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That place where fame & real estate meet

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How does fame impact a home? Does it matter for value if a famous person lived there? What if something notorious happened at the property? Let’s talk about this and consider a few examples. Please note there are entire books written on this subject, so don’t expect an exhaustive dissertation here. Any thoughts? I’d love to hear your take in the comments.

Here are a few examples:

Breaking Bad: The house where the TV series Breaking Bad was filmed was all over the news last month because the owner is building a 6′ front yard fence to keep people out of her yard. According to Albuquerque KOB4 there is a constant stream of visitors and fans have even thrown pizzas on the roof to reenact the main character Walter White doing so in an episode. The owner is clearly not thrilled, and I can’t imagine neighbors are either unless they can somehow monetize the situation.

Kurt Cobain’s Baby House: Brandon Turner at Bigger Pockets is an investor and he accidentally bought a home where Kurt Cobain lived as a baby. The duplex was purchased as an investment without any knowledge of the lead singer of Nirvana’s connection to the property. But tenants began complaining about photos being taken of the front of the house, and that’s how the connection was discovered.

The Almost Governor’s Mansion in California: The State of California built a Governor’s mansion in the 1970s in Carmichael, which is about 10 miles from Downtown Sacramento. This mansion began construction under Governor Ronald Reagan’s leadership, but it was not completed until Jerry Brown took office. Brown actually refused to live in this house, which he dubbed “The Taj Mahal”. This home sold for 4.1M in 2004 and has 8 bedrooms, 8 bathrooms and is 11,984 sq ft. The mansion is still there today, but some of the site has been subdivided for a few custom homes. This is literally one of a few residential homes EVER in Sacramento County that sold above $4M.

Reagan House in the Fab 40s Neighborhood: Governor Ronald Reagan and his family chose not to live in the old Governor’s mansion in Downtown Sacramento back in the 70s, so they moved to East Sacramento on 45th Street to lease a home in the “Fabulous 40s” neighborhood. The home boasted over 6,000 square feet with six bedrooms and four bathrooms (according to Tax Records). The home last recorded for $1,765,000 in May 2000. Not everyone can say, “The future President used to live here when he was Governor”. Do you think that matters for value?

Here’s a look at the price point of the Reagan house. What do you see?

Homicidal Handyman House: There is a property in Oak Park where a serial killer dubbed “The Homicidal Handyman” murdered someone in the later 80s. This property was purchased last year by an investor and I’m waiting to see if it comes on the market (it has a choice location). This murder occurred about 30 years ago though, and the reality is that stigma associated with gruesome crimes fades over time. In other words, it might be a big deal for value to buy a property right after a murder, but much less of an issue if the crime occurred 30 years ago. I observed a recent murder property in the Sacramento market and in this case there was a 5-10% hit on value, though it might not have been an issue at all had the murder taken place 30 years ago instead of recently. Architectural Digest actually did a great piece on stigma recently and I was pleased to see they interviewed Jonathan Miller.

Dorothea Puente Murder House: Seven bodies were discovered at a duplex on F St in Sacramento in the late 80s compliments of Dorothea Puente. She lured victims to her “boarding” home, drugged and buried them, and then cashed their social security checks. This Victorian duplex has some charm as you can see, but it definitely has a dark history too. There was a documentary made about this house in 2015 and the owner has even given tours through the years too. This just goes to show it may be possible to monetize a famous house. Though in this case the owner has donated tour proceeds toward organizations working to alleviate homelessness (way to go).

Here’s a sales history of the Puente duplex. What do you see?

Lady Bird House: A recent movie called Lady Bird is set in Sacramento and had some filming done in the city too. Here is the front of one of the home’s shown in the movie (located in Fab 40s). This was not the main character’s dwelling, so it may not attract much of a following, though it’ll be interesting to see if people snap selfies here. For reference, the San Francisco Chronicle shared Lady Bird filming locations so fans can visit. In this case the owner probably has some bragging rights to say, “My home was in Lady Bird”, and I’d imagine any future listing would mention this fact. But will the market as a whole pay more for a house like this because it had a minor role in a movie? I’ll give you my opinion in the comments if you give me yours.
 
