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detrimental property conditions

That place where shiplap & murder meet

October 29, 2019 By Ryan Lundquist 25 Comments

There’s going to be a new home renovation show that focuses on murder houses. How crazy is that? It’ll be called Murder House Flip and it’s going to air in 2020. I can already imagine adding shiplap to the walls to erase a heinous history… Anyway, here are some things on my mind.

1) Not the home’s fault: Often when talking about notorious homes we hear things like, “It’s not the home’s fault” or “It’s unfair to penalize the house.” I get that, but let’s remember buyers aren’t just purchasing the home. They’re inheriting all the stories and history too. Anyone who has ever owned a home knows this is true because neighbors will definitely tell you about the previous owners and especially anything big that happened at the property. While a home is technically innocent, it doesn’t mean buyers aren’t discerning or making judgement calls about value.

2) Stigma fades: A property with a crime in its past can certainly have a diminished value, but the loss in value may not last forever. What I mean is right after a gnarly situation buyers might react quite negatively, but over time the tendency is to care less, forget, move on, or not even know what happened decades ago. It would be like saying, “A man was murdered here yesterday” compared to “A man was murdered here in 1917.” Would there be a difference in your mind? Maybe so. But for something really notorious the question becomes how long stigma can last. This is why I’m watching the John Wayne Gacy property. The original home was actually demolished, but can stigma remain with the site despite the new home?

3) No one-size-fits-all adjustment: How much does a murder affect value? There’s no one answer to satisfy all situations. It likely depends on when the murder occurred, the nature of what happened, and whether it took place inside or outside. It could also depend on the price range or location as some sub-markets are more sensitive than others. My experience locally is buyers at lower price points tend to be more forgiving about certain issues compared to higher price points (generally speaking).

4) One buyer vs the market: It’s possible a particular buyer might not care about a property’s history, but market value isn’t just about one buyer. What would most buyers pay? Last year I ran a poll about the alleged Golden State Killer’s house and asked people to consider if there would be any price impact if this home came to the market. It was a fascinating conversation with many layers, but one thing that kept coming up was the idea that one buyer might not even care. That’s true. But again, market value isn’t just about what one buyer would do. It’s like this. Imagine lining up 100 qualified and interested buyers. What would be reasonable for them to pay? That’s sort of what market value looks like.

5) Crunching numbers: I appraised a murder house recently and interviewed about ten local real estate agents who sold a murder property in the past. Here’s a blurred view of my data collection. Some agents said there wasn’t any impact to price and others would say stuff like, “It probably sold $25,000 lower.” In short, the answer wasn’t always the same, which meant I had to consider which data points were relevant for my situation. This is huge because it’s easy to find one murder house and call it a day because now we have data. But what happened with one home under $200,000 may not mean anything at the $800,000 price point. Thus some data toward the lower end of the market ended up being less relevant during my appraisal.

An episode of Murder House Flip in Sacramento: There’s going to be an episode set in Sacramento to focus on the Dorothea Puente property. If you didn’t know, she was an older woman who ran a “boarding” house in the early 80s, but instead of giving clients respite she drugged them, buried them in the backyard, and collected their social security checks. This property has sold four times in the past twenty years as seen below.

By the way, there was a documentary made about this house and the owner has even given tours. This goes to show another aspect of a famous home is monetization. In this case though the owner donated tour proceeds toward organizations working with the homeless.

Keep in mind entire books are written about this stuff and I’m only scraping the surface here. I hope it was interesting or helpful though. 

Questions: Are you going to watch this new show? What stands out to you above? Any other thoughts?

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Filed Under: Appraisal Stuff Tagged With: detrimental property conditions, dimunition of value, Dorothea Puente, effect of murder, Golden State Killer, heinous crime, Home Appraiser, House Appraisal, impact of murder on real estate, Murder House, Murder House Flip, Sacramento Appraiser, shiplap

The Golden State Killer’s house (poll results)

May 23, 2018 By Ryan Lundquist 13 Comments

We recently talked about the Golden State Killer’s house and I put together a poll. If this house came to the market, what sort of price reduction would you expect if any? Let’s look at the results and talk through some ideas.

POLL RESULTS: There were about 400 votes. Thank you everyone for voting. I’ll actually leave the poll open for a couple more weeks and you can vote HERE.

