Buying Advice

What bugs The LEXpert

by John Rice

Know what The LEXpert is thinking about today?  Termite inspections….well, there is more than just termites.  You’ve got Carpenter Ants, Carpenter Bees, Termites, Powder Post Beetles and maybe even more.  Those are just the ones I’ve encountered over the past  11 years.

Most people only get inspections when they buy a house.  That means that when you see on the PVA or a Seller Disclosure that the seller has owned the house for a long time, odds are that there miiiiight not have been a termite inspection since then.  It isn’t rare for a house to need a termite treatment in our area.  Seeing a lot of damage is rare though.  And the times I have seen the most damage have been when a seller has been there for a mighty long time.  A termites first bite might have been the night the seller watched the last episode of Cheers.  Now they just watched the season finale of N.C.I.S and the original termite’s great-great-great-great-great-great grandkids are half way up the first floor.

Now that I have scared you into having YOUR house inspected, there are a few things I want to share about how we Realtors handle wood destroying organisms in the Bluegrass area.

The contracts we use say that the buyer may get a termite inspection at their own expense (except for VA loans where the seller has to pay for it for some reason), and IF there is evidence of live or dead insects, or any damage from them, the seller has to pay for a treatment.

Our contracts also say that if there is any damage, the seller is automatically on the hook to pay up to 1% of the contract amount for repairs.  Anything above that amount is to be negotiated.  The attorney who wrote our contracts but have been about to be a buyer, since it sure favors the buyer.

So, if you are a buyer, you definitely want to do a termite inspection.  If you are a seller, you really hope nothing is found.  Speaking of that, there is a place on the standard Wood Destroying Insect Report (WDIR) where inspectors write a bunch of numbers.  If you look down at the key, those numbers are all the places the inspector can’t get to, such as behind drywall, under carpet, behind insulation, etc.  I like to point that out to my people because a clean report really just means no insects were FOUND.

The best time to do a termite inspection is after you have negotiated the normal home inspection repair items.  That way you don’t end up spending the money on the termite inspection until after you have any home inspection repairs resolved.  Our contract just says that it has to be done before the closing if one is going to be done.  The termite inspection does not fall under the same paragraph/time line for the normal home inspection.  Another reason to wait is this:  Since the seller has already agreed to a treatment and repairing damage up to 1% of the contract price if needed, you want to drop that news after you have worked out your normal home inspection repair list.  The seller is only going to spend so much money on repairs.  You want all of the budget for the home inspection repairs.  Let the seller know there are termites at the same time you present the repair list and you get fewer inspection repairs because he is now subtracting the termite treatment/repairs from his budget.

Good deals in a seller’s market? (Depends on the seller)

by John Rice

The market isn’t hot enough for buyers to accept two things:

  1.  A nasty house.
  2. An over ambitious asking price.

If your house is nasty, no buyer is going to be able to imagine themselves in it.  I’m talking if it is dirty, messy, desperately needs paint or stinks.   Trust me, buyers just want to exit a house like this.  Even if you slashed the price in half, I bet most of the buyers would still say no.

I recently sold a nasty house.  It had been on the market for quite some time.  It was in a desirable neighborhood and actually priced right.  It has more updates than most in this nice neighborhood.  Problem?  It smells like dogs and has one of the nastiest bathrooms I have ever seen in a house for sale.  It was hard to get excited about the expensive tile in the remodeled bathroom when there was urine and hair all over the toilet.  Sorry to be so graphic…..I have a picture but decided not to include it, so I am holding back a little for those with weak stomachs.

My buyer is one of the rare people who can see past that and is getting a super nice house for a really fair price.  Added bonus:  It was one of the few times recently that I haven’t been in multiple offers with a buyer.  The house was so nasty that my client called me after the home inspection asking if I thought the seller was going to clean it when they moved out.  He just met with a home inspector and heard everything wrong with the house and the thing that was on his mind the most was how dirty it was.

Moving on, the next item is the overly ambitious list price.  A client bought a house for $400k that had been listed originally at $445k.  Nice house, just not a $445k house.  Maybe $410-415k based on the comps.  LOL, the way the market is going, it might be worth that now!  Anyway, it was reduced, reduced and reduced again.  By the time 170+ days had passed, it wasn’t on anybody’s radar.  Nobody cared?  Buyers today are focused on new listings.  If a house doesn’t catch their attention on Day 1, few will go back and reconsider a house.  They’d rather wait for tomorrow’s new listings.

My client actually passed on this house two times, then came back to it.  They were worried because it had not sold.  In today’s market, 6 months is an eternity of buyer’s saying “No” to a house.  Ironically, a house two doors down just sold for $405k the first day on the market.  It was 1200 square feet smaller and had a marginally more updated master bathroom.

While it is one of the hottest seller’s market ever, not all houses are selling immediately in multiple offers.  I always encourage buyers to seek out these good houses that are being held back by the sellers.  You can avoid multiple offers and get a good deal, even in a seller’s market.  My buyer with the nasty house might pay $400 to have it professionally cleaned but saved much more than that.  My buyer who made a reasonable offer on an overpriced listing didn’t have to immediately make a decision to buy it since there were no other buyer’s around.  It felt like a buyer’s market to them.

