Buyers Demand Tech-Friendly Homes

smart homeOne of the most striking results from a recent Better Homes and Gardens real estate survey was that a whopping 87% of luxury homebuyers would not even consider living in a home that isn’t tech-friendly, or “smart.” This wasn’t the only must-have on the mind of these affluent homebuyers — they would also find it hard to live without a garden oasis (53%), an outdoor fireplace or fire pit (50%), and a separate guest house, not attached to the main house (47%).

But look at the numbers differential! Eighty-seven percent is so close to an across-the-board vote that it’s hard not to imagine that the few remaining affluent homebuyers are either from a generation that never had to learn to use personal tech devices, or will simply be spending too much time on round-the-world travel to care how what their house is wired for.

Even if you’re selling a home that doesn’t qualify as “luxury,” these results are worth noting. Buyers of luxury homes tend to set the trends for other buyers. And although clever staging can hide, say, a lack of electrical outlets, more and more buyers may start looking closely at whether your house can actually support their tech needs. And on the other side of the coin, you’ll get an advertising boost if you can describe your home’s technological features and capacities. Automated appliances! Climate control! Intelligent lighting!

What exactly does creating a tech-friendly or smart home involve? Asking tech-savvy friends how they’ve adapted and upgraded their homes is probably a good start for finding practical guidance. Also check out online sources like Globitor’s “Tech-Friendly Tips for Upgrading Your Home,” Lifehacker’s “How Can I Bring My Tech-Unfriendly Home into the 21st Century?,” and CNET’s “Automate this: Smart devices for every corner of your home.”

“Dear Prudence” Is Giving Real Estate Advice?!

spookyYou just never know what people will decide to write to an advice columnist about. Only yesterday, a couple asked “Prudence” (Emily Yoffe, of Slate) whether they should buy a house that was the site of a horrific and widely publicized murder, in which the husband dismembered his wife. The couple work as a mortician and a pastor, respectively, so they aren’t personally freaked out by death, but they’re worried about what the kids and others will say.

Prudie’s advice is fine as far as it goes. She says if you’re comfortable with living there and want to buy the place, just be sure to tell the kids soon, and perhaps hold a prayer ceremony to . . . well, she didn’t say it, but I’m assuming to rid the house of ghosts and negative energy.

But there’s a lot more this couple should consider, namely:

  1. Their statement that, “Thanks to the Internet, we know all the horrific details of the case” is disturbing. It suggests they might not have learned about the murder from the sellers. A seller is, under most states’ laws, supposed to tell buyers, in writing, about anything that might materially affect the value of the house. If the seller did not, in fact, tell them about this, what else are they not telling? See my earlier blog post about a lawsuit by a buyer against a seller who neglected to disclose a murder/suicide that had taken place in the house for sale.
  2. Is the couple getting a bargain for the house? They’d better be. The place is, in real estate jargon, a “stigmatized” property. The fact that they may be willing to live there doesn’t change the widespread public perception that it’s tainted. Some properties of this nature remain on the market for years, or ultimately have to be bulldozed out of existence.
  3. Have they considered resale value? Once stigmatized, always stigmatized, if the event was horrific enough. And it sounds like this one may have been.

In the end, this couple may actually be the perfect one to buy the house and make it into a cozy, ghost-free place to live. (In fact, buying a stigmatized property is one of Nolo’s “Top Tips” for getting an affordable house.) But to the extent that a home is also an investment, let’s hope they proceed with their eyes wide open, and press the matter hard in negotiations.

Strategic House Pricing: A Little Low, a Little High, or Is There a “Just Right?”

savannah houseHere’s a “must-read” for buyers and sellers of real estate this week: Bob Hunt’s article on RealtyTimes, “What Is the Correct Way To Price a Listing?” Hunt analyzes a recent article in the Wall Street Journal (August 8, 2013), which described a study purportedly finding that “higher starting prices are indeed associated with higher selling prices.”

The underlying reason posited by the study’s authors is a phenomenon called “anchoring,” which basically means that home buyers develop a respectful first impression of a home with a higher price tag, and are thus willing to pay more for it in the end.

Kudos to Hunt, however, for pointing out a basic flaw in the study: The price variations they’re talking about ranged from about $117 to $187. Hunt notes that this has all the significance of “a rounding error.” I can’t add much to his reasoned analysis, but let me call those dollar amounts by another name: Puny! As a percentage of a home selling price, so insignificant that they might represent mere quibbles over repairs!

In the meantime, having observed bidding wars on a number of occasions (they’re common here in California), I can say that there are times when underpricing a house has the exact effect that real estate agents anticipate: They bring in scads of interested buyers, some of whom will fall in love with the place and bid amounts that are far higher than anyone would have realistically set as an original list price.

But that’s in one market, and may not work for every house. Once again, I can’t do better than to refer to Hunt’s observation that, “[A]s far as answering the general question, ‘What is the best pricing strategy?’ we still have a long way to go.”

