When is the best time to sell your house?

by John Rice

I’m seeing a lot of buzz lately saying right around now is the best time of year to sell your house. Many realtors post these articles. I can’t blame them. We are always saying “Now” is a good time to do anything, lol.

I am in now way doubting the statistics. Numbers don’t like. The problem though is knowing what they mean.

Fact: There are more buyers out in the market in the spring. It’s always been this way so I don’t see the newsworthiness of it.

Fact: The likelihood of your house selling for top dollar is less dependent on when you list than it is on the condition of your house and how it fits in the market…..meaning, how do buyers rank your house compared to what is currently available to them in terms of condition, price, floor plan, lot and location.

I have sold plenty of houses in multiple offers the very first day on the market back in 2008-2010. That was when it was an extreme Buyer’s Market.

It is a simple formula really.

You do some prep work. Fix anything that is going to keep a buyer from saying yes to your house. You want them to leave their showing with a positive emotional response. If there is work to be done on your house, they leave with a logical response. They are thinking about what they need to do to your house and how much it is going to cost. If they even make an offer, it will be less since they are deducting the cost of those repairs. So, leave them with nothing to do but fall in love.

Price it right. I don’t mean use what zillow, a recent appraisal or an AVM says the house is worth. Do some real research. See what has recently sold in your neighborhood. See what is pending in your neighborhood. Pending sales, while you don’t know the actually sale price until it closes, can tell you what buyers are doing in real time.

The last step is the most important one. You see what other choices a buyer has maybe 15% below and 15% higher than the value of your house. Then you price your house so it is clearly one of their top choices. Why? Because after 19 years in this business, the one biggest thing I have learned is that every buyer wants the best house they can get for their budget. As long as you have one of those houses, it will sell quickly for top dollar in any market and in any time of the year.

How to get $65k for a down payment

by John Rice

The starter home.

It was that first home that you really were not all that exciting about living in. Yeah, you were coming out of an apartment so it seemed liked a luxury to park in your own driveway or maybe have your own washer and dryer. But it was a place you knew you wouldn’t stay in forever. The goal was to get on what we used to call “The Property Ladder” just to start building equity. Then you’d take that equity with you to your next home, which was nicer and had more of what you really wanted.

The trend I’ve noticed lately is most first time buyers want to start off with their second home. They can’t afford it now, which is the problem. Most would rather complain about how past generations had it better than to buy a house they don’t really love, so they keep renting……as if we somehow loved living in a 1000 square foot home with only one bathroom. We didn’t, trust me!

I don’t think many of them see that the way to get to the house they really want is to start with what you can afford and build the equity. Equity is a pleasant sounding word that means your home increases in value while you sleep and part of your payment goes towards reducing the balance on the loan. Building equity is what my dad used to call “Leveraging time.” If you are young, leverage the time of your youth by building equity.

If you were to buy a boring $250k house and commit to staying there for 5 years, you would have paid down about $15k of the loan. Nice, but there is more. Let’s say your $250k house appreciates at 5% per year for each of those 5 years you are staying. Your house should be worth about $320k. At the end of those 5 years, you only owe about $235k. When you go to buy that next house, the one you really are excited to own, you’ll have about $65k to put down on it after things like some maintenance and real estate commissions.

What I love about this is that you are double dipping in the world of money. Your loan balance goes down and the value of your home goes up every month. Win-Win.

Getting a starter home is how you get to the house you really want within 5 years. Renting won’t get you there. Saving money for a larger down payment won’t get you there. Go buy a house you can afford today. Find the best one there is. Live there for 5 years. It’s what every generation did that now seems to have such nice homes.

Winners & Losers of the NAR Settlement (Plus what I think about it)

by John Rice

Let’s get this out of the way first thing. Contrary to what the media and even President Biden has said after waking up from what looked like a great nap, real estate commissions have ALWAYS been negotiable.

Don’t believe the things you are reading in the media. Remember, their goal is to sensationalize news so you will read their article. The journalists assigned the task of telling you about changes in the real estate industry know little about it. They are only experts on the english language and shouldn’t postulate on much beyond that.

Okay, let’s begin with a brief history of how we coupled the commission for both the Listing Realtor and the Buyer’s Realtor.

Back in the olden days, you as a seller would hire a real estate agent to sell your house. They were tasked with finding you a buyer. They didn’t just put it on the market and wait for a buyer’s agent to show it like today. They had to literally procure a buyer for you. I don’t know who is responsible for this revelation, but somebody along the way figured out that some real estate agents had people wanting to buy a house. Just like the old Reese Cup commercials where somebody eating peanut butter crashed into somebody eating chocolate, it was discovered that the process of selling a house went faster if the agent with the house split the commission they charged with the agent who had the buyer. Voila! (Did you see what I said there? The entire commission was paid from the seller to the listing agent. It was the listing agent who agreed to split the commission THEY CHARGED with the buyer’s agent. It was NEVER the seller paying the buyer’s agent commission. It was the listing agent paying the buyer’s agent.)

