To some people, a house on a busy street represents an opportunity to get into a particular neighbourhood and school district at a substantially discounted price.
To others, it’s a non-starter, and a complete deal-breaker.
Let’s talk about how we value a house on a busy street compared to the same house around the corner, and how the decision-making process would play out for either somebody looking to buy on that busy street, or somebody already living on the street – who wants to get out…
“Great street!”
I hear this a lot in real estate, whether it’s my buyer clients remarking that they like the street we’re headed to for a viewing, or whether it’s the listing agent trying to pump up his or her property listed for sale.
What is a “great street” though anyways?
Sometimes it’s just the name itself.
“Bessborough Drive” in Leaside has that “great street” label, but I can tell you from living on Bessborough for a decade as a child that it’s very, very busy!
I grew up on Parkhurst Boulevard, and it wasn’t uncommon for me to put my hockey net at the end of my driveway and often out on the road.
The first time I put my hockey net on the road when we moved to Bessborough Drive, a car came by about every twenty seconds (it was after school, so rush hour in Leaside…).
For all the panache and namesake that Bessborough Drive has, it’s quite busy!
So is it a “great street” after all?
I guess it depends: are you looking for peace and quiet, or are you looking for a brand name?
There’s no question that a busy street has an affect on value, but how much is very difficult to quantify.
Around the corner from my office in “Davisville Village,” which is a name contrived by real estate agents in the early 2000’s when “Leaside” had panache and “the other side of Bayview” did not, there are truly some great streets, and then some that don’t get as much love.
Davisville Avenue is very busy, and while I wouldn’t say that “houses don’t sell well” on that street, since houses in Toronto anywhere sell well, I would definitely say that the houses don’t sell as well as around the corner on Hillsdale, Manor, or Soudan.
Davisville Avenue is a TTC bus route, and it’s also a thoroughfare for cars looking to get from Bayview Avenue, through Mount Pleasant (where there’s a stoplight, unlike Balliol and the like), to Yonge Street.
If you had a $1,000,000 semi-detached house on Balliol Street, how much would the SAME house cost on Davisville Avenue? Maybe $900,000? Maybe less?
It might sound crazy to some of you reading this, but if you drove up and down both streets every day, and saw the difference, you might agree. If you had children that can roam their front yards freely on Balliol, but not quite as much on Davisivlle, you might agree.
Or, you might completely disagree regardless.
Every buyer is different.
So to the buyer who could pay less for the same house on a busy street, it’s a true dream come true.
A reader emailed me this past week and asked about a house on her block. I can’t reveal the address (all that stuff about “unauthorized advertising” and “interference with an active listing,” I know, I know), but to give you some context, let’s say it’s on a Bathurst/Avenue/Bayview kind of situation.
The neighbourhood she’s in is marvelous – with great schools, fantastic retail infrastructure, and of course – amazing homes.
But being on the busy main street seems to play in her head every day, and you can’t help but think about the greener grass on the other side.
Here’s what she wrote:
“When we bought this house, we never meant it as a forever home and the idea was always to move to a side street and remain in the area, but now whenever I look at listings of neighbourhood homes they are going for $1.2M and up, the question becomes do we really want to take on more debt to get essentially the same! house but on a side street? I say yes, my husband says no, btw.”
Well put.
And the field might be split 50/50 on this one as to what course of action to take.
Do you bite the bullet, pay an extra $200,000 for the house two blocks over, plus transfer costs?
Do you stay in this house and deal with the incessant traffic noise, difficulty backing out of your own driveway, and concern about your children as they exit the front door?
Or do you buy into a completely different area altogether?
Another concern this property owner has is about resale value of her own home, since there’s a listing rotting on the market a few doors down.
Granted, the seller and listing agent(s) could have done a better job with marketing (you should see these listings….), but it’s amazing to see a house like this continue to sit on the market.
Here’s a history of the listing from the very first time it was listed:
1) February 5th, 2014 – $1,248,000 – 53 days on market
2) March 31st, 2014 – $1,188,000 – 44 days on market
3) May 15th, 2014 – $1,088,000 – 14 days on market (after “holding back offers” as a strategy…)
4) June 1st, 2014 – $999,000 (new agent, same “strategy” of holding back offers), raised to $1,099,000 – 86 days on market
5) November 6th, 2014 – $1,150,000 – 73 days on market and counting…
So while there are massive errors in the listing (words misspelled, entire sentences that make no sense), and while three brokerages have represented the seller in these five listings, I still think that if the house was worth selling, it would have sold by now.
After all, it’s been almost ONE YEAR!
Now the blog reader who emailed me is wondering, “Is this just a really terrible selling job, or is it impossible to sell a house on a busy street?”
I wouldn’t say it’s impossible, but terrible listing/marketing practices, combined with over-pricing, on a busy street, is going to significantly decrease the chances of a sale!
