Tag Archives: home

Beginning the Home Buying Process – Part 1

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[photopress:matt.jpg,thumb,alignright]My friend “Matt” is a first time buyer beginning his home search/buying process. That is not his picture, or his real name, of course. By giving him anonimity, I can take him through the steps here on RCG, so that others can follow along with us. Think of it like a board game. The “Matt” game. This will be a series that will run up until “Matt” closes escrow, and possibly beyond into his first month or two as a homeowner, and the surprises that may come up after he moves in.

Given a “blog” is a web log, it seems appropriate for a real estate blog to offer a log of real people in the home buying process. So lets log and blog the adventures of “Matt” and his home buying process. I’d love for someone to turn it into a board game at the same time. We can give it to potential homebuyers. Maybe Galen or Robbie. It could be like the game of “Life” and people who are thinking about buying a home, can buy the game and “play” before stepping out into unknown territory.

START: “I’m thinking to buy a home this fall. Likely an (x area) townhome just outside the (x) growth zone. Any advice on what I should be reading/doing to get up to speed for home-hunting?”

Now I am going to make this as transparent as I possibly can, without giving away the identity of “Matt” or the location of the home search, for obvious reasons.

STEP 1: The first step is the most extensive one, as it combines many factors. Home Price, which is determined by monthly payment affordability, cash needed to close, and commission to be paid to the Buyer’s Agent. This is all one big first step, as the Commission Negotiation affects the “cash to close” issue. So let’s do that first.

The target purchase price, as already pre-conceived by the word “townhome”, and specified area in the email, is $295,000 to $495,000. For the purpose of this Step, let’s assume that “Matt” has in mind to purchase something for around $375,000, that he is thinking his monthly payment is going to be about $2,200 and that he has saved $20,000 toward the home purchase. This may or may not be the case, but let’s start with that assumption for now.

The ball is in my court. Since I know that “Matt” works in the Technology Industry, and I believe he is a first time buyer, I have already picked up the phone and called Jennifer Chi at First Tech Credit Union. The number one issue is, do they still have that fabulous first time buyer program that I have not used for awhile, and if so, what is the current interest rate, downpayment requirement, and cost for that program. I am waiting for a call back. Left a message. My expectation is that they require little or no money down, have total lender costs of about $600, and the rate is about 5.75 %. Let’s see how close I am, if in fact that program is even still available.

Some people think the first step is for the buyer to go to “the lender”, without consulting the agent. Not so. As the agent I first want to determine who might be the “best” lender for this particular client, as I have already done. Of course the client can do whatever they want over there on the side, and check out all kinds of lenders and loan programs. But that does not relieve me of the responsibility to seek out the best and special programs, especially when I am already aware of their existince, and the likelihood that he probably qualifies for it.

Next on my “To Do” list is to Negotiate the Commission. Since I already know “Matt”, I don’t have to stick him in my car and interview him to determine the fee. Based on a sale price of $375,000, I would not normally negotiate the fee up front, as in that price range, I need to reserve monies for repairs and other issues. But since we will likely be looking at newer townhomes and he gets that “special friend” treatment, let’s establish a flat fee of $6,000, which should give him an extra $5,250.00 to spend, and still leave me enough to fix a few things and get him a nice housewarming gift 🙂

This is an important first step because if any sellers are offering less than 3%, it becomes “Matt’s problem” and not mine. Everyone makes such a huge big deal about Negotiating Buyer Agent Fees. Look. It is that simple. Matt didn’t even have to put in his $.02. LOL. Of course Matt has other options, but that is my offer and he can take it or leave it or negotiate it back at me. We’ll see what he does.

That’s all we can do until we get that call back from First Tech Credit Union, as we cannot determine the price of property to look for, until we know the monthly payment he can afford, which we cannot know until we know the interest rate and cash requirements for that particular loan, which is the best, if they have it and he can qualify for it. More to come…

Negotiating the Buyer Agent Fee

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[photopress:swan.gif,thumb,alignright] Greg Swann over at Bloodhoundblog wrote a lengthy piece on his feelings with regard to changes that are needed in the real estate industry.

