Michael E. Anderson
Michael E. Anderson
Broker Assoc. ABR, RSPS BRE# 01417114
(805) 698 - 3770
Anderson Home Pros Real Estate
P.O. Box 2785
Oructt, CA 93457

Home Remodeling-Not For The Faint Of Heart

NoProjectLeftUndoneAs a Central Coast Real Estate Broker I often get asked to do some rehab work on investors’ properties to ready them for sale. This year has been no exception. I started the year with a property built in the late 60s, and like most 50 year old homes it needed some updating: new counters, windows, plumbing fixtures and general cleanup and painting. A real surprise was the pipe from the house to the city sewer main which the prospective buyer had “scoped” by a local (and respected) plumbing company. They came back saying the pipe from the house to the sewer main was bad, de-laminated, with massive root invasion and just had to be replaced. Their plumbing company gave us an estimate of over $20,000 to replace the line. I hired an engineering company and they offered to change the line for a third of that price. The real kick in the head was we opened the old line… and there was NOTHING wrong with it! I was there when the backhoe uncovered it and it was it was in perfect condition. No collapsed or broken sections and water flowed at full force through the entire pipe! I am telling you this so you know that you must be there when they “scope” the line and see it for yourself. There are some major plumbing companies that are preying on the public and during a sales transaction most sellers want to please the buyers. Do not just trust a company just because they are large, have a fancy truck or show you a video from who knows when.
My second rehab project started 4.5 months ago. I was asked by the investor to look at his 1957 rental and decide what he should do to maximize his return when we sold it. The day I walked in it was apparent that something serious had happened. Walls were bare studs, carpet was torn up, most of the kitchen was gone (seriously…gone). The bathroom was the original old blue/green tile and shower was turning shades of black. The tenants’ belongings were everywhere, piled in every room…it was going to be a long haul to put this mess back together.
The tenants were wonderful people but needed to stay for their 60 days notice period before they could/would move. They had lived with the home in this condition for months, waiting for the inevitable notice to leave. They knew the total rehab process would not allow them to stay in the home, but needed to save for their next rental. During their 60 day stay they were fine with us working on the outside which included window replacement, stucco repair and exterior painting. Most tenants aren’t that obliging.
1950s homes were well-made and have quite a few unique features. Unless you are aware of these you might be caught off guard. Things like button board. Not to be confused with drywall, button board is a material with holes in it which allows the plaster to lock into it. It is not the same thickness as drywall and does not line up when you need to replace it with new material. Also back in the day they used true 2″ x 4″ studs. Today’s material is 1 5/8 x 3 5/8…don’t expect that to line up either.
Back to the lessons learned, as we progressed with demolition of walls, we found cast iron drain lines that had been abandoned due to rot and were never removed (because it was in the wall…who would ever see it?). We found old newspapers offering brand new Chevys for $1300! We also found the wiring, which I have to say was not what we were hoping for. Grounding was not common and electrical panels were of very low capacity since they did not have the electronics we have today.
So there we were, walls open, electrical in need of upgrading, plumbing in need of upgrading, windows in need of upgrading, kitchen needed to be built, bathroom in dire need of rehab and flooring was gone. I know what you might be thinking…”How or why would you bother?” The financials for this project just didn’t look promising. The house if sold as is might fetch $200,000 in today’s market. I decided to call my general contractor for a realistic bid to bring this well-built but neglected home back to today’s standards and to its former glory. I honestly wasn’t overly surprised when he estimated $60,000. Given that number with the current sales price the owner would have $260,000 into the house. With a complete remodel the sales price shot up to $315,000. That would net the owner over $50,000 in increased value for going through the process.
