I found myself ranting in front of a client the other day (something I rarely do.). It was about the real estate market. Not how well (or poorly) the housing market was performing, but rather the toll the selling process was taking on my clients. My complaint: selling homes has gone the way of the wedding, and homeowners are none the better for this transformation.
Weddings proved to be almost recession proof after 2008. While most folks were struggling to make ends meet, the wedding industry took off (trust me, I know; we married a daughter in 2014). What used to be a $10,000 wedding rapidly evolved into a $30,000 or $40,000 (or more!) extravaganza with multiple wedding planners, must-do destination locations, rehearsal dinners including the entire extended family, Sunday brunch for all, etc. etc. Don’t get me wrong, these weddings are beautiful and oh so special. But necessary? Not in my opinion. But tell that to the bride or bride’s parents now-a-days, and it falls on deaf ears. The pressure to have that near perfect wedding is much too great.
Switch to the housing market. About four or five years ago, after the foreclosures and short sales dried up, and when it was very much a buyers’ market, I started hearing statements such as, “The realtor told us we had to get rid of all of the wallpaper upstairs.” Or “We need to upgrade the bathroom before we sell.” Or “We have to paint again – neutral colors are a must.” And then I started hearing this phrase “move in condition.” It seems when buyers rule the roost, no one wants to fix up a house after they purchase it. That is the job of the sellers. Never mind that the sellers’ taste might not be the buyers’ fancy, the point is the house should need no major work when the buyers walked over the threshold. Houses that need a lot of work are handed off to developers at a low price. The developer then races through the home’s transformation and flips it for a much higher price. The seller is on the losing end of the deal, as the developer makes all the money. Hence the pressure for them to fix up the house themselves.
The final straw, when I knew the real estate market had crossed the line, was when home staging burst on the scene and stayed. Now many people stuff their own tired or quirky possessions into storage and pay someone thousands of dollars to bring in furnishings and decorations that transform the home into a place buyers can fall in love with — and pay a higher price.
Does all of this work? Well, let’s say this: It sounds like more homes are being sold and bought in “move-in condition” at higher and higher prices. You get more money and you pay more money. Is it necessary? Not when I look at some of my clients, who are tearing their hair out or feeling they can never do enough to please the realtor and the prospective buyer. I am not convinced that all of this pre-sale fixing up is worth it.
The housing market has become a self-perpetuating feedback loop. People are so exhausted from fixing up the old house in preparation for sale, that they have no energy (or money) left to fix up the new house – so they demand that the new house be in move-in condition. Which sends the message to other sellers that they, too, have to fix up their old houses. The ultimate effect is higher housing prices on both sides of the sale. It is an increasingly expensive market for everyone.
When I sit with a client, I try to help them plan for their future. I want to see them settled in the best home they can afford. For most people there are limited dollars that they can allocate towards housing, if they want to meet their overall life goals. I see my job as helping my clients direct those limited dollars towards homes they are buying, not the homes they are selling! I want to help them resist the sales pressure that has been building in the housing market.
So it is not unusual for me to recommend to clients that they follow three simple guidelines in preparing their house for sale:
- Focus on the outside of the house. Curb appeal is important. You have to get the prospective buyer into the house. A fresh coat of paint? Quite possibly, especially if the paint is peeling. Landscaping? Just enough to make it look taken care of and with the requisite shrubbery. Assume the buyer may want to add a few of their own bushes and flowers at some point. Do you need to repave the driveway? Not unless it is impassable.
- Fix what is broken. If there is a leak, repair it. If a toilet doesn’t work, replace it. If your wiring is not up to code, make sure it is. But do you need to re-finish the hard wood floors? Put new cabinets in the kitchen? Paint the walls a benign white? Not if you want to finish the floors and paint the walls in your new home.
- Clean out your stuff. This takes time (lots of time!), but not so much money. You likely won’t need to stage your home if you de-personalize it enough to encourage the prospective buyer’s imagination.
Remember – you don’t get to enjoy any improvements that you make on your old home. But transforming your new home is something you can take pleasure in for as long as you live.
Just as destination weddings have become a must, increasingly so is the urge to create destination homes for buyers. I am not sure how much we have all gained by these trends. I would love to see people start resisting the pressure to add layers of expenses to the sale of their houses. It can begin by taking a hard look at cash flow and making a conscious decision of where you want to spend your money and energy. Selling your home should not be as complicated and costly as we are increasingly making it.
Then again, I am also the person who would like to see the backyard wedding make a comeback. Easier said than done.
The information contained in this post is not intended as investment, tax or legal advice. StrategicPoint Investment Advisors assumes no responsibility for any action or inaction resulting from the contents herein. Betsey’s opinions and comments expressed on this site are her own and may not accurately reflect those of the firm. Third party content does not reflect the view of the firm and is not reviewed for completeness or accuracy. It is provided for ease of reference.