I happen to be writing an offer as I write this, actually waiting for a buyer client to come over and sign it, who was the first client with whom I negotiated the fee at first contact over coffee. That is not my normal scenario of negotiating the buyer agent fee, as I generally like to see at least three homes, of my choice, with the buyer before having the discussion regarding commissions.

I like to see how they look at property, what types of things bother them, how many and what kinds of questions they ask, etc… Just as I need to see a house before I know what I would charge the seller, I have to have some idea of the level of difficulty involved with the buyer attaining his objectives, before I can establish a reliable fee base.

So while I do not totally agree with Greg that a buyer should, or even can, negotiate a fee before seeing any homes, his article is well worth reading. I plan to read it again more thoroughly after this contract is signed 🙂

I will mention, that this particular client and I renogotiated the intital fee we came up with over coffee. So breaking my rule of not looking at houses first, was not a good thing. Having some experience with the agent and vice versa, is the best way to establish a fee that will work for all involved.

Would you lie for God?

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Yesterday’s theme was PreFab, today I’m back to simply providing links to 10 interesting real estate conversations…

  1. Prosper is an online marketplace for people to lend money to other people. Shaun has been playing with Prosper and has some interesting observations.
  2. I don’t agree with Mark’s conclusions, but I think he makes an interesting case that a good time to “upgrade” is in a down market. (via Steph)
  3. For those looking to improve things before they sell, Rory provides some great home improvement links.
  4. If you are going to be upgrading (up market or down), you’d be wise to follow Noah’s advice and sell first!
  5. Will the number of sold homes rise in August as Bill suggests? But I sincerely doubt it.
  6. Todd, since you asked… My take is that if you are going to change domains, you want to do it sooner than later. You’ve still got lots and lots of growth left in your site, but the longer you wait, the harder it will get. Even better, consider getting a hosted version of WordPress that you can put under your own domain. Many hosts have made it so that there is a “one button” install of wordpress and they even manage the upgrades on the backend. (WordPress.org has a list of their “preferred” hosts.) In the long run, this will definitely give you the most flexibility with things like video/podcasts and stat tracking.
  7. Jim’s thinking he wants a sideblog plugin… I’m thinking just take notes and when you get to 10, hit publish. Have you noticed? 🙂
  8. Fran is good for providing a useful tip every few days… Today it is about the importance of the buyer walkthrough.
  9. Jay Thompson (of AZ) gives us a “pick of the week” that includes one hell of a house!
  10. Larry Cragun tells us to watch out for real estate transactions involving religious institutions. Some people are more than happy to lie for God.

I’m actually shocked at the number of emails these lists have generated. Don’t people know I have a job? 😉

Valuing Homes for Buyers

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[photopress:dartboard.jpg,thumb,alignright]To some extent buyers, especially first time buyers, encourage receiving inaccurate information with regard to value and other home details, by asking the right questions at the wrong time.

Sellers understand that it takes time to work on a valuation. Rarely does a seller call and say, “I live at 123 Great Street, what is the value of my house?”. I’d venture to say that no seller expects an agent to know the value of their house on the spot, nor would they want a two second answer. Consequently, valuing the home properly for a seller, within the framework of the seller’s expectations of the time it takes to give an accurate answer, produces fairly good results most of the time.

Buyers on the other hand encourage shoot from the hip responses fairly continuously. The normal process should be that the buyer view the properties selected by both them and the agent. The buyer should select one or more that they might like to purchase, and then ask the agent to take some time to evaluate and value those properties that they like best.

But that is not normally how a buyer operates. Often they ask all kinds of questions, as if an agent knows every property they are showing in great detail and with a large degree of accuracy. Certainly the agent can, and will if you encourage it properly, do all of the work necessary to know every property. But buyers seem to expect an agent to spend this kind of time on every property being shown before the agent shows the property and before the agent knows if the buyer is even interested in the property. By and large an agent is not going to study every single property he shows in great detail, as it would be a waste of time, especially for the ones the buyer hates at first glance.

