The Great Recession was a candy store for investors. Flipping gurus packed convention halls with people convinced that they can make a fortune using their system that cost upwards of $10,000. There were tremendous opportunities for those who had faith that the market would rebound. Fast forward from 2008 to 2018, the market did come back.
As a real estate coach once told me, “Stocks and bonds can spike or disappear. Real estate can go up and down, but it’s always there. That’s why they call it real.”
Housing inventory right now is very tight, there is a shortage of traditional sales, even less of distressed homes. Total distressed homes sold in Hennepin County in 2017 was 663, compared to over 5000 traditional sales. RealtyTrac shows that only 1 in 3411 homes is distressed in Minnesota. Across the country some areas are still having trouble, like New Jersey where 1 in 740 are in foreclosure. But, for most of Minnesota foreclosures are back to pre-recession levels. Problem #1 for flippers is lack of inventory.
Last week I showed a foreclosed property that was on the market for 1 day. As we went into in the basement I noticed ice on the floor, and heard water dripping. A pipe burst and water was splattering all over the floor. At below freezing weather that’s an emergency. I left an SOS message for the agent. The house was in rough condition before the water problem, but my client wanted to make an offer. He was excited, I wasn’t. It needs windows, roof, new boiler, kitchen, flooring, bathroom rehab, the dollar signs were swirling in my head. It was in multiple offers, my client offered well over asking, but didn’t win. Sellers want cash for a property that isn’t habitable; functioning heat and hot water. It had neither. During the recession we would have negotiated the price down, not now. Multiple offers are the norm. We’re all surprised if a home lingers on the market.
The #2 problem is rising costs. Lumber just jumped 30% in price, and tradespeople are in short supply. If your carpenter is in the middle of job and gets a better offer, he can walk. Lack of a skilled labor force is holding down new construction, and rehabbing.
The disaster areas around the country are affecting normal supply and demand. Statistics show that 6 months – 1 year after a disaster that home sales spike by 11%. Many damaged homes aren’t salvageable, and people need a new place to live. Materials and labor are funneled to areas in need, and prices go up.
The 3rd challenge is that buyers with FHA loans expect that a seller is obligated to pay their 3% in closing costs. Lenders let them believe that they can get up to 6% back from the seller. That’s not the case. Seller contribution is always negotiable, no one is obligated to pay a buyer’s costs. More than a 3% contribution from the seller skews appraisal values. In 2017, 25% of transactions had appraisal issues. Calculating the cost of acquisition, holding, and sales of a home is almost always underestimated. Seasoned flippers have learned only by going through the fire what it is really going to cost. There is an ongoing learning curve, and changing markets. The best time to flip homes is when there is a supply of cheap homes in need of upgrading. Is Flipping completely dead? No, but it’s on a respirator. Home prices continue to climb, inventory is low, and profit margins have shrunk. Real estate is always expensive short term. FLIPPER’S brother REHABBER is doing better buying and holding. That time gives an investor time to recover costs and see enough increase in price to see a real profit.
Between 1996 when I first started selling real estate, and today, the world has changed a lot. Technology has made us more capable, faster and smarter. My job description is the same, it’s how we practice the craft that it is different. What doesn’t change is that real estate is a people business. Like an insurance ad that claims to have seen a thing or two, I’ve learned a thing or two.
Stocks and bonds can disappear, real estate goes up-and-down, but it’s always there. That’s why they call it R E A L estate.
It is always about the client and their best interests. If you are good to them, their children will call you when they grow up.
My opinion is just my opinion. Don’t get stuck on it or let it get in the way.
Moving is hard, it is really hard, but it is life-changing. Agents should move often so that they don’t forget.
An easy transaction is an oxymoron.
Buyers have no idea of what they want, they haven’t done this before.
Everyone wants ‘a deal’. Define what that means at the beginning, or everyone will wind up exhausted and disappointed.
All clients need to be educated about the process. That is my job, not theirs. Don’t act like they are supposed to know.
It’s not about the kitchen. We practice contract law all day, every day. Make friends with attorneys.
Negotiation is a win/win. Everyone gets something they can live with or no one wins.
Honesty not only is the best policy, it is the only policy. Honesty isn’t brutal or radical. It is simple clarity of what is.
