HGTV is dangerous.
Needless to say, as a real estate lifer in a real estate family, we watch the channel. When your five year old wants to stay up to see whether or not a couple decides to ‘Love It’ or ‘List It,’ it is an indicator as to how much we watch the channel. She was able to reel off about seven different shows by name the other day…scary…but that is another conversation for another day.
While HGTV is addictive and it has the ability to suck you in almost as well as a good Law and Order marathon, its ‘watchability’ is not what makes it dangerous. HGTV is most dangerous because it sets an incorrect expectation in the mind of the market as to the ease at which property can be bought, sold and improved. While the channel does not profess to be a ‘how to’ on the correct way to buy/sell/flip/finance properties, it does not dissuade us from making the assumption either, and that is truly where the danger lies.
Issue ‘Numero Uno’ is the cost of renovations. Love It or List It, while one of my absolute favorite shows, is one of the worst offenders. Sellers regularly have wish lists that include complete kitchen re-do’s, removal of stairs and/or walls, additions, completion of basements and master bath overhauls and with a budget of $35 – 50k. The large majority of the time, the request list relative to the budget constraint is extremely unrealistic. Likewise, professional fees (architecture, engineering, interior design) are largely ignored and I have yet to see an episode where the plans sit on someone’s desk at City Hall for an extra 3 weeks for no apparent reason (happens all of the time in real life.) The simple act of opening up a wall can trigger all sorts of code upgrades, especially in older homes, and one questionable interpretation from a county code inspector can impact the entire plan and/or blow much/all of the budget.
These shows tend to gloss over the costs associated with financing and transferring of real estate. ‘Congratulations, you have improved your home by $45,000 even though you spent only $30,000’ sounds great but it is not that simple. If cash was used to pay for the improvements, then that cash cannot be accessed unless the home is sold or refinanced, meaning that the $15k in new equity will either partially (or entirely) eaten up in commissions and/or closing costs/refi fees. Additionally, if the refi mortgage rate is higher than the current one, then you have managed to up your monthly obligation in order to recapture the cash spent on the renovation. I also have not touched on the fact that appraisals are a crap shoot in this market and what a home may be worth in the eyes of the bank may differ from what they comparable sales indicate it should be worth.
Another huge issue is how these types of shows depict the buying process. In almost every show, the buyer looks at several potential properties, also has their team look at it, weighs their decision thoroughly, has plans drawn, sees a demonstration on the work to be done, and then proceeds to buy one of the three homes. In this market, any home worth buying would have received multiple offers and sold at or above asking price. The contractor and/or architect who helped draw the plans would be sending the buyer an invoice for their design work, regardless of the outcome, and this would repeat itself over and over until the buyer either quit the process or bought a home without the comfort of completed plans. Glossing over the time and expense of buying a true ‘fixer upper’ is a huge disservice to the buying public.
Ok, this post is not to say that these shows are not valuable nor is it saying that they have no place…they do. The concept of before and after is huge and improving a home may still be the best option for many folks. Opening up a home can have a huge impact on its marketability as well as on day to day life of the occupants. Getting natural light to interior rooms and the huge impact on space that paint, correctly sized furniture and new fixtures can have on space is hard to describe but easy to show…and these shows do just that. Illustrating new concepts and design trends is also quite valuable and keeps the viewer closer to the latest trends. All of these reasons are valid and valuable, they just fall short of the entire story.
If you are entering the market to purchase a home or considering renovation, please do not expect to have an HGTV experience. Buying a foreclosure, fixer upper or executing a major renovation is extremely hard and should be undertaken with great care. Make sure that your budget is far less than your reserves and that you do not bite off more than you can chew. Expect the unexpected and bake in extra time, extra cash and extra headache. If you do that, then the correct expectation has been set.
But don’t forget to tune in tonight at 8 to see if they are going to ‘Love It or List It.’