Month: January 2011

What Does it Take to Sell a House These days??

by John Rice

I really think the toughest part of being a realtor is keeping up with the market.  No, I don’t really mean knowing all the statistics, average days on market, etc………Those things are about the recent past.  What I mean is what is happening right now and what am I going to do in response.

 Here are a few observations of mine since the tax credits expired:

1)  Everybody wants to buy a house for LESS than what the recent sold comps show the value of a house to be.  Even as recently as 6 months ago, buyers were satisfied to pay anywhere in the range of value that the comps supported.  Now, they want it under the lowest number in that range.  I recently had an offer where the buyer’s agent and I both agreed that the house was worth $125-130k.  The buyer wouldn’t come up past $123k.  I mean, here she has her own realtor telling her the house is worth at least $125k??? (Of course, if they start getting these prices, it will be the new market value.)

2)  Buyers are the pickiest they have ever been.  I don’t mean this in a bad way…..just stating a fact.  With all the staging that has taken place over the past few years, buyers have gotten use to seeing some eye candy when they come to see a house.  They don’t want to do anything either.  Has to  be move-in ready or else they start subtracting dollars off the asking price.  I think some of that is just that buyer’s want to preserve any cash they have these days, so they no longer seem willing to do things like finish a basement, remodel anything, or replace flooring.

3)  The low ball offer is the new norm.  Even if a buyer is planning on paying a fair price, they all want to feel the seller out for his lowest number.  I tell sellers just to expect it these days and try to dance with the buyer until the music stops…..sometimes they will come up to a fair price.

What is a seller to do about all this?  Well, as always, I am encouraging my sellers to price their house right, but also to make any improvements needed to get somebody to fall in love with their house.  Sure, I’ve always been big on getting the house ready to sell….making minor tweaks to make it show better.  But now, I am encouraging my folks to paint, replace any worn flooring, update anything that needs updating, etc.  Why go through all that?  Because……….if you can get a buyer to have an emotional reaction to your house, they lose some power in the deal.  If you can make your house the best one in its price range/neighborhood, I mean make it where they hear angels singing when they open the door, they really want your house.  At that point they quit thinking logically and start making decisions with their feelings……and THAT is THE best way to overcome the 3 items above that you just read.

Lexington Ky Neighborhood Video Tour by The LEXpert: Waterford

by John Rice

What a dreary day to do a video tour.  I hate to do them this time of year since the sky is gray and the leaves are off the trees…..plus it is awful cold for a guy who is still wearing sandals.

I went to a great neighborhood called Waterford.  It is in south Lexington.  I remember when this place was new.  It was pretty then and has aged well.  I think one of the best things about this neighborhood is the gently rolling terrain and the views of wooded areas with the two ponds at the main entrance.  You just don’t get that kind of inspiring stuff in most of Lex.

Okay, there are 354 houses in Waterford according to the PVA.  Most are between 10 and 17 years old.  The schools are Southern Elementary, Southern Middle, and Tates Creek High.  Nobody ever searches for a house that goes to these schools, but nobody ever avoids them either.

What is unique?  Many good sized lots.  Close to a 250+ acre city park called Veteran’s Park.  Close to all the retail/commercial on Nicholasville Road.  The HOA now owns the clubhouse that has a pool with a very active swim team named the Waverunners.

Prices range from around $200k to about $300k and are from 2000 square feet with no basements to close to 4000 square feet with finished basements.  I’ve been in a lot of these….many seem to be ready to update, but I have seen several that have been tastefully updated.

The video focused mainly on the older, original section of Waterford.  It use to be clear where the boundaries were, but since they added a new section of both Waterford and neighboring Southpoint, plus built a neighborhood called Pinnacle in the middle, it all kind of blends together back there!  Some of the newer section of Waterford goes to Veteran’s Park Elementary.  That is a really desirable school.  All of Waterford use to be in Veteran’s Park.  In the days of the booming real estate market, many people would move to Waterford just to get into that school, then move somewhere that had an awesome middle school.