Over time, this stuck. Early on, BOTH realtors worked for the seller. Even though the agent working with the buyer was helping the buyer, they owed loyalty and a fiduciary duty to the seller. Eventually that changed where we had laws to protect buyers which meant the buyer’s agent only represented the interests of the buyer. To make things easy for all, the MLS (Multi-listing Service) came into existence. We created policies and procedures to create transparency and order to the business of selling houses. One of which was to offer a commission to ANY realtor who produced the buyer for a listing. This was great because it meant the buyer’s agent knew what commission amount the listing agent was willing to offer should their buyer end up purchasing the place. While 3% in my market was the most common offered, there has always been offerings of 2%, 2.5% and even some fixed amounts.

Like all things, nothing last forever. This NAR Settlement is separating the buyer’s agent commission from that of the listing agent’s commission. We will no longer be able to post the commission amount on the MLS. That is really all that has changed.

I will point out that this is not a market driven decision. I don’t think anybody was really complaining about how the process worked. The public didn’t really understand the old way of doing things and I don’t think they will take the time to figure the new method out either. All they know is that it cost money to sell their house just as it costs money to do anything. If you are remodeling your kitchen, do you care that you are only paying your contractor who has separate deals worked out for each of the subcontractors? Why do you pay your contractor this way? Because it is easier for you and you are paying the only person you actually hired. Imagine if instead of paying just the contractor the whole amount, you paid him less but also then had to write checks to the plumber, electrician, cabinet contractor, and countertop person who worked on your house. Do you think it would be cheaper? No, it would be the same total, only you’d be writing more checks.

While I think the next year or so may be choatic, I do not think this will change all that much. We will see if I am wrong. Right now, there is a lack of organization because large brokerages, the NAR and local realtor associations are too afraid to say anything. I think they will try to leave it up to us to figure out. Currently, everybody is trying to figure out a way to benefit from the settlement. Zillow sent out an email saying they are here for us realtors. It wouldn’t surprise me if they are working on a way of creating what is effectively their own MLS. Many agents who expect a mass exodus of agents are working on setting up referrals so departing agents can still make a little money by sending their clients to active agents.

While I am sure average commission amounts might drop slightly, I don’t see that much of a change. Just like that kitchen remodel I mentioned above. In a great economy where there is a lot of work, prices are at the highest. When the economy is bad, your kitchen contractor isn’t going to work for half price. Sure, they will give you their best price. but they won’t take on the job if they can’t make a living.

One of the biggest reasons why I feel it won’t change much is because in every email I have gotten from NAR and my MLS, we have been reminded that while we cannot post an offered commission on the MLS soon, we can post a seller concession. I suspect that the commission will become similar to the way the Master Bedroom became the Primary Bedroom. It’s just a name change. The seller concession will be offered to allow buyer’s to pay their own agent. The amounts may change but the end result is unfazed. So what this might look like is that the listing agent charges a certain commission percentage and the seller offers a certain percentage as a concession to the buyer.

I am sure there will be lots of sellers who will offer no commission to the buyer’s. I am sure there will be agents who will work with these sellers. I also am sure that given enough time, both will realize that it is good to offer a commission/concession to the buyer so their agent gets paid. Why? The goal is to sell the house. How much money did you save if your house didn’t sell? Buyers want their own agent to help them make decisions and navigate the process. If no buyer’s agent can make even a penny from the sale, they simply won’t do it. Then who does the buyer’s agent tasks fall upon? The listing agent. I think in time, the listing agent will want more than their usual commission to do twice the work, which isn’t saving the seller anything.

So, let’s look at who are the Winners and Losers of the settlement:

Biggest winner: The lawyers of Cohen Milstein. Guessing they will get the usual 25-33% of the settlement. I wonder why nobody has ever filed a class action lawsuit against lawyers? They all seem to take the same percentage of a settlement or judgement. Sounds like collusion to me?????

Biggest loser: The National Association of Realtors. I don’t mean loser in the sense of they lost. I meant it more as a pronoun. They let us down. Regardless of whether anybody thinks real estate commissions are too high or not, the fact is that commissions have always been negotiable. They did a poor job of proving that and they are currently doing a pathetic job of helping realtors figure out how to help our sellers and buyers during this crazy time.

Let me add that if the NAR and local realtor associations are not going to help us right now, I see no need for their existence. I can post my listings on zillow, I can get documents from the Kentucky Real Estate Commission and I am sure I can figure out how to keep my lockboxes working. Provide leadership or you become as useful to us as Conferderate era coins.

Winner: Sellers. Not because of anything having to do with the settlement. Sellers have been winning the real estate game for years due to a shortage of houses for sale. Do remember though that nothing lasts forever. I have been in this business for so long that I remember sellers offering bonuses and even as much as 4% commission to the buyer’s agent. See, commissions have always been negotiable…..not everybody realizes that in a bad market the commission could go higher!

Loser: Buyers. You have been thrown under the bus. If you think you might be able to get a house for cheaper now, you will be surprised. You will not. If a seller has a $400k house, they are not going to list it for 97% of that because they want you to benefit. No, they will still sell it for $400k. How do I know? I have worked with several For Sale By Owners over the years. None have offered to sell for less since there is only one realtor to pay.