Millennials Are Hip to All the Bidding-War Tactics

firewkIf you’re shopping for a home in a hot market — of which there are many, such as Riverside,  Sacramento, Las Vegas, and Oakland — chances are you won’t be the only one making an offer on any given home. And that spells a bidding war.

It’s a war with an invisible enemy, given that you aren’t likely to know who you’re bidding against. And there’s little back and forth — you have to make your best offer and wait to see whether it’s the chosen one.

Typically, the savvy listing agent will schedule a day for presentation of offers, during which a line of buyers’ agents will troop in to deliver the written documents and make a case for why your offer should be the one the seller favors above the rest.

Chances are pretty good, however, that the other bidders will include some “Millennials” — that is, young-ish people born between 1977 and 1992.  And according to a Trulia study cited in Forbes magazine, the Millennials are the group most likely to pull out all the stops and use “aggressive” bidding tactics.

I got a little worried upon first reading the word “aggressive” in the headline, picturing fresh-faced young ‘uns stalking other prospective buyers and slashing their tires, or resorting to underhanded negotiating tactics. No, it turns out they’re just ready and willing to unleash the full volley of tried-and-true ways to make their bids stand out, such as writing a personal (and mildly pleading) letter to the seller, bidding an amount over the asking price (duh), asking friends and family for a loan to help fund the purchase, and removing contingencies from the offer (such as inspection or financing).

Still, the fact that the other age groups surveyed were LESS likely to adopt any and all of these tactics suggest a bit of heel-digging-in. Wannabe buyers who make conservative, “not a penny over asking” offers rarely win bidding wars, and may end up spending more than they would have as home prices eventually outpace them. See “How do I make sure my home purchase offer is the strongest?” for more information.

Friday Real Estate Fun: Ideal House Features

kittyOne of the fun parts of shopping for a home is dreaming about all the great features you’d like to find there — and then maybe being surprised by a few that you didn’t expect or know existed. With that in mind, check out “27 Things That Definitely Belong in Your Dream Home.”

Me, I like the hidden room — it evokes childhood reading about castles full of secret passageways and oubliettes.

Of course, homebuyers will have to listen to the voice of practicality all too soon, and I’m not just talking about affordability. Look at how many commenters pointed out what the neighborhood cats are likely to do with the sandbox! For more on practical matters, see the “Choosing a House” section of Nolo’s website.

 

When Is a Room a Bedroom?

bedSquare footage? Who cares about square footage? It’s the number of bedrooms in a home that’s usually the key indicator when sellers advertise and buyers search for homes online.

Which raises the all-important question: What’s a bedroom?

In real-estate tradition, a bedroom is a room that has a closet as well as a door you can close. Makes sense: If you’re going to sleep in a room, you’ll want to be able to close the door. And when you wake up, you’ll want to grab some clothes from the closet.

From the standpoint of the seller, this standard means that you’ll have trouble fudging the number of bedrooms. Clever staging won’t do it: Just putting a bed into a room doth not a bedroom make.

Unfortunately, that doesn’t stop some sellers from trying to expand the definition of a bedroom. I recently attended an open house for a place advertised as three-bedroom. The upstairs level clearly had only two.  The basement was unfinished. The main floor seemed to have all the normal rooms you’d expect on a main floor, with nothing resembling a bedroom.

I asked the agent, “Where’s the third bedroom?” Ruefully, she inclined her head toward a space off the living room that was obviously a den, with a couch and TV. No closet. The agent explained that the seller had once used this as a bedroom, and knew that people would prefer more bedrooms, so the seller insisted on advertising it as a bedroom.

Now, it’s true that buyers prefer more bedrooms. But for the buyers who really need a third bedroom for their large household, a room with no closet just isn’t going to cut it. They’re going to feel nothing but disappointment as they view the home.

And for the ones who are looking for a third bedroom because — as is common — they need a home office, there’s a perfectly good way to advertise it. Call it a bonus room! You see it in listings all the time, and the home-office seekers pick up on this quickly.  Such buyers might even prefer a home that doesn’t come with the price markup that’s expected for an additional bedroom.

Last I looked, the three-bedroom — no, make that two-bedroom — house I visited was still on the market.

In Housing Limbo, Sellers Scramble to Find New Homes

IMG_4418“I really hope I don’t have to move in with my mother-in-law.”

“I’ve had to move into a rental in a scary part of town — there goes my down payment for the next house.”

“Well, at least my parents haven’t done anything with my old room.”

These are all from stories I’ve heard on the local, Bay Area grapevine.  Anecdotal accounts, it’s true. But I’d hazard a guess, from the current state of the real estate market, that plenty of other recent home sellers are having the same trouble.

