Author: John Rice

How COVID will affect what people want in a home

by John Rice

It won’t change a thing.

I don’t know about you, but all the news I have been reading is saying buyer’s wants have shifted due to quarantining. They say people are wanting a place to work from home, wanting bigger houses, wanting great outdoor spaces, and a less open floor plan.

I personally think that writers of such stories don’t know much about real estate and just have to write something because that is their job.

When have people not wanted a bigger house? When have they not wanted a better backyard? When have they not wanted a home office? Okay, the wanting a less open floor plan is something that has been emerging for the past few years but isn’t really possible in a smaller house. To do a less open floor plan you need a big enough house so it doesn’t feel like you have a bunch of super small rooms. People may covet these features a little more right now, but it definitely is not a new trend in housing.

I think the biggest effect COVID has had on what people want in a home is simple……..to just find one they like, pay at least the full list price, possibly waive inspections, and take advantage of incredibly low interest rates. Beyond that, the buyers of average priced homes are not all that picky.

Kicking a buyer to the curb made my seller $10k

by John Rice

My seller was impressed that I sold his house so fast.

Big whoop.

Just about every house sells fast these days. back in 2008-2011 was when selling a house fast was something to brag about.

Today, I think the most valuable thing a realtor can do for a seller is helping them pick which offer to accept and taking some strategic steps to keep the deal glued together…..or strategic steps to easily get into an equally good contract should the one you have fall apart.

So, the house I am talking about was priced at the tippy top of the market. It got a ton of showings and the only offer we got was from somebody who had a house to sell. People with a contingency have to come in stronger than a buyer without one, so getting no other offers and a full price one from this buyer is a sure sign we got 100% the full market value.

The offer was contingent on the buyers selling their old house. I never like those, but I don’t mind them if I can get the buyer to accept an immediate kickout clause. A kickout clause is when you can keep the house on the market, but if some other buyer makes an offer the seller wants to accept, the first buyer has to be given the change to get the house if they can buy it without having to sell their old house. Usually the time period for the first buyer to either put up or shut up is 24-48 hours. Naturally, a lot of buyers and their realtors don’t like to show houses with kickout clauses. It can be heartbreaking if the first buyer actually can remove their contingency and buy the house. BUUUUUUUT, with an immediate kickout clause, the seller can enter into a contract with the new buyer and all they have to do is tell the first buyer they just lost the house. It is the best of both worlds for the seller. You get to keep the buyer who is paying top dollar for your house and you get to keep looking for a better buyer. There is nothing to lose.

There is a third great thing about having a contingency contract with an immediate kickout. It is called leverage. One reason I advised the seller to accept the offer if the buyer would do an immediate kickout clause was because I wanted to be able to tell future buyers that we already had a full price contract with the immediate kickout.

Well, a few days later, we did get an offer that was about 95% of the list price. I told the other agent that we had a full price offer on the table with an immediate kickout, and her buyer would need to go full price in order to make the seller kick the first buyer to the curb. They agreed to it. Without the presence of that first buyer’s contract, I would have had no leverage to get the new buyers to come up $10,000.

I more than paid for my own commission by strategically positioning my seller to get the most money.

Dave Ramsey is wrong

by John Rice

“When you’re buying a mobile home, they go down in value. From a financial standpoint, mathematically, you’re buying a car that you sleep in—a very large car that you sleep in. When you buy a home, they go up in value.“

He said it. It can be true. But it is not always true.

It is true when you buy a mobile home and rent a lot in a trailer park. In that situation it is just the trailer that is owned. They are harder to sell and cost a lot of money to move off a lot you don’t own. Couldn’t the same be said for a normal house? When a normal stick built house is moved off of it’s foundation to another location, the value of the house is extremely cheap for the exact same reason. often selling for $1.

Another example of this being true is when a mobile home is sitting on a piece of land but is not permanently attached to the ground. Lenders do not want to lend you money for a property with a mobile home that is not permanently attached to the ground because you could move it. Let’s say you borrowed $100k for the land and the mobile home. Then you sell the mobile home for $10k, leaving just the land. The value of the land probably isn’t going to be $90k without a home on it so the lender is at a greater risk should you default. Lenders don’t like that.