And here’s my Lady Bird selfie.  🙂
 
Closing thoughts: It seems like fame can either be good or bad when it comes to real estate values. If a house is famous for something gruesome, it could easily harm value (duh). But part of it depends on how long ago a crime occurred. On the other hand if a home is historically important, it could be a huge bonus for value (duh again). Yet fame can come at a cost too by increasing foot traffic and looky-loos. Would an owner have to disclose the stream of unwanted visitors to potential buyers? Could this potentially limit marketability? Could it impact rental value if there were camera flashes happening at night? Would tenants get fed up over time? These are important questions to ask. Lastly, we would be wise to not overthink a property’s value that had “15 minutes of fame” so to speak. Thus just because a home had a cameo in a movie or was previously owned by someone famous does not mean at the end of the day the market is going to pay anything more for the property. It’s true certain fans might offer more for a particular home owned by a celebrity or athlete, but what would the market as a whole pay? That’s always the bigger question. 
 

Think Like an Appraiser Class (I’m teaching): By the way, I’m doing my favorite class on Dec 7 from 9am-12pm called How to Think Like an Appraiser. We’ll talk through comp selection, making adjustments, tips for talking about value, and what to do in various scenarios. Details here.

Questions: Would you buy a house that was famous in a movie or owned by someone famous? Why or why not? Have you seen any measurable impact to value for a celebrity property? I’d love to hear your take.

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Speed bumps, neighbors, & real estate logic

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Are speed bumps a big deal for value? That’s what a friend asked me, and since she gave me permission to share her situation with a neighbor, I hoped we could chat. If someone asked you, how would you respond?

The situation: My friend said, “We live on a busy-ish street with lots of kids walking to and from school, and neighbors are talking about requesting speed bumps to slow cars down. One neighbor who is against this says, “adding speed bumps will decrease the value of a home by 20%.” What do you think of that?”

My response: I’ve got a few things on my mind.

1) Making value claims: Whenever someone makes a value claim, my market antennas go up. What is 20% based on? Is it just an arbitrary number? Or is it based on market research? A study? Does it even seem realistic? These are questions we have to ask to have an informed conversation.

2) It’s busy already: Speed bumps are usually installed because the street is busy and has traffic issues, so there might actually already be a negative impact on value because of the busy street. To be clear I’m not saying speed bumps cannot potentially negatively impact value, but let’s not forget the busy street in the first place, which could be the bigger issue for value.

3) Crunching numbers with logic: Thinking logically is actually one of the best things we can do when having value discussions with neighbors. Sometimes we just need to step back from our ideas and start talking numbers. For instance, if homes are selling for $400,000, and your neighbor is correct about a 20% reduction in value, would these homes really sell for $320,000 if speed bumps were installed? Does that sound reasonable? Does it seem logical for buyers to make a reduction that large based on what you know about the neighborhood market? Moreover, if your neighbor listed his house for sale, would the list price be anywhere close to 20% less if there were speed bumps?

4) The noise factor: To be fair your neighbor is smart to think critically about this issue because we have to consider what speed bumps will do for traffic, the feel of the street, and noise. I recall talking with a city planner once who said neighbors would complain about a busy street and request speed bumps, but after they were installed the same neighbors would complain about the noise of the bumps when cars were speeding over them. Could noise be an issue?

Anyway, that’s how I answered my friend. If you notice, I didn’t make a specific value claim on purpose because as an appraiser I can’t just make stuff up without really supporting the value I say exists. Sorry if that’s frustrating, but for me the big takeaway here is actually how important it is to sometimes step back from our ideas and think critically about value issues. At the same time I’m hoping to open up some conversation, so I would absolutely love to hear your take.

Questions: How do you think speed bumps might impact value? Big deal or no biggie? Do you think it’s possible to measure the impact of speed bumps? Why or why not? What is #5? Did I miss something?

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Does it help appraisers when agents increase the pending price in MLS?

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Does it help appraisers when agents increase the pending price in MLS for the subject property? In other words, if a house was listed at $400,000, but gets into contract at $415,000, does it help if the pending price is changed to $415,000 in MLS? This might seem like a silly topic, but I get asked this question all the time, and it seems like many believe this makes a difference for value. Here’s my opinion, and I welcome your two cents also.

