Your House Smells
Will your agent tell you the truth about your house? A “No BS real estate” broker would. A buyer will definitely NOT hesitate to remark on odors or other conditions which decrease the allure of the house. A good agent will try to emulate buyers so you have the truth about potential feedback. But, agents don’t want to tell an owner about their stinky house. We’ll tell them to paint, fix, landscape, and ensure all light bulbs work. But we avoid the “smelly house” feedback. Why? Occupants can not always smell the odors. Just like smokers and drinkers don’t smell the odors spilling out of their pores, owners have lived with and have grown accustomed to their odors.
Pictures and curb appeal get prospective buyers to your front door. Once the door is open, odors can chase them away. Other than replacing all drywall, carpet, and carpet padding, we can work to absorb the odors or mask them. But strong odors won’t be hidden for long.
Your agent, who may not have the courage to tell the truth, should get other agents to give the house a “smell test”. But because there are no smell meters, one person’s olfactory is probably not sufficient. Get all agents in the office to review the house. Other People’s Feedback (OPF) is easier to convey.
The two most common sources of difficult and offensive odors are pets and cigarettes; neither of which is easy to remediate. The point might seem obvious, but the first line of defense in any smelly situation is to remove the source of the problem, even if that means a beloved pet must board elsewhere for a while. If the pet is in the house, you’re introducing new odor every day. For people who have pets, over time, it’s a losing battle to get rid of the odor. Cat urine, among the worst of the bad odors, can seep into carpet fibers, carpet padding, concrete and wood floors, upholstery fabrics, and furniture cushions and pillows. You may have to remove the carpet, remove the pad and seal the floor, and then replace the carpet and the pad. Cleaning the carpet might help. But any humidity will raise the odor from the padding or floor beneath.
These proprietary charts (below) show the aggregate momentum of the market. The individual median price momenta (51 zip codes plus 3 counties) are combined to produce this EKG-like depiction of the market. The behavior that has occurred since last Autumn is a First — never have the indicators been so tightly grouped. The reason I call this the Swing indicator is because the swing from an Up-Market and Down-Market are made obvious. But there has been no swing lately. Rather, it appears there is either equilibrium or chaos in the market. Which do you think?
The 19-year depiction of this data (left) shows alternating markets and the swings in between — where the individual Ups, Downs, and Unchanged points converge before swinging in the other direction, indicating the health of the market for an upcoming time period. Then it swings back
The 3-year depiction (right) shows how unique the market has been with regard to ‘convergence with no swing’. Naturally, election years are anomalies for many commodity and stock markets. When low supply, mediocre demand, election year, artificially low borrowing rates, uniquely high cost-of-living (Affordable Care is Not), and psychological changes about home-ownership are occurring, the market shows the appropriate indicators of health. My Swing Indicator is one of those.
Fair Oaks — July 2016 is a Seller’s market! The number of Active listings was up 27.8% YOY and up 8.8% MOM. The number of Sold listings decreased 1.6% YOY and increased 1.6% MOM. The number of Pended listings was down 17.4% MOM and up 9.6% YOY. The Months of Inventory based on Closed Sales is 2.6, up 30.5% YOY. (See web page for Fair Oaks details)
Red and Gray
When none of these leading 8 zip codes is green (Up), yes it means that at least 1 will likely turn green next month (statistically), but, more blatant to me, is the fact that this Red-Gray dominance only occurred 8 times in the last 230 months (3%). The last time this occurred was in October 2014. And all but the current month (Jul 16) of those 8 occurrences have been within the “Down” market in the Swing Indicator (Apr 07, May 08, Apr 11, Jun-Jul 14, Sep-Oct 14).
I wouldn’t call this market Up or Down; it’s more “finicky”. That is, there is demand for clean and unique houses that have been well-maintained, smartly updated, and easy to expose. But the days-on-market are getting higher for those with issues or restrictions. And with a changing demographic and lenders scrutinizing borrower’s economic futures, demand will get curtailed. And because of new government regulations (they’re here to help), borrowers undergo stricter underwriting which is meant to limit over-extended borrowers. That affects demand. And I’m all about No BS real estate.
Choosing comps when there is a gated community
I had a real estate agent ask a fantastic question recently about choosing comps when there is a gated neighborhood. Here’s the issue: If the subject property is NOT located in a gated community, can an appraiser use “comps” that are similar and within 0.25 miles but are in a gated community? My answer is YES and NO.
YES: An appraiser can definitely use sales from a gated community. If there isn’t a price difference inside and outside the gate, an appraiser can use gated sales and make no value adjustment. Or if there is a price difference between the two locations, an appraiser can always choose to use gated “comps”, but also make an up or down adjustment to account for the value difference.
NO: Sound the alarm because it’s a red flag if you are valuing something outside a gate but only using gated “comps”. After all, what is the gate keeping in? And what is it keeping out? Despite being nearby, a gated subdivision could be a much different market that is higher or lower in price. Realistically, if I am only using gated sales for my “comps”, I haven’t really shown what the market is willing to pay outside the gate. There could be a value difference, which is why it’s critical to find non-gated sales to help tell the story of value for the subject property (even if the sales are older). It goes back to an “apples to apples’ comparison where we want to try to use the most similar sales in terms of size, location, condition, quality, bed/bath count, etc… Ultimately as we study the market we can make the distinction between properties that are truly “comps” from ones that are merely sales.
A local example: Here is a graph of all 2500 to 3500 sq ft sales in the Crocker Ranch area of Roseville. The blue dots are the gated sales and the yellow dots are the non-gated sales.
The graph helps show larger-sized properties inside the gated areas tend to command higher prices. Obviously there are some higher non-gated sales too, but the highest sales in the area over the past 7 years have come from within the gate. This is why we have to study sales and then choose “comps” accordingly.
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