Buying Advice

Lexington Ky Real Estate: Tips to take some drama out of the deal

by John Rice

Sometimes real estate can be a pretty dramatic biz to be in.  I’ve always said that you know you are in an exciting field when they make TV shows about what you do.  No TV show I have ever seen was about the life and times of an accountant or librarian…….well, unless it was on BBC.

Most of the drama I have ever seen or heard about seems to revolve around either misconceptions or things that weren’t spelled out clearly…….So here are a few things to think about on your next real estate deal:

1)  Negotiating a price is the first stressful thing.  I have NEVER seen a seller feel like they couldn’t have gotten more out of their house, and have rarely seen a buyer feel like they got a bargain.  I don’t know how many deals I have had nor how many offers I have written, but my experience is that houses usually sell for what they are really worth.  I guess my advice here is to expect to pay a price that is within the range of the comps.  This is one of the toughest parts of real estate.  I’ve seen people get down to haggling over a few hundred dollars.  By the time you get to that point, you are really just trying to win.  Most of the sellers I have seen that have tried to win this battle end up losing……and it is kind of a hollow victory when you didn’t sell your house……or if you are a buyer who has to keep looking.

2)  Write everything that you expect to come with the house in the contract.  I just had a listing where the buyer’s agent didn’t write anything in the space for that type of thing.  That meant that we really didn’t have to leave all the appliances, blinds, window treatments, or anything else that wasn’t really a part of the house.  I also just had a deal where a seller didn’t leave a framed mirror over the vanity in one of the bathrooms, and the buyer thought it should have stayed.

3)  That closing date on our contracts is really just a target date that we are all working towards.  It is not a firm committment and there is no penalty for going past it unless that is added.  The lingo used to make it a firm time is “Time is of the essence.”  Only when you see that is the date binding.  One of the reasons for this is that we can’t really hold the buyer’s feet to the fire on the timeline because they are not fully in control of the process if they are getting a loan.  As a buyer, you usually don’t want to write “Time is of the essence” because if your loan isn’t done on time you could face a penalty.  Sellers don’t have to do anything except move out……and I’ve only seen that happen once (Talk about drama.  That was a mess!)

4)  Another high tension spot is dealing with the inspection.  A seller almost always feels that they have lived in the house for so many years just fine and shouldn’t have to do any repairs.  A buyer always feels like they shouldn’t have to buy a house with a problem.  I’ve only had a few times where the seller just totally refused to do any repairs.  Most of the time they will do some, but not all of the repairs.  I think when you expect the seller to not do much, you open yourself up for a pleasant surprise.  When you expect them to do it all, you will certainly feel disappointed.  You know it is a true compromise when ain’t nobody really happy.

5)  Next is the Final Walk-Thru.  I’ve not seen to many problems happen here, but this is where it becomes obvious that there was some confusion about what was to remain in the house if you didn’t follow my advice above in item #2.  In an ideal world the seller leaves the house fairly clean and hasn’t filled all the garbage cans nor left stacks of garbage on the curb…..but that happens sometimes unless the closing is on garbage day.

All of these suggestions will help……but there is still no guarantee you’ll have a stress free transaction.  Things go wrong in real estate.  Just take a look at all the people involved in a typical deal:  Buyer, buyer’s agent, seller, seller’s agent, home inspector, appraiser, loan officer, underwriter, closing attorney.  There are so many opportunities for an “i” to not get dotted or a “t” to not get crossed that I am surprised when everything goes well.  While you can’t control everything nor everybody involved in a deal, you can control how you feel.  It is too easy to focus on the things you don’t like.  Remember that you are about to either get rid of your old house or are getting the house you picked out of all the ones available to you……..and focus on that!

Do you need wiggle room?

by John Rice

This is one of the questions I get asked a lot when I list a house.  Just listed 3 in the past week, so that is why it is on my mind so much.  I think I probably always freak out my sellers when I tell them that they don’t need to price their house way over what we anticipate it will sell for.

I guess the biggest fear, and I can understand it, is that people will assume that there is wiggle room, and that they are going to have to sell for less…..and that just isn’t the case.

Sure, there may be people who come along and offer waaaay less than you are asking.  But you know what?  I don’t consider them to be real buyers.  When I was a new Realtor, I had some people that would just go from listing to listing making crazy offers.  Eventually I would see the writing on the wall and I’d let them keep perpetuating their hobby without me.   I doubt any of them ended up actually buying a house.  Why price your house based on nuts like that out there?  Doesn’t it make more sense to price it where it will be attractive to the people who may actually buy your house?

