Making It Your Own vs Just Owning
I used to work in Chicago's ample theatre scene for several years before I got into real estate. In fact, theatre is what brought me out here - I started my Chicago tenure with a year-long stage management internship at Steppenwolf in the late 90's. The best introduction to this article that I can think of involves reaches back to those days for the story of a set designer who was pretty well known in Chicago for her adventurous scenery endeavors.
Normally when a set designer first visits a performance space he or she will take measurements of the existing dimensions so that they can create a set that will fit on the existing stage. This is logical. The designer I'm speaking of would walk into the theatre with her plans already fixed in her mind and start her assessment of the space with "okay, first off we'll need to knock out the back wall of the building." Most of the time she was quite serious about this opening volley and would have to be negotiated down to something that left the masonry reasonably intact.
Oddly enough, her sets wound up being the most creative and best suited to the scripts they surrounded than any of the others I've seen to date.
So what does this have to do with the real estate market?
More than you'd think. A lot of first time buyers are coming out of years of living in apartments and in family homes where true customization of their living space is impossible. Once you start looking to buy a house, you need to ditch that mindset immediately. Taking any home at face value is discounting an enormous part of the benefits of ownership - not only can you do whatever you want with your property, but you're supposed to.
In fact, I'd go as far as to say that to the truly ambitious, the only three things that matter about a piece of property are the positions of load-bearing walls, the size of the lot, governmental and contractual constraints, and the property's location.
The real estate industry sets prices based on the concept that you will remain in your home for a considerable amount of time. While developers of new property will create room layouts designed for maximum consumer appeal, you are not expected to want to keep all of it, even from day one. If you move in to a new home and keep it in exactly the same layout and style as the prior owner, you might as well have just stayed in an apartment.
There are some drawbacks to this approach
I have an imp's tendency to try and open up my clients' minds to the idea of extreme home renovation by tossing out "well, it looks like this wall isn't structural. You could probably knock it out." I normally do so pretty early on in the search process and repeat such suggestions often as we go around to remind them that they don't have to take the place as is. Most of them balk when I start talking this way because they haven't accounted for renovation costs in their home loan amounts.
I have three possible replies to this concern. One is that if you're searching properly within the confines of your budget, you're probably still below the maximum amount that your lender is willing to flow your way. Many lenders will offer special loans for renovation. If you're really jonesing to knock some stuff down, bring it up with your mortgage broker and you may get a pleasant surprise. Another is that if you really take a shine to the idea of customizing your space to the hilt, maybe we should scale our search criteria down by $20k or so to leave you some wiggle room for those changes. If one particular home is needing a lot of renovation, I might suggest that we lower our bid proportionately to account for the necessary upgrades. After all, the cost of a home is not what is listed, but what the seller will accept.
Of course, other buyers get skittish about major renovations because it means they cannot move in immediately. There are, of course, ways around this. Build in stages. Talk with a handyman about timeframes and if the worst of the work is only going to take a couple of weeks, take a vacation for the worst of the construction. People live through construction projects all the time. It'll be worth it in the end to know that your home has been fully customized to suit your needs.
You can also spread out the renovation efforts over time, but remember the effect of momentum. The longer you stay in the home using the original layout, the tougher it will be to get going on a major space-altering project.
Finally, when it comes to outdoor changes, there are definitely some limitations. Neighborhood busybodies may express concern about your changes if they're too gaudy or out of place. Homeowner associations can enforce rules regarding uniformity of appearance, as severely differing levels of curb appeal can affect the values of neighboring homes. Condo buildings can limit your ability to move around common elements like plumbing pipes and electrical mains at the points where they enter and exit your property.
Two out of the three of these you can anticipate by careful review of the HOA documentation before you purchase the property. You'll definitely want to warn your attorney that you're planning on making major changes to the property so that she can be on the lookout for any clauses that would complicate your work.
How to get into the right mindset
If you're not the type to get adventurous with your living space, I want you to add three items to your mental checklist for house showings and open houses. They're pretty simple.
- Pick one wall that you would remove.
- Pick one place where you would add a wall.
- Whose lifestyle does the home better suit: yours, or your parents?
That last one is in there because we tend to unconsciously pick home layouts that are similar to the ones where we grew up. The only problem is, those homes were chosen by our parents for use in a bygone era from two to three decades prior. Even though you'll want to make some customization efforts on any property you purchase, you don't want to have to gut the entire place if you don't have to.
Designing for profit vs lifestyle
In choosing your design you do need to take into consideration certain other outside factors. Changes that greatly increase or decrease market value will not only affect your potential sale price but could also change your property tax bill. Changing the number of bedrooms or bathrooms in particular can totally alter your home's value in relation to its neighbors. Your Realtor should be able to help you assess the potential gain or loss from your planned alterations.
You will also have to acknowledge that unique homes are harder to sell.They will appeal to a smaller subset of the population. Not prospective buyer will have your creative instincts and be able to envision your home with their ideal alterations - in fact, I'd venture that most of them won't be able to "envision" any more than what's immediately in front of them at a showing. A beautifully customized home that still appeals to a large number of buyers is, of course, the ideal goal, but if you're going to be adding in a shark tank, secret rotating bookcases or a mad science laboratory make sure you are willing to keep your home on the market considerably longer when it comes time to sell it.
I'm sure you can weigh the emotional & psychological value of a personalized living space against the financial value of the home in the open market. In general I'd say that if you're planning to stay in the home for more than 6 years, the former is far more crucial than the latter but your mileage may vary. I'd also say that nobody should have to endure living a home that doesn't suit their lifestyle.
What if it really is perfect with no changes needed?
Really? You found a house that's 100% perfect? No walls need to be moved? No additional kitchen storage or closets? No new outlets or special rooms?
If that's the case, what the heck are you still doing here? Let's go buy it!
Otherwise, share your creative renovation ideas with me in the comments, and I'll see you on Friday with the 3rd quarter Chicago rent survey.