The roads I was on were:  Watertrace, Shorewater, Streamwater, Creekwater, Bridgemont, Clearwater, Ridgewater, Woodstream,  Clearwater, Waterstone, Rainwater, Springwater, Brookwater and Whitewater.

Check out the video 🙂

How Can a House Not Sell at $325k with a Recent Appraisal for $410k??

by John Rice

Being a Realtor and all, I am always in the mood to move.  Not so much so with my wife.  We went out Saturday to see a house that I really liked, and suspected that she would too.  Guess I know her pretty well because now she is kind of in the mood to move too.

That had me coming home, pulling some comps, and trying to see what I thought the place was really worth.  This is where it gets kind of interesting.  See, it is owned by a relocation company.  The prior seller got transferred, and the “Relo” company bought it from them.  The Relo company had two appraisals done, one came in at $390k and the other at $410k.  So they met in the middle and gave the very lucky seller $400k for the house.  Problem is, it never was a $400k house.  The price has been reduced and reduced, and is now at $325k.  How do I know it wasn’t a $400k house?  I have had 3 clients this year who have looked in that neighborhood and I have been in just about everything for sale out there.  This one is no match for those.

I guess this is really about me running the comps and the contrast of market value to appraised value.  Appraised value is purely science.  They cut and paste values mainly for features and size.  Market Value is about what somebody will pay for it.  It is based on decisions a buyer makes about things they like/dislike about the house.  This house has the garage in the basement.  To an appraiser, it has the same 2 car garage as any other house, and he deducts a value per square footage since there is less space in the rest of basement.  To most buyers, they don’t want a basement in the garage.  This house also has no pantry and has the washer and dryer in a closet in the kitchen.  Both of those are deal killers for a lot of buyers, but don’t even get mentioned on an appraisal.  Starting to see how market value differs from appraised value?  I don’t mean to knock appraisers, but I would love to have asked these two what they would have paid for this house…..especially the guy that pegged it at $410k.   Maybe I should buy it and sell it to him!

Okay….I’m running the comps.  There are a lot of similar sized houses that have sold for much more than this one.  Not really good since those were updated.  I find two that are similar in size and still look like the set from “Knot’s Landing” inside.  A house that hasn’t been updated doesn’t need to be comped to one that has.   The less adjustments you have to make when looking at comps the more realistic a number you’ll end up with.

Now I am into the gut-feeling part of the comps.  My house only has hardwood in the dining room and foyer.  One of the comps had hardwood throughout the main level.  What I usually do is deduct the cost of making it equal from the sold comp.  Then there is that kitchen with no pantry and a washer/dryer closet!  I need to figure out what I think most people would want knocked off for those items.  I am thinking in this price range, that is a pretty big thing to try to look past.   If two houses were side by side and identical except for laundry/pantry facilities, how much less would you want to pay for the one that didn’t have a laundry room?  I’m thinking $4-5k in this price range.  Then there is the difference of kitchen layout.  The color of the cabinets.  It just really goes on and on with these little things that really do make a difference in value to a buyer. 

There you have it.  Now you know a little more about how a realtor goes about comping a house he might make an offer on.  The good thing about me is that I do the exact same thing for my people when we get ready to write an offer.  I always giggle a little inside when people ask me what I think the house they want to buy is worth.  I really wish I could just spit out a number for them, but I always tell them to let me look at the comps.   I did it for myself too!

How NOT to Spend a Homeless Week with Your Stuff in Storage AND Lose Money

by John Rice

Want to know what really causes most nightmares and drama in a real estate deal these days?  Sure, negotiating a contract can be rough.  Getting past the inspection can be a chore too…..but both parties usually seem to work through it or part ways.   What REALLY gets people worked up is when you can’t close on time, and that is usually due to the loan officer.

