What is being a realtor really about?

You’d think it would be about houses, but it is not.

You’d think it would be about the market, but it is not.

You’d think it would be about knowing what a house is worth, but it is not.

You would think it would be about marketing a property for sale, but it is not.

You would think it would be about showing houses to buyers, but it’s not that either.

All of these things are important, but they are not what being a realtor is really about.

It is about guiding people to make a good decision using all of the things above. I often describe my job, when asked, as “Talking people into making a good decision and talking them out of making a bad one.”

In the future, realtors might not even be needed for a buyer to view a house. People may end buying real estate like they do anything else online, or there will be an app to open the lockbox on the front door without a realtor. In the future one of two things will happen: Technology will make tools like Zillow’s Zestimate more accurate, or people will broadly accept them as being accurate. Either way, realtors won’t be needed to determine market value.

It all comes down to helping people make a good decision. There are tons of tiny decisions in buying or selling a house that can have huge consequences. Money can be lost. Time can be wasted. Stress can be compounded. Since most people only buy or sell a house a few times in their lives, often they don’t know the difference between a good decision and a better one. It is easy to make a good verses bad decision. Good verses better requires some knowledge and experience.

A realtor friend and I often chat about what we having going on. It makes us both better realtors I think. He had a situation where he had two offers on a listing. One was slightly better than the other, but the people with the slightly worse offer really wanted to live in that specific neighborhood. Do you go with more money and risk losing those buyers if the home inspection didn’t go well? Do you go with the slightly less offer where you know the buyer is less likely to walk away because they have to have that specific neighborhood? I told my friend to go with the higher offer. My thinking was that if the higher offer people walked away after the inspection, which is usually within 10 days, the other buyers who wanted that specific neighborhood will still be around. Best of both worlds.

Since the market is so hot right now, I am seeing lots of sellers saying a neighbor or a somebody they know is interested in buying their house before it gets listed. My advice to anybody today is to put the house on the market and try to get at least two offers. Today’s buyers are used to fighting to get a house. Get two or more buyers competing for a house and YOU as the seller will always come out the winner. Also, a buyer wanting your house because their parents or grown children live on the street will ALWAYS be there too. That buyer is not just looking for any house in your price range. Being close to mom, dad, grandma, grandpa or grandkids is what makes them want your house. They may or may not pay the most for it, but they are not out actively looking for any house in your price range all over town.

Another thing I am seeing more of is the opposite end of this where a buyer thanks me for my time and tells me they have bought a house from a friend. I had somebody this year with a friend who was selling their house by owner. My client bought it. The house had been on the market for quite a while. In today’s hot market, not selling fast is a sure sign that something is wrong. When buyers decide to wait for the next new listing and pass on your house, can you imagine how difficult it will be to sell the house in a cooler market? This is where the whole good verses better decision starts to have big consequences. People who make poor choices as a buyer typically don’t realize they made a poor choice until they go to sell the house. I saw plenty of that from Great Recession sellers who told me they went over the asking price in multiple offers when they bought the house that they were now selling for less that they owed on it.

So, being a realtor is really about using your experience and knowledge to help people make the best decisions possible. There is nothing that feels better than knowing your seller got the best deal possible, or that your buyer landed a house that will always be easy to sell when that time comes.

Dave Ramsey is wrong

“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?

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.

Can’t find a home in your price range?

You know what happens when you can’t find anything in your price range? You usually start looking above your price range. Can’t find anything around $300k? Then look up to $325k, then $350k, etc. You usually find something you like.

I recently had something happen that was a little mind blowing.

I personally have been on a casual search for a place in the country. I’m pretty picky. I wanted a great view and lots of wooded area so I wouldn’t have to mow it all. I also wanted huge garages so all my cars can live together instead of having them scattered all over. I started out at the price point I wanted. Then upped it. Then upped it some more. Before long, I had almost doubled the initial price range. Still nothing.

Then one day I get a call from somebody who was referred to me from a past client. They had 15 acres in Clark Co. I go to see the place. I look at the recent sales and give them a number for what I think is market value.

While I am viewing their house to list it, I keep thinking things like:

“Why can’t I find a view like this?”

“Why can’t I find huge garages like this place has?”

“Why can’t I find a place with woods on 3 sides?”

“Why can’t I find a small one level home like this one has?”

After all, I have been looking at properties that were nearly 3 times the value of this one.

Later that week, I started thinking about this place again. How much I loved the view. How the huge garages are already there. How the home was the right size. Just about every house I had seen had a huge McMansion on it and I don’t want fancy and I don’t want that much to clean. I want to leave the McMansion I have now.

Then I asked myself “Why don’t I buy this place?”

And I did.

So, when you can’t find something in your price range, try looking below your price range. It doesn’t happen often, but sometimes you can find something you love for less than you were planning on spending.

You’re wrong if you think this about appraisals

But my house appraised for $________.

Should I get my house appraised before we list it?

I hear this a lot. People seem to think that the appraiser determines the value of a property.

They do not.

Buyers and sellers determine the value.

An appraisal can happen for a lot of reasons. Most of the time they are done for a buyer’s lender. Lenders want to make sure the house is worth at least the purchase price since they will be on the hook should the buyer default. Those types of appraisals are more about justifying the sale price. Market value was already determined when the buyer and seller agreed on a price.

Other reasons a house might get appraised are for refinancing, divorces, bankruptcies, home equity lines of credit, etc. On those types, there is not a purchase involved so the appraisal is really just a professional guess at what the market value might be. An appraiser does not determine market value. The appraiser is not buying the house so they are not looking at it the same way a buyer would. They do not care about the color of the walls, if the kitchen is outdated. They just care about if it is in average condition or not. Ever see a listing that said “Priced below recent appraisal!” That tells you that the market did not agree with the appraisers assessment of value.

Last year I sold a house that I had renovated to rent. I was approached by a realtor with a client who wanted it. I decided to sell. We all agreed on a sale price of $205k. Well, the appraisal come back at $186k. The reason is because it was a split level house. An appraiser can only use a split foyer or split level house for sales comparisons on the appraisal report. Of the 40+ recent sales in that neighborhood, there were 4 that were split foyers or split levels, and all were terrible compared to my house. I get it, the appraiser’s hands were tied. Still though, the comps of similar square footage houses in similarly upgraded condition pointed to a value in the lower $200s, which was what I had a ready, willing and able buyer prepared to pay. Bummer.

A little off the subject, but realtors are really better at determining market value. We do pretty much the same thing appraisers do only we know the market a little better than appraisers. I am not at all trying to discredit appraisers here. It’s just we are the ones that go in houses with buyers and know how they will respond to things like barn doors, farmhouse sinks, 80s wall paper, the neighbor who leaves 4 dogs in a kennel all day, and how much natural light a house gets. We have experience with buyers and sellers leading up to signing a contract……still though, when we are called to list a house, it is still a professional guess at market value. Then the appraiser comes in afterwards more as a system of checks and balances to make sure the lender feels good about lending money on the house.

So, now you know that the appraiser doe not determine market value. Market value is like that old saying “Something is worth what somebody is willing to pay for it.” Realtors and appraisers use data to predict what market value should be but we do not decide what market value will be.