Take Inventory: What Are You Selling?
Secrets to Selling Mountain Home, Chris Kopf, Crested Butte Colorado, Luxury Real Estate.
Think back to when you bought or built your mountain home. What made it your dream? What was special about the location, the lot, the home design and layout, the views, the neighborhood, the neighbors? Does your home live up to those same dreams today, or has time passed your home by? Things change and over time – newer homes get built; newer, nicer developments pop up; unobstructed views get blocked by new homes or new condo buildings; and your home or condo may now be one of the oldest homes in the neighborhood. If you bought a home that needed work and you did not do much of that work, you may find that when you go to sell your home it will not appeal to the majority of buyers. Instead, it will look old and tired, and the condition of the home will negatively affect the number of showings and interest in your home. The offers you receive will likely be below your expectations.
Does Your Home Appeal to the Majority of Homebuyers?
Drive-by appeal and walk-up curb appeal are the buyer’s first impression of your home.
How does your home look? How does it look compared to other homes in your neighborhood? How about compared to the homes that just sold that you think are similar? No matter how nice the inside of your home is, potential buyers are judging your home from the look and feel of the exterior. I have had clients who decided they did not want to go inside a home because of the condition of the home on the outside. You only get one chance to make a first impression, and it can make or break a showing. You can not sell your home to a buyer who does not go inside.
If the buyer does go inside your home, will they be pleasantly surprised, or will the cash register be going off inside their head while they add up all the money they will need to spend fixing up your home? Buyers will do the math, and they may be interested only if they can buy your house and do all the remodeling for significantly less than what it would cost to buy a similar house that doesn’t require remodel. The buyer knows that there will be unforeseen costs associate with any remodel work. This may be overages in contractor and materials fees (this may be the “uh-oh, look what we found behind that wall”), or most likely all of the above. Usually one spouse’s idea of a small remodel project and the other’s adherence to the budget are probably not in sync. So they apply a risk factor to their calculations.
Cost of Fixer-upper + Remodel Cost + Effort + Risk Factor of Overages + Time = Real Price of Your Home.
Is Your Luxury Home at the Top of the Market?
Luxury is typically defined as the top 10% of the market in terms of selling price, and is different in every market. I represent many clients that have luxury homes and are some of the nicest, most expensive homes in our Crested Butte Market. In 2014 we had 329 properties sold, and of those, only twenty-eight sold for over $1 million, and only five sold for over $2 million. I represented a client whose home was the highest selling property sold in 2014 for a price of $3.9 million. There were only two other homes sold in the previous five years that sold at a higher price. The highest was a very nice 7,000 square foot ski-in/ski-out home that sold for $4.2 million. Remember that there are far fewer buyers in the luxury segment of the market. If you own a luxury home, you know it is out of reach for the majority of buyers, but it is likely that there will be numerous other competing sellers and listings in the market. In general, the more expensive the home, the higher the expectations will be for buyers. This includes the listing and marketing of your home. Everything is relative, and unless the home is a distressed sale, not many buyers want to buy a $2 million dollar + fixer-upper. You can get away with some clutter and repairs needed at the low end of the market, but not in the luxury segment. The expectation of the potential buyer is that they will be previewing a high quality home that is in pristine condition. The attention to detail in preparation for showings is also key to creating a lasting positive first impression and overall experience.
Did You Build the Home?
It can be hard to sell a home you had a hand in building. You invested years of your life into the vision, lot selection, design, construction, finish-out and decoration, and you probably collected unique pieces just for your mountain dream home. You may still remember the first time you stood on the lot, the first renderings of the home, standing in the half built home looking out the master bedroom at the awesome views. You are not just selling your mountain home; you are selling all the emotions and memories about how special this home has been. Some say when you spent years building a dream home, it is like selling your baby. If you built your home, you may have a hard time parting with it and coming to terms with the market value of your home. It is not uncommon to have a higher impression of the value of the home because you remember every detail, every dollar, and all the materials you selected to put into your home.
Example – Homebuilder and Seller
The seller of my current mountain home was the guy who built the home. He was a self made man and owned a custom home construction company and an excavation company. He moved snow in the winter and dirt and rocks in the summer, and he has built and sold about a dozen homes in our mountain town. We have become friends and he has also become a client. I represented him on another home he built before he left for a couple of years to sail in the Sea of Cortez. He returned to our mountain town recently and called me about various lots for sale and said he was going to build another home. He said, “This is what I know, and what I do.” He typically builds a home, lives in it for two years, then sells it. He said, “I have a winning strategy. I like building for others, but I get to make all the decisions, and I don’t have to wait to get approvals for any change orders; I just make the change.” He picks out quality materials but also said he is very attentive to costs.