Check this out.  Back in about 1997 I had a lawn care business.  I had grown it to the point where I needed a dedicated truck.  I saw an ad in the paper for a 1993 Ford F-150 with 48,000 miles on it.  The price was $5980.  I knew that was a good price.  Took it for a test drive.  Wanted it.  Sat in the little cubicle with the sales man and made him an offer.  He blew his chance to remind me that was a fantastic price.  What he did was make it a battle.  Dude told me that they “Couldn’t sell that truck for one nickel less than that price!!”  I was floored.  Don’t you always haggle when buying a car?  I left to see what else was available since I couldn’t go back there without feeling like I had lost to that guy.  After looking at more trucks, I realized THAT truck was by far the best one and was at the best price anywhere in town that day.  I just didn’t know what to do.  Soooo, I called the wisest man I know…..my Dad.  I told him that the truck was the best deal and that I wanted it, but just couldn’t go back there.  Being the wise person that he is, he told me to go back and offer them a nickel less.  Yep.  Offer $5979.95.  I did and I got the best truck at the best price that was available that day anywhere in Lexington.

Guess what?  Real buyers will recognize the value of your house.  They are looking at every house in their price range just like I did with that truck.  Sure, we are accustomed to wiggle room, but people don’t mind paying near or full asking price if the house is worth it.  I have done this with several of my listings will great success.  I had one where they came back twice with lower offers.  We just politely said “No thank you.  Take a look at the comps.  We’ve priced this house for what it is worth.”  They, like me with the truck, knew it was the best available house at the best price.  Here’s the difference though, I didn’t get an attitude with the other agent like my salesman did with the nickel issue.  We ended up selling the house for 99.2% of the asking price.  We came down just a little so the buyer would feel like they won…..but in reality, we all won that day!

Did you pick the right house??

by John Rice

How do you know if you’ve picked THE right house?  What IF a better ones comes on the market after you make a decision?  How do you know you WON’T regret your decision?  Welp, if you think I can reaaaaally answer those questions, I must be a better Realtor than I think I am.

There is no way that you or I can really answer those questions, so I am not going to try.  But, what I can offer are some tips based on my experience. 

How do you know if it is THE house?  I think that any house you are afraid somebody else will buy out from under you shows it is pretty high on your list.  If you can just totally see yourself  living in the house, it may be the one.  Same thing with comparing other houses to it.  If you are doing that, it means that one is at the top of your list.

How can you prevent regretting your decision.  I think the best thing you can do is to take your time in reaching your decision.  Granted, sometimes when everybody else wants the house too, you don’t have that luxury.  I like it when people want to see a house for the second time.  You always notice more of the bad stuff on the second visit.  It is even better if you come back at a different time of day.  Rooms will look different with the sun on the opposite side of the place.  Something that I’ve always told buyers to do, and not many actually have done it, is to drive around the neighborhood on a nice warm Friday or Saturday night.  That will bring out anybody that will be annoying, so you won’t have any surprises there!  Tough luck if it is winter.

There are a couple other things that bring on the regret:  Having a tight timeline and getting so tired of looking that you just want it over with.  If you have a tight timeline, preparation is the key.  I do a lot of work for people moving to town.  They’ll only be in town for a few days and have to pick a house.  I try to work with them as soon as I know they will be coming.  It all usually happens  by e-mail, but we chat about neighborhoods, parts of town I think they’ll like, etc.  Then I’ll start previewing houses, even taking videos of the houses to send them.  At this point it is all about eliminating houses.  You’re not really looking for the right one, you’re trying to whittle down the list to a manageable amount for them to see when they get here. 

Now, about getting tired of looking.  If you find yourself here and can do it, just take a break.  It is really a scary place to be.  Take a week off from looking….even online.  If you can’t take a week off, have your agent preview houses.  By the time you get to this point, your agent should really know what will work for you and what won’t.  Of all the questions I asked at the beginning, this is the one I see the most.  It’s like a sunburn.  It’ll sneak up on you and you’re not aware of what is happening.

Okay.  One more question left?  How will you know a better house won’t come on the market as soon as you sign a contract?  Simple answer.  You won’t.  I tell people to quit looking at houses online once you get past the inspections.  If you don’t look, you’ll never know.  And if you are the type that won’t take this advice, remember that sometimes houses look better online than they do in person.  You are comparing your house in reality to the select pictures that the listing agents wants you to see……So that other house probably isn’t as good in reality as you are picturing it in your head.  You got a good house….now just enjoy it.

When Location Takes a Back Seat

by John Rice

This may surprise you, but there are sometimes that I don’t always advise people to make location the main priority.  I know, almost all my posts say to pick the neighborhood first, then the house.

So, when do I switch up my logic?  When I have buyers who want to buy in Lexington for under $120,000, especially under $110,000.  Most of the time they are first time homebuyers.  Let’s face it, it is hard to get into a house you’d even like in Lex for under that, and there isn’t that much of a difference between most of the neighborhoods.  Sure, there are ones to definitely avoid, but for the most part, there isn’t much difference in this price range between Masterson Station and McConnell Springs, Skyview and Southland, and any other neighborhood of similar age and style of houses.

