Are we expecting too much?

With yet another unsuitable house viewed yesterday afternoon, it occurs to me to wonder if the problem is our expectations: are we expecting too much?

In terms of an agent we expect the following:
1) Don’t waste your time, our time, or the time of the sellers. Show us houses that fit the criteria we give you;
2) Don’t be selfish or greedy: share with your colleagues and show us houses they have listed if they fit our needs, even if you have to split the commission with them;
3) Recognize that the upper limit of our budget is for a “perfect” house: i.e., a house that needs no immediate expenditure for work to make it ready for us to move in. That means if the house is listed at the top end of our budget and the bedroom wall needs to be pushed out two metres just to get our furniture into the room, we cannot offer full price for it, we have to offer full price minus the cost of pushing out that wall or we simply cannot buy the house;
4) Respect our needs…don’t tell me I “have too much stuff” when I say the house is too small or that I need to “downsize” my collection of pots, pans, and utensils when I say the kitchen isn’t big enough or that “the owner likes it this way” when I opine that something is not to my liking. Just listen, take the information under advisement, and use it to refine your next recommendation;
5) We have R2mil to spend, give or take a couple of hundred thousand. Don’t condescend or treat us like paupers…it is a generous amount of money and it will buy us a decent house…we have time, we are preapproved buyers, and we will keep looking until some estate agent wises up and shows us the right house at the right price. If you want a percentage of that preapproved chunk of money our lender has promised us, go find us a house that suits our needs…don’t try to shove us into just any old house you are eager to sell. I want to buy the brick-and-mortar equivalent of a gently used second-hand Mercedes ML, not a brand new Ka.

In terms of a house, these are the inflexible minimum requirements:
1) 3 bedrooms, one of them large enough for my large, heavy bedroom suite of six pieces of furniture;
2) 2 bathrooms, one of them en suite with the master bedroom and with a shower, preferably larger than a 1m x 1m cubicle;
3) Either generously sized staff quarters or a granny cottage on the property. Our maid came with us from Cape Town and we need sufficient space to house her and her family. I do not consider one room barely bigger than a double bed and an outside toilet to be sufficient space for even one person, and some of these sellers should be abjectly ashamed at the conditions in which they expect their live-in helpers to reside! It is this requirement that has us looking at more expensive houses, as only they have granny flats or staff quarters.
4) No cluster houses, no houses on panhandle lots, no houses backing up to a freeway, shopping centre or industrial park, no houses on busy roads.
5) Adequate security, please! That means a functioning alarm system, security gates, locks that work, and intact boundary walls at minimum.
6) Fireplaces, pools, air conditioning, water features, covered patio and other amenities are nice, but they don’t make up for the lack of a large shower, space in the kitchen for a double fridge, automated garage doors, remote controlled driveway gate, or room for a washer, dishwasher AND a tumble dryer, and we don’t consider them necessary. We won’t turn down a house because it doesn’t have a pool or the patio isn’t covered…we will turn it down if the fridge won’t fit into the kitchen or there is no shower in the en suite bathroom.
7) Please, no houses that don’t have at least a modicum of decent room flow! I don’t want to open my front door into the dining room; I don’t want to walk through my closet to reach the bathroom; I don’t want my mother-in-law to have to walk to my room to get to the guest bedroom; I don’t want to carry a hot, heavy pot of food down a hallway, through a dark “TV room,” and around a corner to reach the dining table; I don’t want to pull into my garage on a rainy day, the boot of my car full of grocery bags, and have to lug those bags, in one of our torrential downpours, across a courtyard or lawn, down some steps, past the pool, through a security gate that I must stop and unlock with a key, and then up to the front door which must also be opened with a key, all in order to just get the groceries into the house. I want a house that has had some reasonable consideration to traffic flow put into its design…I will have to live in it every day for years and I simply do not see myself living happily in a house in which the rooms have been stuck randomly together!
8) An adequate-sized kitchen is not negotiable. It doesn’t matter if it is poorly laid out or has insufficient cabinet space…I can sort that out with a good kitchen designer. But if the room is too small, we are talking major money here to add on foundation, walls, roof, and plumbing in addition to new cupboards, counters, appliances, fixtures and flooring.
9) Trees. I want a mature garden with trees to shade the property. This is Africa and it can get bloody hot here, and trees are cheaper than a/c, they filter pollutants from the air, give off oxygen, and look beautiful. I want shady trees and I simply will not buy a house that doesn’t have them.