Most people that build a home are faced with hundreds of decisions…
As an example, they can get tile for a bathroom that costs $400 or a nicer tile for $800. If they chose the more expensive option every time, then the cost to build the house can be double. My friend said, “I am building the house to sell, so I know where I need to buy the more expensive items, and where I need to save money.” When an individual is building a custom home for themselves, they don’t usually consider the back-end. Many couples who have built a custom home select the more expensive items because that is what they want for themselves in their home. They are not considering the fact that they are also building for others – it may be years down the road, but ultimately they will sell the home to someone else. Years later, the buyers looking at a custom home may or may not appreciate these upgrades, and the market may not place the same value on the custom home as the homeowner thought. The home is no longer brand new, and the market may have changed. The market does not care what a seller has in his home. It only measures what other options those same dollars will buy.
The Reverse Inspection
It is common knowledge that a buyer will hire an inspector to go through the home with a magnifying glass and a fine tooth comb, but most sellers never consider this as an option for themselves. Some sellers will be thinking: “I don’t care what they find, I am sure as heck not spending one dime to fix any of the ridiculous issues their inspector finds in my perfect home!” This is a silly emotional thought, but it is human nature and very common. Instead, why not get ahead of the curve and the buyers and hire your own inspector to give you the report that you know is coming anyway? Best practice is to take the report and hire a handyman and the various contractors needed and fix all the stuff! Be sure to document the work, including keeping the receipts. This can be a very useful tool up front in the marketing of the home, as well in the negotiation process to assure the buyer they are not facing a lot of downside risk in buying your home. A buyer may hire the same inspector since he already knows the house. If they hire a different inspector, then you can provide them with the documentation as well. There may still be minor items that are found, but it will likely eliminate any confrontation at this stage of the transaction.
The Interior Designer
You may be wondering why you should hire an interior designer when you are getting ready to sell your home. Unfortunately, just as clothing fashions change, so do the fashions of interior mountain home décor change. The furniture in the home and the furnishings that appoint the home can make a huge difference in the appeal to potential buyers. An interior designer can provide an unbiased third party opinion on the look and feel inside your home. This will probably be a wake up call, but ask them to be honest and candid and work with them. Sometimes something simple like just removing old heavy drapes from a large window will bring in the views and brighten up a dark and dreary room.
Is the Location or Proximity of Your Home Desirable?
As stated earlier in this book, having a home that is ski-in ski-out, on a river, or in the desirable part of town can provide assurance that it will appeal to a large number of buyers, and sell fast, for top dollar. This is even more true if there is a lack of available homes for sale with similar attributes.
Example – Ski-in Ski-out Home
I represented a client who was selling a $2 million home that was ski-in ski-out. The home was in a subdivision that was marketed as ski-in ski-out. The home was under contract and I got a call from the buyer’s attorney, who asked me to provide him with the legal entitlement documentation for the ski-in ski-out access to this home. I got a copy of the subdivision plat map, and there was no reference to skier access, and I found out that the subdivision had been developed prior to the adjacent ski runs and ski lift being put in place. I looked at all the HOA documents, and nowhere in the bylaws, covenants or declarations did it provide any language talking about the rights of the homeowners to ski across their neighbors’ land. I called the town manager and the current and past president of the subdivision’s HOA and all said: “Yes, that subdivision is ski-in ski-out, everyone knows that, and everyone has been skiing between the houses for years.” When I asked for any legal documentation to support this skier access, I got blank looks and silence on the phone. Net net, no “legal entitlement” existed. My client was of the opinion that this was a ridiculous request and that everyone knew that it was okay to ski between everyone’s houses. That was true, but if someone is buying a $2 million ski-in ski-out home and a big part of the value of the home is because of the location and skier access amenity, then it is a valid request to want to have a guaranteed entitlement.
To make a long story short, I contacted the two adjacent homeowners whose property the buyer would need to ski over to access the groomed trail and I was able to get agreement from both. We had a surveyor prepare a detailed survey of the affected property boundaries and proposed easements, and I got an easement agreement prepared and signed by one of the property owners, and had it recorded in the county records. The second homeowner was agreeable, but did not want to sign an easement agreement. The buyer and his attorney were satisfied that the entitlement was secure, and we successfully closed.