Quick Answer: First off, sometimes agents think appraisers only look at the pending price, but appraisers make it a point to view the entire listing history. If you didn’t know, the Fannie Mae appraisal form actually asks appraisers to input the complete pricing history of the subject property into the appraisal. The appraisal report therefore records the original list price, any price changes, and the pending price. So it’s not like the appraiser or lender is blind to the fact the subject property was originally listed for less and is now in contract for more. In short, upping the list price for the subject property doesn’t help the appraisal come in higher or do anything for value. We have to remember the proof of value is found in the comps instead of whether the list price in MLS was increased or not for the subject property. However, on a different but related note it can be useful when appraisers are choosing comps and they see other pendings in the neighborhood getting into contract at higher levels. After all, pending sales showing higher prices might help us see the market is increasing or even help us make upward time adjustments. So while this practice of changing the list price in MLS for the subject property doesn’t do anything for value, in my mind it can be useful when looking at other pending sales in the neighborhood to see if everything is getting bid up or in contract at higher levels.

Three questions:

  1. What is the goal of this practice?
  2. If this practice is not done when the property is in contract for less, why should it be done when the property is in contract for more?
  3. If this happens in mass could it screw up data in any way?

I hope this was interesting or helpful.

Questions: What is your opinion on this practice? Is it a good idea or not? I’d love to hear your take.

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Being okay with saying NO in real estate

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I said NO this week to an appraisal and I wanted to share about it. This might seem like a random post, and maybe it’s just a reminder for me, but I hope there are some takeaways. Any thoughts? I’d love to hear your take.

Here’s a conversation I had:

Loan Officer: Can you appraise a triplex fixer and bring a screw gun to the boarded property so you can get in? We need an “as is” value (note: picture above is not the triplex).

Me: Sorry, but I’m not willing to take a screw gun. I’m handy with tools, but that’s too much liability for me. 

Loan Officer: I understand. Can you do an “as is” drive-by appraisal instead?

Me: Honestly, it’s a huge liability to do a “drive-by” on a multi-unit property. I care about my license too. I wouldn’t know the size of each unit, condition, or even bed / bath count. Besides, you just told me it’s a fixer, which means it’s even more important to see how bad it is. I’d have to make big assumptions without knowing these things, and that’s not something I’m willing to do.

Loan Officer: Thanks. I don’t want to put you in a situation you’re not comfortable with. 

I have conversations like this quite a bit. People don’t usually have ill-intentions, and I don’t think the loan officer did either. The truth is though despite someone’s innocent request, it doesn’t mean it’s a good situation for me. 

THREE THINGS:

1) Saying NO is okay: Sometimes the most professional thing to do is say NO instead of taking on something with too much liability or embarking on a situation that might actually be unsafe. In this case I was concerned about safety because of squatters and not knowing what I might find inside a house like this. I’ve inspected quite a few boarded homes, but I don’t remove the boards or go alone to these properties. Also, what if I didn’t properly close things up? Would any future damage be my fault?

2) Developing a credible value: If we can’t get enough information to produce a credible value, it might be best to not render a value. Sometimes the most professional thing we can say is, “I’d love to help, but in order to serve you I’m going to need __________________. If that cannot happen, then I cannot give you a value.” There is nothing wrong with walking away when we don’t have enough information or a client is asking us to do something we’re not comfortable with. This happens not only to appraisers, but also to agents who are asked to do BPOs on custom homes on acreage (without seeing them or knowing anything about them). Or in other cases we get asked to give a value to something even though we don’t have any clue on the cost to cure a mold problem or some other major thing. Yes, there are times when we need to make assumptions and disclaimers. I understand that and I do it all the time in the right situations. I’m just saying if there are bigger unknowns that could radically sway value, then we might need more information instead of assumptions. 

3) Be honest about limitations: There are times when we have to say, “I’m not qualified to take this on”, “I think my colleague might be a better fit (and I can partner with him/her),” or, “I’ve never worked on a property like this before, but here are the steps I’ll take to be sure I become competent.” I know, there are people who think they can value anything. I love the passion, but everyone has limitations, and being aware of that is an okay thing. And if you didn’t get the Liam Neeson quote, it’s from the movie Taken.

Well, that’s what’s on my mind today. I hope it was useful. Who knows, maybe you’ll be inspired this week or next to say NO to something that’s really not a good fit for you. And that’s okay. Heck, it’s actually a good thing.

Questions: When have you said NO to something? Why do you say NO to certain things? What advice would you give to someone who never says NO in real estate? I’d love to hear your take.

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