How good advice can be not so good

The first new car I ever bought was a 1996 Geo Prizm.  This was before the internet.  Back then, Consumer Reports was not only the most respected source for advice, it was about the only one.

They had a service where you could purchase the invoice cost to the dealer for whatever car you wanted.  They suggested bargaining up from the invoice rather than down from the sticker, and even suggested an amount deemed a reasonable profit for the dealer.

It all made perfect sense.

I thought I was being the wisest consumer ever.

I went into whatever the Chevy-Geo dealer in Winchester was called back then.  They had a dark green Prizm that my wife wanted.  We later brought our first born son home from the hospital in that car.

I sat down, told the guy what I would pay based on their invoice cost.  He immediately accepted.  Of course, it was about 7:45 PM by the time we got there.  I have since learned that showing up at a time when everybody is wanting to go home is the perfect time to walk into a dealership.

We got the car.

I felt like a hero for getting the dealer to accept my terms.

Later I realized that most of the Geo Prizms had been sitting on the lot for a long time.  This was when full sized truck based SUVs were gaining popularity.  There was a waiting list to get a Suburban since they couldn’t build them fast enough.  Gas was cheap.  A small economy car was not a hot seller.

I received great general advice that turned out being not so great for my specific situation, which is why the dealer was eager to accept my offer.

I see that happen a lot in real estate.

I wish there was a 3rd party in the deal that was looking out for me.  Somebody who could have given advice for my specific situation.  Somebody who would have told me that what I was wanting to buy was a car the dealers were having a hard time selling.  That they were more motivated to sell than I was to buy.  I wish there was somebody who would have told me that buying a small economy car at a time when everybody was buying Suburbans and Tahoes meant that it would depreciate rapidly.

I love being such a person for my clients.

 

 

Best undervalued neighborhood in town

My first new car was a 1996 Geo Prizm.  Green.  Because green was a hot color for everything in the mid 90s.  We bought it because it was mechanically the same thing as a Toyota Corolla.  General Motors and Toyota had a joint plant back then in California where they produced the Geo Prizm and U.S. market Toyota Corollas.

They were the same car, only the Prizm was cheaper.  Few people knew that you were essentially getting a Toyota Corolla for less that what a Toyota Corolla cost.

Neighborhoods can be like that too.

If you are the type to have picked the Geo Prizm over the Toyota Corolla, then you should check out Old Paris Place.

This is a Ball Homes neighborhood.  It has the same model houses as any other Ball Homes neighborhood, only they are cheaper than you will find in other neighborhoods like Masterson Station.

If you are looking in the $125-160k range, this neighborhood should be on your radar.  The same houses will cost you $140-175k in other similar neighborhoods.

Here is what I like about it:

  1.  You are close to the interstate if you need it.  Close to Hamburg too.  Close to all the cool things on the north end of downtown.  And not a terrible drive to the south end of town either.  My kid’s school is very close to Old Paris Place.  I remember rushing to pick them up from a house I was renovating waaaaay out Harrodsburg Road.  It mentally felt like I was super far away, but I would hop on New Circle at Harrodsburg Rd and before you knew it, I was turning left on Old Paris Pike.
  2. You are closer to restaurants, banks, gas stations and grocery stores than you would be if you lived in Masterson Station and paid more for your house.  You’re 10-15 minutes away from Hamburg too.
  3. Several of the lots back to a wooded area owned by the HOA.  Many back to two farms.
  4. I have had a couple of clients live in this neighborhood and have met several other residents.  All say it is a friendly place to live.

Right now,  this neighborhood is a little undervalued.  Most people wanting a 10-15 year old home in this price range default to Masterson Station for their search, just like most car shoppers knew about the Toyota Corolla but not the Geo Prizm.

 

Shhhhh….Don’t tell anybody this

I’m going to let you in on a little secret.

The market has slowed down in much of the Bluegrass.  I don’t mean that it is dangerously slow or anything.  It is still a hot market with too few houses for sale.  It just isn’t the crazy frenzy it was earlier this year.  That is to be expected since it does slow down a little after school starts, then a little more the closer you get to Thanksgiving, then a little more the closer you get to Christmas.

How much?

In Fayette County, sales are down 6% when comparing August 2016 to August 2017.

I put two new listings on the market last week.  I try to put my listings on late Friday afternoon so we get lots of showings on Saturday.  That way everybody is off work and they can all see each other come and go from the house….it makes it feel more like an auction.

I knew it had slowed down some, so I was expecting only 4-5 showings at each house, and probably at least two offers on each.

House A did not get any showings the first day on the market and only one showing was scheduled for the second day on the market.

House B had only one showing scheduled the first day on the market.

Fortunately both sold to the first buyers who saw them, but I imagine they and their agents would be surprised to know this.

Both houses were priced right, presented well and in the most popular price range.

I sold another house this week too.  This time I was working with a buyer.  We saw a very affordable house the very first day it was on the market.  Throughout most of this year, I have shown a house and had another agent showing it before and/or after my showing.  Sometimes there has been a line, prompting me to consider a side hustle of selling snacks and drinks while I am there waiting.  I was at this house for an hour.  No agent was there before me.  No agent was waiting for me to leave.

