I had a funny thing happen this week. I was negotiating a deal for a buyer I am working with. We were $3000 apart. After a round of counters, we were at that point where somebody usually gives in or the deal falls apart. This one was looking like it was gonna fall apart.

What happened next has never happened to me in the past 9 years of being a realtor. The listing agent texted me saying the seller had countered where she did because she had a bad experience with my buyer’s lender. Turns out the seller “Budgeted” in her counter offer having to make an extra mortgage payment or two. She expected the loan to take longer than 30 days to close.

Once I found that out, I talked to my clients to see if they would entertain using a different lender, one I knew could get the loan done as quickly as possible. My buyers wanted in the house ASAP and the listing agent had told me that the seller liked the idea of closing quickly since the house is vacant. My people agreed to use another lender as long as the rate would be the same. I told the listing agent. She told the seller………who accepted my buyer’s last offer that was $3000 less than she had previously wanted.

Negotiating is a funny thing. I think most people view it as talking somebody into something they don’t want to do, beating them down, or trying to force their hand. Usually, those actions tend to just upset people to the point where they will shoot themselves in the foot as long as they also get to shoot you in the foot.

In this case, the seller was afraid the loan wouldn’t close on time and padded her counter offer. I was able to remove that fear by changing to a local lender so she could agree to my buyer’s price. To me, negotiating is about trying to get to the place you want to be while making it easy for the other party to agree to your terms. Often, like this situation, what is important to one party isn’t to the other. My buyers didn’t care who did their loan. They saved $3000 and it didn’t cost them anything to do so.

I met with a client yesterday who is about to use me for the 4th time. She is selling the last house I sold her. She told me something that I got a good chuckle over.

When we were house hunting for her, we saw one that was nice, but had rotting Masonite siding and worn out windows. I was soooo unexcited about that house for my client. She ended up buying another house that was very similar about 2 streets over. The one she got had new windows and vinyl siding. It was in much better shape.

Now is where it gets funny. She told me that she met the new owner of the rotting siding house during Trick or Treat last fall. The owner of the rotting siding house said she had looked at my clients house but did not like all the orange paint. I about fell on the floor laughing. See, that lady didn’t buy a better house over a paint color that would have cost maybe $1500 to change. She did buy a house that had an immediate need of $10,000 to replace worn out windows and rotting siding…..I mean rotting!

So, buyers take note. Changing a paint color is cheaper and easier than buying a house you don’t have to paint that needs a lot of work. Sellers, this should show you how important it is to make it easy for a buyer to like your house. And I guess if your house is really awful, you still might just sell it if you have a fresh coat of neutral paint.

I get asked a lot about how a less than stellar school district effects the value of a house. This is one of those deals where what I am about to say is contrary to what people think. Ready? It doesn’t effect the value at all. Really.

The reason is because the current value is likely already less than the same house in a similar neighborhood with a better performing school district.

It takes a change in school district to really make a difference in value. If you had a better school and got redistricted to a worse performing district, then you might see a decrease in value (or increase in value if you get a new better school.) Make sense?

Obviously a neighborhood full of condos is kind of exempt from this because few people in our market with school aged kids opt for a condo.

There are some exceptions in Lexington. The Waterford and Pinnacle neighborhoods are right beside each other. Both have the same middle and high school. Pinnacle goes to Veteran’s Park Elementary, which is one of the best performing schools in town. Waterford goes to Southern Elementary, which is not one of the best performing schools in town. Guess which neighborhood has a higher value for essentially the same sized house of similar quality? Waterford. Personally, I think it is because Waterford is just a little older and has a bit more character. Funny thing is that Waterford use to be in Veteran’s Park Elementary district. It did take a hit in value for a while there after the change, but it is such a nice neighborhood that it came back. Think about this too: You take a giant neighborhood of kids that had contributed to the excellent test scores while at Veteran’s Park and move all of them to another school. What do you think happened to the test scores of the new school?

Lexington has many neighborhoods that sell well despite not being in top scoring school districts. If you want to be in a better performing school district, great. If you home school, private school or don’t have kids, then don’t sweat it. There are more elements that determine property value than just schools.

I had a dude email me this week. Says he found my blog and asked if I do much with investment property. Then it dawned on me that I have never blogged about it.

The biggest client I have worked with on investment property is……..me! Want to hear my story?

I use to live in Gainesway. I bought that house for about 80% of it’s potential. I fixed it all up, doing most of the work myself. We decided to move. I really hated to sell the place since the market had tanked (this was 2007) and I had done so many long term improvements. I didn’t like the idea of giving somebody else the benefit of all I had done.

I was having lunch with my kids one day at their school and a mother I knew suggested I rent it. To be honest, it scared the heck out of me……..but I also liked the idea.

So, we bought our next house in Andover Hills and I “Finished” all the work I needed to do on the old house. I got it looking good and put it on the market. Having lived there, it was really hard to think about somebody else living there. I finally found somebody that looked good and we signed a lease. They have been there for 6 years.

