My Money, My Property

As housing continues to stabilize throughout large and small markets, the debate of rent control has resurfaced. Rent control is basically a government rule that limits the amount of rent any landlord may charge tenants of residential properties.  The most common argument for supporters is that rent control makes housing more affordable, and critics argue that rent control leaves little profit for landlords to make needed improvements and that it creates rental shortages because fewer investors buy properties that have rent ceilings.  The most obvious answer, to me, is a simple economic principle called supply and demand.  Investors want to make money, and they will only charge as much rent as they can successfully fill vacancies.  Also, assume that the market rental rate is unaffordable to an interested tenant.  That tenant can find a roommate and cut the cost in half without the aid of rent control.  If there was a rent control in play, then maybe the unit is more affordable, so now the aforementioned tenant  may choose to live by himself without a roommate (because he can afford the rent control rate).  That means the would-be roommate now needs a place to live, so the rent control has effectively created a rental shortage.  This is but one example of rent control procuring the opposite result of what it intended to accomplish.  The most common landlord complaint against rent control is the simple question of how a law can limit how much one can charge for his own legally owned property. This is a familiar legislative narrative, isn’t it?

Mattress Real Estate Martket(share)

Chances are good that wherever you see retail development, you will also see at least one mattress store. In fact, don’t be surprised if you see two mattress stores located next door to one another.  I have openly wondered what kind of business plan mattress manufacturers are following when they completely saturate city squares with large, hulking buildings and gaudy neon signs.  I have finally found some answers to their strategy, and I will share a few of the reasons behind the proliferation. #1-Low Barrier to Entry-Besides the real estate build out, there is very little overhead because the mattress manufacturer often provides the floor samples (at no cost to the retailer) and the retailer can generally survive with only one or two salespeople instead of large staffing responsibilities. #2-Commoditized Selling-Since there are more and more mattress retailers, there is very little consumer differentiation between brands/styles, so therefore, the retailer with the most visibility and most locations will probably sell the most mattresses. #3-High Markups-mattress retailers have as much as a 40% markup, so even though customers may only change their mattress every seven to ten years, the retailer is still profitable.

Location, Location, Ugh!

You probably don’t follow the real estate market in Layton, PA, a sleepy town about 30 miles south of Pittsburgh. How then, could a $249,900, 4 bedroom home in Layton attract worldwide attention and buyers all the way from California?  Because that Victorian home was used as a movie set in the thriller, Silence of the Lambs, in 1991.  The home at 8 Circle Street was portrayed as the home of Buffalo Bill, and its exterior and dining room appeared in the movie.  However, the listing Realtor has discovered that while there is curiosity and showings, there are no offers.  The sellers probably thought it to be a good idea to loan their home to the Lambs producers, perhaps even imagining that the exposure would eventually raise the value.  The problem, though, is that it raised its (fictional) notoriety and actually decreased the value in the process.  On a smaller scale, there are homes in the Triad that have a certain negative history or dissenting intrigue that make them hard to close, but few of them are recognized throughout the cinematic world like 8 Circle St.  If you need to make an appointment to view it, don’t call me!

Analytics Say What?

As a baseball purist, I have watched the evolution of baseball managers using analytics to make managerial decisions. They study of patterns of data to make decisions that would otherwise be made by “gut” feelings.  Real estate has always been under the microscope called analytics, and it reveals surprising results.  Have you ever heard the advice “Buy the worst house in the best neighborhood?”  The advice comes from the idea that by buying the lowest priced or worst conditioned home in the subdivision, the appreciation ceiling should be much higher.  Well, analytics say it isn’t true.  The bottom 10% of homes in a typical neighborhood offer no more rapid appreciation than the best houses in the same neighborhood.  It is a myth to buy the cheapest house and expect the greatest return.  My advice is simply to buy the best house you can afford in the best neighborhood, and I don’t need analytics to support that advice.

Change Your Perspective, Change Your Experience

One of the most valuable services a REALTOR can provide is perspective. Given the emotion of buying a home and spending a large amount of money, it is expected that buyers will develop tunnel vision.  A green REALTOR may be reluctant to offer a fresh perspective for fear of losing a sale, but a seasoned veteran understands that a REALTOR is hired for expertise and experience, not to be a transaction coordinator.  Recently, I had a buyer who desperately wanted a particular home.  The home was vacant and had only been on the market for a few days.  The buyer developed their own strategy that since the house was vacant, the seller must certainly be desperate to sell because after all, who wants to pay two mortgages or a mortgage and a rent payment simultaneously.  My buyers surmised that the sellers must be willing to sell for a lower-than-market price because otherwise, the house may sit vacant and become a liability to its owners.  They wanted me to submit a lowball offer.  I told them it was a terrible mistake and offered a 180 degree perspective apart from theirs.  I predicted that the sellers are unmotivated BECAUSE they moved without having sold the house first.  If the owners were in a financial pickle, they wouldn’t have planted the “for sale” sign after they had already moved.  If they were willing to take 30% less than purchase price, they would have probably listed 20% less than the current list price.  Here are two entirely different interpretations of the same situation, and even if my buyers choose not to pursue my strategy, my advice gave them pause for thought and hopefully helps them arrive at the right offer price.  When choosing a REALTOR, if your agent always agrees with you, you probably need a new perspective!

