How would you like to stumble on 20 grand in cold hard cash stashed in a bag when you visit a listing - Heisenberg style? And be able to take it without the worry of a fast food restaurant owner coming after you with a box cutter (apologies to anyone who hasn’t seen Breaking Bad).
Well that’s the equivalent of what you can do in a real estate purchase if you pay close attention to the listing details of a property. I’ll explain with a quick story.
A Tale Of Two Houses
I’m currently in the market for a house where I can increase the value by putting in a legal secondary suite. And so I went shopping last weekend. The first two houses we looked at were very comparable in terms of listing price, size, location and condition. Both had the same potential for a legal two bedroom basement suite. Both had been in the market for around the same duration.
The first home had at least 20 agent cards on the kitchen table, while the second home only had one. This puzzled me. After looking at the listing again for the second home, I noticed it indicated electric heating. Realtors have always told me people hate electric heating, and typically think of dingy old rusted baseboard heaters, causing dry air that might result in curtains going in up flames, all while paying double for heating cost. Okay, maybe that’s an exaggeration, but that’s sort of my impression of them.
What we saw wasn’t that. The house was heated through convective heating with nice old cast iron radiators, all coming out of a newer boiler that was heated with electricity. As far as I’m concerned, the seller or their agent dropped the ball on this one. I would’ve listed the heating system as hot water radiant or boiler - not electricity.
If a homeowner is concerned about the higher cost of electricity, it should be relatively straightforward and inexpensive to bring in a gas line and convert the unit. And as a bonus - you already have a 200 amp service that you can now split between the 2 units. Score!
Not to say that listing heating as electricity was the determining factor between 20 viewings versus one, but I would bet that was one of the main reasons.
You Can't Handle The Truth
Sellers or their Realtors misrepresenting things on MLS listings is nothing new, but most of the time it’s the other way around – saying more than is actually there. However, having inspected over 1,200 homes with Carson Dunlop, and making a habit of checking the MLS listing to see what to expect, I’ve also noticed many listings that seem unnecessarily scarier than than they really are.
I’ve seen stuff like “Seller not warranting status of any remaining knob and tube”, only to find that every circuit was grounded (therefore likely updated) except for the dining room or living room. Or “Buyer to verify condition of oil tank”. Changing out an old tank as long as it’s above ground is straightforward.
Is this information necessary? Is it causing potential buyers to freak out?
In this crazy seller’s market, as a buyer, you need all the advantage you can get. So anytime you see something on an MLS listing (or heck even physically at the property) that might spook out a good percentage of potential buyers, that should pique your interest to do a bit of digging. This can give you the slightest edge, and you might end up picking up a gem.
Another example, but in-person this time. Once while inspecting for a buyer I saw a very nasty water leak into the furnace room. There was a small crack on the wall, and directly on the outside, a downspout was disconnected, resulting in a pool of water right up against the foundation wall. The agent told me everyone was scared of that water leakage issue, and he basically got the property about 30k below market value.
My conservative estimate on that repair is an afternoon with an epoxy injection kit, and some downspout connectors - $400 tops. Not a bad deal for that buyer.
Work With People Who KNOW Houses
The key to finding hidden gems because of an inexperienced Realtor or seller, is to work with a very experienced Realtor, Contractor or Inspector yourself who actually understands houses. They can help you with what things you actually should be concerned about, and what things are not as scary as it seems. And finding those gems can net you some serious coin on the buy.
After following up the on the sales of those 2 houses we visited, the first house sold for 385k (35k over asking) while the second home with “electric heating” sold for 361k (11k over asking).
There you go, more than 20k stashed in a bag, Mr. White.
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