So, a 3 bedroom, 2 bath (one with shower) house with large kitchen, adequate space for our live-in maid (newer American homes often have “in-law suites” which would be perfect), double garage with automatic door openers, adequate security, and a quiet, tree-shaded location…that’s the bottom line. It sure doesn’t seem like too much to expect for a couple of million bucks, now does it?

Do they really want to sell these houses or not?

If you could get a 100% mortgage, how much could you afford to spend on a house? We can afford about R2,000,000 (Hubby can get a 100% mortgage for that amount), which translates to about $270,000 USD. Sounds like a pretty modest amount, yes? Take a look at this to see what $270K US can buy here in Joburg. This particular property search is confined to the “better” suburbs, middle class and up, and shows 448 homes between $135K and $270K USD.

So, while we aren’t looking at Hollywood mansions or Beverly Hills estates, we are looking at very nice homes in upmarket areas, houses selling for a respectable amount of money and located in beautiful settings. The problem is, I am coming to question just how serious these people are…agents and sellers alike…abut selling their houses.

Take the mid-century modern house I have been coveting…it has been on the market since November and was originally listed at R3.1million, a hallucinatory price if I ever heard one. It is a lovely house, but would you pay Beverly Hills prices for a house located nearby…but definitely outside the confines of BH? Well, Bryanston and Randburg have a similar relationship, Bryanston being the prestigious suburb and Randburg being more of an ordinary middle-class kind of place. And although this house and the surrounding area look like Bryanston, the fact of the matter is, the utilities are supplied by and taxes are paid to Randburg and, as one estate agent told me, “Nobody pays 3 million for a house in Randburg, no matter how nice it is!”

So, the owner learned the hard way that this is very much a live sentiment and has been lowering the price of the house, little by little. When we first saw it, he wanted R2.7mil, too rich for our blood. But a few weeks later, checking the website, we saw the price had come down. Unfortunately, our offer of R2.1mil was not accepted…twice. But this weekend we were told the price of the house has come down to R2.2mil…100K more than the best we can stretch to offer. And I have to wonder…does this man really want to sell this house??

He’s had it on the market for nearly five months. He had one offer at R2.4mil, which he accepted, but the buyer couldn’t qualify for a loan. He has had at least six open houses (“show house” in South African) and not a nibble. His own attorneys have advised him to accept our R2.1mil offer…we’ve made the offer twice, the second time backed up by a letter of qualification from our lender. We’re the only game in town and the amount of money he’s quibbling over is around $13K USD…he’s already returned to the US (he’s American) and his family is presently en route, so the house is empty…does he really want to sell this house or doesn’t he?

This being the 21st century, I do a lot of my house hunting on the web. Property Genie, the link noted above, is a particularly good source as it aggregates listings from multiple real estate agencies, allowing me to browse the offerings of many companies all in the same place. But many of the listings are of a very poor quality…not only on Property Genie, but on the agencies sites themselves. Tell me, would you be motivated to go see this house? No pictures, about as unremarkable description as you could possibly get…why would anyone even click on this ad, let alone call to make an appointment to see it? Does this agent really want to sell this house? It sure doesn’t look like it to me!

Or this one, headlined “Bank Repo Bargain”… No photo and the description consists entirely of “look no further for a property that meets your needs.” Excuse me? How am I supposed to know if it meets my needs or not…or even want to explore that possibility…if all I know is the house has 3 bedrooms and 2 bathrooms? Douglasdale is one of those schizo suburbs (I know…I live there) that, on one side of the main road are luxury homes with lush gardens and on the other side are tacky little boxes that pass for houses…without a picture, how can I tell if it’s on the side of the road that would interest me? Without a description, how do I know if it has a garage or a pool or if it is even big enough for my family and possessions? It doesn’t seem the agent is particularly interested in selling this house because if s/he was, wouldn’t there be a few pics and at least a basic description of the property?

Then there are the house listings that show a dozen pictures of the outside of the house from every possible angle and distance, but no pics of the inside. Those listings make me nervous…what is wrong with the inside that the agent isn’t posting any pictures of it? Kitchen and bathrooms not updated since the 1950s? Holes in the walls? Broken cupboard doors? Missing fixtures or sanitary ware? Hideous tiles or paint? Evidence of destructive tenants? What is wrong with a house that pictures of the interior are conspicuously missing? I don’t want to waste the agent’s time…or my own…battling traffic to a house only to find that the kitchen is too small or bizarrely laid out, that the living room won’t fit the sofa, or there isn’t a shower in the place. Show me pictures of the interior and I’ll self-select out the obviously unsuitable houses without wasting anybody’s time…agent, seller, or my own.

