‘HGTV Effect’ warping buyers’ expectations, real estate agents say
They lament the major focus put on renovations, decor
When Toronto real estate agent Derek Ladouceur walks into a home with first-time buyers, he tries to get them to look past the cosmetic features.
“We get so hung up on stuff like stainless steel appliances,” Ladouceur says, recalling a couple who became fixated on a home because of its shiny, fresh-looking kitchen.
“Some buyers are kind of tricked into certain things. It’s the role of the real estate agent to talk them through the pros and cons of the things they’re seeing and make them aware that, yes, it’s a stainless steel fridge but that stainless steel fridge costs just as much as a white fridge.” Dubbed the “HGTV Effect” by some agents after the television channel that focuses on home improvement shows, a growing number of buyers are splurging on homes simply because they’re decked out with granite countertops, stainless steel appliances and a fresh coat of a trendy paint colour.
“The influence of all of these television shows has really hit the mainstream buyer,” says Desmond Brown, another Toronto agent. “They want what they see on television.”
Brown says spending as little as $20,000 to $30,000 to renovate a kitchen or finish a basement, and hiring a stager to remove clutter, replace light fixtures and lighten up the walls, can boost a home’s sale price by as much as $150,000 in Toronto’s real estate market.
But millennial homebuyers are more interested in buying the finished product than a house that needs work — even if it means paying a premium for it.
“There’s no delayed gratification for this generation,” says Brown. “They want it now. A lot of them can’t see the potential of a home.”
Ara Mamourian of Spring Realty Inc. says sky-high home prices and the availability of cheap credit are partially to blame.
“Right now, prices are so high in Toronto that buyers can’t afford any renovations,” Mamourian said.
“But what they can afford is a bigger mortgage. So if they see something that’s completely finished and ready to go and it looks fantastic and it sparkles, they’ll pay all kinds of money for it.”
The combination of the red-hot spring market and a growing fixation on cosmetic touches is also boosting business for Toronto’s home-staging companies.
“This spring is absolutely crazy,” said Ella Zetser, whose company the Last Detail Home Staging, has prepared more than 3,000 homes since its inception a decade ago.
“The market is just booming. We’ve never, in the whole time we’ve been staging, been this busy.”
Although it varies depending on the home, Zetser says an average staging job by The Last Detail costs an average of $3,500. In order to win over clients, some agents are paying for staging out of their commission fees.
“There are 60,000 agents in the city of Toronto,” says Ladouceur. “The only way to separate yourself is by offering services that other people are not offering.”
The popularity of home renovation shows has also given some buyers the mistaken notion that it’s easy to “make a quick buck” flipping homes, says Mamourian — often with disastrous consequences.
“All of these DIY-oriented shows make it look so easy,” he says.
However, the professionals renovating homes on television have a host of resources that amateurs don’t have access to, such as cheap labour and wholesale prices for materials, Mamourian says.
“Buyers are going into homes that need work and they’re underestimating the cost and the amount of time it takes to do the work, because they’ve seen a one-hour show where the whole house gets flipped, and they feel as if they could do that too.”
Another challenge, at least in Toronto, is that even fixer-uppers are selling for record-high prices, leaving virtually no margin for renovators.
“A rookie investor will bid on a house, get it for a crazy amount of money, spend an unbelievable amount of money renovating it and then list it for way too much and it doesn’t sell,” Mamourian said.
“Then they just reduce it down to the point where somebody finally buys it and they lose everything they’ve put into it.”