When you first look at property, you should simply be advising the agent if you like it or do not like it. Then you should ask the agent to dig into only the properties you like and might buy, and find out as much as possible about those and also value only those. For as long as I can remember, many buyers will go from house to house asking questions like, what do you think of the price? Is it worth it? What is the age of the house, have they had any offers, etc… By asking a lot of questions about every single house, even the houses you hate, you encourage the agent to answer off the top of his head. This starts the whole relationship off on a bad foot. The agent doesn’t want to say I don’t know to all of these questions, but it is not reasonable to expect an agent to know a lot about every single property being shown. Next thing you know the agent is giving sloppy and often inaccurate answers to avoid saying I don’t know to all of the questions.

Asking your agent if the asking price is reasonable, is of course a very good question. But just as the seller gives the agent hours and sometimes days to come up with that answer, don’t expect an answer on the spot for every single house you are shown whether you like it or not. If you do ask the question, and the agent answers immediately without taking at least an hour or two to research the answer to that question, don’t be surprised if the answer you do get on the spot is a knee jerk, inaccurate answer.

By encouraging the agent to answer inaccurately, you set up a relationship where the agent continues to give you shoot from the hip responses even on the property you eventually purchase. Look at property from your perspective. Do you like it or not. Then ask the agent to research the properties you like. This will insure a more accurate valuation and more accurate facts. First the agent calls the listing agent to see if he has any offers and if so, what time are the offers being presented. If you have a few hours to get your offer in, and you usually do, set an appointment for a couple of hours later and ask the agent to research the properties in detail before you sit down to discuss the price and terms of the offer.

Often it is not a good idea to ask ALL of your questions before making an offer. If the buyer’s agent calls the listing agent and asks tons of questions like How old is the roof, Did they ever have water in the basement, etc., that buyer will not be given good consideration if there are multiple offers. Many questions, especially negative toned questions, should be asked after you “tie up the property” and most of them should be asked of the home inspector during the home inspection.

Sorry, I seem to have covered two topics in one there. Just following the normal sequence of errors buyers often make when viewing property and prior to making an offer. Often the seller is more negotiable with a buyer who loves their house, than one who is “kicking tires” from the getgo. Timing is everything. You should ask your agent all of the questions you may have and he should answer all of the questions including the ones you didn’t ask. Leaving the agent room to apply proper timing to obtain the correct answers, without alarming the seller or seller’s agent at the wrong time, can make a huge difference in whether you get the property and how much you pay for it. Once deemed a “difficult or squirrely” buyer by the listing agent, you will often have to jump through more hoops to get the property, if you can get it at all. Give your buyer’s agent enough room to play everything to your best advantage and don’t look at him like he is stupid, if he doesn’t know every answer to every one of your questions “off the top of his head”.

Why isn’t my house SOLD yet?

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You have to be in the top three of your “price tier”. Being at the high end of your “price tier” is better than being at the bottom of your “price tier”.

Photos must all be good photos and must be ordered in “hook order”.

Stop looking at what is for sale and stop looking at the comps once your property is listed for sale. If you have a lot of showings and no offers, then it is something AT the property that is causing it not to sell and you are a “bounce point”. If you don’t have enough showings it is something in the mls that is causing it not to sell, unless you HAD a lot of showings at first and dwindled down to not enough.

That’s pretty much it, pretty simple to me, but let me explain some of the lingo up there.

A “price tier” is the increment of value pre-supposed by the public websites. Go to Redfin or Windermere or John L. Scott or CBBain sites, and look at property in your area similar to yours. The site forces you to put a range of value that the site itself predetermines. The lower the price, the more important this is. Let’s look at the $250,000 to $300,000 crowd. If you are $259,000 or $276,000 or $309,000, you are “off”. The site forces people to look at $250,000 to $275,000 and $275,000 to $300,000.

If you are priced at $259,000 you are missing the people stretching up. Let’s face it, almost every single buyer in this price range “stretches up!” as in “I want to spend $250,000, but will go as high as $275,000, but NOT a PENNY MORE! By pricing your property at $254,000, you miss the boat on the $225,000 to $250,000 crowd and don’t compare well enough for the $250,000 to $275,000 crowd. $254,000 is just past the point where someone stretching up will see you at all and your property is not comparing well to those in the group at higher prices. $309,000 is just a KILLER price…the first number being the ALL IMPORTANT one. The difference between $240,000 and $249,000 is nothing, but the difference between $299,000 and $301,000 is a KILLER!! (An aside to agents here. If you are at a listing appointment and the seller insists on pricing at $301,000 instead of $299,999 or $300,000 straight up, LEAVE, RUN! It means “I don’t really want to sell this place, I’m just appeasing my ___ and pretending to be selling it.”

