Tag Archives: real estate

Online discussion of how to avoid selling a home to someone who will build a teardown McMansion

Posted on by

I ran into an interesting online discussion originating out of the North Center neighborhood in Chicago: how can a seller keep their home from becoming a teardown McMansion? Here is the discussion starter:

To my wonderful North Center Neighbors,

My partner & I will be selling our late, well built, 2 bedrm late 1800’s home in a few months( through Baird Warner-realtors need not contact me). We have lived here for 20 yrs, and love North Center with all of it’s old homes & history, which seems to be on the endangered list, becoming prey to developers of McMansions. So…my question is this; Is there a way to ensure(legally) we don’t sell to a developer, or sell to someone who would want to do a tear down? I am a firm believer in preserving & protecting our well built old homes, which also serves to lessen the impact on the environment.

Thank you in advance for any insight.

Here are a few of the responses (separate responses in each paragraph):

No, unless it’s a landmarked property, people can do whatever they want. The good news is, many people WANT a sweet old house with a yard and will not McMansion a home if it’s a solid, well-functioning property. Good luck with your sale!

You could do a restrictive covenant. A restrictive covenant is a type of real covenant, a legal obligation imposed in a deed by the seller upon the buyer of real estate to do or not to do something. Such restrictions frequently “run with the land” and are enforceable on subsequent buyers of the property.

Yes, restrictive covenant is an option but it will decrease your ability to sell. As said, the covenant runs with the land so not only does it restrict next owner but it will also restrict future owners as well. So this will significantly bring down the sales price. I’ve actually not heard of this being done in a sale situation, just through estates and gifts of land. My guess is that your lawyer will recommend against it. However, you could discuss putting conditions in the real estate contract (which only run to the next owner). Talk to the lawyer you intend to use for the sale.

Another solution is mentioned by another commentator: blocks or neighborhoods could enact or argue for particular zoning rules that could limit what kind of teardown home could be built. Of course, it takes more work to get a lot of neighbors to agree and then have the powers-that-be put the new restrictions into practice.

I suppose another option would be to rent the current home and purchase elsewhere. Thus, the current owner still retains some control over the property even though they would then have to manage it.

Thinking more broadly, I wonder how many Americans would go the extra step to try to preserve their existing house. I suspect most Americans tend to see their homes more as temporary housing solutions rather than structures they really care about and would want to preserve for future generations. This could be a function of having suburban neighborhoods where homes may be somewhat interchangeable, an American interest in mobility, or a rise in disposable consumerism where more goods are seen as temporary.

Fighting over the most expensive Christmas tree lot in New York City

Posted on by

Prices are higher in New York City. This even extends to the cost of renting Christmas tree lots which has led to a battle between two New York City Christmas tree entrepreneurs:

“SoHo Square,” says Scott Lechner, who pays the New York City Department of Parks and Recreation close to $50,000 a year to sell trees here, “is the most expensive site in the world.” He doesn’t sound proud of it.

But Lechner must bid high to stay ahead of his onetime protégé, George P. Smith, who has been on something of a spending spree since he outbid Lechner and took over his Washington Market space in 2007. Smith has also made waves with a huge takeover bid for the Marine Parkway spot in Brooklyn, and has tried to do the same in SoHo and elsewhere.

Smith now has seven locations; Lechner has nine. The two are bitter enemies. Lechner calls Smith an “unsavory individual,” who was “fired by my organization for malfeasance and dishonorable conduct.” (“He hates my guts,” Smith says.)…

The contested Washington Market space — one of 21 the parks department has auctioned off to vendors for the month — was the site, in 1851, of the first urban tree lot in the United States, for which a Catskill woodsman named Mark Carr paid a silver dollar in rent. Today, Smith says he plays close to $30,000 a year for a mere 33 days of sales.

Even in the nation’s most expensive ZIP codes, these rents are, for the moment, somewhat unusual. Rents for many other tree sales sites in the city remain in the low thousands. In 2011, a space on Central Park West was $1,150. DeWitt Clinton Park on West 44th St. was $2,500. Essex Playground, $3,960.

The rest of the story notes that this has been a good thing for the city’s parks department whose is raising more revenue in the competitive bidding for these lots. With many cities facing fiscal issues, I’m sure New York City is happy to have this extra money. Of course, this has repercussions: people buying trees at these lots now pay higher prices.