When we looked at the floor plan there were 2 small bedrooms with a hall bath and a very small ¾ bath just off the breezeway. The home offered a unique opportunity to re-arrange the floor plan since it was over 1600 sq. ft. We had to do a huge amount of demolition work despite or maybe because of what had already been done. I want to forewarn all who attempt remodeling that everything you fix will inevitably require you to fix something else. I also caution to only do this with a licensed contractor and with city permits. If a remodeled area does not have a building permit, a bank will not make a loan on that area (or count the additional square footage).
With opening up the wall in the kitchen we were able to add a breakfast bar with pendant lighting. Tearing out the old cast iron drain under the sink allowed us to put in updated sinks, disposal, dishwasher, etc. Did I mention disposal and dishwasher electrical circuits and switches? Wiring was odd (I’m being kind) to say the least. As I said earlier, panel amperage’s and the volume of circuits have changed dramatically. Having ground fault interrupters near water sources, recessed lighting, a stove, oven, microwave and a new refrigerator all added to the load so we needed a new electrical panel.
We moved a few walls, removed old pocket doors, re-arranged the hall bath and added another bath to the front bedroom. There was an odd room that could have been a den. They liked to have separate rooms for everything in the old days vs. today’s open floor plans. We were able to make the den a possible 3rd bedroom by adding a large walk-in closet. While all the walls were open we found we needed to replace much of the old galvanized plumbing, the old wiring, ground the house wiring, and we upgraded the wall and ceiling insulation. The electrical upgrade required a new panel which means stucco repair. When you replace windows you need to understand there are two ways…new construction vs. retrofit. New construction windows are typically less expensive but require more siding repair to install. Retrofit windows just fit in the holes and are self trimming and cost more. Since we were planning on doing stucco repair we went with new construction windows. One more surprise popped up…old gas lines that had been laying in the dirt for over 50 years were now corroded beyond simple repair and needed replacement. Remember…if you touch it you’ll need to fix it. That also was true for one of the bathrooms. We removed a toilet only to find the floor was damaged and needed replacement. There are also the new standards for lighting (low voltage light fixtures), water conservation (1.5 gallon toilets), low flow shower heads and faucets and the list goes on.
We are now 4 months into this project and things are finally coming together. It is a wonderful home with new everything. We now have 3 bedrooms, 3 bathrooms, new kitchen, new bathrooms and basically new everything else. The sewer, electrical, gas, water demons have been eradicated. All termite damage has been addressed (make sure you get an inspection at the beginning of your project). The drywall and texture all match the rest of the house. A good drywall man is worth his weight in gold. When we finally get this house to market I will share this process with the new owners. They will be getting a great home but most of the real benefits will be the unseen ones hidden in the walls and ceiling. We will disclose everything as required by legal requirements. Make sure you keep a list of upgrades and repairs. Make sure everything is done to code and with permits and make sure you plan for the unexpected!
I tell this story for all those who are out looking at older homes and are unaware of some of the pitfalls. Restoring a home to today’s standards can be a fun and profitable but it isn’t for the faint of heart or those without the financial wherewithal to support the process. Know what you’re doing!

