GOING GREEN

"Green" and "Organic" are words, which you hear quite often these days. I have been wanting to research and write something on the topic of a "GREEN" house or home, but have not had the time to do the research I felt necessary to get to the place I needed to be to write such a post.

A lot of what I have come across is someone trying to sell me something and not just good advice.
Today, however, I was given a gift, and was sent such an article, which I am going to link you to. It is entitled GOING GREEN WITHOUT GOING BROKE! from Safe and Sound Home Inspections. I hope there is a helpful hint here that makes a difference in your pocketbook.

Sellers: What Are Buyers Looking For?

After I went on an appointment the other day, I was really struck that all four houses, for what they were, showed really well. To start, they were all row houses. Two were grandma houses, one was cleaned up (new kitchen, new hardwood, paint and trim), and one was a complete rehab and very modern and innovative.

It usually doesn't happen in the price range, in which we were looking, that all of the properties would show well. What did they have in common? They were all clean. One had furniture, but no knick knacks or pictures. Why is this important? There are no distractions. The buyer can picture themselves living in the house. When it is clean, they can imagine that they can move in without a big cleaning job, and they can look around and see the good attributes of the house.

I had this subject on my mind, had the television on this morning, and they were talking, on the TODAY SHOW, about a how to make your house look good for both you, and when selling the property without spending a fortune. The biggest piece of advice, which was given, was to paint the walls in light and neutral colors. Of course, I have seen examples where bold has worked, but it seems you need to be very careful when using bold colors. Next, they advised sellers to keep the house straightened, and remove pictures and personal knick knacks.

They gave an example of someone with a white tiled bathroom with hot pink paint. The owner loved the hot pink, but the advice was that no one really wants someone else's bathroom, and it would be good to paint the walls white and make it look like a new, clean bathroom.

Then, they spoke about quick fixes in the kitchen, which can make it look much better. They were as follows:

• New Back Splash
  
• New Cabinet Doors versus All New Cabinets
• New Knobs and Pulls
• Add an Island
• One "Status" Appliance

The next piece of advice they gave was for the buyer. I thought it was the absolute best piece of advice in the segment and that was to not buy a fixer upper unless you can fix it up. I would add to that .... or unless you can afford to have it fixed up in a timely fashion.


So, when I am going through a house, and I am talking about a row house, the following are the things I am looking at with my prospective buyers:

1. Cleanliness
2. General Condition of Kitchen and Bathroom
3. Basement: at minimum should be clean and neat, and in good repair. Hopefully it will also be dry.
   
4. Heater
5. Water Heater
6. Electric: Fuses or Circuit Breakers? Number of outlets in each room? Are there ground fault circuit interrupter outlets in the bathroom and kitchen (GFCI)?
7. Soil Line
8. Age of windows
9. Treatment of front of house and back of house
10. State of yard and wall
11. Lastly, decor and features such as anything high end or closets, etc.. In Philadelphia, we have that great store called IKEA and if there are no closets, you have a great opportunity to buy attractive, and functional wardrobes in place of the closets. For me, I prefer the wardrobe. I know, however, from showing houses that most people prefer closets.
    

Other things that seller should consider are the conditions of the roof and chimney. These things cannot be checked by the buyer, but instead by the home inspector, but the seller should be aware of the age and condition of these two items when selling their house.

For those of you not from Philadelphia, the yard in the above
picture is really big for a South Philly Yard!

Over Improving Your House

I can only say, your home or house, whether it is a single family or condominium, is not an investment. However, you must consider which improvements are worth doing and which are not. Your home is the place, where you live, whether you rent or buy. Now, you should only spend what you can afford on your home, but there are things you may put into your home that you would not put into an investment property, because you want whatever it is to enjoy your lifestyle more fully. It may be something like a spa tub. You may not recoup the cost of that tub when you sell the property, but your quality of life is so improved that it is worth the expenditure while you are in the house, but do not consider it an investment, but rather a luxury. And don't expect that it will increase your property value by the amount you spent or any at all.

