Sheri’s Blog

Recently, I met a seller, whom I’ll call Joe, who owns a lake house in a resort town close to Huntsville. The house has been sitting on the market for over two years, and Joe was only just beginning to question the competence of the listing agent. He began asking me questions about the market, and why I believed it hadn’t sold. I asked him what kind of feedback, in the two years that the home had been listed, that his agent had provided him. He said “very little”. Now I’ve always believed there are two sides to every story. There’s his side, the agents side, and perhaps the truth lay somewhere in between. And in the business of real estate, sometimes the truth for sellers is difficult to hear, particularly when a house is grossly overpriced and not selling.

In this case, the seller had purchased the lake house during a time when our real estate market was at its peak. The prior owner of the house had purchased it for just over half a million as a “flip” one year earlier. He finished out 800 square feet of attic space and then put it back on the market. Joe bought the house for $850,000! The same agent that sold it to the investor client, relisted the house, and then represented both sides of Joe’s transaction. As you can guess, both the investor and agent made out great. Joe was not so fortunate. He put the house up for sale shortly after he purchased it (because of unforeseen circumstances), for just under one million dollars, and to date, the house has not sold. Each month, Joe shells out $3,000 toward mortgage. In two years, mortgage alone has cost him $72,000. (that does not include tax, insurance and maintenance). Joe’s dream house has turned into a nightmare.

Joe informed me that he was ready to withdraw the listing from his agent, and asked if I would meet him down at the home for a consult, and I agreed. From what he described, I was expecting to find a beautiful quiet retreat, away from the hustle and bustle of city noise. He had touted all of the many wonderful features of this home, and truly had no idea why it had not sold. However, as I pulled down the street and headed toward the home, I spotted problem #1. Turns out this quiet retreat was located 300 feet from the main highway. When I opened my car door, you could see and hear traffic whizzing by, the sound was deafening. I rang the bell, and Joe greeted me, and we started our tour. The home was very traditional, with fluted columns, crown molding, and travertine floors. However, when we approached the living room, adorning both sides of a beautiful granite fireplace, were two huge orange modern style veneered shelving units. These cabinets took up the majority of wall space, each about eight feet wide and eight feet tall…they were hard to miss. Then we made our way to the kitchen. The modern style orange veneered cabinets matched the living room cabinets, and the kitchen was very small and dark. The veneer was bubbling in places where it was lifting away from the board underneath.

There’s no question the view out back to the lake was spectacular…if you could ignore the traffic to the right of this scene. Finally, we made our way up to the finished attic. The stairwell leading up to the room was so narrow, and no handrail had been installed because it impeded the ability to carry furniture up and down. The only way to support yourself was by pushing on both sides of the wall with open palms. If you were a large person, you might not be able to make it up at all.

Finally we walked out to the back patio…and I took another deep breath. The entire back of the house was constructed of EIFS (Exterior Insulation and Finish Systems). This is the fake stucco siding that has caused many home owners thousands of dollars in repairs. Many buyers avoid looking at EIFS homes, even if the home is bonded, and agents often avoid showing them without first issuing a big warning to their clients about the product.

After the tour, Joe was anxious for my feedback…the moment of truth. The simple fact was, that given today’s market along with the condition of the property, the house was grossly overpriced. I felt Joe would be lucky if he could sell it for much more than the original investor purchased it for (ouch).

I gave Joe my feedback in the most empathic way that I could. Joe was faced with the decision; reduce the price dramatically and cut his losses (and even with a huge reduction in price, there was no guarantee it would sell), or hold on to the property with the hope that the market would pick up some day. The rose colored glassed had been removed, and a torrent of rage ensued. At first he defended his purchase, challenging my feedback, and then he blamed the listing agent for selling him the house. He needed time to digest this new information. Unfortunately, I never heard back from Joe after our meeting. To date, Joe’s house is still listed at his original asking price.

I have used this recent example because clearly, as a consumer, there are things you should know about before purchasing and selling a home, particularly if you are concerned about resale value. A home is one of the largest investments that most people ever make. Be wise about how you spend your money.

For Joe, this home was an “impulsive” buy. He bought it without doing any research about the neighborhood or recent sales. According to Joe, his agent never showed him comps before he purchased the property, nor did he share with him that the house had sold for $300,000 less one year earlier. Joe’s home was the largest home in the neighborhood. The surrounding area was made up of old homes selling from the mid $100,000’s and up.

So here are a few lessons you might take away from the story:

Lesson 1: When searching for a home, it is always best to find an area where there are many similar homes, otherwise, the smaller old homes keep the newer larger homes from appreciating.

Lesson 2: If you purchase a home on a major street or off a major highway, expect a discount. Understand that when you resell the home, you may be drastically limiting your buying pool.

Lesson 3: Be informed about the kind of materials used on the interior and exterior of your home.

Lesson 4: Finished attic space does not yield the same dollar per square foot value as the main living quarters. This generally applies to basements as well. So while it may add some value, it will not increase the homes value that significantly.

Lesson 5: Always have your agent run comps before making your purchase. It’s important to understand market trends, so that you don’t overpay for your home.

Lesson 6: If you’re going to sell an expensive home, it needs to look high end. When buyers are shopping for homes, they look for reasons to discount. Inexpensive cabinetry turns buyers off. Work with your agent on “staging” and how to present your house in the best possible light. If your agent does not know how to stage a home, hire a professional, or find another agent that does.

Lesson 7: Large Kitchens add value, small kitchens give buyers reasons to discount. Kitchens are important to buyers. If you are concerned about resale value, look for a home with a reasonably sized Kitchen.

Lesson 8: If a home is sitting on the market month after month, make sure you are kept informed by your agent. Usually there is a reason why a house doesn’t sell, and if you’re not being kept informed, be proactive and start asking questions.

Lesson 9: Don’t overprice! By overpricing your home, you will eliminate traffic. Buyers look at many homes before deciding which one to purchase. If there are nicer homes for less money in nicer areas, they will choose to purchase those homes.