This could lead to an interesting discussion about whether Christmas trees should be treated more like public goods that shouldn’t be so expensive. For a resident of Manhattan who has no individual vehicle, acquiring a Christmas tree, real or fake, could be a difficult task. This sounds like a more limited market where the consumer is already behind and may not be able to comparison shop much. The average suburbanite, on the other hand, has more options.

This also reminds me of sociologist Mitchell Duneier’s ethnography Sidewalk. Toward the end of the book, Duneier discusses how a family who comes to the city for a month each year to sell Christmas trees is treated much differently than the homeless black men who are street vendors in the community all year long. The contrast is striking: because the tree vendors are white and respectable, local residents interact with them regularly while having more antagonistic relations with the black street vendors. Apparently, getting into the Christmas tree game in New York City takes some major money and this limits who can can sell such goods and participate in community life.

Tradeoff between making a stricter energy code for new homes and higher costs for buyers

Posted on by

While there is growing interest in more energy efficient homes, this doesn’t come without an upfront cost. This is illustrated by the debate in Illinois about how much new energy standards might add to the costs of new homes:

A new statewide building energy code that takes effect Jan. 1 strives to make homes more comfortable and residential energy bills less costly by making the building’s “envelope” tighter. The adoption of a substantial amount of the International Energy Conservation Code for homes puts Illinois at the forefront of such efforts among states.

But the updates to the building energy code, required by state law every three years, have not been without controversy. While proponents say the changes will increase the cost of a new home from $958 to $1,775 in Illinois, or about $1,500 in the Chicago area, detractors of the new rules peg that Chicago-area cost increase at $4,600, a sum they say will price some first-time buyers out of the market…

The changes won’t be obvious, and even the code’s proponents agree the upgrades in energy efficiency won’t be as easy to market to consumers as, say, granite countertops and crown molding.

They include upgraded insulation in attics and basements, more energy-efficient windows, upgraded bathroom vent fans, the use of some high-efficiency lights, insulated hot water lines to kitchens and air sealing around furnaces…

Supporters of the changes say consumers living in a Chicago-area home of 2,400 square feet with a basement should save an estimated $350 a year on their energy costs, compared with the current building regulations.

If these estimates about savings each year are correct, these code changes would be worthwhile over the the full lifetime of a home. However, how many homebuyers take this long perspective? In a mobile country, how many would be willing to pay upfront for costs from which they may not personally benefit?

This seems like the classic dilemma about a number of green products in the United States: will people pay upfront for savings down the road? It will be interesting to see how builders try to sell these code upgrades , massage the price points of home to account for these new costs, and also try to appeal to greener buyers overall.

“The downside of retirement downsizing in a McMansion world”

Posted on by

Downsizing has its challenges:

Anne Tergesen at The Wall Street Journal explored the problems of moving from a larger home to a smaller home at retirement: “But downsizing isn’t always simple, painless — or even all that beneficial financially. With the real-estate market still fragile, many baby boomers are getting a lot less than they expected for the old homestead. All too often, they have little cash left over after buying a new place, and their monthly expenses don’t fall as much as they thought — or may even rise instead.”

Tergesen also wrote about the emotional pain downsizing might cause: “They can’t bear to sort through or part with all those boxes in the basement, or argue with the adult children who want to keep the house where they grew up. Sometimes they downsize only to find they miss their old lifestyle and stuff.”…

Of course, downsizing doesn’t necessarily mean a scaling back in comfort. Architect Sarah Susanka, author of the best selling “Not So Big House” series of books, writes about how people can live in smaller homes that seem bigger because the design eliminates the wasted space in homes — such as dining rooms and formal living rooms.

Buying and selling homes, though, has its own challenges. Jacob Goldstein with NPR looked at the question of whether homes are cheap right now: “Houses are much cheaper than they were six years ago. Of course, six years ago was the peak of the biggest housing bubble in the history of America. So does ‘much cheaper than they were six years ago’ mean cheap? Does it mean ‘cheaper, but still overpriced’? Or does it mean ‘about right?’ ”

Moving can be difficult. But, downsizing can be viewed as a good thing: it gets people out of unnecessarily large homes that take up too much space in the first space; it could help people get rid of stuff they accumulated over the years (American consumerism at work) as well as begin a lifestyle where they can’t accumulate as much because they have less room to store it (though there could be problems with passing down heirlooms); and it might reduce housing and utility payments.

