I went out yesterday and showed 5 properties to buyer clients. Nothing odd about that. Except that, for the first time in my recent memory, all the properties were vacant, and none were new construction.
The houses I showed yesterday were all in the $300-400,000 range. These are not homes where owners regularly pay cash, nor are they owned by folks for whom owning “an extra home” is not a problem. And so I have to wonder, “What is going on here.”Hmmm. My partner Jim Duncan has written about this phenomenon in the past, and I have certainly commented on it. But, frankly, I’m surprised that I’m still writing about it.
Currently, we have a very small inventory. Across the city and Albemarle County and all product types, there are only 903 properties for sale. Take out those that are “proposed” (meaning not yet started pre-sell new construction) and that number drops to 715 properties. And within that group, there are currently 206 homes that are listed as Vacant for showing instructions or 28.8%. This is certainly down from several years ago when the bubble burst, but not as much as I thought it would be.
There are several reasons for a home being left vacant. 1) The owner has taken a job in another town. 2) The owner purchased another home and has moved out. 3) House was originally a rental property and the owner has ceased renting pending a sale. Or 4) The owners have moved to a retirement facility or passed away. I’m sure there are other reasons that I’m not mentioning here, but these are the big causes.
In case 1, occasionally a new company will be paying expenses during the move, so the vacancy is less painful. But in all the other cases, this is a real expense eating away at cash flow and wealth. Even if you pay cash for a home there is still a cost of capital to the investment costs, plus taxes, utilities, maintenance, and heaven forbid repairs if something should go wrong such as a water leak. There is a reason many home insurance companies drop vacant homes from their rolls, or significantly increase the premium.
During the run-up to the bubble, when people thought houses were guaranteed to sell in 7 days, a vacant house was not necessarily a bad plan, but today, homes need to show their best. And vacant home rarely show as well as furnished homes. One of the homes I went to yesterday had filthy carpets, sticky countertops, and the only blinds that remained with the house were those that were broken. My client instantly knew the property had not been cared for. The price expectation went down a solid 10% upon seeing the condition. (If this is what I see, what do I not see?)
There is not doubt that there will always be some vacant homes on the market, but if you need to leave your home vacant: Maintain it like you live there. Keep it fresh and clean. Run water in all the sinks and tubs once a week to keep the gasses from come through the pipes. Furnish it as best you can. If it looks great when it is vacant, buyers will know you cared about the home when you lived there.