I could write a chapter of a book on “price tiers” alone, so let’s move on to photo “hook order”. Photo #1 is all important as many sites (like Realtor.com last I looked) require the user to click another button to get past photo #1. If photo #1 doesn’t grab them, you are dead in the water, and they are scrolling down past you.

Unfortunately mls rules hinder the seller when it comes to photo #1. There are a few rules written with agents in mind that I do not agree with, and this is one of them. Why should the mls REQUIRE that this all important key photo be…??? Seller should have more freedom in that regard. According to mls rules, photo number one must be an “exterior” shot, preferably the front door area, so agents can more easily find the property. Lame rule in my opinion if the curb appeal is NOT the seller’s claim to fame. All mls services should change that rule yesterday, giving the seller the opportunity to put his best foot forward, regardless of what constitutes each seller’s best foot. In condo complexes it is a KILLER rule. Who the heck needs to see another shot of the outside of a big condo building. Ever wonder why you see 25 shots of the same photo on a new construction project? Looks pretty dumb from the user’s perspective…but….it’s a rule. If the interior is a slab granite knockout and the exterior is 1977…this rule KILLS a seller and the mls is wrong, wrong, and wrong again for making the seller put the 1977 exterior as photo #1 vs. the knockout new kitchen. Let’s all fight for that change…or Robbie, can you reconfigure the photo order on an mls feed???

Hook Order – think attention span. Once you get past photo #1 issues, the second photo must be your absolute best of the rest. Forget about the “virtual tour” concept where you have the buyer “walking in from the front door”. If your claim to fame is your fireplace and kitchen, get those into the #2 and #3 spots. Make a list of your selling points in order or priority. If #1 is new kitchen, #2 is fireplace, #3 is double sinks in master bath…show the photos in the order of the priority of your selling features. If your #1 claim to fame is a jacuzzi in a cheap condo, don’t be afraid to put that jacuzzi as photo #2. Every picture in sequence, is a hook, as buyers often say “no I don’t want to see that one” after seeing photo #1 and #2. Having your best selling features at photo #11 and photo #12??…think about it…common sense rules.

A small note about the number of total photos. Max allowed is 15. Always use max if possible. That DOES NOT mean I want to see the open toilet and the toilet paper. It means take your best features from varied angles. Don’t be afraid to be redundant with regard to your very best selling points, but mix them up. Put it at photo #2 and #3 and bring it back to emphasize the strong selling features at photo #11 and #12, but from a different perspective as in #2 is kitchen from kitchen and #11 is kitchen from dining area.

This is getting way too long and I have things to do, so let’s just brush over the last point. If I could crack open every agent’s brain and slide in a little microchip, it would say STOP LOOKING AT THE COMPS AFTER THE PROPERTY IS LISTED FOR SALE! You look at the comps to determine your opening price out the gate, that’s all, DONE, finito!! No showings…wrong price. Plenty of showings but everything is selling but yours…condition problems. DO NOT even MENTION the sold comps once you are out the gate…irrelevant data.

And if I had nickel for everytime I heard an agent say, “I don’t know what’s wrong? We’re the ‘best game in town’ given what is for sale.” Face it…they are going to the next town, because you are an overpriced dog, regardless of the fact you have no competition in YOUR complex. What else can they buy for THEIR MONEY is the order of the day! Of utmost importance with one level condos. Buyers come in waves. “Surfing the net” is not just a catch phrase.

In the low price range the buyers are currently renting and have nothing to sell. If they don’t like what they are seeing in their price range, because the cream has been skimmed off the top, they wait for the next wave of new inventory. Your wave has crashed and your board is floating out to sea.

Buyers pay attention to these rules, and go grab all of the stale ones who aren’t following the rules, by offering them eighty cents on the dollar. Go for the $309,000s, on market for over 60 days, with only two photos, photo #1 being the sign with the name of the condo complex on it 🙂 and search for the “pick of the litter”.