So, if downsizing is a good thing, can’t someone figure out how to make it easier? How about some sort of company or program that matches people who want a larger house with people who want to downsize? How about communities or perhaps governments that would guarantee people a certain value for their home if they live there a certain amount of time and then leave for downsizing purposes? What if a company promised to buy a downsizer’s home if they purchase an somewhat equally priced new Not So Big House? These ideas might be out there but if we wanted to promote downsizing, there are things companies or governments could do help the process along rather than just leave the process to the twists and turns of the real estate market.

Mortgage interest deduction part of fiscal cliff negotiations

Posted on by

The negotiations regarding the fiscal cliff include the mortgage interest deduction:

Limits on a broad array of deductions could emerge in any budget deal. It is likely that any caps would be structured to aim at high-income households, and would diminish or end the mortgage tax break for many of those taxpayers…

Such a move would be fiercely opposed by the real estate industry. The industry has played a crucial role in defending the tax break, even as other countries with high homeownership have phased it out…

One of the reasons the mortgage tax break is so vulnerable is that both Democrats and Republicans have recently favored capping deductions, including both President Obama and the recent Republican presidential nominee, Mitt Romney…

Taken on it own, the deduction limit wouldn’t make a huge difference. But it can play an important role in a broad plan to cut the deficit, and shows a willingness to tackle once sacred cows. The tax numbers suggest it may not be hard to structure deduction limits in a way that leaves most middle-income households untouched.

This is not a new idea – people have been suggesting for a few years now (see here) that the mortgage interest deduction tends to help the wealthiest the most. Capping the deduction would still provide a benefit for less wealthy homeowners and boost the housing market. Yes, homebuilders and real estate people may not be able to construct and sell as many large and expensive homes that provide higher profit margins and commissions but there are plenty of other arguments against such homes beyond the mortgage interest deduction (see the green argument and the moral argument). Wealthier Americans are probably still going to buy homes, because they have the money and there is still an American cultural push toward homeownership, whether the mortgage deduction is there for them or not.

There are other countries in the world with higher rates of homeownership even with the federal government’s decades-long support of homeownership. The data is a few years old but check out these figures reported by National Association of Home Builders: a number of European countries have higher and lower rates of homeownership. Of course, American homes tend to be larger than European homes and I’m reminded of quick suggestion in Suburban Nation that Americans may have the best private realm, referring to our homes, in the world.

I assume a capped deduction would also limit or remove the deduction for the purchase of second homes?

Perhaps the biggest thing to note here is that the mortgage interest deduction was indeed was once a “sacred cow” but tough economic times lead to new measures.

 

 

Why the interiors of model homes look better

Posted on by

Here are some tips to help your home look more like a model home:

Professional home stager and model home designer Katie Schafer of Chicago-based Dressed to Sell has a one-word explanation for why many new homes bear little resemblance to picture-perfect models: clutter…

Another common mistake, designers say, is assuming the furniture from your old place will fit effortlessly into your new scheme. Moving is a great time to get rid of pieces you no longer need while identifying new ones to enhance your space, said Mary Cook, president of Chicago-based Mary Cook Associates…

Cook’s upcoming book, “The Art of Space,” scheduled for publication in 2013, elaborates on those seven elements in detail. A biggie, she said, and one that most homeowners tend to overlook, is scale, the size of something, and proportion, its relationship to the things around it. Rooms that are too full — or too empty — just look wrong, she said…

Color is another element that well-decorated models employ wisely. While new homes are often delivered with white walls, a Mary Cook-designed model can have as many as 25 different paint colors. Thoughtful-yet-fearless use of color can add richness that makes a home feel warm and inviting.

In addition to color, model home designers are experts at mixing patterns and texture, said Helen Velas, president of Naperville-based Eleni Interiors. While the average homeowner isn’t likely to be as skilled, home-goods retailers have become good at bundling pieces together to help people get that custom-designed look, she said.

Staging can go a long way to helping make a sale. However, I’ve always been struck by the unreal image model homes present. The lived reality of an average American home includes clutter, probably some non-perfect furniture, and maybe some clashing colors and patterns. It involves residents and family members moving around, appropriating spaces for their own use, and being comfortable. We know this from our experiences so why would we fall for the “staged” home?