Then there are the ones that show multiple interior shots but nothing outside…or no pics of the front of the house. It just makes me wonder what they are trying to hide. We actually went to see a house that had an absolute horror of a back yard…boundary wall backed up to a busy freeway, the trees that once shielded the household from the traffic noise cut down and some of them burned in huge pits dug into the back yard, no flowers, bushes, trees, or shrubs…nothing but a dry, scrubby lawn and a pit at one side of the house full of stagnant water. The house interior was also a nightmare, with sagging ceilings, no room flow whatsoever (you had to walk through a dark TV room to reach the dining room from the kitchen, for example), and a tenant in the cottage who refused to let anyone in to see it! This house was listed at R1.65M and the owner had turned down an offer from a neighbour for R1.5mil…about half a mil more than I would have considered it worth! Did that woman really want to sell her house? Her actions would suggest that she wasn’t really a committed seller.

Then there are the pictures themselves. Even when the agent includes interior pics, they seem to be randomly chosen, and often so dark that the features of the room are indistinguishable. Do they think this lends an air of mystery to the property, that it piques curiosity on the part of potential buyers? Well, not this buyer. There are literally hundreds of listings to sort through and if other buyers are anything like me, they only spend a lot of time on the really interesting listings and just skip over the ones that don’t jump out at them. In fact, I suspect most buyers are like me, because the listings that jump out at me often are for properties that have already sold, indicating the listings jumped out at somebody else before I even got there!

Which brings up another problem…houses that remain on websites long after they have been sold and the mortgages granted. The laziness on the part of the agents who fail to take the listings down causes a lot of pointless phone calls. OK…I suspect some of the agents leave them up because they will generate calls to which the agent can say “I’m sorry, that house has been sold…but what are you looking for and maybe I can find something for you?”

In America we call that “bait and switch” and it is illegal. Surprisingly, it is not illegal in South Africa, although it is gravely unethical. I won’t work with an agent who suckers in potential clients this way. Advertise a good house with decent pictures and appropriate description and I’ll call you, waving my prequalification certificate like a flag!

I don’t understand why agents aren’t breaking their bums to find houses for buyers like me. If these agents really, really want to sell houses and take commissions to their pockets, what is their issue with sharing with their colleagues? Don’t they realize that 3% of a sale is much nicer to the wallet than 6% of a no-sale? I see multiple houses listed by the same agency but an agent working there will only show me his/her listings! Agents! I don’t care who listed the house, you or your colleagues…they have listings…I am a serious, committed, prequalified buyer…why aren’t you showing me everything your agency has listed that fits my needs, instead of the one or two houses in your own personal inventory? Don’t you realize that half a commission is better than none? That your sellers need more foot traffic than less because the more people who see a house, the better chance of selling it?

But I seem to keep coming across agents who would rather try to talk me into buying the wrong house than find and sell me the right one. How lazy…and ultimately stupid…is that? We saw a house that was too small and too expensive. Instead of hearing us…at this price we wouldn’t have the money to expand the house…and saying “Let me check with my colleagues and see what they might have available that would suit you”…she countered each objection with an explanation for why the owner did that, or that the owner likes it this way, or we could make something bigger or paint it or… Sorry, but the owner’s taste and sense of balance and style were way out of whack with mine, it would have cost a fortune we don’t have to fix it, and unless her owner was willing to drop the price by about a million rand so that we’d have the funds to fix it, this was just not the house for us!

So, we continue househunting, slogging through internet listings that don’t tell us how big a house is (and those that do invariably include the garage, patios and balconies in the square footage, places I am loathe to put the sofa, king-sized bed, or Hubby’s big screen), that list prices the owner won’t accept, that fail to show pictures of such important areas as the kitchen, bathroom, and front of the house…or just simply fail to show pictures at all. For an entire afternoon’s perusal of hundreds of listings, yesterday I came up with four houses…one of which has been sold, two of which we are going to see today, the fourth one we will see tomorrow. Nearly 500 listings and only four suitable…

But what about all those that fit our price and location requirements but didn’t have any pictures or descriptions? Wouldn’t it be sad if my perfect home was one of those but because some slothful estate agent couldn’t be bothered to write a description and post some pics, we never meet?

Later…Hubby on his way to pick me up to see a house…

I don’t get it

There is a possibility that Hubby will be transferred to Johannesburg in the next few months and, if it happens, I will be going too.