Loser: Realtors. We now have to figure out how to work for our clients without any organization or direction. We can’t discuss anything in a group or it is considered collusion.

I am anxious to see how all this goes. My predictions may be right. They may be wrong. I am sure I will be blogging about this in the near future as it develops.

Know this though. Regardless of what, it anything, changes. I am still here for my friends and clients. I only work with 3 group of people: Those who are past clients, those who have been referred to me by past clients and friends, and those who find this blog. I’m not really worried how I get paid or how much. If I really wanted to, I could liquidate a few assets and comfortably retire. This month marks my 19th year as a realtor. I plan to keep doing it as long as you all need me.

Don’t be afraid. Just do it.

by John Rice

There is a lot of fear involved in real estate.

Fear of missing out. Fear of making the wrong decision. Fear of financial ruin. Fear of even making such a huge decision.

I see it every day.

One of the most common questions I get asked by those who are afraid of missing out or making the wrong decision is if it is a good time to buy.

I usually tell people that it is always a good time to buy if you are ready. The prices and interest rates of the past are gone. Nostalgia. The present is all you have to work with. Yesterday will always have been the best time to buy a house. Today is the second best. If you are not going to stretch yourself too far financially and you are 99% sure you will be in the house for 5 or more years, then today is when you need to buy a house. The sooner you get one, the sooner you can start building equity. The sooner it will be paid off too. The market can’t be timed. Other than the great recession, prices have historically always gone up. Trust me, one day in the distant future you will be telling young people how it was a struggle to make the $3500 payment on that $500k house you bought. They will be like “Wow, that’s what my cell phone bill is!”

Another thing I see all the time is fear of picking the wrong house. Often first time buyers or those who struggle with making a decision will want to keep looking at houses, almost as a way of not having to make a decision.

Here are some signs you might have found the perfect home for you:

  1. Your showing lasts longer than any other house you have seen. A house you are in and out of in 5 minutes is not the one. The house where the realtor is standing beside the front door after turning off all the lights and you still don’t want to leave…..well, that might be the one.
  2. You are comparing every other house you see to one, which is usually the house you didn’t want to leave in item #1.
  3. You are afraid of somebody else buying it out from under you.

When any/all of the above items happen, you’ve found your house.

I hope this helps somebody out there. I know fear is a hard thing to get past, but it is so worth it. I try to keep things simple. Really it’s all about finding a house you like, that will be a good investment and that you can afford. That’s it!

Guess how long I’ve been a Realtor

by John Rice

N I N E T E E N

Y E A R S

That’s how long I’ve been a realtor. March 2005. It’s kind of hard for me to believe. One day I’m the new kid in town fresh with enthusiasm. Then all the sudden all this time passes. Now I’m the old dude with all the wisdom and experience that one only gains with time.

I was going to write about all the changes in real estate over the course of my career. I was going to say that while there have been changes in execution, pretty much everything is still the same. I even had some analogy about how whether you had a YETI or a Stanley Cup, what you put inside is the same and they both serve the same purpose.

But I will skip all that. Maybe next year.

So what am I going to say in this post? I am going to talk about how it feels having been a realtor for this long.

It’s been a great ride overall. Remember, I was the kid who was reading the real estate section of the Sunday newspaper. I would skip school once I got my driver’s license and cruise around neighborhoods looking at houses. I had no idea that one day I would be able to check out the inside of some of the houses that caught my eye.

I also had no idea the success this would bring. Pretty much everybody I told I was going into real estate said “Oh, you’ll do great at that!” I had no idea what they meant but I appreciated the encouragement. I had no idea that I would become one of the top producing realtors when at my peak. It was a lot of fun to reach that level. LOL, I don’t know if I want to do that again though. It was so much stress. I am much happier now and think I am a better realtor only being up to my shoulders with work instead of drowning in it.

Another feeling I have is gratitude. I am smart enough to realize none of this would have happened without my family, friends and clients.

My wife would keep dinner warm on the stove all those nights I had to work. Often I would have paperwork to do and she would bring a plate up to my office. I would not have been able to have gotten into real estate if she didn’t have a good job that covered all our expenses those early years.

My parents always encouraged me to do whatever I wanted to do. They also would watch my two sons when I had to rush out to show a house…..although, haha, they benefited as much from that as I did. My dad used to be an attorney. He’s probably given me a million dollars of legal advice for free.

Then there are my friends. Many of them would watch my sons too when I had to work. Many of them trusted me for their real estate needs when I was a newbie. A lot of them sent their friends, co-workers or family to me.

And my clients. Many of you have become friends. Ultimately I have you to thank because without you, none of this would have come to fruition.

I don’t think I have done anything to deserve all the wonderful things that have happened to me over my career. That’s probably what is the most humbling part of it all……that I am blessed by the goodness of others and not as a result of anything I have done.

And I am not done yet. Here’s to another 19 years!