I wonder how much of this has to do with presenting an aspirational image. Think of the average cluttered home: how many residents would be willing to show that off to strangers without cleaning up(though after going through a number of for-sale homes a few years ago, there was a higher percentage of people doing this than I would have imagined)? Or think of the common image of a home: in advertisements, new homes, movies, art, magazines, etc., homes look put together. That is what we think it is supposed to look like. I remember reading about a company that had started including people in their staged homes; this added a special touch in helping people imagine themselves in the home. And this all ties into the larger American Dream image of the “perfect home.”

Real estate firm survey: younger Americans still want to own a home

Posted on by

Even though a number of commentators have suggested younger Americans are not as interested in homeownership, a recent survey conducted by “Better Homes & Garden real estate brand” suggests this may not be the case:

Nearly all of them said they were willing to adjust their lifestyles to save for a home. Sixty-two percent said they’d eat out less. Forty percent said they’d work a second job. And 23 percent said they’d move back home with their parents to save money — they’re being strategic about saving money to own a home.

They also said that all of the media coverage of the housing crisis has taught them the importance of doing their research and planning, and they think they’re more knowledgeable about the process than their parents were at their age. But they want to be ready to own — 69 percent said that someone is ready to buy if they can maintain their lifestyle (while owning), and 61 percent agreed that the “readiness indicator” is if they have a secure job.

And even if these younger adults do want to own a home, the real estate industry has to be ready to appeal to this group:

Well, as an industry and certainly as a brand, we’d have to step up our campaign to show young buyers the importance of real estate as a long-term investment and lifestyle.

On a related note, something else also drove us to do this survey: the big disconnect in the average age of a first-time buyer (36), versus the average age of a real estate agent (56). This younger generation of buyers’ habits are different — they’re comfortable using technology, especially mobile devices, to buy and track everything, and agents need to learn this.

Several things are interesting here. First, it appears a good number of younger Americans do want a home but they are also more aware of what it will take to make it happen. If homeownership is such a big investment, younger Americans want to do their homework to know what they are getting into. This could mean that fewer people in this group will buy a home until they find a more “perfect” situation which might decrease the homeownership rate but it could also mean that those who buy a home are more committed.

Second, it is suggested that the real estate industry needs to stay relevant in the era of the Internet. Traditionally, real estate agents are necessary people in the middle who have expertise that the average homeowner would not have. But, potential homebuyers have much more information at their fingertips and if more people are selling their own homes, the real estate industry needs to continually show what extra value it offers. Also, this article hints at the aging of real estate agents: is this a desirable job for young people to pursue? If you look at a table of occupational prestige in the United States, real estate agent is at the bottom.

I wonder if the story for younger Americans and homeownership will be a bifurcated one based on socioeconomic status. Those with higher education and good jobs will continue to buy homes. Those who don’t have college degrees and/or struggle to find a good job may not have the option to do so.

Century 21 says winning NFL teams boost housing prices

Posted on by

A new study from Century 21suggests housing values rise when NFL teams win:

The question was this: What is the impact on a city when the hometown team does well or doesn’t do well? Century 21 looked at teams’ successes, population growth from census numbers, home value appreciation and attendance rates. And the correlation between on-the-field success and real estate prices was evident:Four of the five cities with teams that went from a losing record in 2010 to a winning record in 2011 saw average home sales prices increase between 2010 and 2011.

After winning the Super Bowl, Green Bay, Wis., saw a population growth of 1.7 percent in 2011, compared with runner-up Pittsburgh’s 0.6 percent growth.

Going from a record of 10-6 in 2010 to 2-14 in 2011, Indianapolis, the home of the Colts, saw a 19.8 percent decrease in home sales.

Eight of the nine cities with a team that had attendance rates of 100 percent or more in 2011 saw average home sales prices rise that year.

Here is the original Century 21 blog post with this information.

The NFL is a powerful entity but does it have this much power? Is this due to a small sample size (this article mentions only one year of data)? Are there other factors behind this correlation? If I had to guess at what is going on here, I suspect this is too small of a sample and that 2011 prices in certain cities happened to coincide with NFL results. Why not look at the housing crisis years and see the relationship between records and housing values?