Home of the Free

On December 19, 2003, the Service Members Civil Relief Act (SCRA) was signed into law, replacing the Soldiers’ and Sailors’ Civil Relief Act of 1940. The SCRA affects active US service men and women, and it established special rules regarding (among other things) foreclosures, property seizures, and debt breaches as it relates to interest in real property and personal property.  To illustrate, suppose a National Guard Reservists is called into active duty and deployed.  In the meantime, his wife falls behind on the bills and the mortgage.  Even if the family cannot make the house payment, the SCRA prevents the lender from foreclosing on the house or forcing the sale.  Upon the soldier’s discharge from active duty, he would have 60-90 days to reconcile the debt or work out an alternative with the bank.  SCRA and its benefits to the men and women in our military are important to me, because I want our freedom fighters focused on our nation’s safety, not principal and interest.

Roads Less Traveled

When subdivisions are developed, the roads begin as public roads, and many will then become public roads (assuming the roads are in compliance with NCDOT standards). Usually the transition occurs once a certain number of properties have been sold within that subdivision.  Prior to that transition, the homeowners and the developers are responsible for maintaining the streets.  The high cost of maintaining a street may affect a person’s decision whether or not to buy in a private road subdivision.  Additionally, school buses, snow plows, and other service vehicles may not travel on private roads (emergency vehicles will however).  All developers are required to present buyers a subdivision street disclosure statement upon purchase, which should alert the buyer  to the private vs. public status.  You can also go to NCDOT website to enter a street address to find out if it is a public road.  Knowing the difference can save you thousands.

Christmas “Sell”

If sellers are thinking of selling their home in the spring of any given year, they usually start preparing over the Thanksgiving and Christmas holidays. Once they start prepping for the spring market, they inevitably ask themselves, “Should we go ahead and list it now rather than wait?”  I get this question frequently, and here is my answer. Yes.  For one thing, the majority of sellers will wait until spring, at which time you will typically compete with 30% more houses in your market area.  Increased competition means lower prices.  Secondly, a home is an emotional purchase, so having your Christmas decorations in place (assuming they are tasteful) adds a family element to the home and makes it a warm, inviting destination.  Thirdly, buyers need to buy for many reasons that have nothing to do with seasons or holidays.  Job transfers, divorces, deaths, downsizing, etc. occur without regards to Christmas or any other season or holiday.  Why shouldn’t they get the chance to purchase your home rather than waiting until March or April?

Featured Memories

During the course of selecting a home for purchase, buyers may consider the exterior siding, counter tops, light fixtures, plumbing fixtures, roof, landscaping, and a host of other features. As I reflect upon the first home I ever bought, and even the second home, I cannot recall most of these details. The reason they escape my recollection is because none of those features impacted my happiness or fondness of the home. The things my family and I did inside the home is what I recall most vividly. When buyers are contemplating a purchase, they rarely imagine what they will do inside the home, but instead focus on what the home looks like. If the look of the home is more important than the activities inside, then that focus hits the target. However, if you look forward to celebrating a birth, a Christmas morning, a 4^th of July picnic, or some other meaningful occasion, then I encourage you to look beyond the framing and the siding and discover that the most important job you will do is inside the home with ones you love.

Newer is Not Always Available

A large number of my buyer clients express to me that they prefer newer homes.  Buyers want newer homes because there is a smaller likelihood that the roof or HVAC would need to be replaced soon.  Typical roofs can last anywhere from 20-25 years if properly maintained, while HVAC systems could last as little as 12 years and as many as 25 years depending on the type, size, style, and maintenance.  These new home seekers are being faced with challenges though, because last year, over 70% of the U.S. housing stock was built prior to 1990.  That means that sellers should expect buyers to negotiate new HVAC or roofs with their offers even if they are currently working adequately.  The majority of buyers, after having just coughed up a down payment and closing costs, don’t have $8,000 saved for a new roof or $5,000 for an HVAC overhaul.  The large percentage of older homes is partially the result of the slowdown in new construction, and the fact that many of the previously listed newer homes did not sell because the seller was upside down, hence the home was withdrawn from inventory.  The moral of this story is that if you are a seller, have your roof and heating / air system inspected so you can demonstrate to your buyer that your pre-1990 home still has a big upside!