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contemporary

Rapid price growth & the Gilmore Girls next door

February 10, 2021 By Ryan Lundquist 28 Comments

It’s unbelievable to see how much prices have risen lately. Today I want to share one quick visual to show you exactly what I mean. Then I have a couple photos to share based on a conversation my wife and I had about the Gilmore Girls.

BIG POINT: The median price is about $40,000 higher than it should be.

RAPID APPRECIATION: This visual helps show the median price rhythm throughout the year. Normally we see prices go up for about half the year and then they soften during the second half of the year. Well, 2020 was abnormal because there was an uncharacteristic price dip in April (beginning of the pandemic) and then prices basically went up in the fall instead of softening like they should have. In short, if we had a normal year in 2020 it looks like the median price should have been closer to $445,000 for January 2021, but it’s now $485,000 (orange line).

Crazy growth, right?

IT’S THE GILMORE GIRLS NEXT DOOR

The other day I was walking with my wife and we were admiring a brand new contemporary listing in the middle of an older neighborhood (Fair Oaks Village). Then when seeing a Craftsman home on the adjacent lot, my wife said, “Look, it’s the Gilmore Girls next door.” This made me laugh because she doesn’t work in real estate, but she clearly recognized the contrast in design.

Here is a brand new contemporary listing in an older neighborhood.

The contemporary home is located next to much older homes.

SOME QUICK TAKEAWAYS:

1) Gilmore Girls: First off, sorry if you don’t get the Gilmore Girls reference. My wife has been streaming this show over the past few years, so I know quite a bit about it (don’t judge me). Anyway, this show is about twenty years old and it took place in a fictitious town called Stars Hollow. This town is older and has many Victorian homes, which is why my wife made the comment she did. By the way, Sebastian Bach, the lead singer of Skid Row (80s hairband), was actually an actor on the Gilmore Girls.

2) Eclectic neighborhoods: Some areas are eclectic, which means it’s completely normal to have a variety of housing designs. Thus it’s acceptable to see brand new contemporary units mixed in with stuff one hundred years old. It’s like vintage and new coexist and people are good with it.

3) Contemporary vs modern: The words “modern” and “contemporary” are often used interchangeably, but there is actually a difference. Here is a Houzz article if you want to read more (and maybe still feel confused). This blog post is also worth reading and maybe a little easier to understand. In truth I was torn whether to call this home contemporary or not, but I went with contemporary because it seems to blend some styles. Let me know what you’d call it.

4) The principle of conformity: There is an idea in real estate that homes ought to generally conform to the design of surrounding units in order to maximize value. In other words, when a home is so different it could lead to a lower value because it will stand out like a sore thumb. In many cases we accept this as a market fact, but it’s really not true all the time. For instance, in Fair Oaks Village there are many different types of units and the market embraces the diversity. Also, in Midtown we see a variety of newer modern units mixed in with Victorians and buyers are okay with that. Obviously in a cookie cutter stucco box tract it could be awkward to see something else, so it’s possible in some situations to see a negative reaction to different architectural types that just don’t fit. All I’m saying is it’s easy to assume a property takes a hit to value because it’s different, but that might not always the case.

I hope that was interesting or helpful.

Questions: Does someone in your household watch Gilmore Girls? What’s happening in your area with price growth?

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Filed Under: Market Trends Tagged With: Appraisal, Appraiser, contemporary, Fair Oaks Village, Gilmore Girls, housing blog, housing trends, median price 2021, modern, rapid appreciation, rapid price growth, Real Estate Market, sacramento housing market, sacramento regional appraisal blog, trend graphs

When 1,000 square feet doesn’t count

September 25, 2019 By Ryan Lundquist 27 Comments

One of the most interesting homes I’ve seen just sold. It was brand new, four stories, and a halfplex. Oh, and on paper it was 3,000 sq ft, but about 1,000 sq ft didn’t count in the square footage. This is definitely a conversation piece, so I’m thankful Realtor Brian McMartin agreed to do a Q&A. I hope this will be valuable and interesting. Any thoughts?

Quick points:

  • This house has 1,000 sq ft that is not permitted as square footage.
  • The “non-conditioned” space looks just like square footage.
  • Understanding permits really does matter.
  • We discuss how to value a home like this.
  • This is ripe for lawsuits if square footage is misrepresented in the future.

Q&A with BRIAN McMARTIN

Ryan:  First off, how many stories did this property have? And how wide was it?

Brian: This halfplex has a total of 4 stories, including the ground floor where the garage is located. It is 17’ wide with a 3’ setback on the side. 

Ryan:  Tell us about the non-conditioned space.

Brian:  Ok – this can get a little confusing. This house has 2,065 sq ft as permitted living space, but the building has over 3,000 sq ft of usable space. It is hard to tell the difference between space that is permitted as square footage and other areas because the quality of construction is the same throughout (besides central heat and air not being present in the non-conditioned space).

Basically, the “conditioned” spaces that had permanent heat and air were on floors 2 and 3. On the first floor building plans show a non-conditioned “workshop”, but the sellers had it finished very nice and it presented like a huge game room or large living room. The 4th floor is described as a “sundeck” from the building plans, but again the sellers had the room presented nice with the same carpeting and fixtures as the rest of the home.

Ryan:  This sounds like a situation where someone is going to use the extra space as square footage.

Brian:  Even though it was not on the building plans, the sellers thought it would be okay to install separate wall mounted “mini-split HVAC systems”. However, during the final inspections the city made them remove these units as the building was not designed for habitable “conditioned” spaces on the 4th floor.

