I had an experience with a car salesman in the summer that strongly reminded me that the bottom line of sales is measured in units sold, not the good of the customer and it brought into sharp focus some things that have been bothering me about the way real estate is practiced in our culture.
I have come to believe that the first set of hands that a house passes through on its way to market should not be those of a salesman and have begun to entertain a radical proposition – removing “salesmen” from the equation, or, at the very least, significantly curtailing their role in the process.
Purple Bricks (formerly Comm Free) and discount brokerages like 3% Realty have, with good intentions I think, offered alternative models to real estate status quo but at the end of the day, they all operate within the boundaries of the same business model, akin to rearranging the chairs but keeping the same room. It is a business model which underserves and overcharges buyers and sellers alike.
Our homes are the largest and arguably the most critical financial transaction of our lives, out of reach for a larger and larger percentage of the population.
We have to do better and I believe we can.
Over the last several months, I have been experimenting with different ways of doing “better” in my practice of real estate and I intend to continue doing so.
If this piques your interest and you'd like to hear more about it, I invite you to sit down with me over a cup of coffee and have a conversation about how my new approach could work for you.
Long Version: Case Study
In March of 2015, Ryan and Ashley, with the help of Ryan’s parents, bought their very first home. It was a 1950s character bungalow in a good location that had just been newly updated – brand new kitchen with crisp white cabinetry, white quartz counter tops, classic white subway tile backsplash and new stainless steel appliances including built-in dishwasher and built-in microwave; renovated 4-piece bath also all in crisp white; comfy new carpet in the finished basement. The house also had PVC windows and advertised an upgraded electrical panel – it was almost everything the young couple had been looking for but had been unable to find in their price range, until now.
The one fly in the ointment was that the property offered no parking other than the street.
The house was so fantastic, however, that if street parking was the price they had to pay to have it, Ashley and Ryan were willing to pay. After all, only Ashley drove and the property was close to several major bus routes, so Ryan was happy too.
Fast forward to the spring of 2018. A former client recommended me to their children, who needed to know the current market value of their home. I did some background research, we met, I toured their home and property to assess its overall condition and then settled into the living room with Ryan and Ashley to hear the story of this home under their stewardship.
The ride had been a rough one, as it turns out, because although the house had looked great on the surface, it had also been harboring some unpleasant and expensive surprises.
First Ashley and Ryan discovered that although the electrical panel had been upgraded as advertised, much of house’s wiring had not and contained active knob and tube wiring that had to be removed and replaced for insurance purposes. That cost about $8000.00.*
Then the couple noticed that the walls behind the tub surround felt spongy. Their investigation discovered drywall that was water-damaged and moldy, so the tub surround had to come out, the area gutted, re-sheeted with water resistant drywall and then tiled. Ryan and Ashley were able to do most of this work themselves so it wasn’t nearly as expensive as the fix to the wiring, although it had been stressful and time-consuming.
All was well for a time after that, but in 2017 the paint on the ceiling of the main floor started to crack and peel indicating that the attic had become a condensation trap due to inadequate insulation and ventilation. Rectifying this was another $8,000.00 or so.
As costly and inconvenient as these defects proved to be, they had been rectified fairly easily and the value of property preserved. The couple were completely unaware, however, that there was a far greater threat to their home’s market value than anything they had dealt with so far:
the lack of parking.
Their lot backed directly onto a commercial parking lot – oh the irony - so there would never be rear access to the property and because the lot was too narrow to allow a car to squeeze past the house on either side, there would never be a garage either.
Developing a front driveway was the one and only option. Because of a light standard and a large tree on the boulevard in front of the house, however, there was only location for the driveway and it wasn’t ideal either as it would have to accommodate a manhole and sewer grate. Assuming the city would allow you to develop a front approach in this neighborhood, that is. Just finding out was going to cost a couple-few thousand dollars.
As for the street parking, it, too, presented the worst possible scenario – parking was allowed only on the opposite side of the street where it would be impossible to plug a car in during the winter months.
The parking situation truly was the perfect storm, an absolute wild card in the determination of the property's value.
Market value is determined by a process called comparative market analysis – CMA for short - which is equal parts science and art. By scouring recent sales for properties similar in key ways to the subject property and adjusting the sale price to account for differences in features and conditions between the two, a reliable range of value can be established.
Here’s the thing, though, there are no properties in the city that don’t have vehicle access of some kind. Having nowhere to park in our car culture represents a gross functional obsolescence, the kiss of death to market value. The best I would be able to do was determine the property's value range as if it had parking and then try to guess at how badly the lack of parking would affect that range.
What I really had a hard time wrapping my head around as the true situation of this property become clear to me, is that not one of the professionals tasked with helping Ryan and Ashley purchase this home made any mention of the implications of the parking situation.
Not even the real estate agent whose legal obligation it was to protect this young couple’s best interests.
This house had been languishing on the market for over 200 days when Ryan and Ashley viewed it.
In most situations, 10 days on market is enough time to determine that the market has rejected a property at its listed purchase price, but Ashley and Ryan’s agent didn’t comment on this. Nor did the she conduct an analysis of the home’s market value in order assess its asking price. Had she, she would have known that the price was way too high.
Just to be clear, my issue isn’t that Ashley and Ryan bought this property, but that they had been deceived as to its true condition and consequently paid a price for it that they could not hope to recoup without developing a driveway, a fact they were not aware of.
Fast forward again, to the fall of 2019. By this time, the house had depleted our young couple in every way imaginable, personally and financially. Ashley and Ryan were divorcing, the house had to be sold, and they had not been able to remedy the parking situation since having been made aware it the spring prior.
The three of us pulled out all the stops readying the house for market, highlighting the value present in the house and marketing the property to buyers who either didn’t need parking or who were willing to undertake the development of a driveway in exchange for the giant leap in market value that would inevitably result.
It was anyone’s guess what a safe price was to pay for a property handicapped in this way so we debuted the home on the market for a sacrifice price - the same price Ryan and Ashley paid for it 5 years and $20,000 in renovations ago.
There were many showings but no offers and the feedback was always the same – “We love the house but we are afraid to take on the parking situation.”
After 30 days on market, we reduced the price by $10,000 which created another flurry of showings, again with same the results.
After 60 days, Ashley and Ryan were giving up on the hope of a sale and were considering renting the house out instead when a buyer for whom the house was a perfect match stepped forward. The purchaser bought the property for a full $21,000 below what Ashley and Ryan had originally paid 5 years earlier. The sale was a blessing with just enough money to pay all that was outstanding, but they were left with almost literally nothing but the clothes on their backs.
This is the kind of situation which should never have happened. One of many situations I have come across as a Realtor that should not have been allowed to happen, each one bringing me ever closer to the conclusion that the professionals we put in charge of protecting the interests of the buying and selling public – salesmen - are the wrong group to have in charge.
I’ve started experimenting with alternative ways of doing business in my real estate practice so that buyers and sellers alike are better served. Buyers deserve to have much greater confidence in the condition and value of the home they are considering purchasing and sellers deserve to pay less in real estate fees, putting that money work for them in a way that makes their home more attractive and valuable to buyers.
If this piques your interest, I invite you to sit down with me over a cup of coffee and have a conversation about how my new approach could work for you.
Wendy Peters, Realtor
Royal LePage Top Producers
Direct Line (204) 979-0640
*I know that correct term is “salesperson” but it just doesn’t evoke the level of sketchiness that “salesman” does for me.
**Only under very specific conditions is knob and tube wiring insurable. More and more, the only insurance you can get is one that becomes null and void if the knob and tube wiring is not removed within 30 days of tasking possession.