Doing Whatever It Takes

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[photopress:woman.jpg,thumb,alignright]I have to admit that it felt a little odd, even to me, for us to be personally painting the kitchen of my newest listing. We, the owner and I, were getting his place ready to go on market. He had his hands full with his own projects that needed to be done before we entered the listing in the mls. The color scheme of the condo was already transcendental. I wanted the kitchen to be a light color, because darker colors minimize space, and the kitchen in an 827 square foot condo is not something you want to minimize.

In my own house, I like to “repeat” a color by adding different amounts of a “smashing” color in one space , to white paint for tone on tone effects. And given this kitchen had a “pass through” to the dining room/living room “flexible” space, I wanted the kitchen to be “a glow” of the color in the eating area. Given there is not much wall space in the kitchen, I decided it would be easier and faster if I just did it myself, rather than try to explain how to mix the color to the right degree of “glow”.

I was thinking of “anonymous Joe” when I was making the bed yesterday before the first showings. It was “kind of” made already 🙂 I went around changing lightbulbs from 60 watt to 100 watt in the entry and hall, scrubbing the grout in the tile floor of the entry and kitchen, taking the “mauve” colored towel the owner had used that morning off the towel bar and ditching it in his hamper, because the mauve towel he had used was clashing badly with the citrus colored wall behind it. Turned his hand towel, the one I had picked out as “the right color” (but he wasn’t supposed to USE!) around so the tag wasn’t showing. Several other truly “anal” things, standing in the doorway of every single space from every single angle, and tweaking until I was “satisfied”.

This morning I was thinking of Russ’ before the fact contract, with a long list of “services and metrics” that all agents will provide to all. Some list of generic things that people think provide value, when really every single person needs “Whatever it takes”, and whatever it takes changes from individual to individual, be they buyer clients or seller clients. In 16 years I’ve never had to paint someone’s kitchen before, and frankly hope I never have to again. But at this time, for this client, that’s what needed to be done. The poor owner was wasted! It was hot, he had been working on “his stuff” until he was ready to slash his wrists, and I just rolled up my sleeves and chipped in from morning until night until we were done. Sometimes doing it with them, helps keep them going and sometimes my crawling around in every space helps me find things that need to be fixed, that the owner truly just never noticed. The more I do, the more I can head the home inspector off at the pass, so the seller knows his true net proceeds better, after repairs, before I hit the button sending him “live” into the MLS.

I never sat in his house with a little marketing flip chart. I never provided some big list of “services and metrics”. I didn’t even have a written contract saying I would be paid, while putting in twenty to thirty hours helping him get the place ready. When he said half jokingly after all the work was done, “maybe I should stay here”, I took his hand and looked him in the eye and said, “Seriously, if that is what you want to do, if you decide not to sell it after all, that’s OK. Don’t feel like you have to sell it now, just because we worked so hard getting it ready. You do whatever makes you happy.

I remember training a few new agents and making a little bag for each of them to put in their trunk with windex and paper towel and toilet cleaner and brushes (for the vacant house toilet rings). I remember a new agent who “got in it for the money” refusing to touch the bag and saying “I don’t want that in the trunk of my car!”. I remember him refusing to go measure the unfinished basement size, because he saw a cobweb and he had his “good suit” on. No, he’s not in the business anymore…actually he never did sell a house and yes, I did fire him and he went to a local big firm before he quit altogether.

Real estate is a business like none other, and their truly IS a reason why “we make the big bucks”. There’s a lot of reasons why we make the “big bucks”. But most importantly it’s because we do “Whatever It Takes” to sell the house “For the HIGHEST Price, In the Least Amount of Time and with the Least Inconvenience to the Seller”. This owner should have an offer within 3-5 days of “going live”, at the highest price achieveable, and be able to go back to watching his TV (which I have moved 🙂 from his living room to his bedroom). To do this job right, we can’t have that House Values goal of having 20 to 30 more “leads” this month!