When I’ve been out with first time buyers, they are most interested in a house they like and can live in…..And I can’t blame them.  I think I would opt for less of a location to get a house with a 2 car garage and 2 bathrooms verses a slightly better location with only 1 of each.  Which is more convenient:  Driving further to places you go or waiting for somebody to get out of the only bathroom in the house?   When you got to go,  the only “Location, Location, Location” you’re thinking about is an available potty!

Which leads me to mention something I read the other day.  It said that young folks and first time buyers are heading towards the suburbs, which is contrary to what was predicted just a couple years ago.  Now, Lexington doesn’t really have suburbs.  The closest we come to the burbs are newer neighborhoods on the edge of town.  Not always the most convenient location, but full of affordable houses with more than one bathroom and garage.

I guess I was amazed that was even newsworthy.  I mean, that is how it has always been here, and should be obvious to anybody who has ever lived in a one bathroom house.

I’ve worked with enough first time buyers that I know they want the most house they can get, and are willing to compromise on a convenient location.

One of my favorite examples of this was recently.  I had some first time buyers who were in this price range.  We looked at several houses.  Many were older houses with one bathroom and were too small.  Others were newer, but had no yard.  Like a lot of first time buyers, we started looking on the edge of town for good deal.  This was actually better for them since it was easier to get to their jobs.

We got lucky and found a foreclosure.  They got a lot of house for the money.  All they really needed to do was paint and address some carpet issues.  Not everybody gets this lucky.  What I like for this couple is that they aren’t going to outgrow this house in a couple of years.  That is another reason I tell first time buyers to get the most house they can for the money.  See, when a lot of them are coming out of an apartment, 1200 square feet seems big to them.  Then a baby comes along, and they are maxed out.  They call me,  I sell their house, they pay commissions, new closing costs, and moving costs to get into a bigger house.  When houses were appreciating rapidly, that was okay.  They aren’t now.  It just makes more sense to make long term plans these days.

Another reason getting the best house regardless of location makes sense is…..when they go to sell, the next crop of first time buyers will also be wanting to get the most livable house for the money, even if they are on the edge of town or close to nothing.

So, that is one of the few times when focusing on the house more than the location works.

My worst day in Real Estate

by John Rice

I’ve been waiting to blog about this deal for quite some time.  See, I have an old friend who traded his house towards a new one.  I did a CMA and came up with a value for their old house.  Told them if I were to list it, I’d probably do it at about $235k.  We negotiated the price with the investor who would be taking it in trade.  I got a good laugh when the investor put granite counter tops in the kitchen and painted the place, then listed it for $269k.  The place had only appraised for $225k just a few weeks earlier.

Well, my friends (the previous owners) watched with delight as the days on market for their old house racked up.  We were always joking about the price.  Then we both got that sinking feeling in our guts when the place sold for $272k!!!!!!!  WHAT???????

I knew that the new buyer had rolled their closing costs into the loan and had traded their old house in on this one since I called the listing agent……so I KNEW that the house wasn’t really worth $272k.  My friends were pretty cool about it, but naturally they had a LOT of questions for me.   If they didn’t trust me, it could have gotten really ugly!

So, how did this happen?  Well, to begin with, let me tell you that the listing agent was also the buyer’s agent, and this agent has done a lot of work for the investor who is always taking these trades.  That right there should tell you that this ain’t no usual “Arm’s Length Transaction.”  Who do you think this agent favored in the deal:  The buyer that would be represented once or the investor that keeps feeding the agent listings?  Then, you throw in the fact that the buyers traded in their old house.  There are a lot of ways to shift numbers around here, just like trading in your car.  I knew that when my people traded this house, there was a potential to play with numbers, so what I did was to make sure we worked with real numbers.  I focused on what their old house was worth and what their new house was worth.  Then we treated the deal like the two separate transactions it really was.  But, the buyer who paid too much for this house used the listing agent who was buddies with the investor.  Those poor people didn’t have a chance!

I’ve been waiting for enough time to go by so that I could show my friends the price that their old place went for was not typical of the neighborhood.  In the year that has gone by, three similar houses in the same neighborhood with basements have gone for between $212k and 224k.  There have been 7 other sales within the neighborhood of houses without basements, all under $200k.  Wonder how the new owners feel about this??

You really have to look at the parties involved when you look at comps.  There is a house in my neighborhood that just sold for top dollar.  I was really excited until I looked to see who represented the buyer in the deal.  The listing agent was the one representing the buyer….and…..oh….the listing agent was also the seller!?!  I don’t really consider that to be a normal transaction since the person giving advice to the buyer was not only the listing agent but the seller as well.  Now I’m not saying he did anything wrong, just saying that it takes a really honest person to have not steered THAT deal in the agent-seller’s favor.

So, the bottom line is that sometimes odd things happen in real estate and you can’t assume that a sale price really reflects market value.  There are enough bad agents and stupid buyers to ensure that things like this continue.

Both of these buyers were like the kid in the picture about to take on the sumo wrestler……It isn’t really going to be a fair match, is it?