Month: September 2011

Playing “Bang for Your Buck” & it took longer than 30 minutes!

by John Rice

Ever watch that show on HGTV called Bang for Your Buck?  Let me let you in on a secret…..the winning house is ALWAYS going to be in a neighborhood that will best absorb the amount of money invested on whatever the improvement was.

I recently had a chance to play “Bang for Your Buck” with a client, only they were wanting to pick the house that had the best change to have been the winner.  They narrowed down their short list to about 8 houses.  I ran the comps, took what I knew about the neighborhoods and the market, and told them which ones would be the best bet to get back the $20-30k they want to spend on improvements.  Of the eight houses, most were at or near the top of the range for their neighborhood.  That never works for getting anything back on your improvement dollars.  If the range for the neighborhood is $150-200k, you can spend a million bucks on a house, but you aren’t going to get much more than $200k for it.  See, once you over-improve a house, you end up making buyers pick between the best house in an inferior neighborhood or an average house in a superior neighborhood…….and sometimes those people have a realtor like me who will tell them they can improve any house, but they can’t do a ding dang thing to change the whole neighborhood!

So, my folks picked a house in the lower end of a neighborhood that ranges from $200k up to well over $500k.  That should give them the room they need in the value range to get back most or all of the money they spend.  It is also in an area where it is the preferred neighborhood due to character and school district.  You’ve got to consider what other neighborhoods any future buyers may also consider.   We ruled out several good houses just because there were so many similar neighborhoods all in the same part of town.  In fact, we saw about 10 houses that were all pretty much the same floor plan within a quarter of a mile from each other.  You don’t want a future buyer to be playing “Where’s Waldo” with your house when it is time to sell!

 I also gave them some ideas for what would be the best things to do to the house.  Pretty much, what you want to do is offer a buyer just a little more than what they expect to see in your neighborhood.  Some people (and amateur Flippers) go over board.  I think I blogged about a Flipper who put granite and travertine all over a house in a neighborhood where 30-year-old laminate was typical.  That dude could have done just as well with a nice new laminate counter top and 89 cent tile.  Sure, who doesn’t like granite and travertine, but it was wasted money from an investment standpoint……especially since his higher material cost drove up his asking price and he couldn’t sell it.

Here are some things that never go out of style:

-Adding a fireplace

-Hardwood Flooring

-Crown Molding

-Plantation Shutters

-Adding a deck or patio or making the one you got larger

-Fencing a yard

-Landscaping

For things that a buyer will want to rip out in 10-20 years, (tile, counter tops, backspashes, carpet, light fixtures, cabinets, etc) you are only going to get a return on your investment as long as what you bought is not only still stylish, but in good condition.  For example, when your maple glazed kitchen cabinets are beat to heck a few years down the road, don’t expect a buyer to pay you back for them.  And in 15 years, they don’t add any value.

If you can’t tell, I really want my own reality show.

If real estate were gym class, would your house be picked last?

by John Rice

I was that kid in middle school that was always picked last in gym class.  You know the drill.  Two team Captains (Buyers) pick their team (Houses) until there is only one left and that person gets picked by default.  Don’t feel bad for me though…….I’m sure the past 30 years has been better for me than for most of those picked before me 😉

The real estate market is very similar to what we’ve all experienced in gym class.  Buyers organize the houses in order of preference.  Naturally, they are most interested in move-in ready houses that are priced right.  Then they move down the list to those that are less desirable.  Sellers want to be picked sooner rather than later……think “Days on Market.”

Once the Captains are chosen, that is like the beginning of the house hunting season.  The Captains pick those they think will be the best.  Once those kids are on a team, they are “Sold” and not available anymore.  All a Captain can do is pick the most desirable kid from what is left.  Once the best one has been picked, the second best one becomes the new best choice.  That is until it was just me standing there and the Captain says my name…….with the enthusiasm as if he had just heard the cafeteria was serving goulash for lunch.

