Who Knows?

Disclaimer: We hate long, wordy blogs, but sometimes it’s necessary. If you’re not interested in knowing what to expect in selling and/or buying real estate, you can stop here. We’ll have plenty of short blogs with reno photos in the near future.

Our last flip is complete and sold! But, the selling and closing process didn’t go as planned. In pricing the townhouse, we consulted our realtor. The list of relevant comps was small. Ultimately, we settled on a list price of $179,900 considering the average price-per-square-foot of comparable homes paired with our complete home renovation, including a new HVAC.

We received a full-price offer with exceptional terms. And, the renovated townhouse right next door also went under contract for above their asking price of $174,000 (a property with one less bedroom).

To make a very long story short, neither of the properties appraised for agreed price. Our property appraised at $12,000 less than asking at $168,000! And, the smaller property next door appraised at $167,000 (only $1000 less than ours).

So, who knows what’s realistic in determining an ARV (after renovation value)? Determining the ARV is key in our business, because this number determines what we can bid at the property auction considering the desired renovations.

Here’s what we learned:

  • Cash buyers are gold! If no loan is needed to buy the property, both buyer and seller can proceed with the price that they both agree is fair.
  • If a buyer needs a bank loan to purchase the property, why wouldn’t the bank give a loan on the mutually agreed price? Well, the bottom line is that the bank is technically buying the property. The bank is taking the risk. Considering the housing-market disaster around 2007, financing has never been tighter.
  • With tons of new regulation in home financing and tight Fannie Mae (Federal National Mortgage Association) requirements, completing the loan process is a pain in the ass. For example, just recently Fannie Mae began providing its own comps to appraisers, and appraisers must use those comps or provide solid reason not to.
  • Banks use qualified and unaffiliated appraisers to determine the value of each property needing a mortgage. With new regulations, appraisers have even less subjective criteria to judge a property. Appraisers find themselves under the microscope with these federal regulations.
  • Here’s the disappointment for a flipper…sometimes it’s more profitable to not renovate!
    • Even though we provide buyers with a beautifully designed, move-in ready home, we may lose money to a low appraisal.
    • Beautiful upgrades help a home stand out and entice someone to buy. But those updates don’t translate into a higher appraised value.
    • Appraisers look at the condition of the home, not the high-end countertops or stainless-steel appliances. A newly renovated home will score a higher quality rating over a home with holes in the sheetrock, but that higher quality rating translates into only hundreds of dollars in increased value (not thousands).
    • Even though we replaced the HVAC, it does not add to the appraised amount. A new HVAC system, new roof, new paint are all considered home maintenance. An old air conditioner that works has the same value in appraisal as a brand new system.
    • In an attached home, like a condo or townhouse, price-per-square-foot should not be used in calculating your home’s value — even if you’re comparing your townhouse to your neighbor next door. For example, appraisers consider bedroom square footage as “dead space.” In other words, the cost to build a three-bedroom townhouse isn’t that much more than a two-bedroom. Just some electrical, sheetrock, and flooring. This explains why our property only appraised $1000 higher than the smaller town house next door.

The foundation of our business model is “more than a basic flip.” We want to incorporate beautiful design choices in the homes we renovate. But, we must consider the impact those choices have on our bottom line. We will continue with an acute focus on the front end: Acquire each property at a price low enough to allow a renovation that delivers the high quality and high design for which we’re known.

Blog note: Our posts represent our experiences and opinions only. If you choose to do your own renovation, buy or sell a house, definitely consult the advice of an expert including licensed contractors and/or realtors.

Crooked Corner

While we’re completing the finishing touches to the townhouse, I’d like to share a pretty cool solution for an odd-shaped corner countertop.

We knew that we needed to replace the cabinet/countertop vanity in all the bathrooms. In the guest bathroom, the vanity seemed to be custom-built with a very old laminate countertop cut to fit a double corner. Jennifer and I certainly wanted to avoid the “custom” option. Custom = big $.

We chose to purchase a pre-manufactured cabinet and align it with the “first corner.” This left a weird triangle between the right side of the cabinet and the wall. Next, we had our granite guys cut the countertop to cover the cabinet AND the weird triangle space to meet the wall. Last, we built two shelves to bridge the distance between the cabinet and the wall.

Check out the pictures to see the finished product. A “custom” look for less money. And, the shelves add that much needed storage space for toiletries or rolled towels.

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Just Say No No to Apollo

We’re in the final stretch of completing our townhouse remodel in North Raleigh, and we would not be this far along without the support of some fantastic contractors.