I had a closing yesterday.  All the parties were told we were closing at the end of last week, then the following Monday, then Wednesday, then finally, it happened Thursday.  The buyer had packed everything up and moved out of their apartment.  They had to pay to store their possessions.  They also couldn’t register their kids in Fayette County Public Schools until they had an address here.  Their kids didn’t go to school this week.  My clients, the sellers, moved out of their house a week early. I was even a little freaked since I didn’t know if something was wrong and they were just trying to buy time.  To make matters worse, the seller agreed to pay $3500 in the buyer’s closing costs, but the loan officer only used about $2900 of it.  My clients were happy though since the remaining money ended up in their pocket.

Now, I know most loan officers are caught in the middle.  They have to collect all the docs and info from the buyer and then present it in a way that looks pretty to the underwriters.  They often don’t have any real control over how long it takes the buyer to get them the docs any more than they have control over when an underwriter will get around to dealing with it.   But what they should be able to do is see a problem coming, have a back up plan, get an idea of how long it will take, and solve the problem.

Some of them are a bad combination of greedy and lazy.  I recently had a doctor client who was getting a special physician’s loan from an out-of-state company.  We were having the seller pay the closing costs.  I called the loan officer, who told me to ask for 3% of the loan amount.  I kind of made her mad  because I told her that wasn’t gonna fly with me.  She needed to sit down and calculate exactly what it was going to be…..especially since I knew the closing costs and pre-paid items would NOT have exceeded the almost $15k that the 3% would have been.  See, if we asked for 3%, she would have used it all.  She also didn’t want to give my client a Good Faith Estimate (GFE) until we agreed to that percentage since they now aren’t allowed to make big changes from the estimate.  Had we rolled with her plan, she would have had a big budget to work with.  She either would have built all that money into her fees or any excess would have ended up in the seller’s pocket.  I forgot the exact amount, but she ended up “Waiving” her origination fee….think it was $5-6k that my client saved.

I know a lot of people think the only difference between loan officers is what they charge.  Not true.  Sometimes the main difference is between one that gets the job done on time and with no drama versus one that pretty much ruins your life for several days right at the exact time you don’t want to deal with one more problem. 

Not trying to turn my blog into a commercial here, but I always ask my clients to entertain the idea of talking to a loan officer who has impressed me a lot.  Sometimes they do.  Sometimes they don’t.  Dude’s name is Kris Vanzant with Stockton Mortgage.  I met him a couple years ago when my old loan officer got out of the biz.  I gave him a shot and now after 20+ loans, I still think he is the best in town.  I used him myself when I refi’d my house.  I didn’t ask for any special deal nor did he offer me one.  I can’t be having people think I recommend him because I get something in return.  All I usually get is the same box of chocolate that he probably gives every other realtor at Christmas time.    He really knows how to solve problems and stick to a timeline.  On a few occasions, he’s done some complicated deals for my clients.  He always seems to have multiple back up plans and can quote lending guide lines that I bet most other Loan Officers don’t even know exist.  His brother, Jeff Vanzant, owns Clear Title and has done several closings for me.  Jeff first got on my radar when I started to notice that  he would always have the settlement statement correct and ready for review before the closing.  Most of the time, you either get it early and it is wrong, or you walk into the closing with nobody knowing what they owe, how much they are getting, if the termite inspection or home warranty actually made it onto the thing, etc.   A good closing is one where there are no errors to correct and no issues to resolve.  For Pete’s sake, all you’re really there to do is sign your name and either walk out with a check or keys to a house.  Now, I have to disclose that I have become friends with these guys.  That just happens when you work together so much.

So, my advice is to use a loan officer you know something about.  Ask your realtor, ask friends…..just don’t go with somebody you know nothing about, even if they entice you with a looooow price.  Remember the buyer for yesterday’s closing?  She lost about $600 in the closing cost fiasco, paid to store her stuff and lost vacation time from taking off work for all the days we didn’t close.   If you’re friends with her, I can tell ya, she isn’t going to recommend that person to anybody.