KEY POLL TAKEAWAYS:

  • 37.6% said the impact would be 0-10%.
  • 41% said the price discount would be 10-40%.
  • 21% said there would be a discount above 30%.
  • Most respondents hovered between 0-30%.
  • Votes declined as price discounts increased. 

THOUGHTS ABOUT THE GOLDEN STATE KILLER HOUSE:

Minimal impact & marketing: Close to 1 out of 3 people said this property would sell with a price discount of 0-10%. Thus there are a good number of folks who think either there could be no impact to value at all (or a minimal impact). I wish I had narrowed the poll down to 0-5% and 5-10%, but I can’t go back now. This result doesn’t surprise me at all because many real estate professionals and the public have said, “It’s probably not a big deal.” Yet to be objective, let’s not forget this home has a potential marketing issue because it has a smaller pool of buyers even willing to consider purchasing it. I’m not trying to sway opinions, but only saying let’s think about how a more limited pool of buyers might impact value before we claim there is no value issue.

No bodies or crime: One of the big conversation pieces over the past two weeks was that no crime actually occurred at the home, so there really couldn’t be any damage to value. I understand that sentiment, but let me play devil’s advocate. Why not? Close to 2 out of 3 people on my poll said there would be a diminished value despite no crime taking place on site. Also, many locals have said they would not purchase the home at all. So it begs the question, do we need bodies or a crime for there to be a stigma? This poll is nothing scientific, but a lack of bodies clearly didn’t matter to some respondents. I find it’s easy in real estate to make sweeping value generalizations, but I guess this reminds us to be cautious about that.

Selling at a premium: A number of conversations have suggested this property could actually sell for a premium. I completely agree there are buyers out there who would pay more for whatever reason. Yet to be fair (and technical), do these buyers represent the market? Would the market as a whole pay more for this property? That’s the big question to ask when it comes to thinking through value.

Market value: If we lined up 100 qualified buyers to purchase this home, and they were informed that a notorious rapist and murderer owned the home, would it matter for value? There might be individuals willing to pay a premium, or some who wouldn’t care, but what about the market as a whole? That’s the big issue, and it’s frankly challenging to answer a question like this. In fact, there are entire books written about detrimental property conditions, so I won’t pretend this is an easy issue to dissect. Let’s remember banks lend on market value too instead of one individual buyer’s perception of value, which underscores the importance in thinking in terms of the market.

Housing shortage isn’t the trump card: We have a sincere housing shortage right now, so I’ve heard things like, “Because there is a lack of inventory, this isn’t going to be a big deal for buyers.” I think there is something to that because when inventory is low, buyers tend to overlook some negative issues. Likewise, when there are too many homes on the market, negative issues stand out like a sore thumb. So there’s some truth here. Yet my observation is that a housing shortage has not been the ultimate trump card for other homes with negative issues in today’s market. What I mean is buyers have exhibited sensitivity toward overpriced homes and properties with adverse locations or issues. Again, I’m not saying there is a price reduction for this property, but only that a housing shortage has not seemed to erase negative issues for other properties in the market. Yes, buyers are desperate to get into contract, but at the same time my sense is they’re not so desperate that they’re overlooking negative things either.

I know I sound like an advocate that there is a price reduction, but if you read carefully I haven’t actually said that. I’m only bringing up ideas to help us think critically. I welcome your take in the comments. And let’s hope we do get to see this property sell so we can see who answered correctly in the poll.  šŸ™‚ 

I hope this was interesting or helpful.

CLASS I’M TEACHING: Next week I’m doing my favorite class at SAR called “How to think like an appraiser“. It’s from 9-12pm on June 1st. We’ll talk about comps, adjustments, value, etc… It’ll be fun. You’re invited.

NOTE: This is not a scientific poll. Take it for what its worth. Let’s think critically about value and have conversation. That’s the goal.

Questions: What do you think of the poll results? Would you buy this house? I’d love to hear your take.

If you liked this post, subscribe by email (or RSS). Thanks for being here.

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Filed Under: Random Stuff, Resources Tagged With: appraisal issues, Citrus Heights, detrimental property conditions, East Area Rapist, Golden State Killer, Golden State Killer house, House Appraiser in Sacramento, poll results, property with a history, property with stigma, Sacramento Home Appraiser, Stigma

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