By Lindsay Smith
Last week we had something happen that still has me shaking my head. We placed a home on the market for sale that was needing some TLC. Actually, the home was in need of a considerable amount of tender loving care. It had knob and tube wiring, needed new baths, kitchen, flooring, wall repairs, and someone to remove the duct tape from the kitchen wall. We priced the home $70,000 lower than a comparable sale that was completely renovated, to compensate for the needed work. What happened next was the head shaker. We had over 200 groups through the home and over 20 offers. The home sold $25,000 more than the fully renovated home we used as a comparison.
Why is this happening? Homes needing work selling for more than renovated homes? The reason is very easy to come to terms with. The demand for homes is stronger than we have seen in years. Not only that, the number of homes available is very low and causing buyers to move quickly to purchase. And yes, in an “inventory-shy” market, homes with flaws become attractive with little else for buyers to purchase. At the end of August, we had 160 detached homes for sale in Oshawa. A year ago, we had 344, meaning we currently have less than half the amount of homes for sale compared to last year. This is a perfect storm for sellers.
Let’s dig into what this means breaking down why a home that needed major work sold with such buyer response.
I have met many homeowners who are hesitant to sell their properties, feeling their homes are in need of renovations they are not prepared, or can afford to complete. Some of the reasons homeowners have shared that would cause them to not sell their homes can be summed up in a short list:
- Home is on a busy street or the town or region is planning on major road repairs.
- Home has foundation or water issues.
- The neighborhood is changing with commercial or high-density residential development.
- Landscaping issues such as grubs, water pooling or cracked driveways
- Major items need replacement, such as furnace, air conditioning, shingles and/or windows.
- Bathrooms and/or kitchens need renovation or replacement
- Neighbour issues.
- Electrical issues such as aluminum or knob and tube wiring
Many homeowners who are living with some of these issues can be left feeling that their home may be difficult to sell, or even not saleable. The above example shows that in the current market, buyers are willing to either overlook or take into consideration flaws a home may have and still move forward to purchase the property.
For the past 36 years, when I gather information on a property to help a homeowner determine market value, I have balanced positive features with the cost of repairing or replacing the areas that need attention and come up with an adjusted price that a buyer would pay for the property. This is done (similar to the process bank appraisers use) by comparing the property to other homes and then adjusting for features or deficiencies. What happens in a low inventory market like we are currently experiencing is that buyers with few homes to choose from are more agreeable to purchasing a home with flaws and doing the work once they own the home. I feel it is still prudent to price homes based on neighbouring sales and features, both good and flawed, but in many cases, buyers will bid the home up in value to the be the top offer.
This is the perfect storm: little to choose from, buyers with a need to buy, and homes selling quickly.
If you have a home you feel has any of the above “flaws,” and you are pondering selling, my advice is to reach out to a full time real estate representative and explore the possibility of selling. You may be surprised at what you learn.
If you have any questions about the above information, or if you see a real estate emergency on the horizon, I can be reached at email@example.com.
Keller Williams Energy Brokerage