They couldn’t afford to buy a second house before selling the first one — banks aren’t exactly sympathetic to carrying two loans these days. But after the sale is done, they have nowhere to go. Inventory is low, and in this part of the country, multiple offers are becoming normal again — at tens or even hundreds of thousands of dollars over the list price. (Remember when the market felt so slumped that it could never unslump? Weird.)

The only silver lining to the low inventory is that buyers are often so grateful to be in contract to buy a home that they’ll bend over backwards to accommodate sellers’ needs to stay a little longer, an arrangement outlined in Nolo’s Q&A, “What happens if we’ve sold our old house without buying a new one?” But even the most sympathetic seller isn’t going to want to wait around forever.

Scary Stats on How Quickly People Buy a Home

IMG_4403According to the National Association of Realtors® Profile of HomeBuyers and Sellers 2012, typical U.S. home buyers spend a mere 12 weeks searching, and view only around ten homes, before settling on the one they ultimately buy.

Let’s think about that for a minute. Twelve weeks. About three months.

That’s a very short time, in which a whole lot has to happen. The front end of the transaction alone is plenty time-consuming — prospective buyers occupy themselves viewing houses online and on foot, meeting with realtors, researching comparable values, writing up offers, negotiating over a purchase contract and repairs, researching and applying for mortgages, arranging for home inspections, buying homeowners insurance, and so on, until the deal is closed. (The closing usually happens about six weeks after the buyers’ offer is accepted by the seller.)

Behind the scenes, of course, there’s plenty more going on: Clearing out closets, holding a garage sale, trying to figure out where the hell you tossed your last pay stub because the mortgage broker has to have it right this minute, researching moving companies, finding new schools and doctors, and oh yeah, trying to hold onto your job in the midst of all this, because you’re going to need it to pay the bills.

Intimidating enough picture for you? This should serve as a reminder to get as much done as possible BEFORE you get serious about househunting. At least the clearing out of closets can be done well in advance.

In fact, the item that should perhaps go at the top of your “Do it now!” list has to do with another scary statistic, this one from the Federal Trade Commission: Around 5% of consumers find errors on their credit reports — errors serious enough that they could end up paying more for loan products such as, oh, I don’t know, maybe a mortgage?

Let’s bring in another important number: It can take up to 45 days to get credit report errors corrected, as described in Nolo’s article, “How Fast Can Home Buyers Improve Their Credit Score?” Yup, some advance work could really pay off.

Friday Real Estate Fun: “If You Lived Here”

HousesFor anyone who loves real estate, it’s good to stop and reflect once in a while on how the concept, shape, and style of what we call a “house” varies across cultures and time periods. And the book, “If You Lived Here: Houses of the World” contains artful images of just that variety. (Yes, it’s a children’s book, but one that adults can enjoy, too.)

By artist Giles Laroche, the book contains cut-paper collages showing everything from cave dwellings to yurts to Dutch floating houses to Venetian palaces. It’s accompanied by concise text explaining what the house is made of, where such houses are found, and what it’s like to live in one.

My favorite text comes with the cave-dwelling entry, noting that if you lived in one, “you would be among the 45 million troglodytes (cave dwellers) living in the world today.” (Gotta remember to use the word “troglodyte” more often.)

Perfect gift for a real estate agent who’s got kids, perhaps? Or a way to keep your little ones busy in the car while you visit your 25th open house? Then again, Laroche’s inviting picture of the Airstream trailer might make you forget your house-hunting plans altogether.

Athletes Who Over-Customize Their Homes May Have Trouble Selling

foosballIt’s not a problem that most of us will ever have — but it’s a good reminder of the general principle that homes fixed up with special features to suit the owner might eventually drive away would-be buyers. “Over-customization,” you might call it. Athletes with multi-million dollar contracts seem particularly prone to this syndrome.

Take a look at Tiger Woods’s $6 million digs for example: It’s not easy to dwarf a house with its own amenities, but this place comes close, with a tennis court, diving pool, lap pool, running track, boat slip, and golf green.

According to “Broke,” the 30 for 30 film by Billy Corben, one of the first things an athlete often does after hitting the big time is to buy a house for Mom. And another one for himself — a big one, with lots of rooms, perhaps a bowling alley or two. And then he goes on to buy a few more houses for friends and relatives. The title of the movie should tell you where all this often winds up, with the houses on the market or in foreclosure within a few years.

Alex Rodriguez is getting credit, however (in Darren Rovell’s article in ESPN), for having had the foresight to add nothing more than an indoor batting cage to his Miami Beach mansion, even while he poured in over $7 million worth of  improvements. (He added white oak flooring. a zen garden, a rooftop deck, and so on.) A-Rod bought the place for $7.4 million and recently sold it for $30 million.

The buyer was not an athlete, but a businessman. And that’s “an important distinction,” says Rovell,  “since so many athletes customize their homes so much that they find trouble selling them to anyone outside the sports world.”

So, there you have it. Best stick to a foosball table, that you can take with you when you move.