Tuesday, April 29, 2014

The small things a great buy can hide behind! (Nothing that the price can't fix!)

Don't let the cosmetics stop you from making a really great decision. 

    We are in a unique market here in North Oakland County, MI right now. Inventory is at historic low levels. By historic I mean 10+ year lows for number of homes for sale. Some statistics show the levels are the lowest in 40 years when adjusted for population growth. Enough of the boring stats, what does this mean to you as a home buyer? In a word - F-R-U-S-T-R-A-T-I-O-N! Running all over town at a moments notice, kids in tow, scrambling to write late night offers in a fit of caffeine-induced delirium. Trying to make sense of highest-and-best, 2nd best calls, final offers, dutch-auctions, "BATVAI disclosure-exempt" and a property may have multiple offers. Agonizing minutes, hours and days of waiting - only to find out someone else wrote an over-asking price offer, gave 79 days occupancy, guaranteed 20,000 dollars over appraisal, offered to pay the sellers moving cost and co-signed on their eldest child's college loans. Enough already!! Before you throw in towel and convince yourself that with the right lighting you really can turn the pantry into a 4th bedroom, lets take a deep breath, relax and take a fresh look at what is really happening in the 2014 market. 

    "Updated, Open-Concept, Maple cabinets, Granite counters"

    If I were to ask buyers what they were looking for in a new home, I would guess about 85% of the time the words "Updated, Open, Maple, Granite" would be the first words I got in response. I can't blame anyone - after all those are all very nice things. Updated brings to mind other words like "new" and "fresh". Open is "big" and "expansive-feeling" while having good "flow" and positive "Feng shui". Maple and Granite just speak for themselves - rich, luxury, custom. If you add all that up, buyers are looking for a new, fresh, big, expansive-feeling, flowing, luxury, custom home with positive Feng Shui. Who wouldn't want that? Consider the alternative: old, stale, small, cramped, restrictive-feeling, economy, production-style house with bad Feng Shui (I am not sure what make certain Feng Shui bad, but it apparently the bad kind causes Geopathic Stress - and that sounds even worse). 

    Conversely, when the same clients are asked what they didn't like about a home they will reply with: it felt dated, the floor plan was to closed-off, they weren't happy with the laminate counters or the old oak cabinets. As a casual observer (read: non-casual, active participant), I see a trend here (for which I place the blame squarely at the doorstep of HGTV). Home-buyer expectations have been altered. There is a growing expectation that buying home should be like buying a car - decide what options you want to have and then go find that model. When they don't have that model locally, have the dealer order one in from across town - or across the state - or from Ohio - or Texas - or have the factory build it. Seems logical (it cost's a few extra hundred for delivery sometimes, but why not, right?) A problem arises though when you apply this model to housing. As the old saying goes, in real estate 'location' is everything. You can't just have a house shipped in from somewhere else after all, right? Well, actually you can - I have done it, and if you want to do it I can help you through the process. No, not a 'house' that had factory-installed axles either - I mean like this:



    So what to do? Wait? Pray? New house dance? Hang out at home depot and wait for Renovation Raiders to show up? Keep refreshing your browser to try and catch that perfect house before someone else? Watch your real-estate app on your phone, ready to jump at a moments notice, hoping to beat everyone else to the newest and bestest listing, only to find out the sellers are going to wait 96 hours before considering any listings? I think there is a better and far under-utilized option in this market. Rehabilitation!

    As a Realtor, I see a unique opportunity for the shrewd client to get a better price with less competition. As a Realtor, I also have a unique opportunity to serve my clients needs beyond just advising them on purchase costs, inspections, title-work, and closing gift. 

    The straight forward model of buying a home goes through a predictable process: Look, Offer, Negotiate, Inspect, Appraise, Close. The model to buy and renovate a home also has a predictable process: Look, Offer, Negotiate, Inspect, Appraise, Close. Then Renovate. 

    Renovate? Doesn't that cost money? Won't it take time? Don't you need contractors for that? In a word - Yes (to all of the above). There is a old saying in the real estate business "There is nothing in a home that price can't fix". In other words, if you buy it right, then the money needed to renovate is built right into the purchase by paying less for the home. You can also put the rehab costs right into your mortgage at the time of purchase (there are several options for doing this now, including on standard conventional mortgages). 

    Yes, it will also take time. Have you heard the expression "Time=Money"? Well, in a low-inventory market (like the one we are in now) that is especially true. The money is being spent in the form of paying a premium price for preferred properties. The majority of buyers are fighting over the top two or three homes in each market segment. This leads to multiple bids, bidding wars, paying cash over appraisal value or even guaranteeing offers with no appraisal contingency. This is good for sellers, but not so good for buyers. 

     Yes, you will also need contractors for this. Contractors come in all shapes and sizes, just like Real Estate agents. Some specialize in certain areas, some are more generalized, some are good doing systematic work and some are just good at working the system. Working with a Realtor who wades into the rehab waters themselves and has a background in general contracting (::ahem::) certainly helps. 

    My job as your Realtor is not to follow the prescribed process and then bail if things get dicey. If you want someone who will just send you listings in email and wait for you either find something you like or just give up, you can get that from Realtor.com all on your own. However, if you are looking for an agent who is willing to help you explore alternatives, see solutions when others only see problems and get you from where you are to where you want to be, then try me. 

    If you have any additional suggestions or checks, leave me a comment below. You can always find me at my website JasonGault.com