The practical file
What do first-time buyers really want?
The results of a recent survey of Coldwell Banker real estate brokers, published in the Inman News August 21, 2008 article, "Survey: Affordability matters most to first-time buyers", got me thinking about what a seller needs to do to sell his or her home to a first-time buyer.
Why should a seller care about what today's first-time buyer wants in a home? Because in this area, anyone selling a single-family home for about $1,200,000 or less, depending on city and neighborhood, and anyone selling a condo or townhouse for about $800,000 or less, is most likely going to sell to a first-time buyer.
If he sells.
Perhaps I should say the elusive first-time buyer, because many have been laying low in the underbrush over the past few years, as first the boom priced them out of the neighborhoods they like, then the bust scared them out of the market. And as the chart below shows, home prices at the top end of the first-time buyer price range, currently around $1,000,000 or more, or about what it takes here to get a decent-size house and highly-regarded schools, haven't dropped enough to make the pleasant unpretentious middle-class neighborhoods so beloved by first-timers any more affordable than they were in 2005.
In fact, the chart shows that home prices in desirable cities like San Carlos, and in favorite neighborhoods like Sunnyvale's Cherry Chase, have actually gone up since 2005.
So you can understand why "affordability matters most" to first-time buyers. Couple still-high home prices with widespread uncertainty over where those prices—and the economy—will be in a year, and nowadays the seller of a home in first-time buyer territory has a target market that needs a lot more persuading that it should buy his home and not someone else's or no home at all. Something more persuasive than honey stop the car!
The seller of such a home should bear in mind one other criterion mentioned by Coldwell Banker brokers as important to first-timers: 81 percent "reported that first-time buyers consider move-in condition to be very important" while a piddling 7 percent "reported first-time buyers seeking 'fixer-upper' properties".
This leaves 12 percent unaccounted for, but I can tell you that after location location location, virtually 100 percent of today's first-time buyers want their home to have the following attributes, in descending order of importance:
And any "real estate broker" (or did they mean "real estate agent"?) who thinks his or her first-timers are looking for fixers is kidding him- or herself. Or being kidded. Or the buyers are kidding themselves.
In fact, I'm going to postulate that those 7 percent supposedly looking for fixers are the newest to the market, and don't know what a real-life fixer looks like in all its hammered glory. Most buyers, first-time or not, enter the market thinking a fixer is a home that needs the carpeting cleaned. One tour through a true fixer with its roller-coaster foundation and peek-a-boo roof and $20k in rot damage and they too will be singing heartily from the "move-in condition" hymnbook.
So the seller of a home in first-time buyer territory needs to bring his best game. This doesn't necessarily mean that Seller has to drop $50k on a new kitchen he'll never enjoy. It does, however, mean that Seller has to attend to the myriad details that make the difference between sale and no sale. And don't let those apparently rock-solid home prices fool you: there are plenty of no-sales these days. Take San Carlos, for example, where home prices are still 6.8 percent higher than they were in 2005. San Carlos has had 195 sales this year as of August 26, but it's also had 81 listings—over 40 percent of the number of sales—removed from the market unsold.
Call it a Darwinian market. So how can Seller make his home the fittest in his neighborhood, even if it doesn't have the upgrades that make cautious first-time buyers forget their fears and make value-driven first-time buyers see value?
Seller should look at his home with a critical eye. But since this is virtually impossible—it's like asking Seller to look at his newborn with a critical eye—Seller should ask Agent to look at his home with a critical eye. Agent should be up to this challenge. Seller should not use an agent who's either too timid or too clueless or too lazy to make critical suggestions. This is where Agent adds value.
Agent shows up with notepad and walks around the house with Seller, noting defects major and minor. Is the exterior paint chalky or peeling? Does the front yard landscaping need a tune-up? A major overhaul? Is the roof older than most first-time buyers?
Moving inside, does the carpet need replacing ("fixer" alert!). If there's hardwood underneath, Seller should not be in a rush to throw cheap carpeting over it. When was the last time the interior was painted? Even if the answer is "recently", will removing the furniture reveal that the paint has had a short but hard life? Are the plumbing fixtures old and worn? If they've been replaced, were they obviously selected with price rather than style in mind?
Here I want to preach a short sermon on when to replace and when not. A few weeks ago I was showing a remarkably original and well-preserved 1930s bungalow to first-time buyers. The home wasn't quite ready for the market, and a handyman was busily replacing the original light fixtures, which exuded old-fashioned charm, with Home Depot's cheap and charmless schlock. Folks, think about what you're doing. You're not getting a $900-a-month apartment ready for its next tenant. You're selling charm. If you've got it, keep it.
Well, I think you get the idea. Do the obvious cosmetics, whether they're upgrades or just deferred maintenance items that would otherwise make first-time buyers wonder if Seller did anything more around the house on week-ends than watch golf on TV. Just use some discretion: sometimes that old-timey stuff helps sell a home.
But what about major structural repairs? Are they worth doing?
It depends. If a property inspection turns up $5k in termite repairs, just do it. First-time buyers unfamiliar with pest reports perspire freely at the sight of the word "termite", and a Section 1 certificate, certifying that the home is free of active wood-destroying organisms, is the kind of peace of mind they'll pay extra for. Or say the general inspection finds a couple of small foundation cracks that'll cost $2500 to patch. First-time buyers freak at the very thought of foundation problems, even if they're the minor glitches common to older homes in this area. Again, just do it.
Whatever Seller does, he (and his agent) should never walk away from five feet of crumbling foundation and say, "Not only will I not fix that, I won't even get an estimate", or look at a termite-ridden detached garage and say, "I won't have my pest inspector inspect that because no one in our quaint little burg inspects detached garages", because this gives a sharp buyer's agent ahem an opportunity as big as a house trailer to do some last-minute grinding on the sales price. That is, if his clients don't run away from the house screaming.
Finally, I want to put in a big plug for staging—getting a good (and they're not all good) professional stager to install new furniture and accessories in your home before it goes on the market. Not only will staging make any house hip, and that's a good thing when selling to younger buyers, but it'll also show them how to use your home's space, something buyers of all ages have trouble envisioning. Staging is, without a doubt, the best money any seller can spend, but it won't work unless the condition of the rest of the house supports it. Throwing staging into a house that hasn't been spruced up since Grandma moved in 52 years ago just looks ridiculous, and ridiculous doesn't sell.
The seller who spends $10,000, $15,000 or $20,000 on his house, doing the basics, taking care of the small but obvious details, will get a tremendous return on that investment. First-time buyers will gravitate to his home, forget their apprehensions and decide that this one might be the one.
Then they can get on with their life, and Seller can get on with his.