I’m generally skeptical of sports fans and others that claim sports are important for the civic pride of a community or that new stadiums need to be funded by taxpayers because the loss of a team will hurt the local economy. However, this could be pure genius from Century 21. What better way to boost business than to hook your services to the popular NFL? Hey, there was even a Century 21 2012 Super Bowl ad!

Hard to get green homes appraised as there is a lack of knowledge, comparables

Posted on by

Interest in green homes, exemplified by net zero energy homes, may be growing but there is an issue: because there is a lack of comparable homes, appraisals for green homes are more difficult to do:

Last year, single-family green home construction represented 17 percent of the homebuilding market, in effect doubling since 2008, according to a report by McGraw-Hill Construction. Researchers predict that by 2016, green home construction could comprise 29 percent to 38 percent of the market, as builders devote more time to green projects. The share of remodeling projects labeled as green is expected to rise as well…

Appraisers are slowly getting up to speed. Since 2008, almost 4,900 appraisers nationally have participated in 275 courses on green and energy-efficient valuation conducted by the Appraisal Institute trade group. Still, green home appraisals continue to be difficult, in part because there are few comparable sales but also because the building technology is changing. That makes it hard for appraisers to value — and for lenders to accept those higher values — home features that can run the gamut from rain barrels to a tankless water heater to a whole-house geothermal heating system…

In the Chicago area, Midwest Real Estate Data LLC added “green” fields to its multiple listing service so sellers can highlight environmentally friendly features of their homes to potential buyers. The Appraisal Institute created an addendum to appraiser forms to help analyze the value of green features. And lenders are starting to track so-called green mortgages to see if defaults are lower than on traditional home…

To increase the chances that improvements that go above and beyond what’s required by local building codes is correctly valued, experts recommend documenting green features added to a home.

They also urge builders and consumers to consider obtaining third-party certification about the home’s energy efficiency.

Put another way, there is more cultural and economic interest in green homes. People want to both reduce their energy costs but also want homes that are “responsible” and not seen as energy-hogging McMansions. However, it takes some time for the whole market to catch up to the perceived higher values of these new homes. This is the real issue here: while extra money and time may be spent on green features, appraisers aren’t yet “rewarding” builders and homeowners with the increase in housing value they think a more efficient and green-conscious home deserves.

Thinking more broadly about this, I wonder about the motivations of builders who are constructing more green homes. Are they motivated more by wanting to be green or by the knowledge there is a growing market for such homes? Of course, being green and making money can go together and perhaps this is how it should work in a perfect world. But, this might matter for some who are more concerned about being green and who wonder if being green is currently about being trendy which could endanger such causes down the road when the cultural and economic winds change.

Real estate agent: the $3.1 million, 5,900 square foot home is warm and likeable and not a McMansion

Posted on by

Here is an example of trying to sell a large home by first arguing that it is not a McMansion:

The house that ranks as the Baltimore region’s priciest sale in August is, in the words of the sellers’ real estate agent, “understated” — the sort of home that doesn’t smack you in the eye with its high-end glitz.

The four-bedroom home on Golf Course Road West in Owings Mills, which sits on 2 acres near Green Spring Valley Hunt Club’s golf course, changed hands for just over $3.1 million.

“It wasn’t a McMansion,” said Linda Corbin of Prudential Homesale YWGC Realty, the listing agent. “It was an absolutely beautiful, charming, warm, wonderful house that you could feel like you could put your feet up in every room … and be comfortable.”…

Part of the home’s not-in-your-face style comes from its U shape, which makes its 5,700 square feet look less enormous from the outside. But there’s a lot packed inside. Besides four bedrooms, the home’s features include four full bathrooms, three half-baths, two laundry rooms (one upstairs, one downstairs), a gourmet kitchen, a butler’s pantry and a movie theater.

A separate building paired with the in-ground pool has its own living room, bathroom and second-floor space intended for an exercise room or guest bedroom.

This home may be more understated that other homes of similar square footage or in its price range, but in comparison to the majority of American homes, this home is probably not understated.

I am intrigued by this sales pitch: this home is attractive because it isn’t a McMansion. This suggests buyers tend to think larger homes are indeed McMansions and want to be shown otherwise. Also, I wonder if this means that the homes that are indeed McMansions do sell for less because fewer buyers are interested and that real estate agents change their tactics when the home they are selling is indeed more obviously a McMansion.