What Is a Bedroom?
This may seem like a silly question, but defining a bedroom is important because the value of a home increases with the number of legitimate bedrooms. It is always in the best interest of the home seller to have as many bedrooms as possible, and of course buyers are very interested in this as well. A bedroom can be used as an office or TV room, but not necessarily vice versa.
A bedroom is a room that has a door that closes (not a loft), an egress window, a closet or an armoire, and either has a bathroom in the room or accessible via the hallway (not via another bedroom).
The egress window is an important safety feature in the case of a fire so that people can have a second exit other than the door to exit the room and the house. The window can be a door that opens to the outside, but if it is a window per building code and the International Residential Code (IRC) for residential buildings it must have a minimum opening area of 5.7 square feet, a minimum opening height of 24 inches, and a minimum opening width of 20 inches. The window must be accessible (it cannot be up so high it requires a ladder to access), and it must be able to be opened by “normal” operation of the window, door or skylight without the use of keys, tools or special knowledge and without the removal of a second sash from the opening. The maximum distance between the finished floor and the finished windowsill is now 24 inches.
You may have a room in the basement or a cute storage area of the home in the attic or top floor that you are using as a sleeping room or bunkroom for kids that does not officially qualify as a bedroom. The buyer will see this and may like that this space can be used for overflow sleeping, even though it is not a “bedroom.” They will also like that you are not calling it a bedroom. I have corrected my buyers when they are touring a home and they say, “This home has five bedrooms, but the listing only says four.” The safety issues have been pointed out and the chances of a fire are remote, but you should be aware of the safety and legal risks of putting guests in rooms that are not officially bedrooms. If you are renting your home and advertising that it “sleeps twelve” but some of the beds are in a room that is not legally a bedroom with egress, then you should re-think that strategy.
Example – Convert an Office into a Bedroom
I got a call from a homeowner who has not been able to sell his home with another agent. It is a very nice three-bedroom home with a small office. He was not ready to make a change with the listing agent, but asked me to go look at his home to give him my opinion as to why it was not selling. He was considering reducing the price a bit. I suspect that he was missing out on many showings because the home as listed in the MLS was only three bedrooms. The office was larger than many bedrooms in other homes and could be considered a bedroom if it had a closet since it already had legal egress windows, and there was access to a hallway bathroom. There was space in the bedroom to add the closet, and I strongly suggested that he spend the small amount of money to have this work done to change his three-bedroom home into a four-bedroom home.
Why Is Square Footage Important?
As a seller, you will be required to sign a square footage disclosure. This document states the square footage of the home and the source for this measurement. The county assessor typically has this information, and it is one of the variables used to determine your property tax – if this number is accurate, then you will use it. You may have done some work on your home that increased the living area square footage which is not represented in the assessor’s number. If this is the case, you can hire an appraiser to measure your home, and this is an acceptable source. Like it or not, your home will be compared with other homes on a price per square foot basis, and the value of your home will increase if you can verify more square footage of living space.
Appraisal Calculation of Square Footage of a Home…
A finished basement can affect value positively, but a finished basement or walkout basement will not be included in the appraiser’s calculation of livable square footage because it is “below-grade” (below ground level by one foot or more, even if three sides of the basement have exterior walls and only one side is below-grade) per Fannie Mae and ANSI guidelines. Your real estate agent will record the total living square footage of the home and this will be represented in the MLS. There will probably be a field specifically for below grade or basement finished square footage as well.
It should be noted that in mountain towns there are many homes built on the side of a slope, and many homes with very nice basements that have bedrooms with egress windows, exterior doors, etc. An appraiser in a mountain town knows this and knows that many of the comps are similar, and will take this into consideration. Sometimes a lender will hire an appraiser from the big city who does not know the local mountain town market, and this can be problematic.
A really good real estate agent can positively affect the selling price point of your home by as much as 5%
One area of recommendation may be to turn to the active listings in your area and see which homes that are similar are for sale and what their price points are. If you have looked at the sold data, you should know how many similar homes sold in the past twelve or twenty-four months in your area. This is a pretty good predictor of how many will sell in the next twelve months as well. Will your home be one of those homes that sells? Why not put your home on that list of homes that will sell? You can do this by attractively pricing your home as compared to the competitive listings in your neighborhood.