Your reputation follows you everywhere; it is your shadow.
You can’t talk yourself out of your own actions.
Embrace change. The alternative leaves you covered in dust.
Watch yourself on video. You will get outside yourself, and see what others see.
There is too much to know, but every little bit helps.
Opinions are like socks. They need to be washed often and discarded when they have holes.
Be kind, and remember that everyone is doing that best that they can with what they know, and what they think is right for them.
There is no ‘the one’. Find one with 80% of what you want and work with it.
Don’t complain about your problems. 80% of people don’t care, the other 20% are glad that they aren’t you.
Learn which rules are meant to be broken and which ones will come back to bite you. Keep copious notes on everything. You and the iRS will be grateful.
The older I get the more I realize how little I know. Education is winding path of discovery. Learn something every day.
Our eyes are fixated on the screen, our blood rushes, and we hold our breath. Are you ready? Are you ready to see your dump of house transformed? YES, YES, YES!!!! The buyers scream, Ohhhh, we can’t believe it!!!” We cheer with them, our hearts are pounding, and we can’t wait to see the surprises inside.
Room by room they swoon, it gets better and better. The designer squeezed in every desire, it’s almost a psychic dream come true. Sunlight pours in through enormous windows casting a cozy glow across sparkly granite countertops. Walls were opened up creating expansive airy rooms, clever spaces for entertaining friends and family. It’s the fantasy of every homeowner, and homeowners to be to have a shabby reality transformed into a dream home. And, it’s all done within an hour with time for commercial breaks.
It’s not that I want to punch holes in your new shiplap, or watch your assets swirl down the drain. But, what you’re watching is not how it works. It’s hard to resist believing what your eyes show you. Believe me, reality makeovers are far from reality. What looks effortless is a whole lot of sweaty teamwork going on behind the scenes. There were clues that you might have missed along the way.
For example: “You only have a budget of $125,000, so we have to be very careful in planning.”
Or, “I’ve shown you three houses, talk it over and let me know which one you decide to buy.”
And my absolute favorite, “We found a problem with the plumbing that might cost you another $5000, so you will need to come up with additional funds, or we’ll have to cut it back somewhere.” Eye roll.
Hollywood is no stranger to sweat equity. In the early1950s movies were about soldiers home from WWII to marry the sweetheart who waited for them. After the wedding, he’dswoop her off her feet carrying her over the threshold of the only shack he could afford. She’d melt, “Oh darling! It’s everything I’ve ever longed for,” they’d kiss with violins playing in the background. The next morning he’d march off to work, she was in an apron, hair piled on her head with a plate of pancakes in hand, “Can’t wait until tonight darling.” He’d come home after a day at the office, she’d open the door with an enormous grin, a hot dinner on the table, the whole house was remodeled. There was new furniture, and every room was freshly painted. He’d say, “Well, it looks like you’ve had a busy day! I can’t believe what you’ve done with the place.”
Neither can I. Even as a child I would wonder how much coffee she drank to make it happen, and why she wasn’t tired and crabby like my mom would be. No one else seemed to notice that the bride was a contractor, painter, carpet installer, not to mention a fabulous cook with never a hair out of place, the forerunner of Martha Stewart. Seeing a home transformed appeals to our belief in magic. Most TV reality shows have a Realtor and a designer. The Realtor shows homes, and negotiates the offer. Spoiler Alert: they already purchased one of the 3 homes before the show, and applied to be featured. The application includes a profile, financial info, how much they intend to spend, with extensive contracts. Then the designer performs a whirlwind of magic with a little help from a plumber, electrician, carpenter, painter, landscaper, and decorator or Ikea. The buyers are always ecstatic and overwhelmed. Except, when they are not. That’s when the law suits start.
Here on earth, the process works a little differently. Amber Smith, lead designer forChief Concepts in Minneapolis, recounted a call from a potential client, “I want to reconfigure the upstairs bedrooms, add a bathroom, and take out a couple of walls. You know, sort of like the Property Brothers, “giggle giggle. Her budget was exactly 1/4 of the actual cost. No Disney themed decor or furniture included.
Your budget comes first. All decisions are made around that budget. Decide on the scope of the work, what you have done. You know, and I know that you’ll always want more. If you are remodeling the kitchen, the dining room will look dingy unless you at least give it a coat of paint. It’s so tempting to be a victim of creeping scope, give yourself a reality check.
