Real Estate Reality TV shows have been growing in popularity for years. It’s easy to see why—voyeurism at it’s best! We can watch as people buy, sell, flip, rehab and stage their real estate—what’s not to love?! The only thing is, reality is not always as it appears on reality TV. A few ways that the real estate reality differs from real estate TV:
REALITY: I wish. Seriously, the shows make it out like everyone who is anyone professionally stages their home to sell. Unfortunately for us real estate agents, this is the exception, not the rule. Most people do not have the budget to hire a professional stager to prep the property for sale. Staging is definitely a good idea (even if you DIY). It will help sell your home faster and put you ahead of the (non-staged) competition. Any amount of staging is time (or money) well spent.
REALITY: Umm, no, they don’t. Most buyers can’t and do not want to do a full renovation on a property. Some buyers do, but once again, a buyer seeking out a fixer upper is an exception to the “average” shopper. Moving is stressful enough without adding on a complete overhaul, which is why a “project” house will typically take longer to sell than it’s move in ready counterpart. There is a market for remodel buyers, but it is a much smaller pool of buyers than the shows would lead you to believe. Unfortunately, a full remodel terrifies most people more than a feral cat colony living under the house.
REALITY: Most home shoppers look at 5-8 houses before making a decision. Some buyers may look at 2 houses, some may look at 30, but most look at more than 3. Most of the home buyer shows seem to have 3 or fewer homes showcased because in reality, the buyers have already picked the house they are buying and are already in contract. The “hunting” is the TV drama that we all like to watch, but it is mostly scripted.
REALITY: Most buyers are not all-cash buyers. A cash offer is, of course, preferred if you are the seller. However, just because you are a cash buyer does not mean you will save 50% off list price. Many people think they can save that much if buying all cash and typically it is not true. The seller still has their bottom line, regardless of how you are paying for it. Think about it—if you are selling and someone offers you significantly less just because they are paying cash, would you do it? Probably not.
REALITY: Successful flippers make good money flipping, but for every successful flipper, there are 10 unsuccessful ones. Don’t get me wrong, flipping is a lucrative business…if you know what you are doing. It’s not easy, it’s not cheap and it typically isn’t as fast as it’s portrayed on TV. Investors can spend months trying to locate the perfect deal—after all, if you aren’t making money on the buy, then you’ll never make money on the flip! Once the property is purchased, then the real work begins. There will be unexpected costs and as a flipper, you have to the write the check to cover the surprises. Other significant costs that are often left out of the profit summaries on the shows are the property holding costs (taxes, insurance, yard maintenance, capital gains and closing costs). The show may summarize the profits like this: Purchase Price =$100,000; Rehab Costs=$50,000; Sales Price= $200,000; Total Profit=$50,000. So as a viewer, all we see is $50,000 and it sold in 60 days! In reality, there were likely several thousand dollars in prorated taxes, real estate commissions, title fees and other closing costs (Let’s say these fees were $15,000). I’m not going to get into the capital gains issues for simplicity, but any flipper needs to have a good CPA on hand to discuss capital gains and a plan in place for them. So in reality, the Total Profit is more like $35,000 before taxes. Don’t get me wrong, that is still a great payday, but far different from the $50,000 the show is reporting. Flipping is a great strategy, but just know that it is not as easy or as simple as it appears on TV.
I fully admit to being enthralled by the shows on HGTV, just like everyone else. They are fun to watch and they do have some good information. However, you have to keep in mind that they are shows meant for entertainment, so often more of the down and dirty side of things is left out. Always remember that reality TV is only as realistic as Hollywood can cram into a 30-minute episode, and reality is much longer than that.
Lisa E. Priest loves real estate so much she watches HGTV in her free time and is an East Texas Area REALTOR® with Picket Fence Realty, Inc. You can reach her via phone or text at 903-948-3343 or at BuyPalestine.com.