Another example of a mobile home not appreciating is when it never gets updated. Most don’t get updated. The same can be true about a house. I am sure you have seen old, worn out houses that haven’t appreciated once adjusted to inflation?

Okay, so I have sort of agreed with him so far in some situations. When does buying a mobile home become a good idea then? When it is permanently attached to the ground. Now, it really makes no difference to most people whether it is or is not. You are not going to “Feel” any difference inside and it really isn’t going to look much different from the outside. The only reason this makes a difference is for financing. In a world where almost everybody finances their home, you expand your pool of buyers when they can get a Conventional, FHA or VA loan. Imagine what the real estate market would look like today if you had to pay cash for a home? The values would plummet because there would be almost no buyers out there who could afford to buy a home.

As a realtor, real estate investor, advisor and friend to my clients, I can give a thumbs up to purchasing a mobile home on a permanent foundation. If you keep them in good condition and update them as often as you would a normal home, they DO appreciate and ARE a very affordable way to own a home.

Could this have been the worst house in Lexington to buy?

by John Rice

A house I had listed a long time ago came on the market recently. It sold really fast of course.

Let me tell you a little about this house.

The seller paid $157k for it in the summer of 2006. That was pretty much the peak of the market. We were already starting to hear stories about the market crashing by then.

The seller didn’t want the house any more. Listed it for $166k the summer of 2007. After 291 days it did not sell.

Then it was my turn. I listed it in 2011 for $153,900. It didn’t sell after 129 days on the market.

Late in 2014 the seller tried again with another realtor for $159k. 61 days on the market with no buyer.

Spring of 2015 it sat on the market for 201 days with a list price of $156k with a new realtor. Still did not sell.

Spring of 2017 it was listed for $162,900 with yet another realtor. After 68 days on the market, it sold for $153,500.

So, after 11 years and literally 750 days on the market using 5 different realtors, somebody finally bought it for less than the seller had paid for it in 2006.

What was the problem with this house? The yard. The lot had such a slope that you couldn’t get a car in the garage. It was so steep that your ankles hurt just trying to get to the front door. The backyard was worse. There was a patio, a retaining wall, and a grassy strip about 15 feet overhead.

You can imagine that seeing this house listed for $180k this year got my attention. I’m glad I was sitting down when I saw what it sold for. Can you believe somebody went $20k OVER the listing price for this house? It sold for $200k!!

This house is the poster child for what happens when buyers don’t have many choices. They pick terrible houses and seem happy to have just gotten one. Today is 2005 all over again, but worse. When you have almost no choices, a lousy house seems great. It won’t always be this way though. That is why you should never buy a house that in a buyer’s market took 750 days and 5 different realtors to sell for less than was paid for it during a seller’s market.

Bottom line is this……don’t buy a house that will become a noose around your neck in a buyer’s market. I’ve been saying it for 15 years. Never buy the house with the bad lot, one that backs to something unpleasant, one that backs to apartments or a lot of rental properties, one that doesn’t fit in with the rest of the houses in the neighborhood. If you are the seller of such a property, this house proves now is the time to unload it.

Will the election affect the real estate market?

by John Rice

Every four years I get this question.

I am probably going to disappoint a lot of readers, but it just doesn’t work like that in real estate. It sure can affect the stock market in the short term, but the real estate market is a lot different. That’s because your house is your home and the stock market is just about making money. People always want to move and will do so whenever they feel comfortable that they can.

The past few elections, the popular vote has been about 50-50. That means half of the voters are happy and the other half are not. With such an equal split, it isn’t going to change much…..the only possible change could be which 50% of the voters feel more confident about buying a house. Also, the roughly 50% of Americans who don’t vote have already shown us that they will be unfazed by which guy gets in office.

About the only direct, immediate change these elections have on real estate is leading up to election day. Historically, the month or so beforehand has been pretty slow as everybody waits to see who wins. Then a few days after the election, things get back to normal. I’ve got a new listing that I could have put on the market today but I am going to wait until later this week. I am sure it would sell today since the market is strong and the house is at a price point where there aren’t any listings. I want to wait for multiple offers so I can get the best terms for my seller. I guarantee you that whatever buyer gets this house, they are going to be happy regardless of which guy wins today.