Then assemble your 9000 Pinterest Boards that mix styles, colors, and themes for that ‘eclectic’ feel. Decide where to prioritize your money. Is it cabinets, tile, counter tops? What sized cabinets do you prefer, 36”, 42”? Will the cabinets you love support a huge slab of quartz or granite? There are a lot more decisions and details than you anticipated. If you are renovating the kitchen, pull samples of backsplashes, tiles, counters, flooring, cabinet doors, hardware, and paint colors. More than 3 choices will just confuse you, it confuses me too.
You should visit a stone warehouse. Most have a stone yard with hundreds of quartz, marble, granite slabs on display. Next is a visit to a cabinet shop, some have small sample sizes to take with you. The best thing that you can do is spread your samples in front of you, and try combinations. If by now you’ve hit overwhelm, stop torturing yourself and hire a designer. This is a good idea because:
Your General Contractor is not a designer. He handles plumbers, sheet rockers, electricians, carpenters, tile installers, window installation but not design.
A designer has resources, experience, and will be able to weed through the chaos of your Houzz, Instagram, Pinterest boards and pull a real design together to give the contractor a direction.
You don’t know where to prioritize your budget. Controlling a budget when you don’t know the cost of materials and labor, or where you can compromise without losing the look you are after, is bumping into your own walls. A designer will have options at different price levels on hand. It will be the best money you’ve spent saving you time, money, and from losing your mind.
Amber says, “I have found that in working with clients on selections, the best way for them to envision their space and truly allow them to see what they like, or what they thought that they liked, is to spread out samples and try combinations. Almost every customer that I work with says, “I know exactly what I want.” But, when we lay out their choices next to other options, they almost always have a change of heart and are surprised that they go with something else. It made sense and looked beautiful in their head, but not in front of them.” Expect that every remodel or rebuild has a timeline. You will want someone with experience to help you design, plan and execute a project so you will love it for years to come. You need someone like Amber on your team. Give us a call.
First time buyers are used to scrolling through hundreds of options on Zillow, Trulia and Realtor.com. Some think that they need to see every home on the market to make a decision. They form a wish list from houses online, and by visiting a few open houses. There is a better way.
Searching for homes has gotten easier, but still requires a little due diligence. In the late 1990s, buyers were sure that they knew everything about a house from a 1” square photo online. After seeing a few homes in person, they quickly discovered that one small photo didn’t tell them that there were electric lines overhead, that the basement looks like Cellblock D, or that it was squeezed in next to a gas station.
Now we have a multitude of photos online, floor plans, and are fast approaching 3-D tours. But, that still doesn’t tell the whole story. When you buy a house, you buy a neighborhood, the school system, and the city where you live. An MLS listing has information about the house, room sizes, garage, and the lot, but there’re other resources to check as well. Google maps is more than just directions, it lets us drill down to a bird’s eye view of the neighborhood, the backyard, the garage, besides just checking commute routes. Trulia and Zillow show walk scores, crime maps, school info, sales history, estimated monthly payment, and local restaurants. It’s worth taking three minutes to research online to see if the yard backs into a major freeway, or if deer are grazing there.
The average buyer looks at 12 homes before making a decision. It’s possible that they find ‘the one’ during the first tour of homes, but they wouldn’t recognize it. A deck or a sunroom becomes a priority once they’ve seen light streaming across gleaming wood floors. It takes seeing five or six homes for buyers to get a handle for what is on the market in their price range, they are building criteria. Sometimes they buy a home opposite from the original Wish List, criteria evolves.
When a buyer sees more than 20 homes and isn’t close to finding the right one, they’re chasing a unicorn. Everyone wants more than their budget allows regardless of price point. My job is to keep them up on what’s available to them, help them make decisions that lead them to YES.
A young couple once told me that they wanted 1920s charm, new construction condition, and a deeply discounted price. Although that might have been possible in 2010, it’s not happening now. Well priced homes in good condition are selling in multiple offers within a couple days on market. We saw over 50 homes, nothing made them happy. Mrs. Buyer would open the front door and say,” Well, what’s wrong with this one?” That’s a, “I’m afraid to buy anything” signal. Maybe it’s fear of making a decision, of spending too much, or making a mistake. Those people think that they want to buy, but they will not be satisfied regardless of price or condition, they’ll find a reason to say no.
