Tag Archives: home

Staging a House the Martha Stewart Way

“Martha Stewart is now under house arrest. So she’ll go to her $40 million 153-acre estate. So she’s going from the big house to an even bigger house.” –  Jay Leno

T.J. Maxx.  Target.  Burlington Coat Factory.  Walmart.  Kirkland’s.  Goodwill.  Did you notice I didn’t mention Kmart?  That’s not because we don’t buy our staging items at Kmart.  It’s just because we don’t have many Kmarts around here.  If we did, I’m certain some of our stuff would come from the Martha Stewart Living line.

And for what it’s worth, I forgive Martha for the whole insider trader thing.  She’s paid her debt to society.  But I still don’t tune into her show – mostly because listening to her talk is about as exciting as watching a car rust.

So why stage a vacant house?  Here are my top three reasons:

  1. A high percentage of buyer’s start their search for a home to buy online – a home that is staged looks more, well, homey.
  2. Staging items like furniture, pictures and plants give the buyer an idea of how much space they will have in the house for their own stuff.
  3. Lived in homes, or homes that looked lived in because they are staged, usually sell faster.

We like to stage the kitchen, master and hall bathroom and master bedroom.  The family room isn’t a bad idea either.  Our budget is around $500.  I’m sure we’d make Martha proud.

For more tips check out this video:

 

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But what about the Shadow Inventory?

Tale as old as time, song as old as rhyme, Beauty and the Beast.  That’s a catchy tune.  And my little girls love the movie.   Honestly, I enjoy it too.  Lumiere, the suave French candelabra, cracks me up.  His big solo number, Be Our Guest, is very entertaining.

So imagine my frustration when I found out I couldn’t buy this film after my youngest daughter was born in 2004.  I looked everywhere.  Best Buy.  Walmart.  Amazon.  Barnes and Noble.  Nada.  Zilch.  Nothing.

Fortunately, we had a trip planned to Disneyland.  Problem solved.  I would go directly to the source – Main Street U.S.A., Disneyland, California.  The souvenir shop there had the movie selection prominently displayed behind the cash register.  I could see all of Disney’s big hits:  Aladdin, Cars, The Incredibles, Sleeping Beauty and Cinderella. 

But wait a minute.  Where was Beauty and the Beast?

It’s in the vault she said.  What?  The Disney cast member repeated it again – it’s in the vault.  So I said well go back there and get it!   No sir, you don’t understand.  Disney puts movies in the vault for extended periods of time.  You will have to wait until it’s re-released.  That was 2005.

Disney finally pulled Beauty and the Beast out of the vault – last October.  I gave it to my daughter for her 6th birthday.  I also paid $24.95, about twice what a normal kid movie would cost.

You see, the folks at Walt Disney are master marketers.  They don’t just make whimsical princess movies and cool adventure attractions like The Pirates of the Caribbean.  They’ve figured out how to create artificial demand.

Disney got a rational guy like me to pay double, and wait five years, for one of their products.  People who don’t even have children or grandchildren yet bought this movie out of fear it would get locked up in the vault for another decade.  Pretty smart.

That’s why I find it a little amusing when I’m in real estate circles and someone asks me about the shadow inventory.  Aren’t you worried about it?  If the banks unleash this shadow inventory on the retail market don’t you think prices will plunge even further?

The answer is no, I’m not worried about it because the banks will not unleash this shadow inventory (if there really is a shadow inventory) on the retail market.

First of all, let me clear up one myth – banks don’t foreclose on a  mass of houses, board them up and then wait to sell them off for months or years on end  (at least not in Arizona).  Many experts define this as shadow inventory.   I’m on the ground here in Phoenix and that does not happen.  Once a bank forecloses they promptly secure it and sell it as an REO. 

The home directly behind mine was foreclosed on last week and it was on the multiple listing service 6 days later.  The banks do this because there is too much liability in home ownership.  If they foreclose on a house and then let it sit they are responsible for property taxes, homeowner association dues, utilities and general maintenance. Even worse, bad things tend to happen in or around abandoned houses.  When bad things happen people sue – not good.

Banks are far more likely to postpone foreclosure proceedings on the current homeowner for months or years at a time.  I bid on house at the auction earlier this week.  Its sale had been postponed 38 times – 1148 days.  This property has been in foreclosure for more than three years.  I bid on two other houses scheduled to go to sale this week – their sales had been postponed 12 and 18 times.  And guess what?  All three of these sales were postponed again.

There is another camp of so-called experts who refer to these homes as our shadow inventory.  But how do we know the owners of these homes won’t eventually bring their loans current, get a loan modification or execute a short sale?  My guess is only a small percentage will actually get foreclosed on and end up on the market as an REO.

Here’s why I’m really not worried about shadow inventory (if there really is such a thing) – artificial demand.  The banks are actually copying the Disney marketing model.  They’re being fairly strategic about what they release and when.  This creates scarcity, which increases demand (albeit artificially).

There is nothing wrong with this.  I’m actually a proponent of it.  It’s good business and probably the smartest thing the banks have done since this crisis began.  It serves us all and makes me want to break out in song – Be Our Guest, Be Our Guest, Be Our Guest…

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Your Home is Not an Asset; it’s a Place to Live

I was standing at the checkout line in Target on Sunday with my 7 year-old daughter, Allyson.  She desperately wanted me to buy the spearmint Icebreaker breath mints.  Now I’ll admit…these things are good.  But, at $1.99 they are a want, not a need (unless of course I just ate Mexican food.)  I decided that this was an opportune teaching moment.  I explained to my daughter that Icebreaker breath mints are a liability, not an asset.  They cost a lot of money and within a few hours she will have nothing to show for her investment.  My comments didn’t stop her from wanting the breath mints but they did make her think.

I can’t really take credit for this clever parable.  It just so happens that I’m reading Robert Kiyosaki’s ‘Rich Kid, Smart Kid’ book.  Among the many lessons he writes about is the importance of understanding financial statements.  Poor people buy liabilities.  Rich people buy assets.  If we can instill this fundamental concept in our children can you imagine how much better off they will be financially as grown-ups?

As adults we frequently mistake liabilities for assets.  Your home is a perfect example.  How much are you paying to live there?  There’s the mortgage, utilities, HOA dues, repairs, taxes and insurance.  Yes, your home will eventually go up in value and if you’ve been paying down principal you may actually have equity.  However, when you sell and move away then chances are the next house you buy will have gone up in value just as much, thus negating the increase in value and reduction of principal in your old home. 

The same can be true in a real estate market moving downward.  My parents sold their house at the peak and purchased a new one closer to me and my family.  Within a year the bottom dropped out and they watched values in their neighborhood drop by more than 30%.  I did some quick research on their old neighborhood and found values there had dropped by more than 40%.  I explained to them that in the end they were no worse off – the market in both neighborhoods was almost identical.

Once you understand this it’s easy to see that your home is not an asset or investment; it’s just a place to live.  When you hear someone say your home is an asset they are not lying to you.  As Robert Kiyosaki points out in his book, your home is an asset – the bank’s asset. 

The bottom line is ANYTHING that costs you money is a liability.  I recommend getting in the habit of asking yourself these questions every time you reach for your wallet:

  1. Is this a want or a need?
  2. Will this cost me money or make me money?
  3. Is this an asset or liability?

More assets and fewer liabilities – that is how wealth is created.  It’s like Robert Kiyosaki’s Rich Dad once said, “One of the main reasons people work so hard is that they never learned how to have their money work hard.  So they work hard all their lives, and their money takes it easy.”

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