We’re introducing a new recurring “Case Study” series on our blog where we dig into the specifics of deals we’ve done. Though every deal can bring about its own unique set of challenges and opportunities, the goal of this series is to help the reader if they find themselves in a similar situation.
The focus of this Case Study is 1003 Harrington, a home in which we represented the sellers and sold in October of last year after they had trouble renting it out. We’ll discuss why the house didn’t get leased, and what we did to sell the home quickly and for full asking. We’ll also discuss the challenges we foresaw in selling the home, and what we did to overcome those challenges (and by “we” I’m referring to the sellers and Chris and Cab working together as a team).
1003 Harrington - Context
The sellers for 1003 Harrington upgraded to a larger home in their ideal neighborhood earlier in 2022 because of their growing family. 1003 Harrington was their first home, one they absolutely loved and adored. Ideally they wanted to hold on to it long-term and keep it as an income property.
A common issue we see with newer properties in the loop is that they don’t really cash flow as rental properties. Market rental rates in the inner loop Houston may be high enough to cover a property’s mortgage, but after factoring operating expenses like vacancies, maintenance reserves, property taxes, and insurance, a homeowner might find they’re actually operating at a net loss. Often the monthly loss is just a few hundred bucks, and some homeowners are ok with eating that loss while they hold on to the property and wait for it to appreciate. (There are also tax benefits
that may be reason to hold on to a property even if it doesn’t cash flow, but that’s a discussion for a different day.)
This happened to be the case for our Harrington owners. To help with their margins, they hired a property management company with a low listing fee to list the home for lease.
The home was listed in the summer, which should have been an advantageous time due to the amount of renters that are typically in the market. However, after about 1.5 months they didn’t get much showing activity on the property. There were even 3 price reductions, but still no luck in getting a lease signed.
By this time the owners decided it was in their best interest to sell the house, so they reached out to Christina and me. We looked at the lease listing on the MLS and walked the property, and we identified the following reasons the home didn’t get leased.
Why the home didn’t get leased
First things first, the MLS pictures for the lease were ok at best. No shade intended, but it’s clear the pictures were cell phone pics and not professional real estate photos. Even when it comes to leases, you still want to have professional photos taken. Nearly all of your tenant prospects are going to see the listing online first, and pictures matter. If it doesn’t look amazing and/or doesn’t look as good as the other listings online, no one’s going to reach out for a showing. So having professional photos should be a given.
The home needed touch-up repairs (like patching and paint). The owners bought the house in 2018 and lived in it as their primary residence with a growing family of young boys. They also liked to entertain. As such, there were normal scuffs and dings on the walls and surfaces that you’d expect. The paint on the kitchen cabinetry also showed signs of wear, and there were some drywall cracks along a few seams of the house that were from normal settling.
Some would-be landlords might be tempted to think a few nicks and dings won’t bother renters because it’s a temporary living situation and they’re not buying the home. On the contrary, stuff like that does matter, especially for the typical tenant this particular home was aimed at, i.e. young professionals that want to be close to the city. Even though it’s a lease, renters are moving into a space that’s new to them, so they want it to feel like new.
The home needed a deep clean. The home was probably vacant for a few months after the owners moved into their new home. When prospects come for a showing, the house needs to feel fresh, clean, and ready for move-in.
“WE ACTUALLY HAD GOTTEN IT PAINTED AND CLEANED TO OUR STANDARDS,” NOTED ONE OF THE SELLERS,”[BUT] THE FIRST THING YOU RECOMMENDED WAS REDOING IT LOL. SO WE APPRECIATED THE REAL TALK, AND YOU SEEING IT WITH FRESH EYES.” [PARAPHRASED SLIGHTLY]
Pictures from the previous lease listing
Challenges of the Market
To get the home ready for sale we addressed all the issues above. The next challenge we faced was that of a shifting market. At about the exact time that we were ready to list the house on the MLS, interest rates were experiencing dramatic increases and there was decline in homebuyer demand.
On top of that, the owners had paid a premium for their home when they bought it as new construction because of the customizations and upgrades they added in
. Because of the shifting market, it was going to be difficult for the owners to break even on the sale. Telling a homeowner they’re unlikely to break even is never ideal. But the comps (comparative sales) are what they are, and numbers don’t lie. If the sales data isn’t there to support a higher price, Christina and I aren’t going to tell you we can get you a higher price just to make you feel good or to win the listing. We’re going to be honest with you, set realistic expectations, and then work damn hard to keep our word and meet expectations accordingly.
[By the way, pricing a house higher with the thinking that you can always decrease it later isn't the best strategy to get the best price for a home. We’ll expand on that in a future reel and link back to it when it’s posted.]
In the case of our Harrington deal, we were fortunate that our clients understood the shifting market and the sales data we presented them with. We worked together to come up with a pricing strategy we all felt confident in, and then proceeded to list the home.
Selling the Home and Maximizing Showing Potential
To get the house ready for market we worked with the sellers to fix all of the issues we described earlier. Additionally, the sellers took advantage of our in-house staging services. Staged homes tend to sell faster and for more money than non-staged homes, for reasons we discussed in this reel.
Chris & Cab’s Professional Listing Photos w/ Staging
After just 6 days on the market, we ended up receiving 3 offers on the home. We helped the sellers analyze which offer was best, and in the end we sold the home for full asking.