No one should buy a home that they don’t love, but there is no perfect home. There are homes that meet your wish list on paper, yet you don’t love them. There is the market, and there are expectations. They have to come together. Having a clear idea of what is going on with the market, finances, and open mind make finding a new home easier. There are tools that you can use in your pajamas to make you smarter, and the road easier. It is always a journey, but having a map points to your new front door.
Every morning I wake up with my head exploding with brilliant Instagram images on rehabbing houses. It’s not an easy work, it takes a village. There are project plans, the decor has to be gorgeous, crew lined up, and buyers vetted. Hair and wardrobe make or break the image. What should I wear swinging a sledgehammer or showing a dingy basement? The look has to be professional and glamorous, yet with homey relatable images.
At 10 AM I meet the new couple at my office. They’ve been vetted by the casting team, contracts are signed, budget is set, and they’ve already bought one of the three houses we’ll show. They are so excited!!! We go over the script, and plan the day’s shooting. I’m ready, cameras on, let’s roll.
In the opening shot we’re doing introductions and I’m asking them everything about what they’re looking for, what would be their dream home? She goes on with the litany of, “I want, I want, I want, I want…” Listening attentively I nod my head, “You want four bedrooms, a gorgeous master spa bath, custom kitchen with a mile and a half of granite countertops, an outdoor entertainment center for under $200,000? Is that all?” Of course she does, I smile cheerfully. Let’s go see some houses!
The first house is a tiny bungalow with deferred maintenance for $120,000 begging for an $80K remodel to make it livable. Let’s call it The Witch is Dead Gingerbread house. Next, a spacious two story in need of coming out of the 1900s built on a hill with 300 steps. We’ll call that one Goat Hill. The third house is a brick 1.5 story with an unfinished 1/2 story and basement. Lots of naked space. It’s within the budget, they like the neighborhood, not far from schools and a hop to work. This one is Head Start. No brainer right? No wait, they want to think about it? I whip out my iPad showing 3D floor plans where we are moving walls, opening up the back with sliding glass doors, building a patio with beautiful grape vines, acres of granite in the kitchen and adding a couch with nautically themed pillows. They love it, let’s write an offer. Whew, we won the bidding, had to go over list price which means we cut back on the pillows.
The next morning we huddle over the iPad blueprints. We make color selections, cabinets, and finalize the design in 20 minutes. I’m wearing overalls and a hardhat prepared for demo. Most Realtors don’t do demo. I don’t either but my producer says that buyers want engagement and love to see Realtors in action. We already closed on the house, so we can head over for an early start. The crew is coffeed up, they’ve started without us. The buyers are excited, they get to knock out a wall. I grab a sledgehammer, give it a swing, and OMG it hit a water line. There is water all over the place! The buyers are watching bug-eyed with their mouths gaping. The producer yells, “Somebody get a plumber!” I’m soaking wet, my hair is dripping down my face, my right shoulder is screaming at me, and I’m not video ready. Can we cut PLEASE? Things happen. We joke that this kind of thing can happen to anyone. God, I hope that they don’t sue.
While I went to the emergency room our videographer got some good footage of the buyers ripping out cabinets and taking out a demi wall. Only one ugly surprise, flattened dead squirrel was found under the fridge (apparently he was hiding, but couldn’t escape.)
I met again with the buyers with my arm in a sling for a photo op just to show that this is not a job for wimps, I’ve got grit, and it’s an Instagram moment. We’re all together at base camp smiling. The crew takes over sheet rocking, wiring, plumbing. I’m taking a couple weeks away to work on my Instagram for my online store, Fantasy Fixes, everything you need for a rehab for pennies on the dollar. Only a phone call away.
The phone rings Saturday night. Mrs. Buyer just walked through a Restoration Hardware, she wants to change the theme as she fell in love with a $5K couch. I pour myself a vodka, straight. She’s crying, she insists that the couch will change her life. I’m crying, she is ruining mine. Thinking of 14 ways to asphyxiate her with the nautical pillows or get her to change her mind I purr into the phone, “Don’t worry, you sound so stressed. Why don’t you take a hot bath (scalding), relax, and we’ll meet at the house in the morning to work it out.”