As we’ve mentioned before, we hire experts for those jobs we’re not qualified to handle. For example, we learned that this home had an Apollo Heating and Air system. Do you know what an Apollo system is? No? Neither did we. Back in the 80s, homes were installed with the HVAC system tied to the hot-water heater.

Jump to today and you’ll be faced with a big question: Should I repair the existing system for a large amount of money…or do I replace the archaic system for double that large amount of money?

We hired Marcus Barnes with Bee Bee HVAC to help. (I used him at my personal home earlier this year.) Marcus provided us with a short tutorial on the Apollo system. He explained that our AC handler wouldn’t last another week (charge wouldn’t hold). And, he provided us with two choices –replace it with a new system or repair it for the half the price.

Half-the-price sounded great, but who would throw money at an inefficient dinosaur? We bit the bullet and bought the new handler.

Marcus did an excellent job and remained in touch to ensure that we were happy.

We like working with family-owned businesses like Bee Bee HVAC because of the personal attention to detail.

BUT, please be wary of those companies that advertise often on the local radio stations with a “family-owned-like” name…like, for example, Carl and Son. Make sure to get competitive estimates for each project. We found that “Carl and Son” quoted  $1250 for an electrical project, while another local company quoted “no more than $300.” It’s a pain in the butt to get multiple estimates, but it’s worth it!

No photos this time. We’re so close to our post featuring the before-and-after pics!

 

It’s The Little Things

Many times the small jobs take the most time…and they deliver a heap of frustration. The 80/20 rule applies here. The small jobs (20%) seem to take the most time (80%).

IMG_4958For example, when we took possession of our current renovation, our first priority was to change the toilet seats and get things cleaned up. But, one toilet seat would not budge. The bolt was corroded in rust, and that sucker wasn’t moving.

After pulling the toilet into the front yard (classy), we were able to knock off that sucker. That’s a 25-year-old toilet. Oh, the stories it could tell.

Now, the town home has transformed. And, we’re not finished yet. So far, we’ve completed the following:

  • All-new floors from top to bottom.
  • New stainless-steel appliances.
  • New AC unit. (We weren’t expecting that expense, but that Apollo system had to go!)
  • 18 beautiful light fixtures.
  • Granite in the kitchen and bathrooms.
  • All-new solid-wood cabinets with soft-close drawers.
  • Brushed-nickel fixtures everywhere.
  • Smooth ceilings in every room.
  • Every surfaced painted.

We’ll leave you with a few photos of the kitchen mid-renovation.

This week we’ll be working on a new tile backsplash in the kitchen featuring a grey grout that coordinates with the countertops, wall paint, and floors. Plus, we need to swap out all the beige switches and outlets for white ones along with finishing the painting. It’s already so beautiful!

If you know someone looking to buy for under $200k in the 27613 zip code, let us know. The home is walking distance to Lake Lynn, includes swim and tennis, and is convenient to Highway 70 and I-540. We’d be glad to give you a preview. Realtor friends, we definitely value your service, and we’ll certainly pay the 2.4% realtor fee.

This move-in ready home features 3 bedrooms and 2.5 bathrooms, a beautiful deck that overlooks the trees, plus a bonus loft with tons and tons of storage.

Stayed tuned. We’ll post before-and-after photos soon!

First-Week Fun

Jennifer and I covered a lot last week…even with my daughter and Jennifer’s nephew graduating from high school.

Demo is complete! We named our dumpster Bertha. We held a small service when she left us — she served us well. (BTW, we filled the dumpster in 8 hours!)

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With the new floors being installed next week, it’s important to have the cabinets installed and the nasty ceiling and walls prepped. No more popcorn ceilings! And, we could do messy projects this week without worrying about damaging the floors. For example, instead of painting all the stair rails and spindles by hand, we could use spray paint. Yep, spray paint! But, using spray paint indoors can be dangerous. So, we use googles and respirators. Pretty!

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The cabinets look fantastic! The townhouse looks brighter and better every single day.

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Demo Day!

The renters are gone, and we’re finally in our townhouse. Time to sling the sledgehammer!!

Here are a couple “before” pictures.

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Our goal today: Get all old cabinet, counter tops, and vanities into the dumpster.

Here’s an action shot.

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At the end of the day, we fit every single item into that dumpster.

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Check out the gutted kitchen! And, we were able to finish before the sun went down. Time to shower and go to bed.

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