Saturday, July 16, 2016

Allowance or no allowance?

Sorry, this is not a blog about parenting and children's allowances!  
Here, we are talking about sellers offering an allowance for repairs.
I am often approached by sellers who tell me they know their home needs "X" (fill in the blank - new carpet, refinished wood floors, repainting, new hvac, etc).  But, they say they would like to avoid doing the work now and just offer their buyer an "allowance".  They want to know if this is a good idea?  The short answer is NO!  Despite the many explanations I hear, I stand firm that an allowance is rarely if ever a good idea.
Why?  For every reason/excuse to offer an allowance, there is a reason NOT to;
1. "They will want to pick their own ___".  Hogwash.  The buyer may want to pick their own colors or finishes, but most do not unless they are buying a true "fixer upper" and planning a full remodel.  When you say, "seller allowance for __" in a listing, you are pointing out a problem. Essentially, you are saying, "Our house needs work and we don't want to do it. We're going to give you our problem.... but we'll give you some money to handle it".  Inevitably, you want to list your house at the full retail price of a move-in ready home, but offer the "cost" to replace carpet/paint, etc. But, you must remember that no one wants your problem or to do your work. In their eyes, you can't begin to compensate them for the hassle of organizing and orchestrating the work.  Or, the house should be priced as a fixer upper. Buyers paying retail want simplicity and a move in ready home. 
2.  "They will see beyond the paint/carpet/flooring, etc".  Wrong again.  Most buyers actually lack the ability to visualize transformation. While a small percentage can visualize transformation, you lose the "first impression" of an appealing home.  You can immediately translate this to dollars.  If the buyer is forced to visualize, the buyer expects to be compensated. See The Shiny Penny
3.  "I like the personality color/wallpaper/finish someone else will too".  Here you are partially right.  Someone probably will.  But, most everyone will not.  Would you rather fish in a pond with 100 fish, or 1 fish?  Someone out there will like purple paint and have a great emotional response to it, but 99 people out of 100 will not and will see it as a negative.  Why would you want to present a negative, when you can easily change it to appeal to 99%?
4. "I can't afford to do the work".  This is the one valid reason presented.  But, the allowance is not the answer.  If you can't afford to do the work, price the house accordingly.  And, know that houses that need work don't usually sell at 100% of retail price (there are market exceptions).  So, your "allowance" will be part of the negotiation of the contract price.  Also know that most lenders and most loan products won't allow the buyer to get cash back to make the repair or improvement anyway.  The buyer is going to have be someone who can afford to make the repair from their own cash after closing unless they obtain a special type of loan. 
Final thought;  selling a house is a marketing task.  Your goal is to present the best product possible in the best light possible using the best images/marketing materials possible.  An allowance would be like an ad that says, "Buy our car.  It has scratched up paint, a missing fender, needs a new seat, and the brakes need to be replaced... so you can't drive it right away. But, we'll give you the cost of the parts off the MSRP so you can get it fixed.  Why would anyone buy that car?  Why would they not go down the road and buy a different car, at the same net cost, that's in perfect condition that they can drive to work tomorrow?

Stinky hot water? Replace your water heater anode. An unusual post!

OK, so this is a bit of an unusual post for a real estate broker.  But, I just HAD to share!
To paint a picture: I live in a home served by a well.  Because we have sulfur in our water, we have an expensive water treatment system with softener.  
My husband and I began to notice that our hot water was a little stinky... like rotten eggs. So, we immediately called our water treatment installer/servicer.  They asked if it was just hot water. Well, I said, "Yes, now that I think about it, it is".  I was told that it was not the treatment system, it was the water heater.  Huh?  
It turns out that there are sort of "sacrificial" anode rods in most conventional water heaters.  Apparently, higher end units with long warranties even have 2.  These rods take the hit from corrosive substances to protect your water heater from rusting. They essentially deteriorate instead of your water heater deteriorating.  But, when the rod itself becomes so corroded that it can no longer do its job, the water heater tank will rust out, leak and need replacement. And, in some cases, the water starts to smell foul. 
At the suggestion of our water treatment company (who does not replace anodes), we called a plumber. The plumber arrived, looked at the age of the water heater, and refused to do the replacement. He said there was significant risk that the anode would not come out, would strip out the threads, or the new would not go in and seal properly.  Also, he said the water heater would need to be drained partialy to create space to put hydrogen peroxide in the tank to neutralize the smell in the water already in the tank.  He wasn't confident that the drain valve would close back and seal properly either. So he left!  
Not ones to settle for "no", and definitely not wanting a new water heater for lack of a $75 anode rod, my husband and I decided we'd try to replace it ourselves.  We had nothing to lose. If we failed, we'd need a new water heater. But, this plumber was already telling us to just replace it now instead of even trying to replace the rod.  
So, here's what we did;
1.  I purchased a tri-metal replacement rod.  My water treatment guys said this is the only kind I should use.
2.  I turned OFF the circuit breaker to stop power to the water heater - CRITICAL STEP
3.  I turned off the water supply to the water heater
4.  The HARD part - Both my husband and I worked for about 20 minutes to get the old anode rod loose. This is really a challenge. It involved a socket wrench and an extension bar, rust release fluid, and a LOT of elbow grease.  After working diligently, it finally loosened and we could unscrew it.
5.  I screwed on a hose and opened the drain valve at the bottom of the tank to drain out some water.  I drained a lot because our water heater is in the basement and we could let it all flow outside.  Then, I closed the valve tightly.
6.  I poured 4 quarts of hydrogen peroxide into the tank through the hole where the anode rod was.
7.  I applied "pipe dope" or liquid teflon sealant to the threads of the new rod and then inserted the rod back into the water heater and tightened it back down.
8.  I opened the water valve just for about 10 seconds to let some water in and stir up the tank.  Then turned it right back off.
9.  We let the tank "sit" for 4 hours with the peroxide and did not use any hot water at all for 4 hours.
10. I turned the power back on and opened the water valve, and then checked for leaks.
The water heater refilled fully. We opened all of our faucets in the house and turned on "hot"... they vented out gas and we let them run for about 2 minutes then shut all off.  
Now, our water is back to normal!  We hope this has "saved" our water heater and it will serve us many more years.  My research, aka my "google" degree, tells me that replacing your anode road can double the life of your water heater.  I hope so!
**Note; I am not a plumber and make no recommendations to others about trying this.  I am just sharing my story!  (photos below)

removing plastic cover from top of water heater
      to expose anode

Removing the old anode... this took some work!
The old beside the new!

The new adode in place

Screwing in the new anode