The next morning we met at the house, which is nearly finished. Mrs. Buyer is excitedly placing the $5K couch along a load bearing wall of her mind. We measure, measure again. The couch is ginormous, but the house is not. It would take up over half of the living room, it won’t even fit in through the front door. The husband stands quietly glassy-eyed, he knows when he can’t win. “Well, what is it that you love about THAT couch?” She loves the creamy linen and the charcoal piping. We picked out a deep blue velveteen. “What if, just what if we have a cream linen slipcover with charcoal piping made for the couch that looks like the RH couch, but can fit in this room? That way, you get both a summer and a winter look, and stay on budget?” She stopped, rolled her eyes left, then right, sighed, looked at her husband, and back at me with a huge grin, “Alright!” We all breathed deeply in unison.
After that, things moved along uneventfully. The buyers weren’t allowed anywhere near, but I think that they sneaked around at night. Finally, the day for the big reveal. The slipcover for the couch is done, the kitchen glows with sunlight, we even came in $25 under budget. It’s a win for all sides. My producer blindfolded the buyers, I’m their guide dog and lead them down the path. Cameras are rolling, “ARE YOU READY?”
Of course, they are ready. Smile, and call it a day.
Whether you’re selling a house or buying a new home in the Minneapolis, MN, area, turn to Mary Jo Quay with RE/MAX Results for quality real estate assistance. Contact her at (612) 384-1360 or visit the website to learn more about her services or browse local real estate listings.
I’m writing the Raise Ur Roof blog because about three years ago I had several clients buying new construction. Each experience was terrible. I realized that post-recession and Boom new construction were very different. One of my client’s put down $15K in earnest money in April 2014 couldn’t move into her home until March 2015. Everything that could go wrong went wrong. The lot was different than was what was described her, spring rain stalled construction for months, she didn’t have access to the design team, had to do her selections twice, and the contractor installed wrong floors.
Another client was purchasing an existing spec home and wanted to make a few changes. The builder’s agent acted like you never heard of such a thing, and had a hard time understanding what a boot bench is. He went through 47 pages of contracts in 10 minutes. It was sign here, sign here,& here on a $480,000 home. They only had a clue because I spent an hour and a half prepping for them through contracts the day before. When we got to closing, the builder refused to hand over keys on a Friday if we didn’t hand deliver a paper check by 2 PM. Their title company worked from 8 AM to 2 PM, and handed me a package saying,” Usually we do an orientation, but since you didn’t use us here’s the package, call if you’ve questions.”
The third client was looking to build with the national brand. They were very disillusioned with their options, and the treatment they got from the builders representative. By now I was pretty annoyed with the process, and frustrated that I wasn’t able to serve them better. My mission became to find out how. I found some new construction classes at the builder’s association. Some classes were online, others were in person. After many hours of staring at computer, a series of tests, I walked away with a certified new home specialist certificate. That was the beginning. Learning is ongoing, Technology and energy are changing the way we LIVE.
Builders are not the enemy, they want you to be a deliriously happy with your new home. But not every buyer is set up with the right expectations, not every real estate agent is educated in how the process works. My goal in this blog series is to educate you on the process, timelines, and what to expect. Building new home is and enormous project. It takes about six months from start to finish. If you don’t know what to expect and work hand-in-hand with your builder it can be very frustrating and extremely expensive. The more you know, the better decisions you can make. Builders don’t always explain or understand what you don’t know. And you don’t know what you don’t know.
Most people walk through model homes joggling the kitchen, what’s trendy, and snazzy cosmetics. You are buying a lot more than the kitchen, but you don’t know it until the supervisor does the walk-through before closing. It will take him a couple of hours to explain about the structure, utilities, Energy savings, and why the home is 40% more efficient than any home built prior to 2006. It’s really a lot to take in unless you are an engineer. My goal is to give you the steps and enough information so you can make Wise decisions in building your new home.
Whether you’re selling a house or buying a new home in the Minneapolis, MN, area, turn to Mary Jo Quay with RE/MAX Advisors for quality real estate assistance. Contact her at (612) 384-1360 or visit the website to learn more about her services or browse local real estate listings.