Figures show that residential home sales for the Outer Banks are down 17% for February. There were only 83 home sales, making that the weakest month of sales since November 2011. So today I want to address the proverbial “elephant in the room” and what I consider the primary reason for the drop in sales.
First factor I addressed last month. We were expecting this year to be flat, no substantial growth. This is because markets are cyclical and historically speaking we have a flat year every 3 to 4 years. This year just happens to be the time for it.
The second contributing factor continues to be the inventory level. While we are moving in the right direction regarding inventory, we still have more homes for sale than buyers.
The interesting conundrum we experience, here on the Outer Banks, is the discretionary nature of buying and selling. Most sellers I talk to say they don’t HAVE to sell. It makes sense, as they aren’t physically moving OUT of the home. Similarly, buyers are not physically moving INTO the home so, they too, don’t HAVE to buy and they are willing to wait for the right house. There is no push for buyers to make a decision on a home that is not “turn key”.
So, what exactly does “turn-key” mean to a buyer?
- Zero to minimal maintenance work required. This means the main systems of the home are in good repair and working order – ie. the roof, windows, doors, siding, decking, paint, HVAC etc.
- Upgraded, clean interior with the latest finishings (flooring, appliances, furniture etc.)
- Well equipped for rental/summer season. This means well furnished, stocked and equipped for use by guests and owner with the best possible amenities.
Why do buyers want a home that is turn key?
- They don’t want to manage a maintenance or renovation project from afar
- Many don’t have the willingness to do any remodeling and upgrading
- There are a lot of other choices available (remember the inventory) that are turn key
- They want to be more than compensated for the “what if” scenarios that come up if handling maintenance issues
- Financing is more challenging making it difficult to get the funding for repairs and/or upgrades
- Cash after a large down payment to purchase is not as readily available
- Probably the biggest reason is buyers are starting an exciting and new adventure with a beach house – they don’t want to feel they are starting out, already behind (ie. Having to do work to something they just paid a lot of money for)!
Why aren’t more Outer Banks homes turn key? There are a lot of homes on the Outer Banks that have deferred maintenance and/or are outdated and this can be for a wide range of reasons.
- Since this isn’t the primary home, owners aren’t seeing it every day and often aren’t aware of what needs to be done
- No one else is telling them about things that need to be addressed
- Most homes are owned for several decades and owners get to an age where it’s more difficult to do the work themselves
- Finding and managing good contractors from a distance is a challenge, especially as owners age
- Sellers have disengaged from the property – this happens for many, many reasons.
How can we best leverage this information? The key is understanding what makes a home more ATTRACTIVE versus more VALUABLE to a buyer. This is where we see the connection between wants versus needs.
Basically, if the NEEDS of the house are updated and in good working order (aka, not original to an older home) the home is more ATTRACTIVE and will sell faster.
- Needs are the things the house is already supposed to have – think the mechanical systems, building envelope, main components of what makes it a house
- Buyers are already paying for these things and will not likely pay more for something the home is supposed to have in good working order. This is related to the maintenance work I mentioned above.
- When you have these items in good shape this makes the home more ATTRACTIVE to a buyer, not necessarily more valuable.
The WANTS of the buyer in a house are the flashy upgrades a buyer is willing to pay more for. Doing upgrades that make sense can potentially make the home more VALUABLE and help it sell faster.
- Wants are the latest, greatest finishings and materials – think, granite counters in kitchen and bath, tile showers, hardwood or laminate flooring, composite/synthetic decking, fashionable décor
- Upgrading doesn’t always make sense! It’s important to check with a professional agent for where best to spend money before selling. Depending on the home, sometimes the money is better spent in adjusting the price over investing more into the home.
Bottom line…as I look through the list of homes sold this year, there is a common theme. The majority of the homes that sold quickly and for the best pricing share some of the same words in the description:
- New in 2017/2018
- Updated recently
- Completely remodeled
- Upgrades galore!
Although this is the common theme, that doesn’t mean your home won’t sell without dumping a ton of money into it. As I said before, it does not make sense to upgrade and update in every situation. What I think it does identify is the need for proper pricing based on the condition of your home in relationship to the expectations of the buyers looking in today’s market. These buying trends are not likely to go away, so if you’ve been thinking about selling, call a professional for advice on what, if anything, you can do before listing. And keep in mind condition is a major factor in today’s market. I hope this information has been helpful. If I can answer any questions for you please reach out.
