Monthly Archives: April 2015

Sellers – Don’t underestimate upgrades to Selling

When selling a house, don’t underestimate the value of upgrades to a home. It is always a big question, do you upgrade your home prior to sale or just sell as is? Here is a tale of three homes. Just like Goldilocks, my buyer found which one was just right – but why is what all sellers want to know.

Even though all buyers have different tastes, a prevailing idea is the less work and more upgrades, the more people will spend and the fastest it will sell. I recently saw three identical homes in the same neighborhood with a buyer client. Same floor plan. All three homes were clean and well-kept.

House 1 was move in ready. It had warm updated colors on the walls, nice furniture, updated light fixtures, hardwood floors, stainless appliances, tile backsplash, nice blinds, nice carpeting and tile. Lovely decorations.

House 2 was not move in ready, but offered a blank slate. Everything was neutral, but colors were warm. Cabinets, counters, carpeting, tile. Basic, but buyers could easily add new tile, backsplash, nice colors and make this home their own. There was sparse furniture in the home, basic college level stuff – no décor.

House 3 was dated. Furniture was dated. Lace curtains and collectibles everywhere. Colors were pastel (pepto bismol pink) on the carpeting, tile and cabinets were white and neutral, as were the appliances. Mirrors on the walls. Lighting was minimal and dated (polished brass). However, house 3 was slightly larger and had several features like a water view, fireplace and walk out basement.

Buyer reaction to House 1 was pure excitement. They loved everything. They wouldn’t have to change anything to live there, just move their things in. They loved the colors, the décor, the upgrades…everything. And even though the furniture and decorations where not staying, they loved it.

Buyer reaction to House 2 was ok. They were not in love but said it was not bad. They saw the potential of the home and how with a little effort, it could be something. House 2 was significantly lower in price.

Buyer reaction to House 3 was nothing but negative. They spent much less time in the home and hated everything. All they could see was how much work would be involved and were distracted by the amount of work would have to be done to get it to their taste. House 3 and 1 were the same price.

House 1 and 3 were identical in price. House 2 was $25k less. From a pure numbers point of view, House 1 and 2 would have been the same price. House 3 would have been more. So because house 1 is more appealing, it will get a higher price. House 2 will get the next best price. And House 3 will get the lowest price and take the longest to sell.

Sellers need to remember one thing. 10k in purchase price is equal to $50 per month in purchase price. So if a home is $20k more and needs no work, it only costs $100 more per month. The alternative is a renovation loan, which are sometimes hard to get, or $20k on credit cards, which a lot of people don’t want to do.

So, the answer to this seemingly fairytale story is that House 1 fits just right, will sell faster and for more – maybe even multiple offers (which actually happened). The question is does your home appeal to buyers? Are you House 1, house 2 or house 3?

Millennial Buyers – How to Live for Free

I blog a lot about Millennials because they are very important to every aspect of our economy and housing recovery. One of the millennial trademarks that is unique to this generation is the “boomerang” or “failure to launch” effect of millennial graduates moving back in with mom and dad.

Let’s face it, after the taste of freedom in college, living with your parents as an adult is a little awkward and can be difficult to conduct your life on your terms and spread your wings.

It can have the same difficulties to your parents who don’t keep the same nocturnal calendar as their adult children and are tired of having to tell an adult to pick up their things.

To solve all of those problems and plan for the future, several of my millennial buyers have come up with a new idea that I am calling the Millennial Boarding House.

Instead of living with mom and dad, this formula can be used by smart millennials who don’t want to waste money on rent and want independence. You can be a first-time buyer and create an investment nest egg to move up in the housing market, get government grants and most importantly LIVE FOR FREE. Here is how it works….

1. Use your good credit rating and income to qualify for a nice starter home that has a good price, good area, good schools and is in an accelerating and not a declining area and has potential for future resale. You can do some work updating it if you like or not. The idea is good for now and easy to sell in the future. There are still deals out there and we are in an accelerating marketplace. Interest rates are good. Waiting will cost more.
2. Use government grants through the @Home Illinois program to get $5k in free down payment and/or closing costs.
3. Find a few friends to be roommates and charge them a few hundred dollars each month. Cheap for them and they get independence from their parent’s house or basement.
4. You can live for Free. If you have two or three extra bedrooms, you can charge friends enough to cover your monthly payment and you pay nothing or next to nothing each month to live.
5. You save money by not having to pay anything each month to live, building your nest egg for the future.
6. In a few years when you are ready to get married or start a family, you sell the house for a profit and a nice down payment on your first family house. Or, you keep the house as an investment and rent it out for future income.

There it is, an easy formula for success to start saving money, not waste money on rent and plan for the future. Do yourself a favor and call a Realtor – call me – and get on the path to future equity and success.