment amount.
Ardell wrote: “Appraisers are tough…and they are not giving much for these improvements in the appraised value, regardless of how much the buyer is in fact willing to pay.”
I wouldn’t say they’re tough. I’d say they don’t adequately account for kitchens, either positively or negatively.
In my first expert witness case I don’t recall the opposing appraiser making any deduction for the kitchen. It was a remodel from hell with a bizarre layout with the cabinets setting at all sorts of angles, and at least 3 different styles of cabinets, one of which was painted plywood cut by a skilsaw at other than right angles. Clearly that limited what the property was worth, but there’s no little box in the appraisal form for remodel from hell.
Kary,
All points lead to the same place, regardless of their justification methods. Lenders are using every trick in the book to limit their exposure…and who can blame them?
I am hearing agents all over the Country freaking out about appraisals coming in lower than “needed” to close. It is what it is regardless of why.
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