Santa Maria, Orcutt & Central Coast News

Record 57 Million Americans Living in Multi-Generational Households

Source: Wall St. Journal

A record 57 million Americans—or 18.1 percent of the population—lived in multi-generational households in 2012, according to an analysis of Census data by the Pew Research Center. Overall, the share of Americans living in multi-generational households continues to climb, and the recession accelerated the trend. Making sense of the story The number of multi-generational households has doubled since 1980. The arrangement of having multiple generations together under one roof spiked during the Great Recession of 2007-2009 and has kept growing in the post-recession period, albeit at a slower. Young adults ages 25 to 34 have been a major component of the growth in the population living with multiple generations since 1980—and especially since 2010. Continue…

Central Coast Real Estate Values

offers_above_asking_priceReal Estate values on the Central Coast.

Over the last few years while the bubble was bursting and everyone’s home value plummeted, the issue of how to place monetary value on a home came front and center. Appraisers whose job it was to estimate those pre-bubble values were assailed daily for making a valiant attempt to keep up with market conditions. Prices were changing every day and almost daily they would have to adjust their mathematical formulae. It was a daunting task to say the least.
Fast forward to today’s Central Coast Real Estate Values and marketplace: The Feds, in their infinite (sic) wisdom, decided to set arbitrary conditions and limitations on how this industry was going to operate. Like most knee-jerk reactions by our members in Congress this was done with good intent but did not have the desired result. This law, The Dodd-Frank Interim Rule on Real Estate Appraisal Requirements hamstrung appraisers and stopped most, if not all home appreciation in its tracks. Since that time homeowners and Real Estate professionals have struggled, applying more realistic values based on supply and demand principles. They soon found other methods, such as using the CPI (Consumer Price Index), for instance, does not work for all homes in all neighborhoods. Every home is unique and as such has potentially different values. The only way forward was the willingness of the population to drag the market values up by offering over asking price or appraised values. The chart above proves that point. This method to increase values takes a firm resolve by the buyers who perceive value as what it is worth to them at a given time for a desired product. Home inventories are still very low and demand is still high which is driving values higher. Many of our transactions exceed appraised value based on this understanding, not CPI.
Every home is different and every transaction is based on perceived value. I could go on about quality, maintenance, curb appeal, staging, neighborhoods, schools and a myriad of reasons of what creates that perceived value in the public mind. However, the bottom line of price to value is still the 400 lb gorilla in the closet: Appraisers who were the first to feel the pain of this law are reluctant to allow their appraisals to rise too fast lest they get accused again of inflating the market. That lands us back to the question of what the sellers and buyers are supposed to do. Offering more than appraised value or listed value is one of the only possible solutions out of this conundrum but cash sales are becoming more common. In March cash sales almost doubled in Santa Maria, being 43 for March versus only 24 for February.
I was recently involved in a transaction where the actual value exceeded market value by tens of thousands of dollars. It was perceived by the buyer that the desirability of the home made appraised value a moot point. Obviously the banking/lending industry whose sole purpose is to protect investors prefers to base their decisions on appraised value. The banking industry is not happy about buyers and sellers taking these decisions out of their hands. This trend is allowing the market place to set the equilibrium, which in my opinion is a more natural and desirable state of affairs.
If you are thinking of buying or selling I recommend having a serious conversation with a Real Estate professional so you have a firm understanding of the market forces that drive values in today’s market. Trends like the one discussed in this article will definitely affect your buying and selling strategies and your Realtor or Broker is the one best equipped to give you timely advice.

Water Crisis Solutions For Your Home

Water Crisis On The Central CoastWater Crisis Solutions For Your Home

We on the West coast know full-well how valuable water is. It has become a serious issue for all California Central Coast homeowners & residents. This month we would like to focus on what you can do for very low cost and what would provide the highest return on your investment.

Since spring has come and we look to our gardens and yards that are hopefully springing back to life, I wanted to start there. As you can see by the informative chart, our yards landscaping consume 57% of water resources. There is something wonderful about vast expanses of  bright lawn. However, lawns require the most amount of water of any feature in our yards. As a Real Estate professional on the California Central Coast I would not tell you to remove all your lawn, since most buyers want and desire a lawn area, but I would recommend that you reduce the size, use water retaining fertilizers, increase mower height to reduce evaporation, follow a reduced water schedule, and make sure any runoff is minimal. The second place to focus your water-saving efforts is to install drip irrigation in your flower beds. Watering with drip emitters, micro spray heads or weep hoses delivers water efficiently and economically. Why water weeds?…focus on giving each plant exactly what it needs to prosper. Using drip is very beneficial to your landscaping. My third suggestion is to use a mulch in your flower beds to reduce evaporation and help to keep weeds down. There are many other suggestions on where to save water in your daily life such as turning off your faucet when brushing your teeth could save as much as 10 gallons a day or cutting your shower back to 5 minutes vs. 10 minutes could save 12.5 gallons a day. Continue…

Who is working for you in a Real Estate Transaction?

Real Estate AgencyWho is working for you and what is Real Estate Agency?

The normal response to that question from a buyer or seller is typically “my agent.” The real answer is more convoluted than that and Real Estate Agency really should be better understood by the public. When you sign a listing agreement or an agency agreement with “the agent” you are actually hiring the Broker of Record.

The first item to understand is that the Broker of the company is whom you are hiring. The agent who you meet is typically an independent contractor hired by the firm and in most cases represents the broker. In the first few pages of documents you should see an agency agreement where it is clearly (or should be) explained how you as a buyer or seller are being represented. There can be a buyers’ representative, a sellers’ representative or a dual representation where the agent or broker provides services to both parties. Continue…