Buying Advice

When 2 out of 3 Ain’t Bad

by John Rice

Now that winter is here, I finally have some time to blog about some of my recent experiences.  Guess I’ll start out by telling you about a couple that was referred to me last Spring.  Great young couple.  First time home buyers too.  They were looking for something pretty specific.  The wife reminded me of myself, because she wanted to be on her deck/patio and not see another neighbor.  I am like that too.  I’m probably worse since I have this thing about having a lot that sits higher that the houses around me.

Anyway, we looked at a whole lot of houses, which is always fine with me.  My attitude is the more houses I get into the more useful I am in the future to folks.  It really helps me to know what is typical for the area.  Especially when I am doing comps.

I had been telling them they should by a house that they can see themselves in for a long time.  The way the economy is, who knows what the interest rates would be when they wanted to sell.  If we have inflation like the 1980’s again, there will be a lot of people who can’t afford to move up to a bigger house if interest rates shoot up.  I kind of shot myself in the foot I think since that upped the ante for the house.  But hey, it’s about them not me!

Like everybody, they wanted a move in ready house.  Off topic here, but if all the houses on the market were move in ready, we could pull ourselves of the housing slump.  There really aren’t that many move in ready………I mean MOVE IN ready houses out there.    Well, real estate is all about Location, Price, and Condition.  Those are the 3 realities we have to work with.  It is pretty rare to get all 3 in Lexington for under, well, just about any amount, especially under $200k.

So, I started dropping hints that it would  be easier to update a house than they thought……….if we found one that had everything else right about it.  At first, I don’t think they were that interested in that.  Like all home searches that go on for a bit, they started to get tired of looking.  That can be a dangerous point cause then people sometimes compromise toooo much just to end the search.  We didn’t go that far.  If somebody is near that edge, I’ll usually look at houses without them and decide if it is worth showing them.  People can only take so much disappointment.

They started to entertain the idea of painting, new carpet, updating lighting, etc.  Somehow we found the 2 most unreasonable sellers in their price range.  We made offers on these houses, I mean offers that I thought were VERY fair, only to have them rejected or countered on the far side of reality.  (One of those houses was taken off the market and rented and the other one is still sitting there vacant!)

Third time is the charm.  We found a great ranch with nice rooms, a nice lot, in a fine neighborhood.  We also found a seller who smoked, had multiple cats, and probably didn’t own a vacuum.  The place looked pretty bad.  It smelled and it was messy.  If I had taken this couple to this house any earlier, it would have become one of the forgotten ones.

So, we made an offer, it was countered by an agent who kept calling me “Babe,” and yes it was another guy.  I thought that was kind of an odd thing to call another guy as opposed to “Bud”, or “Dude”, but I took one for the team.  Finally they had a house!!

Since I got them into this mess, I figured I better help them with the worst part, which was pulling up the carpet.  Man, it was nasty.  Come to think of it, I don’t remember seeing a cat box in that house!!

While they were painting and making daily trips to Home Depot, I would occasionally get a text from the husband.  It always scared me a little since I never knew if it was going to be something like this:  “Curse U John Rice!  WTH.  Y did U sell us this house.  I’ll get U L8er for this!!”  But it was always just an update of how the reno was going.

This couple spent about 6-8 weeks painting, changing light fixtures, getting new carpet and decorating the place.  I’ve been over there a few times and it really looks great.  They’ve been over to my house, and it is kind of embarrassing for me since their house looks so awesome and mine, well, just doesn’t.

I think they are really proud of their house and that they did all the work themselves.  When you find a house that works for you on so many levels but only needs a decor-ectomy, you should buy it.  Those things are easy to change.  So now they have Location, Condition, and all within their Price.  They got it all, and all it took was 6-8 week.  A happy ending, especially since I also made some new friends in the process.

WHY AM I SO INTO NEIGHBORHOODS?

by John Rice

I woke up today asking myself why I am so into helping people pick a neighborhood that will work for them.  I think a lot of the insight I have that benefits my clients comes from my own experiences and driving around Lexington neighborhoods since 1986.   I have owned 3 houses in my life.  One of them was too close to the train tracks.  The Fire Department used the alley behind me to practice backing up their fire trucks.  BEEP!  BEEP!  BEEP! all day long every December.  The Driver’s Ed teacher at the high school also picked the spot in front of my house to teach kids to parallel park.  Every weekend, I would look out and see kids’ with their dad’s using MY car as their victim/reference car.  I then moved to another house that was near a busy road.  The problem there was that police would pull people over, they would turn down my street, stop in front of my house, and then get arrested if they had outstanding warrants.  There are more people than I ever imagined that get arrested from a traffic stop.  Then the house next door sold to a guy that turned his basement into a casino four nights a week.  Plus the people who bought behind me and kept four large dogs outside 24 hours a day.  Trust me……..I now have a sixth sense about these things!