Ryan:  How did you treat this space in terms of giving it value?

Brian:  This was a huge challenge. The building has over 3,000 sf of usable space, but the property only has 2,065 of “conditioned” space. The room behind the garage and the 4th floor consisted of over 1,000 square feet of “non-conditioned” space. So, even though these rooms presented just like the rest of the home, they did not have heat and air. They have value, but I could not include these “non-conditioned” spaces in the square footage of the building any more than I could include a garage. These are permitted spaces, but not permitted for living area. Additionally, each floor of this property had two balconies, so I had nearly 600 square feet of balcony space to consider as well. 

I previewed every new home on the market in Midtown to review the competition. In the end, I came up with an estimated value based on the “conditioned” square footage and then added a range based on what value I felt the additional “non-conditioned” square footage added to the value. I had other challenges in marketing this property, but essentially we decided to “test” the market a little with a high range to see how the market would respond.

Ryan:  How did you report the non-conditioned space in MLS?

Brian:  I did not report the “non-conditioned” space in the MLS where you show the square footage of a home as this is not considered habitable square footage. However, I did mention the additional space in the marketing comments.  

Ryan:  This was incredibly smart of you to do. I can see someone not doing this in the future because this area looks just like square footage. It sounds like a lawsuit waiting to happen when the new owner finds out about 1,000 square feet not being permitted as living space.

Ryan:  Anyway, this is a unique layout to say the least. What sort of feedback did you get from buyers and agents about this one?

Brian:  Despite my best efforts to explain the difference between the “conditioned” and “non-conditioned” spaces, it was confusing to most agent and buyers which is understandable as this was very unusual. It was easiest to explain when I was at the property and was able to show people the building plans and answer their questions in person. 

Ryan:  How did you pull comps on a property like this since there wasn’t really anything out there?

Brian:  You are correct – there were no comparables in Midtown with this type of issue. In the end I used new construction comparable sales in Midtown and relied primarily on the “conditioned space” to come up with a base value.

Ryan:  What did you learn through selling this one?

Brian:  I learned a few things from this experience. In doing my homework on this property I learned that the there was a reason the builder did not have some of the areas as “conditioned” areas, especially on the 4th floor and it had something to do with the city requirements for having a habitable living area on a 3rd or 4th floor. I did not find out exactly what the conditions are with the city, but I was told that it had something to do with needing to install a separate egress when you build above the 3rd or 4th floor. Since the 4th floor was considered a “sundeck” and was not a habitable area, this requirement did not apply. This made sense to me later when I learned that the city made the builder remove the split HVAC systems from the 4th floor as it could not be considered habitable living areas and changed the nature of the intended use of that floor. Despite these area presenting as beautiful well-appointed rooms, it just created confusion for the buyers as to what the rooms could be used for and how it would benefit the homeowner. This confusion caused many difficulties in marketing this home.

Ryan:  What about the layout and interior?

Brian:  We had some design issues with this home and they were difficult to overcome. The exterior presented more of an industrial modern look, whereas the inside reflected more of a suburban contemporary look. Additionally, the floorplan was clunky and inconsistent. So, despite having a brand new home, nearly every buyer was considering how much it would cost to redesign the home to fit their needs and tastes.

Ryan:  Anything else you’d like to add?

Brian:  Yes, over the years I’ve noticed there is some general confusion over permitted structures and permitted habitable structures. For instance, I had a client once that had a small apartment in the back yard that they were renting to tenants. The sellers informed me it was built by a previous owner (and permitted). However, upon reviewing the apartment, it was apparent that modifications were made to the unit to add a small kitchen. Long story short, upon investigation we discovered and found that there were indeed permits for the structure, but it was not built as a habitable unit and at some point someone had added the kitchen to make it work for an apartment. The sellers were naturally upset as they purchased this property as a duplex or 2 homes on a lot and were not happy to discover that I could not market the home this way.

Ryan:  Any closing thoughts for real estate agents?

Brian:  Just because tax records shows a property as a certain size or having an additional unit does not always mean it is correct. I had a property in East Sacramento once that showed as a duplex but the downstairs unit was never properly made into a habitable unit. Additionally, I’ve found that the existence of separate meters on the property does not always mean the additional unit is permitted. In closing, if something doesn’t quite seem right about a unit or an additional space, be sure to ask more questions of your clients to make sure you are marketing the property correctly.  

Ryan:  Thank you Brian for doing this interview. You killed it. Everyone, you can check out Brian’s website here.

Closing appraisal thoughts: There is so much I can say, but the thing that stands out most is it’s really easy to include non-permitted space as square footage if we’re not careful. My advice? Don’t just ask an owner if it was permitted. What was it permitted as? That’s the better question. Moreover, if you see a huge discrepancy between Tax Records and what seems to be at the property, find out why there is a difference.

I hope this was interesting or helpful.

BEER & HOUSING CONVERSATION: Do you want to hang out at Yolo Brewing? On Saturday October 5th from 2-5pm we’re going to have a get-together. No presentations, agenda, secret handshakes, or geeky stats. This event was born on Twitter with Erin Stumpf. Hope to see you there. Details here.

Questions: What stands out to you most about the interview? Any thoughts on the house? I’d love to hear your take.

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Filed Under: Resources Tagged With: Brian McMartin, conditioned space, contemporary, intersting property, Midtown Sacramento, modern, non-conditioned space, not considered square footage, not permitted as living space, permits

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