As home buyers and sellers know, this is a sellers housing market. In fact, Portland has been consistently one of the hottest markets in the country almost every month for the last several years, and no one is anticipating any slow down in rising home prices. As a result, home sellers have come to expect multiple offers when they list their houses. Unfortunately, many sellers are not finding that to be the case. Why not?
Location, location, location AND price
Buyers know that when it comes to buying a house, their top two requirements are location and price. In some locations, just about any house that is listed, regardless of the condition, will sell with multiple offers IF it is priced properly for the neighborhood. Even fixers sell quickly in these neighborhoods.
So, why do some sellers receive so many offers regardless of location?
Homes that seem to be in the highest demand are often either priced under that buyer sweet spot of $300,000 or less, or are priced below market value.
Unlike the house buying frenzy we experienced in 2012 – 2015, home buyers this year are far more cautious, picky, and savvy. This is likely to continue, in spite of low inventory and high demand. The bottom line is when buyers are spending so much money on a house, they want what they want, and seem willing to wait for that “right house” to come along. This is likely to continue as long as home prices continue to rise. Paying $300,000 for a house, while still relatively low priced in Portland’s current housing market, is still a lot of money.
Houses must be priced right to sell quickly
Almost every home owner thinks their house is worth more than it really is. Part of this is the emotional attachment to the house, but more often, sellers expect to recoup every cent they have spent in upgrading and maintaining their home. This is not the way it works. There are almost no upgrades that will repay you fully for the actual cost. You should reasonably expect about 75% of the actual cost, while some renovations will net you slightly more, and some could actually result in lower offers because they are so personal in nature that buyers will deduct from the price in order to have that upgrade removed or replaced. You may love your renovations and upgrades, but not every buyer shares your taste. You may think it was worth it to pay $5000 for a Bosch cooktop, but your buyer may not even notice or care if cooking isn’t a really big deal. You may have spent a ton of cash on custom cabinetry in your kitchen and bath. Would you believe most buyers won’t even notice that it’s custom?
Items on buyers must have lists that may keep them away from your house
- Gas ranges – while this is generally not a major factor in price, approximately 90% of all buyers want gas ranges, and some won’t even look at a house without one.
- Dual sinks in master baths are must haves in master baths, and often in main bathrooms as well, depending on family size and number of baths.
- Air conditioning is increasingly becoming a must have for many buyers, especially as we see more people moving into Portland from much hotter and/or more humid climates.
- Attached garages.
- Hardwood floors.
- Curb appeal is critical. If buyers won’t even walk into your house, you may have lost a sale. Be sure you’re not advertising a yard full of weeds and at least have some attractive landscaping out front. Paint the front door and even install a new light fixture. Remember, buyers form their first impression of your house in the first 10-15 seconds. Make sure their first impression is a good one. Great curb appeal can net you up to 10% higher offers and sales prices.
What if you price your house too high?
Prior to the housing boom of the early 2000s and this sellers market, it was okay to price a house a little too high. Houses typically were on the market 30-60 days, and most buyers typically offered less than list price anyway. Those days are gone. These days, if a house isn’t under contract within 5-10 days, buyers assume there is something wrong with the house. The old adage that if a house doesn’t sell, we can always lower the price is a bad practice in this market. The longer your house is on the market, the more likely it is that offers you receive will be less than list price. You can forget about multiple offers – they are very unlikely.
While it may seem counter-intuitive, sellers who price their houses a bit below market value are far more likely to sell for more money, AND receive those coveted multiple offers. Buyers are always shopping for deals, and sometimes can’t resist making an offer on a “steal of a deal.”
Price per square foot – this is the most over-used and inaccurate statistic out there
We see this number on multiple websites, or we can compute it ourselves really easily. If you divide the sale price of a house by the square footage of the house, you arrive at what is customarily called price per square foot. While this number makes sense in a homogenous neighborhood, where all lots were purchased by the developer for the same price, it is much less accurate in more custom or older neighborhoods where even lot size and condition of homes can differ widely. This is when price per square foot becomes such a misleading number that few people really understand. The truth is that a proper sales price is determined by multiple variables including:
- number of bedrooms (each bedroom is given a value, but a master bedroom with a walk in closet is valued higher than one with a small closet, while a master suite is the most desirable).
- number of baths (this is further refined by whether a bath is a half bath (sink and toilet), 3 piece bath (sink, toilet, shower or tub), 4 piece bath (sink, toilet, tub and separate bath), 5 piece bath (sink, sink, toilet, shower, bathtub). The more plumbing outlets, the higher the value of the bathroom.