Using round numbers, let’s assume that given the market, the target selling price for your home is $900,000 and the average discount from asking price to selling price is 10 percent. Most sellers will price their homes at $1,000,000 or $999,000 and hope for the best. Price your home at $950,000 with the instructions to your real estate agent that you have some wiggle room in this price, perhaps enough to pacify a buyer, or deal with inspection objections. The result is that you will get more showings because your home is $50,000 below other similar homes. You are offering a “better deal” and, regardless of the other competitive sellers that may have negotiated down to $900,000, the buyers will never know that. Instead, you are the seller that gets the offer(s).
But There Is Another House for Sale Next Door…
Most sellers think other homes in their neighborhood for sale is a bad thing. But why does Pizza Hut put a store right next to a McDonalds? Why are there four jewelry stores in every large mall? Because buyers want to compare, and comparing two houses next to each other makes sense. The buyer will say: “Well, we might as well see that one also since we are going to be right next door!” and the typical real estate agent will love the fact that the don’t have to drive across town to show you the second home. The traffic to both houses will increase when there are two next to each other for sale. The pricing strategy mentioned previously and the house next door are common when looking at condos or townhomes in the same development. In some condo buildings, it can be very hard to differentiate one condo from another. Each condo shares the same common amenities, and may have the same three bedroom three and a half bath layout, and even the same exact furniture package. If this is the case, then the differentiating features come down to views, which floor they are on, how close to the noise from the elevator, and the price.
If You Were Buying Your Mountain Dream Home All Over Again
I hope you will get a copy of my book Buying Your Mountain Dream Home, which goes into depth on this topic, but for now we will cover some of the key considerations from a buyer’s perspective. It may not make sense to think about buying your mountain dream home all over again, but it may open your eyes to things you have not considered. It also might have an impact on whether a buyer likes your home, and why they decided they want your home over the competing options that are available to them.
Does Your Home Appeal to the Majority of Homebuyers?
As you go through the process of looking at your home, you should ask your listing agent to set up a preview of other homes that he/she thinks will be competitive homes in the eyes of a buyer. The two extremes for the majority of buyers are: your home is perfect and “move-in ready,” or it will need to be totally remodeled and updated. It is normal for a buyer to expect to get a good deal on a home that needs work because they are adding up in their head the price of the home, plus the dollars it will take to bring an old home up to current standards of appearance, layout, and quality.
If you are reading this and are many years away from selling your home, then you may consider picking some projects that need to be done and spending the money to fix or update your home. You will get the benefit of enjoying the dollars you put into the home prior to selling it, and if you do smart remodeling, you will get the majority of those dollars out when you sell the home. Conversely, if your home needs work and you haven’t done anything, you should not expect to get close to top dollar for your home. Remember, the buyer knows that most projects cost more than they think, and even if you have bids, or they get bids for remodel work, there is the risk that it may cost more. As well, they will have months of time when the house is in disarray and they cannot enjoy the home. Net net, if your home needs work, you should be prepared for the reality that the value of your home, and the price you receive, may be below the market average.
The Buyer’s Motivation
Remember that, unlike selling a home in a major metro area where a family needs to find a home to live in so their kids can get plugged in to the school and friends, in a resort mountain town, your home is typically a discretionary purchase by a second homeowner. They do not have to buy a home, and with many other options, they do not have to specifically buy your home. They may want to buy your home, and the price of your home may be fair given the market, but it is good to climb inside the buyer’s head a bit to realize they usually have no pressure or impending doom if they do not buy your home.
The Comps and Options from the Buyer’s Perspective
There are typically many other options available to buyers other than your home. Not only are you competing against the other sellers, but also against the option that a buyer will buy a lot and build a new home. The perception of the value of your home from the buyer’s perspective is key. Many sellers are proud of their home, their HOA, their subdivision, their location, their views, etc. But the buyer’s opinion of the combination of all these items and their willingness to plunk down money on the barrelhead because they feel your home is the best option for them at the price they can afford or want to pay is paramount to them buying your home.
How can I help you with Your Crested Butte Co Real Estate Needs?
This Crested Butte Real Estate Market Report March 2017 and the level of detail is representative of what you can expect from me as your Real Estate Agent. I have consistently been among the top real estate agents in CB and I strive to exceed client expectations. If you are interested in finding out what your property is worth, or considering me to represent you as a Buyer, I would appreciate the opportunity to earn your business (or that of a friend you think I could help).
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Data last updated on: 10/24/2016