VOL. 41 | NO. 26 | Friday, June 30, 2017
Can’t take the heat? Replace that furnace before you sell
Nashville, 2017, and the air is filled with pollen, songwriters and homebuyers.
In normal times – when a reasonable number of homebuyers are shopping a wide variety of homes for sale – buyers would visit a home at least twice prior to making an offer. In many cases, the approval of a spouse or significant other was required, while others needed someone, be it friend or family member, to help them feel comfortable with their decision.
With the market as frantic as it is today, however, this careful process can prove disastrous because some other buyer is ready to swoop in and snag the house with no delays or due diligence.
With prices at all-time highs, many buyers also cannot digest the reasoning for the pricing. As was mentioned last week, this is no city for real estate number crunchers. The balance sheet – too many credits, not enough debits – will not balance.
That is, unless the house is an older home, then the sellers get the “three-beat.”
Pat Riley might own (literally, through copyright) “three-peat” – a phrase coined when his Lakers sought unsuccessfully to win their third consecutive NBA championship in 1989 – but the Ledger now owns the three-beat.
Here is how the three-beat occurs: A person decides to sell the house and interviews Realtors for a possible listing of the property. In the case of an older home, some of the systems – HVAC, electrical, plumbing – are older.
The Realtor usually provides a comparative market analysis that details the sales of comparably sized homes in the area. For this example, the house would be worth $650,000 if all the systems were new.
The Realtor mentions that the buyer is going to insist that the systems be replaced, and the owner rebukes the suggestion stating that all the systems are performing well and any buyer is going to know that the house is older.
The owner is proud, as he should be, that he has replaced the filters each month, had regular termite treatments and has had the chimney cleaned every spring. The Realtor might remind the owner that the HVAC is 30 years old, the roof 15, the plumbing galvanized and the driveway cracked.
The information is absorbed, and the owner can see no need to replace perfectly good systems that are currently working well with new systems of inferior quality, but agrees to a lower price based on their age.
He agrees to go with a price of $635,000 to allow for the depreciated home. This is the first step of the three-beat.
As time goes by, the showings are going well, and the days on the market are accumulating. The feedback is that the prospective buyers are concerned of the age of the systems.
Eventually an offer comes for $610,000, and the buyer’s agent explains that the buyer fears he will have to update all the systems. After several counter offers, the buyer and seller negotiate a price of $615,000.
The second beat has occurred.
Along comes the inspector, who warns of the plumbing needing immediate attention as some of the galvanized pipes have eroded to the point of leaking, a condition unbeknownst to the seller.
Additionally, the electrical wires are of the knob and tube variety that most insurers will not cover, and the breaker box was manufactured by a company that has closed due to numerous claims and lawsuits because its boxes caused fires all over the country.
To make matters worse, the heat exchanger is so dirty and corroded that the inspector could not reassemble it until it was checked by the codes department, as he feared it was unsafe.
The inspector then explained roof math. In roof math, each year is six months, meaning a 30-year roof lasts 15 years. Based on that, it is at the end of its lifespan.
The buyer asks for a $25,000 price reduction, leaving the seller three options:
1. Terminate the contract and hope someone else comes along with a different prospective. That’s unlikely.
2. Fix everything and go back on the market, where there is no guarantee it will sell again
3. Take the offer and sell the house for $590,000.
The owner does not have the resources to pour more money into the home, and the feedback has registered loud and clear. He takes the $590,000.
If possible, sellers should do whatever they can to avoid the threebeat by updating all systems prior to selling.
Sale of the Week
Sylvan Heights has for years played second fiddle to its rocking neighbor, Sylvan Park. No more.
While prices in Sylvan Park continue to rise, its sister neighborhood is faring well, as evidenced by the sale of 346 Chamberlin Street. That home sold for $25,000 in October of 1996, $36,000 two months later and $40,000 two years after that sale.
In 2014, the 704-square-foot house on the property was replaced by a 2,308-square-foot home with a 24-by-24 detached garage. It sold for $419,000.
Last week, it sold for $589,000 within 17 days of its introduction to the market.
The property was represented by real estate veteran Lydia Armistead, who was selling real estate during the era when this property was selling for tens of thousands of dollars rather than the hundreds of thousands the property commands these days.
Armistead has been with Freeman Webb Company for decades and has managed to be tremendously successful while married to Nashville icon George Armistead.
Well located between 46th Avenue South and Charlotte Pike, the home has three bedrooms, two full baths and a half bath.
Armistead’s comments describe the homes as “a gorgeous home with no details spared in desirable Sylvan Heights.’
She also wrote that the home featured “spacious, open living on main level with gorgeous hardwoods throughout, coffered ceilings, a chef’s kitchen and a master on main.”
When the property sold for $25,000, it featured 10-year-old carpet, vinyl (linoleum) tile with very few holes in it, a master and anything else resembling a bedroom on the main level, and a chef’s kitchen whenever a chef stopped by to cook.
Brandon Blair, the broker with flair, represented the buyer who bought a 3-year-old house with all the trimmings, including an upstairs bonus room.
Richard Courtney is a licensed real estate broker with Christianson, Patterson, Courtney, and Associates and can be reached at email@example.com.