We can’t, as an industry, keep doing less and less for more and more. And frankly, Joe and other consumers cannot keep hounding me about exactly what I am going to do, before I meet them and see “their product”. Because clearly there are different prices because of the different amounts of effort needed to sell their home at the highest price, in the least amount of time and with the least inconvenience to them (short showing period).

Those who want to trade in one “price fits all” for a lower “price fits all”, well…I thought you wanted a “fair price” for the job at hand and an end to the price being “fixed” at “6%”. If all you want to do is trade in one price fits all for a lower price fits all, with the guy who needs more service STILL getting paid by the guy who needs less service….I truly hope that’s not the case.

Let’s let each client pay for their individual service, some higher and some lower and always a fair price for the service required to achieve the goal. I truly hope THAT change is the one coming down the pike. Let’s end “price fixing” period. Not just trade in one fixed price for a different fixed price.

Because if it’s just about a tug of war on which fixed price to use…then I’ll have to move over to the other side of that rope. Please tell me it ain’t so.

Sales that “fall apart” on Home Inspection

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[photopress:brokenmask.jpg,thumb,alignright]Tim’s Comment: “What many do not realize is the extent and frequency in which commissions are reduced via credits to the parties at closing. It is very common.’While Tim raised this subject as if these credits were commission negotiations, and sometimes they are, more often these credits are how agents help the buyer and seller accomplish their true objective. The true objective of a seller is to sell his house. The true objective of the buyer is to close on their new home.

Often during the home inspection negotiations, people get all upset. The buyer is really ticked that “the seller won’t fix…:and the seller is really ticked that “the buyer is being so petty as to want him to fix…” For many, many years, agents have used a portion of the commission to keep everything together and throw money at the problem that the buyer wants fixed and the seller won’t fix. With commissions being reduced, and so many agents paying referral fees and bottom feeder site fees and lead generation fees, there is less and less money available to keep these sales together, so more and more are falling apart.

It will be very interesting to see if the new business models that cut the commission down to the bare bones, have a higher rate of sales falling apart at inspection time, with not enough commission in play to fix what the buyer wants fixed and the seller won’t fix. The first time I saw an mls listing that required the buyer agent to submit the offer directly to the seller, one of the $500 mls only listings, the poor sellers were on their third round with two sales falling out of STI. They had even lost the house they were going to buy because of the failed efforts, and were on their third try at getting a buyer that would “stick” to the end. So my guess is the less money on the table to hold everything together, the more sales will fall apart.

When I negotiate with a buyer or seller, I make sure based on the type of property and price range, that I am not leaving the client so short, that the objective cannot ever be attained.

Our Home is Now Listed!

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And despite the fact that we may not have Ardell’s magic open house touch, we are showing it on Sunday between 12 and 3PM as described in the open house listing on Trumba.

Update:

I also created an adword campaign around our home. If you see the following ad while surfing the web, don’t click on it because it costs me money and just takes you to this blog post! 🙂
[photopress:beautiful_ballard_home.jpg,thumb,centered]

Funny side note… I decided to try out Google’s option to target ads at specific websites and noticed that Zillow was on the list for real estate related sites. However, in order to see the ad for my home on Zillow, I had to disable the one-two punch of Adblock and Filter.G on my Firefox browser. By disabling these two extensions, so many websites that I visit on a regular basis looked so much uglier! It was like traveling the web naked! It you’re not using the firefox browser with these two extensions, then you are almost definitely surfing a web that looks much more annoying than mine!

Where do the kids sleep?!?

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[photopress:dig_deep.jpg,thumb,alignright]Whether you are a buyer or a seller, you really need to dig a little deeper when determining the value of a home. One thing I noticed when I first started practicing real estate in the Seattle area, is that almost no one digs deep enough when determining value based on “buyer profile”. This is an old fashioned concept, I guess, that I learned many, many years ago when I was the Certified Corporate Property Specialist (CCPS) for a large real estate company on the East Coast. That’s a fancy name for someone who must quickly sell the vacant inventory homes of relocated executives whose homes were “acquired” via a “buyout” corporate perk. The very first question I had to ask myself when I went to the property before putting it on market was, “Who is likely to buy this house?” I needed to know if I had an expanded or diminished buyer “pool”.

