Buying Advice

Shhhhh….Don’t tell anybody this

by John Rice

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?

by John Rice

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?

by John Rice

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.

Best time to be a buyer?

by John Rice

It is right now.

Why?

Real estate is like traffic.  Do you want to be driving on Nicholasville Road at 2:PM or 5:PM?  Timing makes a huge difference.  This might be a bad example because personally, I don’t want to be on Nicholasville Road at ANY time of the day.

At 2:PM there is still a lot of people on the road, but fewer drivers.  By 5:PM, everybody who is going to be on that road IS on that road.

In the market, spring and summer are when there are the most buyers out snatching up houses.  It starts to slow down some about the time school starts.  Then it slows down more around Thanksgiving.  Then it really slows down around Christmas.  Then in January it starts picking up again.

We are in that sweet spot where buyer activity will be slowing down some and we are also seeing a good amount of new listings too.   Later in the year, buyer activity will slow down more, but there won’t be as many houses.  It will be like driving down Nicholasville Road in the middle of the night…..sure, there is no traffic, but that is because nothing except Wal-Mart and a few gas stations are open.

Also, sellers tend to get a little nervous the later in the year it gets.  The Lexington sales graph is like a gentle rolling hill.  It gently rises to it’s peak in the late spring and early summer and settles down in the fall/winter.  Some of the surrounding counties look like Mt. Everest.  Their market is dead, then they have 3 months of steep sales increases, then decrease back down to nearly nothing in the fall and winter.  Most sellers assume fall and winter are bad times to sell and plan accordingly, but it is a non-issue for Fayette Co sellers.

We still are likely to have more buyers than houses in the sub $250k range, so I am definitely not saying that it is going to change to a buyers market, just that you may actually have a chance of buying a house without competing with 5 other offers.  Over $250k with the exception of the most popular neighborhoods, you have a better chance of not getting in multiple offers this time of the year.

So be encouraged if you are a buyer and go get you a house!

How to pick a winner of a house

by John Rice

Okay…..You are buying a house in Lexington Ky.  You are concerned about resale potential because prices keep going up and up.  You don’t want to lose your shirt if you ever need to sell in a cooler market.  What are you to do?

First off, congratulations for thinking of the exit plan.  Any time you make a big financial decision, it is always good to have an exit plan.  Right now with so few listings, people are most concerned about finding a house and often don’t think about this step.

So, here are some things that will help ensure you will be okay in the future.  Be sure to do them in this order too….by the time you have gone through all of these, you should have a house that will be any buyer’s top pick regardless of the market:

1)  Stick with an established neighborhood.  Brand new neighborhoods are nice, but you never know what they will be like once they go through their first round of resales.

2)  Stick to a good location.  Location can really mean a lot of things in real estate.  Pick something that is convenient to somewhere.  Neighborhoods close to Hamburg, UK, downtown, the interstate, parks, big employers,, etc, all have appeal to a variety of people.

3)  Pick a neighborhood with at least average performing schools.  Sure, a lot of buyers really want excellent schools, but most of them seem to be just fine with decent ones.

Now that we have narrowed down the location, lets take a look at what to look for in the house itself:

4)  Pick a house that fits in with other houses in the neighborhood.  You don’t want that split foyer that looks like a half-timbered English cottage in the middle of traditional homes.

5.  Pick a house that is similar in size to most in the neighborhood.  You don’t want that 5000 square foot McMansion surrounded by 1200 square foot starter homes any more than you want to be the smallest house surrounded by bigger ones.

6.  Stick around the middle of the price range for the neighborhood.  The cheapest house in the neighborhood may be disappointing to a buyer who is expecting more.  The most expensive house in the neighborhood will leave a buyer feeling like the neighborhood is a let down.

7.  Go for a lot that is typical for the neighborhood.  It is okay to have a sloping yard if every other house does too.  Remember….nobody ever complains that a yard or driveway is too flat.

8.  As you look at the house, keep in mind that anything that is a big negative to you will also be a big negative to the next buyer.  Half bath riiiight off the kitchen bug you?  Backyard have no privacy?  These are things we called “Deal Breakers” in a slow market.  They will keep somebody from wanting your house when they have a choice of more than a handful of houses.

9.  If the house made it this far, buy it!