NEVER do this when buying a house

by John Rice

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I got an offer on a new listing this week.  We negotiated it to the exact number I told the seller to expect.  There was one thing that made me nervous about it though.  The buyer wrote on the contract that they wanted the master bathroom shower door replaced.  It worked and was not ugly.  You just had to lift up a little on the handle to open it.

Before I get to why that freaked me out a little, let me tell all the buyer’s out there that doing something like this is NEVER a good idea.  Sure, this buyer wanted a new shower door and for some reason didn’t like the existing one.  If the seller would have considered doing this, we would have just added the cost to the counter offer, effectively making the buyer pay for it anyway.  Then there is the issue of what the buyer is expecting it to look like.  The seller having to find out how much it would cost to install.  Those things take time and slow down negotiations.  In a fast moving, hot market like we have right now, the last thing a buyer should do is cause a delay in the seller responding to their offer.  It just gives too much time for another offer to come in.  So, this is never a good idea.  The buyer never benefits from it.  Don’t do this.  Period.

What writing this in the offer showed me was that these buyers expected way too much and would absolutely kill us on the home inspection.  Any time I have had a buyer for one of my listings write repairs or things like replacing flooring, repainting a specific room or anything like that, the buyers have been a nightmare to work with.  Most of the time the deal falls apart because they expect the seller to repair everything on the repair list.  If the roof or HVAC are older but functioning fine, they are the buyers that ask for brand new ones despite signing the seller disclosure that told them the ages.

In the end, this buyer sent us a clue about how they would be to work with…..and we said no thanks.

How to get a house in a tight market

by John Rice

Let’s just jump right in:

  1.  Obviously, the first step is to go see it as soon as it hits the market.  Many houses are selling immediately these days.  You wait until it is convenient to see and you will likely lose it.
  2. If it is a new listing, there is a higher change of there being multiple offers.  Don’t make a lower offer and see what the seller counters back with.  In between your offer and the seller’s response, odds are another offer will come in.  Seal the deal ASAP because nothing is settled until all parties sign a contract.
  3. If you find yourself in multiple offers, go in with your best terms.  Keep in mind that there is more to this than just price.  The closing date and when the seller has to be out are often just as important.  Remember, everybody moving out is going to be moving in somewhere too.  They have to coordinate their move just like you do.  I’ve seen sellers accept or counter a lower offer because the closing date and/or move out date were more favorable.
  4. Sellers get nervous about the home inspection.  I would only suggest doing this if the price is right or it is your dream house, but you could buy it totally “As-Is” or agree to limit what the seller might spend on repairs.  You could maybe just inspect the major systems too.   I’ve been on hundreds of inspections.  Most of the time the repair list amounts to no more than $1000 and is full of minor items that you would not walk away over……so in a super tight market for the house you really love, why risk losing it?  This is funny for me to write, because when the market was so terrible, I was suggesting sellers do anything they could to hang on to the few buyers in the market!
  5. You could raise the earnest money amount.  Personally, I don’t care how much the earnest money is.  The buyer gets it back for just about any reason short of giving you the middle finger and saying they just changed their mind.  Some agents and sellers get excited about the amount of earnest money though.
  6. Most people have a personal attachment to their home.  They want it to go to somebody they feel good about.  So yeah, we are back to the days of writing a personal letter to the seller and maybe including a picture of you/your family.  Everybody else will just be a name at the bottom of the offer.  You will be a person.

Of course, every situation is a little different.  Having an agent who can help determine the best course and to what extent you need to do all this will help the most.

BIGGEST factor in picking a house

by John Rice

A friend of mine called me last week.  Her son was about to buy a house sight unseen in a different state and she wanted to know what I thought.  While I did not have any specific knowledge or experience in a market that was a 10 hour drive from Lexington, what I chose to tell her should help insulate her son from making a bad decision.  It will do the same for you.

The biggest thing to think about is how a house fits in with the other homes in the neighborhood.  If almost all the houses have a 2 car garage and the one you want only has a 1 car, that is bad because buyers will view your house as inferior to others.  You don’t want a small lot when most are bigger.  A smaller house when most are bigger.

About the only way being different normally helps is if a house is better than most in the same neighborhood.  Like, having a 3 car garage when most have 2.  Having a bigger lot when most are smaller.  These things make the house superior to the rest and help with resale potential.  (When buying though you have to make sure you are not spending a lot more than the typical house in a neighborhood-these superior features do add some value but it is generally not a good idea to be the most expensive house in the neighborhood.)

Resale potential is about how appealing a house is in the market place…..not to be confused with resale value.  Values fluctuate.  Appeal is consistent.  In a hot market, all houses sell.  In a bad market, only the best sell.  When the market was in the toilet several years ago, the better houses kept more of their pre-crash value and sold faster than others.

Pick a good one.