This particular house was purchased for $872,000 in July of 2013, and it was originally a triplex. So to convert this to a 3-bed, 4-bath, albeit cheaply finished with poor workmanship, must have cost them at least $150,000.
Maybe it’s “worth” $1,050,000 or more, but again, it’s all a matter of perception.
Even with the poor workmanship and cheap finishes, if this house was around the corner, it could sell for $1,250,000, and the buyer would just spend $30K undoing a lot of the poor work in the home.
But with the house being on a very busy street, the situation has to be right for a buyer to get involved.
The buyer needs to be enticed, or have a reason, and that reason is always the same: price.
The buyer/renovator/speculator for this property clearly ignored the first three tenets of real estate: location, location, location.
They probably looked at what houses are selling for in the area, and thought, “Wow! We can get that run-down tripled for $872,000, renovate it, and put it out for a-million-and-a-quarter!”
But they didn’t realize that there’s a massive discount for the busy street, and that was the fatal flaw that will end up costing them money (not to mention a year of work, plus the opportunity cost of potentially working on a project that did make money), if and when they accept market value for the property, and let it go.
So for my blog reader, who is watching this farce of a listing, and wondering about her own options, what should she think?
Well for starters, consider this the worst case scenario, and even then, the scenario is probably a lot worse than anything she would encounter.
Unless she’s got:
a) a poorly finished house
b) cheap finishes
c) a crappy agent (actually three…)
d) a habit of over-pricing
Then I think she’s going to do better…
Having said that, she still has to recognize that any potential sale of her home won’t be as easy as any sale around the corner on a quieter street, and the listing would have to be perfect.
There would be no mistakes, and no cutting corners, like the crappy property next door.
Timing, pricing, staging, marketing – I’ve always said those four points are the foundation of a solid listing, and they would have to be executed perfectly.
You’d have to acknowledge right off the bat that the buyer pool for a property on a busy street would be thin – maybe 25% of the buyer pool for the house around the corner on a quiet street.
So from there, what strategy do you take?
Do you price low, hold-back offers, and hope for multiples like most sellers do?
Or do you price at fair market value, and wait for the “right” buyer?
I think I’d recommend the second option.
The first is far too risky, and you don’t want to be the person who puts their house out at $999,000, holds back offers, then re-lists at $1,149,000. Kind of like what the folks next door did…
Having said all this, my blog reader/emailer still has to make up her mind if moving is even worth it. There’s a huge cost to moving, although if she and her husband are going to be in the new house for another ten years, then it would probably appreciate at double the rate of the old house. Over ten years, that might make up a lot of acquisition cost of the new property, and make the whole venture worthwhile.
Imagine driving down Mount Pleasant Avenue and seeing somebody in one of the 3-4 houses on the whole block, trying to back out of their driveway at 5:30pm on a weekday, and the person in the car with you says, “I would never live there, under any circumstances.”
You would though – at the right price.
What is that price?
It’s different for everybody, and perhaps that’s what makes pricing a house on a busy street so difficult…
Anita merlo
at 7:18 am
Great article David. The big issue is that the Sellers were either misled or plain greedy. The house was purchased in 2013. Expecting a gain of $150,000 in less than a year, wether the rents are cheaply done or not is unrealalistic. Yes the market has been increasing but not at almost 20% I from the summer of 2013 to the spring of 2014.
Multiple offer “strategies” only work in prime areas and on prime streets, or it would have to be priced really, really low. I have no sympathy for this Seller that reached out to you. They have chosen 3 different agents that only have told them what they wish to hear. That is what is sounds like to me.
Jewel
at 9:52 am
Read the article. The person that reached out to David wasn’t the seller. It was someone else living on the street that had been following the listing.
Anita merlo
at 6:34 pm
Jewel it makes no difference if the person asking about the listed home was not the seller. My point about the Seller does not change. They have been selecting agents that will only tell them want they want to hear.
Joe Q.
at 10:00 am
David writes: ““Davisville Village,” which is a name contrived by real estate agents in the early 2000′s ”
This could be a topic for a future blog post… which neighbourhood names in Toronto are real, and which are contrived?
Kyle
at 5:19 pm
I think a big part of it is psychological and a lot of it comes down to curb appeal. I think people are actually more fussed by the number of lanes, speed of traffic. lack of trees and the presence of traffic lights, than the actual volume of cars. In many upscale neighbourhoods, there are “busy” streets, but because they don’t look like a main thoroughfare, they don’t seem to have much if any price discount relative to the streets around them. Some examples that come to mind are Heath St, The Kingsway, Indian Rd, Crescent Rd, South Dr, Glen Rd, Logan Ave, etc. Widen any of these streets and throw up a few traffic lights, and watch their house values drop compared to the houses on side streets, sort of like on Oriole Parkway.
jeff316
at 7:31 pm
Yeah the Heath to Oriole comparison is really good. Heath is a really busy street but being only two lanes really helps mask that perception.