I really didn’t have any plan to keep going, but I did. I found another small ranch house in Century Hills that had a remodeled kitchen and bath, plus a 4 year old heat pump. The house was just dirty. It needed paint and carpet. So, I bought it, did paint, carpet, new lighting and a new range. It rented quickly.

Then we decided to move again. After keeping my old house the last time, my default was to keep the Andover one after we moved out. This one rented quickly too. There aren’t many 2500 square feet houses for rent. While they cost a fortune for the turnover, they are easy to rent and I’ll have a huge asset for retirement.

I got this wild idea that I needed one that was more about cash flow than creating an asset for the future. I bought a shotgun house on the edge of downtown for $18k. There were lots of positive things about this street. I could see it turning around in time. All was well until the tenant had a home invasion. I think she was selling drugs. She came with the house. I would have never picked her. I sold it 4 months after buying it. It just wasn’t the property for me. Every investor has a different model, and this was not a good fit for me. Some people like the super low end rentals, some like multi-family properties. Everybody has their own niche.

I then got word of a property in Ashbrooke from a prospective tenant who looked at my little ranch. His family was selling it. It was pretty rough. I got that one for a pretty low price and spent 6 leisurely months fixing it up. It got an all new kitchen, hardwood, a lot of work in the bathrooms, new roof, windows, hot water heater and HVAC. For all practical purposes, it was effectively a brand new house. Other than maybe carpet and paint, I shouldn’t have to spend a lot on it for the next 15 years.

Because this gets addictive, I just bought two more small ranches. I think I might be done for a while though!

Here is how I roll:

1. If a house won’t cash flow on a 15 year loan, I don’t consider it. Neither should you.

2. I only pay wholesale (unless it is my primary residence). I like to be able to make all the improvements needed to keep it in good shape for the next 10-15 years and still get some free equity.

3. I like to make my houses a step above what other houses look like. People always want the best house they can find. By doing this, I have always been able to pick the best tenant.

4. I try to make long term decisions. I’ll do hardwood if I can because you can refinish it forever. I do wood cabinets rather than melamine film because I can paint them or repair any minor damage. Most landlords just go cheap and have to keep spending the same money over and over again.

5. I like single family homes. You can sell a house for retail whereas you can only sell something like a duplex to an investor, and they don’t pay anything over wholesale.

6. I only rent to the best applicant. I would rather have a house sit vacant than stick a bad applicant in it. It’s that whole long term verses short term thinking.

7. I always remember my tenants are people too. It is my house but their home. They get a good house and deserve a prompt response when anything needs fixed. Not only is that just the right thing to do, it is good business. Happy tenants stay longer. Long term tenants save you money. Everybody wins.

I’ve enjoyed getting to this point. I am always happy to help anybody wanting to do the same!!

On my last post, I wrote about all the things I liked about working with sellers. Well, today it is about buyers.

Here goes:

1. I like the search. It is exciting for me to help somebody weed through the not-so-great houses and find the best ones. What makes a good house? It is the right combination of practicality, condition, what maintenance costs are in the near future, resale value and the little things buyers often don’t think about. Let’s face it. Anybody can find a house they like. They don’t need a realtor to find a house these days. They need a GOOD realtor to help them make the best decision. Real estate often isn’t about making a good choice verses a bad one. It is about making a great one verses a good one. I view my job as being a consultant who manages the transaction for a buyer and not a sales job.

2. I like going in houses. I like houses and neighborhoods. It is fun for me to look at houses too. Every one I go in makes me a better realtor because I gain more experience and am exposed to more of the market. I never view looking at houses as a waste of time, even when people have a change of plans and don’t buy.

3. I like it when a buyer thanks me for pointing out something they didn’t think about. I get that a lot. It is exciting for a buyer to think they may have found “THE” house. No offense, but most of them just think about the positives they see. They might fall in love with the tile in the shower but not realize until they move in that there really isn’t much room for a table in the kitchen. Or that the road behind the house is busy street and will be noisy. Or that the windows will need reglazing. Or that the floor plan in the vacant house they are in is going to difficult for furniture placement. Or the things that affect resale value such as how the house compares to what is the norm for the area. There are a lot of people out there who think they got a good deal on their house. You never know if you really did until you try to sell it. I want to prevent you from having a house that will be tough to sell down the road. When the market was really bad, I had many sellers tell me the agent they used to buy the house didn’t point out these type of things to them.

4. I like doing the research to find the real value of the house. This takes a lot of time and thought. I look at recent sales in the area and make adjustments for all the differences. Some agents just boil it all down to statistical averages. They’ll say “That one over there just sold for $xxx,xxx and it was the same size so this one must be the same.” If all the finishes, features and age of systems are the same, that is okay……but that almost never is the case. I recently had a buyer who made an offer on a house where there were several other identical houses that had recently sold in the neighborhood. I could have just looked at the surface and been $10k off what this house was really worth. Why? This was one of the older houses in the neighborhood and the recent sales were practically new. The recent sales had less wear and tear and all the things like water heaters and HVAC had much more life left.

I could continue, but I am at 614 words now.

~The LEXpert