I am noticing home inspectors have been able to get to jobs in fewer days too.

When I scroll through the pending sales every day, I am seeing fewer and fewer 1 day on the market sales.  Most are still selling in less than a couple weeks, but that is a big change from earlier this year when almost every house sold the first day.

All of this makes me think it is a great time to buy.  Probably the best time all year.

 

 

 

What is it worth?

What is it worth?

That is a question I get asked a lot.

Sometimes I can do a little quick math in my head and come up with a ballpark number.  Most of the time my default answer is that I need to study the recent sales….AKA “The Comps.”

When the market was flat, it was easier to do it all in my head.  I could think “Oh, I sold that house over there a couple years ago, and I remember showing that one down there last year and it sold for this much.”  The past couple of years the market has been appreciating so much that the best answer is to look at the comps.  When values are going up (or down) you should always look at the most recent sales to determine value.  It’s a big purchase for a client and they need an agent who will put in the time to make sure they don’t over pay.

I love studying the comps.

Some times they are easy.  Like in a newer neighborhood developed by a mass builder.  Most of the houses are the same age and in the same condition.  It doesn’t take long to come up with a pretty accurate value.

It gets harder when the house is more unique.  Like an older house where every house in the neighborhood has a different floor plan,  and all are in varying conditions.

I think the most challenging ones are rural properties.  I LOVE rural properties.  Part of my reason for enjoying them so much is purely selfish.  I love driving out in the country so it is always a treat just to get there.  It is also interesting to see these properties, whether listing them or working with a buyer.  No two are alike.  Also, there is a relationship between the house and the land that must work.  I often have buyers who like the house but don’t like the land, and the other way around.  That is why I always try to depict both when I list rural properties.  I know that is important to the buyers.

Here are some of the things I look for when determining value for rural properties:

  1.  Location-The closer to the subject house the better.  This can be a challenge because there are fewer properties and fewer sales in the country.
  2. Age-You often find a wide range of ages in the country, which also means a wide range of floor plan types.  If I have a mid 90s house that I am trying to find the value on,  I try not to use a brand new house or one from the 1960s even if they are next door.
  3. Lot size-The closer in size to the subject house the better.  If I’m trying to find the value of a house on 1 acre, I might use houses on up to 3 acres.  If I have a 5 acre lot, I might compare up to 10 acres.  Most 1-10 acre buyers just want to be in the country.  Most 1-3 acre buyers just want a big yard.  Some 5-10 acre buyers have horses or need that space.  Over 10 acres and you are often looking at somebody who wants a working farm.

A good rule of thumb when using recent sales to determine the value of a property is the fewer adjustments you need to make, the more accurate the value will be.  Looking at the comps is really studying buyer behavior.  You are saying a buyer paid this much for this house, and the house I’m trying to figure out the value on is 300 square feet bigger, so it should sell for the same price PLUS the value of that extra 300 square feet.  That is why beginning with the best 3-4 houses is key to ending with an accurate value.

I showed a house last night to some friends of mine.  They asked what I thought it was worth.  I pretty much told them everything you have just read.  When I went to look at the recent sales this morning, I found 3 houses on the same street that had sold within the past year that were all on similar sized lots, and were similar sized houses that were all built around the same time.

Sometimes comping rural properties can be easy too I guess.

Why is this the dullest blog post ever?

This is probably going to be the dullest blog post I’ve ever made in a decade of blogging.

Flood insurance.

Seeing all the news about the hurricane and flood insurance has it on my mind I guess.

It is a boring topic but there are some important things to know about it.

In Lexington, we don’t really get flooding.  Our basements sometimes fill up with water when we have two feet of rain in a short period.  Some intersections might have a foot of water in them.  People who back up to a creek might have their backyard under water.  That is about the worst.  We don’t have a river in a heavily populated area.  We are too far from the ocean.  It isn’t a wide spread problem here.

But we still have several houses that require flood insurance.  These are mainly ones that back to a creek.  In the past 12+ years as a realtor, I am guessing I see about 1 in 20 houses where the seller has checked on the Disclosure that the house is in a flood plain and requires flood insurance.

Almost always, I suggest that my buyers don’t even look at the house.  Why?  Most people don’t understand what flood insurance is, how it works or what it means.  When people don’t know how much, if any, water to expect and they don’t know what it will cost, most buyers move on.  It scares them, and when you are scared, you normally retreat.  So, being in a flood plain and requiring flood insurance is a stigma for most buyers.

There are two exceptions where I can feel good about rubber stamping my approval on purchasing in a flood plain:

  1.  When the house is in a higher price range.  An extra $100 a month to a buyer in the sub $150k price range is a big deal.  The buyer considering a $500k house isn’t as worried about the extra $100 a month or whatever the insurance will cost.  To them, it is just a fee to have the nice view that often comes with backing to a creek or pond.
  2. When the lot is just soooooo worth it.  I sold relatives of mine a house in a flood plain.  It is never fun to pay for it and occasionally deal with a creek that just can’t stay within it’s banks…..but any other time they have a huge, wonderful backyard that backs to a picturesque creek.  It is so beautiful back there that we were all silent when we first saw it.