Right now, we are in the time of year where not many new listings are hitting the market.  It’s kind of like when there are only about 6 kids left from the whole class.  These are the ones that maybe nobody really wants, but the next kid that gets picked is going to be the best of those that are left.  There are many sellers right now with average to below average houses that will get contracts simply because there are no better choices for a buyer right now.  I always say that fall is the best time to get rid of  house that nobody has wanted all spring and summer…….which I guess is my whole point.

  On a side note, the only time I ever got picked any higher than dead last was when it was for volleyball.  See, I am left-handed.  When I serve, the ball always goes on the opposite side of the court from where it lands when most people serve.  Everybody on the other team was always caught off gaurd……and nobody ever noticed the pattern of where the ball would go when I served.  Come to think of it, that is one of the first times I ever realized the benefit of zigging when most people zag and zagging when most people zig.

FOR SALE: A worn out house that stinks……Hurry. Won’t Last!!

by John Rice

So, I’m out showing several houses to some clients of mine this week.  We roll up to a house where we knew the seller had several small children.  The dad is waiting in the van with the kids.  I can see the mom scurrying around inside opening blinds, turning on lights and trying to do all she could to make the most out of the showing.  The dad gets out of the van and apologizes to us.  Dude really looked stressed out.  Then the wife comes running out of the house.  She looks just as frenzied as he did.  We go in the house and before they have even left the street we are ready to leave.  Want to know why?

The house sucked…..That’s why.  Who wants to buy a house that looks bad when there are ones for sale that look good?  It’s that simple.  When we walked in, the house smelled, we saw walls that had seen a lot of wear and tear since they were last painted, and the paint job wasn’t that good to begin with.  There were 5 different flooring colors upstairs.  The laminate flooring had been installed very poorly.  Bottom line, we couldn’t come up with one good thing to say about the house other than that it was in a good school district.  That was barely enough back in 2005, but doesn’t cut it at all in 2011.  Not trying to be mean to these people.  They seemed very nice.  I wouldn’t mind hanging out with them in their house if I knew them, but there is no way I would buy it…..and guess what, nobody else will either unless they make it attractive to buyers by improving presentation or reducing the price.

What gets me is having watched all the effort they put into the showing for us.  I could tell they really want to sell.  So, if the seller of this house were to read this, my advice would be to paint everything, fix the botched flooring, and to clean clean clean or drop your price to about 90% of what the comps show the potential value to be.  Your choices are sell for cheap or work on presentation……There is just no getting around the fact that there are several better houses for sale at a similar price all over town.   I guess a third option would be to change the way a buyer’s mind works when they look for a house, but I think working on your house would be easier!

 

When the market comes back

by John Rice

When the market comes back……….People will finally be able to sell their house, we’ll see surgeons leaving their practices because real estate is more lucrative, sellers will no longer be under water on their mortgages.  Yep, it’s gonna be great again……when the market comes back.

Only problem is that the market we are currently in (at least locally) matches up to what historically has been considered normal.  About the only time in local real estate history that doesn’t match up to today is the heyday of 1998 to 2006, especially 2003 t0 2006.

Check this out.  Here are the January 1st through September 7th (today’s date) sales numbers for residential real estate deals in Lexington:

1997-2236 sales

1998-2911 sales

1999-2898 sales

2000-2811 sales

2001-2989 sales

2002-3133 sales

2003-3568 sales

2004-3746 sales

2005-3723 sales

2006-3469 sales

2007-3106 sales

2008-2538 sales

2009-2290 sales

2010-2395 sales

2011-2117 sales

Wish I could easily get the numbers prior to 1997, but they aren’t available online.  I was here prior to that though…I remember when it started to heat up back in 1998.  There was an article in the paper about a local realtor who needed foot surgery but was putting it off since the market was soooooooo hot.  1997 to 1998 was the largest jump in sales for two consecutive years.  Prior to that, the market was…..well, just normal.

And that’s why I really think that the market IS back, just back to normal.