Obviously, if you are planning to move to another city, the first thing you need to do is find a place to live. This being the era of the internet, we hit the net looking for suitable properties…and came across several that might suit.

Since we found the properties on the net and all of the agents repping the properties have email addresses, I sent them emails asking that they contact me regarding those properties. One would think that in a depressed property market, agents would be answering my emails within minutes of my sending them, right? Agents are hungry right now because the staggering rise in interest rates and a concurrent national tightening of credit-worthiness criteria has put the property market into a severe slump, with houses losing as much as 25% of the value in the last year.

So why, when a live one pops up and says “Please contact me ASAP regarding your listing #2234567890. We are anticipating a transfer to your area and need to find a home,” am I getting no responses”

I seriously don’t get it. If you are selling something expensive for which demand has precipitously fallen off and a buyer says “I want one…contact me!” wouldn’t you burn rubber trying to get in touch? Why don’t these people want to sell those houses?

A possible excuse is that they haven’t checked their email. Well, why not? It has been two days since I last sent mails out…shouldn’t they be checking at least once per day? And since I am out of town, doesn’t it make sense that I will want to conduct business via the net, where I can receive pictures and send details of my needs until such time that we’ve found a couple of places to actually fly up to see?

These people literally have someone coming to them saying “take my money…please!” and are not responding!

What do I have to do to get a pro-active agent who really wants to sell me a house??

Some people and their houses!

Hubby and I are considering buying another investment property. The property market is sluggish here with prices either stagnant or declining, which makes it the best time to buy, whether for a personal dwelling or an investment.

There are several kinds of investment buyers…some want to buy the property and “flip” it for a profit: these buyers need an undervalued or distressed property that they can buy, wait a few months for property values to rise, then sell at a profit. Other investment buyers specialize in fixer-uppers: they buy properties in need of repair, fix them up and then sell the property at a profit. These investors need in increasing property market in order to profit from their purchase. We, on the other hand, are landlords: we buy a property and rent it out, using the rental income to pay the monthly payments on the property. To make this kind of purchase work, the price and the condition of the property must be such that it can be rented out as soon as possible and at an amount that will pay the mortgage. Pretty much a no-brainer in my eyes, but I am constantly amazed at people who simply don’t get it…especially estate agents!

We were supposed to go look at a possible investment property last night, but at the last minute, the estate agent had to cancel our appointment. Seems the property is occupied by a renter who decided she had better things to do and was not going to let us in to see the property. I wonder if Judy, the agent, has any idea how bad that looks to a potential buyer? Why didn’t the owner show up with keys to let us in? Why is a tenant being allowed to determine when…and if…a potential buyer will be allowed to see the property? I own rental property and if I was keen to sell it, I’d be there with keys in hand if it was inconvenient for my tenant to admit potential buyers...I certainly wouldn’t allow my tenant to control whether or not potential buyers would see the property!

After our experiences with Lynda, who couldn’t seem to wrap her head around the concept that landlords trump tenants, Hubby and I no longer want to see this property because it is apparent that if we do, we will inherit a tenant who thinks she is in control of things, not the owner. Sorry, been there, done that, and don’t have any desire to do it again!

I am astounded at some of these properties…and at Judy’s attitude. I saw four properties yesterday and three of them were appalling. One required a huge investment in repairs, another one was grossly overpriced and inhabited by messy tenants, the third was an absolute pig sty, with things strewn about and washing hanging everywhere, dirty dishes in the sink, even a chunk missing out of a corner of a masonry wall!…the kind of place that “Clean House” moves in and makes over. Amazingly, the estate agent defended not only some outrageous prices, but the filthy, rundown conditions of the properties as well! She knew full well that if we buy it will be an investment property…maybe she doesn’t know what that means in practical terms.

You see, the whole purpose of owning investment property is to make money on it. If you are a landlord, to make a new investment property pay it has to get rented out as quickly as possible because every month the house is unoccupied is a month that the owner makes the payments out of his own pocket. This means the more work the property needs, the longer it will be off the market, which effectively means the buyer’s cost for the property is increased…not to mention the cash outlay for fixing the property in the first place. There is nothing emotional in an investment property purchase (or at least there shouldn’t be), the whole thing is driven by the numbers.