Appraiser
at 8:50 am
Reading this article regarding location adjustments put me in mind of what is known in my field as: Paired Sales Analysis.
An appraisal technique used to find the value of one particular attribute. The appraiser locates two sales where the only difference is the attribute being appraised; the difference in value is considered to be the value of the attribute.
It’s a nice theory, but it is often difficult to apply practically in most cases. Why? Well how likely is it that one could locate two identical properties, save one single attribute, which happens to be the attribute that one is trying to adjust for? And even if you did, does that “prove” the value of the attribute? Wouldn’t proper scientific theory dictate that the result must be duplicated, perhaps many times before a definitive conclusion could be drawn? Good luck with that.
Ah, the difficulties and challenges of determining value.
Joe Q.
at 11:28 am
Made even more difficult when the attribute in question can’t be quantified or otherwise represented numerically, as is likely common.
Appraiser
at 11:41 am
@Joe Q. To clarify, if two identical properties sold except that one was on a busy street and the difference in sale price was $50,000, then that is how the attribute is quantified. In theory.
Joe Q.
at 2:39 pm
I understand your point Appraiser, I am thinking about quantifying the attribute (rather than valuing it) — in cases where the attribute doesn’t have a binary (yes / no) property.
There are different degrees of street “busy-ness”, of reno quality, lot size or garage size, etc. that I would imagine, at some point, you would want to assign a number to — and those numbers may be hard or impossible to determine in many cases. E.g. two otherwise identical homes sell, both of which have renovated basements, only the quality or extent of the basement reno differs between them — you would need a way to evaluate or “score” the reno in order to make appraisals in the future.
Appraiser
at 3:16 pm
@Joe Q. It must be remembered that I am referring specifically to “paired sales analysis,” which assumes that the appraiser is examining two sold properties that are otherwise identical except for a given attribute. In the example you have provided involving two properties with finished basements but one property’s basement is superior, then the difference in sale price between the two properties determines the value of the superior basement. Again, in theory.
Wut
at 7:40 pm
It is possible if you consider new homes with lot premiums a large enough sample to gauge resale by. A cul de sac often goes for 50-80k more, and the main reason someone wants that lot is to have a quiet street. Otherwise the house is identical, and the only real difference could be the lot size, although usually it isn’t much different other than some have a shorter pie sized back yard.
These lots always go first, so I’d consider those prices a minimum of the value people give that attribute. I know when I house shopped a busy street was not even an option.
Kyle
at 11:41 am
Your blog readermight have to think outside the box a bit. As an end user residential option houses on major streets will likely under-perform similar houses on side streets, but as a commercial property or income property i think it’s possible for it to actually have a higher value than similar houses on side streets. Sort of like how some of the old Victorians converted to Commerical use in Kensington Market have a higher value than similar Victorian SFHs in the neighbourhood. Assuming her street really is major and she has zoning that allows for other uses, it might be worth exploring what she could get if she listed on ICX with a Commercial Specialist first.
Roger Perry
at 1:09 pm
Nice article as for me. It would be great to read more concerning that topic. Thnx for sharing this info.
Alex
at 4:14 pm
Well we just pulled our Victorian off the market.Terrible experience which cost us valuable time.Combination of an absentee agent,poor marketing and some issues raised during a home inspection.We are also on a busy street (considered a minor arterial road by the City) but traffic has increased dramatically.Upside is great TTC access 24/7.
This agent-a Broker as well (which I thought would be a bonus) just seemed to think it would sell without putting much effort into it.In almost 2 months I did not see any proof of ads supposedly run (despite promises ),spelling mistakes in the MLS listing and brochures-which I brought to her attention immediately, but she never corrected.Wrong room sizes ( listed much smaller than they are)We actually ended up doing the measurements ourselves.Her excuse was’ no one looks at that anyway’!Really? I know I do.
Our rationale about buying was that it is on a huge 1/4 acre lot-plenty of play space for our kids.Also it was a real fixer upper so we got a good price. We have thought about getting it zoned Commercial (but I’m told it is a lengthy process and costs $3500 non refundable if the City refuses to grant commercial designation).We are considering selling privately in the Spring. The commission she would have earned was $33,000.Definitely not worth it.Someone joked I should take a real estate course and sell it myself and still pocket over $25,000.
This would have been our second home sold with a terrible real estate sale person experience. That one resulted in him forging our initials on the sales agreement (to approve of termite treatment which we did not agree to.It was in the Beaches-but we had no termite problems),charging 5% commission instead of 1%, jumping up in the middle of a bidding war to say ‘sold’ before the buyers agent had even given his final offer, etc…. Nightmare.Where is an agent with integrity these days???
anita merlo
at 5:45 pm
Its unfortunate Alex that you had a bad experience.
I do hear that often. However there are plenty
of professional agents that are worth every penny they earn.
Ark
at 11:17 am
Houses on the corner of Sheppard/Bayview are sold for 6M each, two blocks in those houses wouldn’t even worth half the price.