Adding Value to Luxury Listings

Today's New York Times had an amusing but informative article today about things people have done to raise the prices on their properties. Perhaps the most extreme example was a seller who regrouted the bathroom tile and added $100,000 to the estimated value of the listing, on the theory that cracked and dirty grouting would tend to make buyers think that they would need to do a major bathroom renovation. Another broker told of a client who changed the kitchen cabinets and repainted, thereby getting an offer $100,000 higher than the broker had anticipated.

Most of the examples involved big dollars, but obvious pointers: Get rid of the clutter. Clean the rugs. If you are a landlord, put in new appliances. Replace towels and bath mats with fluffy new ones. Improve the lighting. We all know these things, but it's sometimes hard to think objectively about a place we've lived, especially when the expense incurred will benefit the new owner and not ourselves. It's worth doing things that improve either curb appeal or the initial impact during a showing. Last week's Times real estate section even talked about a new trend of using pets (well behaved and freshly groomed) to make open houses more homey. Who knows? Fido might even replace the tried-and-true cookie baking, to fill the home with a delicious aroma.

The best story, however, was the last example in the article. One broker tells her clients to go out and buy 25 pairs of expensive designer shoes, which will pay for themselves in a higher sales price, as "people want to step into your life". Isn't that like the closet envy scene in the first Sex and the City movie? Well, if it works, what woman wouldn't want two dozen new pairs of great shoes?

Prices Holding Steady

When we look at the real estate market statistics from last year in Greater New Haven, we don't have much to crow about. All around, it was a blah year, made that way mainly after the tax credits expired in June. However, one thing that is surprising is that the prices didn't go down as much as you might think. Our Guilford office had a mean sales price only 1% or so down from 2009. Our market as a whole was down about 2.9%.

Those figures don't jibe with what the average person on the street thinks. Why is perception so different? One reason is that many things didn't sell at all, and, if they did, they had been reduced one or more times before they went under contract. Also, as we must always point out, these statistics are not the same as in other industries, because the same homes aren't selling every year. Therefore, the particular mix of homes could change, although that is less true when you look at numbers over a whole year. So it could have been that the home that sold for $330,000 in 2010 was as good or better than the average $340,000 one from the year before.

What the numbers do show is that people went for value. Properties that sold were in good to excellent condition, in established neighborhoods, and were priced to sell. Buyers tended to feel that they were in the driver's seat, and could choose among a broad range of options (which, as I've discussed before, was less true than they thought--another example of mistaken perceptions trumping reality).

What does it bode for this year? Value is still important. Basic conservatism will still prevail. Sellers who don't have to sell will still not sell unless and until they can avoid steep cuts. Buyers will continue to be fussy. But, finally, the market will improve. Maybe slowly, but clearly. And we can't wait!