I had a buyer look at a very pretty jacuzzi and say that would be an expensive sweater dryer for her. Some of these things, which you may think add great value, will not for the next buyer of the home. The spa tubs are a perfect example, because some people love them and others hate them. Unless, you are investing in very high end properties, you probably would not include something like a spa tub for a tenant, because of the cost, maintenance and propensity to have more problems than a regular tub. Would you make enough in rent to cover the cost of installation, maintenance and possibly replacement? Probably not and you would therefore not install it.

You must be careful not to over improve your home unless the expenditure absolutely does not matter, and you are prepared to take a loss when you go to sell the property. For example, if you have a two story row house with no parking in a neighborhood where the most expensive houses are selling for say $200,000.00 and all two story houses, and you put a $60,000.00 or more third floor on it, and you plan to leave the house in the next few years. Was the money well spent? Probably not. However, if you put central air, new plumbing, new electric, new roof, new doors, new windows, is it money well spent? The answer is usually yes; these items add value. If you go into a poor neighborhood, however, it may be hard to recoup the cost of something like central air.

If you go to my previous blog on COMPS or COMPARABLE PROPERTIES, you will gain an understanding of how a Realtor, or Appraiser for that matter, determine at what "price" a property should sell. What a Realtor or Appraiser is looking for, however, is a comparable property that is similar in size, close in proximity and has sold, hopefully, in the last six months. Thus, if you put a third story on the property, there may be no comps and no market for it. I am not saying no one will buy it, but if the price you need to get to come out even or even ahead is so great that your prospective buyer could buy in a better neighborhood and perhaps get something like a garage or parking, which your property does not have, they are likely to go for the better neighborhood.

Last year, I ran comparables for a property in the neighborhood, where my office is, which is the area South of Oregon Avenue, North of the Expressway, and West of Broad Street. Most of the Properties will sell close to $200k and up to perhaps $270K. There are a few along Broad Street and Marconi Plaza Park, which sell for more. The ones that sell for more have parking and many have been improved to be very high end properties. They tend to be larger and have a view of the Park.

At $270K in the properties not on Broad Street or the park, what do you get? Well, new everything plus hardwood floors, granite counter tops, finished basement, new windows and doors, 3 bedrooms, at least one bath, but more likely 1-1/2, a finished basement, high end appliances, new front, etc.. The subject property was originally, a three bedroom. The middle room, however, was reduced in size to accommodate the enlargement of the bathroom. The bathroom was definitely the nicest room in the house done in beautiful Italian Marble. The middle room was now reduced to a small office or storage; you definitely could not put a bed in the room. There was a third floor added and made into a large bedroom. The plumbing was run for another bathroom, but not built. There was a small deck off the back with a view of Center City. All of the mechanicals, window, doors, etc. were newer and good quality. The kitchen was newer, nice, but not as modern as what is currently selling as modern. The rest of the house was okay. It was very clean, well maintained, but rather vanilla. It was decorated to the owner's taste, but not to the taste of what is selling as "modern". Anyone looking at the house would want to decorate. They would probably want to further update the kitchen and put down hardwood floors. If you are spending $270K on a house in that neighborhood, you should get hardwood floors.

Now, I thought they could stretch and perhaps get the $270K, but they wanted $325K. Now, when you get into the $325K range, you can buy a bigger house, a better address, and perhaps parking. At $350k, there are a lot of choices. If I had taken this same house with decorating problems and put it off Fitler Square, it probably could bring a price between $500K-$600K, but not in this location. In this location, South Philly, there are a lot of other choices over $300K.

The moral of the story is that they "over improved their house". They were very insulted by my price. They did not give me the listing. The gave it to another office. The house did not sell. It ultimately, had a FOR SALE BY OWNER sign on it. I haven't followed through to see if they eventually sold it and for what price. But I tend to think that the house did not sell.

The irony, in all of this pricing of this property, was that they wanted to move to a larger, two story house with a grass yard, and parking in Packer Park that was listed for about $350,000. The difference in a 30 year, fixed rate mortgage at 7%, if fully financed between $325K and $350K is $2164 versus $2330. In this price range, it is not truly a big difference. Parking alone is enough to justify the price difference. Which house would you buy?