What are those numbers? Well, the first one is “How much rent can I get for this place?” The second one is “What are my monthly payments going to be?” (If you don’t have an idea of what interest rates are and how to calculate your monthly repayment, then you should not be looking at buying rental property!). Now, if the discrepancy is small and something you can make up out of your own pocket without too much pain, then you ask the rest of the questions: how quickly can I have this ready to rent out? How long can I make the entire payment out of my own pocket? How much is it going to cost to make it ready to rent?

These last are the questions that make or break a deal. If you can assume the estimated rental is approximately the same as the estimated monthly house payment, it looks like a good deal, right? But suppose the house, like a house I saw yesterday, has a garage conversion that was so badly done that it now has a leaking roof, sodden ceilings, and the only access is through the master bedroom. And, to add to the trouble, the main bathroom has badly broken tiles and the toilet has had a serious leak in the past which was very amateurishly repaired. Now what?

Well, the first thing you have to do is come up with a rough estimate of the cost of the repairs. Will you do the work yourself? How much time will it take? Each month the building is under repair is a month without rental income, so you are actually adding to your acquisition cost.

Look at it this way: let’s suppose you feel you can afford R800,000 for a rental property:

Cost of property (including fees ): R800,000
Monthly repayment: R7,000
Three months to repair: 3
Cost of repairs: R50,000
Actual cost of property: R871,000

Why R871,000? Because that it what it is going to cost you before you can rent it out to the first tenant: R800K for the house, R21K out of pocket for the house payments, and R50K to fix what is wrong with it. So, to limit your investment in the property to R800K, you’ll have to buy it for R730K or thereabouts…That way, when the property is ready to be rented out, your property investment is actually the R800K you figured you could afford.

Now Judy tried to convince me that the house was priced at its fair market value, but it had been on the market for months and it was vacant and the sellers were getting desperate. If it was truly at its fair market value, wouldn’t it have sold already? Obviously, those who had viewed the property were not inspired by the obvious work that was needed. What the estate agent was refusing to face is that when a buyer is quoted a price, s/he expects to have a property ready for occupation at that price, not a property needing further investment in order to be habitable. “It’s a fair price,” she kept telling me. Yah…if it was ready to move into, I might agree…but not if it is going to cost me another R70K before I can put up a for rent sign!

Investment buyers are, by definition, people who seek to acquire property with the least expense to themselves and then profit from their purchase. We look for properties that are ready to be rented out very quickly or that are priced low enough that a month or two off the market for repairs won’t be deadly to the pocket. And the properties have to be in neighbourhoods that will attract renters who have pockets deep enough to pay a rent that will cover the majority of the monthly bond payment. Over time rents go up and eventually the property will go into a positive cash flow mode, but if you’ve paid too much for the property, either through extensive repairs and off-market time, or by failing to resist an agent’s platitudes, you’ll never get into profit.

One of the things a potential landlord looks at is the condition of the property at the time of showing. A lot can be inferred by the way people are living in the house. I viewed one place where I could not see the bathroom fixtures and floors because they were strewn with clothing. I could not see the condition of the carpets in the bedrooms because the rooms were dark and there was junk and clothing strewn all over the floors. I could not see the condition of the kitchen counters, sink surround, or anything else in the kitchen because it was jammed with dirty dishes and clutter and stuff strewn around. We entered through a patio door…was there something wrong with the front door? The resident’s dog was busily digging a hole in the back garden while the resident ignored him (he couldn’t’ have been shut in the garage for the short time we were there to view the house?).

So, as a possible new owner for this place, what was my impression? I had no way of determining the condition of the property because the place was a pig sty and I couldn’t see the windows or the lights or the walls or the carpets or the floors or the kitchen or bath fixtures. Were the tiles in the bathrooms intact? Was the shower grout in need of replacing? Did the kitchen drains work well? Did the cupboard doors close properly? Was there water damage under the sink? I couldn’t get to these areas, they were blocked by the clutter and mess of the resident. But, when you consider that these people obviously have no interest in cleaning up after themselves, what is the likelihood that they made any efforts to keep the place in good repair? I did notice a big chunk out of a masonry wall and when I pointed it out to Judy she just shrugged and said “Oh, it’s just cosmetic.” Excuse me? A pyramid-shaped chunk of cement nearly two inches across gouged out of the corner of a stud wall is just cosmetic? And who is supposed to pay for that fix and the painting of the room that will inevitably follow?

Judy hasn’t called me back to see any more properties. I think she thinks I’m too picky. But not being picky when you buy a property, unless you can get it at a low enough price to make up for the deficiencies, is just stupid.

Which I, of course, am not.