Can’t find a house? It’s time to get ugly!
An agent I know listed a charming little home, in a beautiful location. The house had seen numerous upgrades in recent years including new windows, heating system and a host of cosmetic upgrades. The kitchen and bathrooms were renovated, hardwood floors refinished, it had been painted not long ago and the house is generally neat as a pin. The exterior has that doll house appeal and just looking at it from the street; you knew it was going to attract offers, most likely right away. It did. Now, I think that a one and one half storey home with just 1,030 square feet of living space on its two upper levels, priced at $239,900 is pushing the top end of the market, regardless of its condition, but the buyers poured in to see this hot new listing and almost everyone who viewed it thought they’d like to live there. It attracted multiple offers. An offer was accepted and later firmed up at $260,010. Wowza!
You can probably appreciate how much fun this kind of situation is for a home seller. You have a number of buyers drooling over your home, knocking themselves out to try to beat the next ones offer. How delightful. However, it’s not so much fun for the buyers is it? Been there? Yuck!
If you’re having trouble finding a house and you’re tired of participating in these kinds of bidding wars, perhaps it’s time to set your sites a little lower, to see ugliness as the beautiful thing that it is, or at least can be. Homes which have been neglected still attract very little attention. Buyers view them with indifference at best and total disdain at worst. They tend to linger on the market and fail to attract offers. Why is that? Most buyers are really unable to visualize and imagine what an ugly house could become. The truth is, there’s really only one thing that can’t be fixed if it’s bad, and that’s the location. Poor floor plans, ugly decors and even structural defects can all be addressed, at a price.
The same home which I discussed above may have lingered on the market at $165,000 if the seller had not been so diligent in keeping the place up. A couple of weeks into the listing period, a savvy buyer could likely have bought it for $160,000 leaving them with $100,000 in potential renovation room. The buyer would have actually had as much leverage as the seller in this negotiation, because in all likelihood they would be the only interested party. In all likelihood, an awesome renovation on a house of this size would be far less than the difference which was saved by buying a home which was not attracting much interest. Most mortgage lenders will allow you to work these kinds of renovations into the mortgage amount provided that the “as improved” value of the property doesn’t exceed the total purchase price and the renovation cost. So, you get to pick the new kitchen, the bathroom, the paint and flooring colours. Sounds like a winning move to me.
Try it! Have your agent show you some of the ugly stuff. Look at some properties that have been on the market for a week or two. Start by using location and size as the primary criteria and really think about how some of those dogs could look with a little bit of attention. Have fun! I’d love to hear how your agent responds the first time you say, “We really have our sights set a little lower than this. Have you got anything ugly that you could show us?”
I’m always happy to answer your Saskatoon real estate questions. All of my contact info is here. Please feel free to call or email.
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Norm Fisher
Royal LePage Saskatoon Real Estate
6 comments so far. We'd love to hear your thoughts.
April 3rd, 2009 at 11:37 AM
Love the link to your blog on the front page. Joanne Kerr and Kevin Goyer say Hi from NAR! Looking over my shoulder as I type.
April 3rd, 2009 at 11:37 AM
Thanks man! Say hi back for me and try not to get them in too much trouble down there, hey.
April 3rd, 2009 at 11:38 AM
Sounds like a reasonable idea in this very fast moving market. I’ve been looking for a year. Maybe I’ve been too focused on finding the “perfect house.” Thanks for the great tip.
April 3rd, 2009 at 11:39 AM
Thanks Jason. I hope this new direction works for you.
Please try not to let another year pass before you purchase a home. I understand that it’s important to take proper care to ensure that you don’t make a mistake but the market continues to rise at a fairly rapid pace. In fact, since you started shopping for a home, prices have risen approximately 11%. In other words, a home which could have been purchased at this time last year for $150,000 is now selling for around $166,500. Of course, hindsight is always 20/20, but it’s easy to appreciate that one may have been better off to settle for a little less last year. It won’t be surprised if Saskatoon homes appreciate to the same degree over the next twelve months. Something to keep in mind as you move forward from here. Thanks again for your note.
April 3rd, 2009 at 11:39 AM
Good advice and I like the idea of it – but it goes along with some fairly hefty ifs don’t you think? Like if you can actually LIVE in the place in the meantime and if you can get a contractor in the next 6 months and if you wanna live through renovations…
Unless you’re unemployed with lots of time on your hands or have a background in construction – I’d be tempted to pay a premium for a house I know was taken care of and is just what I need – right now.
April 3rd, 2009 at 11:39 AM
Hi Chad. Your points are all valid and there’s no doubt that all of these factors must be taken into account. I have lived in a couple of homes under renovation and it’s not fun. Finding a contractor right now is almost as hard as finding a house.
Right now, the resale market is so insane that I think it’s good to be open to all options. My business partner Nevin wrote an offer on one of the nice ones yesterday for a client. By the time they arrived, 63 other prospective buyers had viewed the home and the listing agent indicated that he had a “stack of offers” which would be presented today at 6:00. Same agent claims the seller will not even look at an offer with conditions. No finance condition, no home inspection and the house probably sells at some insane amount of money. This seems less than ideal to me as well.
At least with the dogs, you have an opportunity to inspect the property thoroughly so you understand what you’re buying and you’ve got a chance to perhaps even get a decent deal on it. Sometimes looking at the stuff that others are passing on can really work in your favour.
Thanks for the comment.