Remember, the market is shifting from a “baby boomer” market to a “Generation X” market, and we have to change our thinking and valuing with the trends that are affected by this shift. “We” meaning anyone interested in the “value” of property, whether that be buyers, sellers or real estate professionals.

Here’s a simple scenario. Four houses. Each 2,600 hundred square feet per mls. Let’s say everything is comparable in terms of neighborhood, lot size, view considerations (all have a view) and improvements. The ONLY difference being the placement of the square footage, each being 2,600 square feet not including the garage.

House #1 – 1,400 square feet on the main level and 1,200 square feet on the second floor. 2,600 above ground square feet with 4 bedrooms on the second floor and none on the first floor. View from all “main” rooms, (kitchen, living room, entertainment spaces and master bedroom).

House #2 – EXACTLY the same house as House #1, but with views out the front door, not visible from main rooms and views from all children’s bedrooms only, when inside the home. In other words on opposite side of the street so front door faces the view instead of the rear of the house facing the view.

House #3 – 2,000 square feet on the main level with 3 bedrooms on main level and 600 finished square feet in basement level with one bedroom in the basement. All views from main areas on main “entertaining” level.

House #4 – 1,300 square feet on the main level with only the master bedroom on the main level and 1,300 on the basement level with three “children’s bedrooms” down in the basement. Another variation would be two bedrooms up and two bedrooms down.

What really concerns me, is I see people getting info from the internet regarding total square footage, and doing comps based on this total square footage. “The house across the street sold for $800,000, so this one is worth X on a “price per square foot” basis. Even if it is the house next door, PLEASE stop valuing property based on price per square foot based on TOTAL square footage. Clearly you can see that those four houses, all 2,600 square feet, have considerable differences with regard to value.

When a pregnant woman and her two year old walk into house #4, they have to walk right back out. Do you really think she is going to love her master bedroom with view, if her newborn baby and two year old are sleeping “in the basement”? Now, personally I love my kids being “in the basement”, as mine are grown. But I wouldn’t pay as much for the house with a huge master suite on the second floor and all other bedrooms in the basement, as I would for one with more bedrooms “up”, even though that suits MY “buyer profile“.

Diminished buyer pool means that the average family buying a home cannot live with that floor plan, and that affects value, even if that floor plan suits YOUR needs. If the answer to the question, “Where do the kids sleep?!?” is down in the basement, on a separate floor from “Mommy”….hmmmmm.

Investors be very aware of this concept, as what you are thinking is a “bargain” in the neighborhood, and buying as a flip project, may be the ones with this “floor plan flow” problem. You sink a ton of money into granite counters, etc. only to find the low price was based on these types of differences in square footage placement, and you get nailed on resale of the improved flip house.

If a house is not selling and the price is reduced below the prices of the neighboring properties, make sure you know WHY that is happening. Likewise, if a real estate agent prices a house with 3 bedrooms on the main level and views from main rooms like house #3, based on the price “per square foot” of the house next door like house #4 with the kids in the basement…THAT house may be a TRUE bargain.

Rent back a recently sold home or wait to sell?

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A reader asked me this great question today, and I simply don’t know the answer. Can anyone give him some advice?

As a buyer of new construction, we recently found out that the builder wasn’t going to make our late July completion date. Instead the builder estimated a mid-September completion. Ugh, we have a child who will start school in a new school district, so this will cause a hassle.

Anyways, we were planning on listing this week (with an open house on the weekend hosted by our agent) but because of the delay in construction I’m at a loss of what to do. Here are my thoughts on the numerous statistics and opinion I’ve found so far:

  • Spring, especially during the last weeks of school is generally one of the best times to list a home
  • Listing a home later in summer can increase Days on the Market slightly, but sales price is often unaffected
  • Due to the region having great job growth and numerous relocations, the school calendar, has a lesser effect on home sales than other regions.

BTW, we are selling a condo in the Klahanie – Issaquah area. So, long-winded way of asking… Do I:

  • List in mid-late June and get a high volume of traffic but have a request that we pay rent through mid-September (roughly 45 days+ if the condo sale closed near end of July)?
  • List in mid-late July hoping to close in late August, thereby having to pay rent to stay only an extra two weeks?
  • Do something else?