- square footage of house (this should be actual living space but in fact includes unfinished basements and even storage areas) .
- garage (single car, two car, oversized, oversized with storage, finished (sheet-rocked), attached or detached, etc.)
- basement (finished, unfinished, partially finished, high ceilings, outside entry, walk out basement or underground basement, etc. While all basements are computed into living space, they shouldn’t be. A basement with only 5 foot ceilings is basically worthless as living space for most families, but is often cited as living space and is calculated into price per square foot. An appraiser won’t give this basement full value though, and he/she shouldn’t).
- finished attic space versus unfinished (variables include formal stairway to attic, ceiling height, insulation, walls, number of rooms, bath in attic, fully wired, etc)
- lot size (if your lot is dividable or just over-sized or under-sized for the neighborhood, this will definitely affect the price per square foot)
- condition of house – don’t overlook the details because buyers won’t.
- landscaping – and yes this definitely does matter. Buyers are more likely to pay more for a house with both hardscaping and attractive front and back yards. Landscaping, and especially hardscaping is expensive. Do you have an outdoor kitchen? Water feature? Pool? Hot tub? While some of these features add values, others can cost you. What should not be overlooked is making the landscaping attractive, because a yard full of weeds will lessen the value of the house, and some buyers won’t even walk into the front door if the “curb appeal” is missing.
- energy efficiency of appliances, fixtures, etc. Homes with high energy scores will appraise higher and will sell for more – up to 4-5% more than homes that are not scored and don’t include that 95% efficient furnace, etc.
- Decks are more attractive to most buyers than patios – for reasons I don’t totally understand. They are much higher maintenance, and if not up high enough off the ground to be easily accessible, can attract all manner of varmints. Stray cats, mice, rats, etc will find that low lying deck a great place to nest and shelter from bad weather.
- Hardwood floors versus carpeting. Some buyers won’t even look at houses with carpet.
So, if you see the house down the street from you is listed for $300 per square foot, you may decide that your house should be priced the same. But what if that house is priced under $300,000, while you want to price your house at $400,000? Suddenly you’re looking at a whole new batch of prospective buyers. Yes, your house may be bigger and have more upgrades than your neighbor’s house, but there are far more people who can and will pay up to $300,000 than up to $400,000, so you’re not competing with the same buying pool. It’s very likely that your neighbor’s house is smaller than yours, and/or may be on a much bigger lot. In any event, more potential buyers will find themselves in a more competitive market for lower priced homes regardless of size or condition.
Statistics show staging your house almost always reaps more offers at higher prices
Believe it or not, only 10-30% of all home buyers can actually visualize how their furnishings will look in your house. This is why most high end homes and almost all big developers stage their homes before they go on the market.
- Empty homes look smaller than furnished homes, and this is especially important for bedrooms.
- Buyers are better able to visualize themselves in your space.
- Rooms with undefined uses (such as dens or bonus rooms) can now be defined.
- The entire house looks more finished and higher end. This is really important when prospective buyers are looking at photos online, and of course when they walk into the house.
Yes, staging is expensive, but statistics show that homes that are staged do receive higher offers.
Why do home prices continue to rise in Portland?
- Industries continue to move into the Portland area – many of these are industry giants like Google, Airbnb, Amazon, Uber, and more. At the same time, tech start ups find Portland attractive, and of course, it seems that just about everyone wants to at least visit Portland, and once they do, they’re hooked and ready to pack up and move here.
- It has been reported that as many as 160 people move into Portland every single day!
- Portland has been rated the #1 best city to live in by the National Association of Realtors as of September 2, 2016!
- Portland offers much that so many people are seeking:
- moderate climate,
- big city atmosphere,
- it’s a foodie haven,
- everything you could ask for in terms of outdoors activities all within an hours drive, and often bike riding distance
- Moderate housing prices relative to most other big cities in the U.S., and especially relative to other urban areas on the west coast
- Housing inventory remains below 2 months (the number of months it would take to sell all the houses currently listed at the current pace of sales.
- We still have a huge number of institutional investors (think pension funds, banks, unions, insurance companies or real estate investment trusts)buying in Portland to capitalize on the rising housing prices and rising rents.
We could go on and on singing the praises of Portland, but unlike 20 years ago when Portland was known primarily for rain, we are now one of the most popular tourist destinations, and as mentioned above, one of the fastest growing cities in the country. (If only our transportation and housing needs could keep up with our growth.)