For my current house, I have used my 6th sense to pick a winner.  We are on a long cul-de-sac of 25 houses.  We are not so close to the corner that my kids are at risk of getting hit when people fly around it.  I am well within the perimeter of the well-defined boundaries of my area.  And, for my own personal preferences, the house sits east to west.  I don’t like it when one side of your yard gets baked in the sun in the evenings.  I am also on a high point, which is good since I don’t like having a neighbor’s house looking down on mine.  I also don’t like to hear traffic noise.  I am about a mile from the interstate, but I can still hear some noise if the wind blows a certain way.  Overall, I think I would have a hard time reproducing all the secondary things about where I am now that I like.

So, I am always asking my peeps if this or that is going to bug them if they lived there.  I find that some people get really excited about the house, but don’t notice somethings that may bug them later.  Such as noise, the view, the location within the neighborhood, a steep driveway.  I look to see if there are signs of outside dogs in yards around them, neighbors that work on cars or motorcycles (no offense, my dad has like 12 motorcycles and I wouldn’t want to live next door to him!)  I also tell people to drive around their neighborhood on a nice warm night and when everybody is coming home from work to see what it is going to be like.  Of course we also hit the PVA to see how much is rental, plus the sex offender registry and crime map.

Those were all some practical things that can make or break enjoying your house, but there is more to this neighborhood thing you need to consider.  When you buy your house, an appraiser will pick 3 similar houses, ideally within the same neighborhood.  Well, when you go to sell, an appraiser will do the same thing!  When selling is on your mind, you suddenly care about things like if you bought the most expensive house in the neighborhood or if you over improved.  Why not think about that BEFORE your buy it?  So, here is the caution tape that you generally want to stay within:  Don’t buy the cheapest nor most expensive house.  Don’t buy one that doesn’t really fit in well with the neighborhood (Think round house on Mt Tabor Road.)  Don’t over/under improve.  All neighborhoods go through cycles, so don’t buy in an area that is in decline.  There is a ton of other stuff to consider, but the bottom line is that you really want to take a close look at the neighborhood.  It is much easier to change a house than it is to change a neighborhood.

School redistricting and home values

by John Rice

Well, I finally closed on a really awesome house in Andover Hills.  The buyers lived in a neighborhood that is very close and very similar to Andover Hills.  Why did they move?  They wanted to get their kids into a better school district.  The wild thing to me is that this is the 3rd time within a year I have known about people making a lateral move from less than a mile away………..All for the school district!

All the newer development on the northeast part of town didn’t have schools that were considered to be desireable.   Then came Athens-Chilesburg Elementary (ACE).  A brand new building that is only a few stop signs away from Andover Hills and good performance suddenly made a nice neighborhood even more desireable.  I’ve been watching this neighborhood for several years.  It seems to be attracting more and more young families.  Home prices also seem to have been really stable.  The prices for the neighborhood with the exodus have declined.

I have also seen the same thing happen with Andover Forest and West Wynd now that the new Liberty Road Elementary has opened.  Both neighborhoods were really struggling when the market slowed.  Then they built the new school.  Sales have picked up.   I think it is too soon to tell if that school will turn out to be a good one, but a new building sure puts it on peoples radar.  I also think not having a past helps.  As long as the test scores turn out to be at least average, all should be fine.

So, The bottom line is that a desireable school district makes a big difference in resale.  Even if you don’t plan on using that “Perk”, it is still wise to factor that into your decision making process.  I guess the only exception to that rule is if you plan on being in the house for a long long time.  Over, say 15 to 20 years,  what makes a school desireable can change a lot.

How to Save $100k in Beaumont

by John Rice

I’ve spent a lot of time with Beaumont on my radar lately.  I have had 3 buyers this year who picked that area.  That means that before we made the offers, I had to do a lot of research on days on market, what you get for the money & why, compare past sale prices to see how much of a hit the area has taken, etc.

One thing that has really stood out to me is that there is about a $100k gap between an almost new house and one that is about 10 years old.  I mean, we’re talking similar size, features, lots here!  Why the big difference?

It all boils down to the finishes.  The houses I have been in and seen that have or will sell for north of $500k are newer, have granite, trendy lights, hardware, lever style door handles in either bronze or nickel.  The ones that are worth about $400k have laminate counter tops and a lot of brass.  Some of the older ones don’t have as open of a floor plan, but enough do to make me not think that is the only reason for the big gap.

Here is what you do get that is similar:  About 4000 square feet, 4 or 5 bedrooms, 1/4 acre-ish lot,  most have finished basements, same popular school district.  In an era where exotic hardwood in wider sizes is popular, almost all the houses I have seen up to about $550k have the same 2 1/2 inch wide oak in a honey looking stain.

So, what is a buyer to do?  Well, if you have the time and money, I think the way to go is to buy one that is a little outdated and update it.  Let’s take a look at what you can do:  Want a dark stain for the hardwood?  $5-6k will get you floors that look brand new.  Granite?  $5-7k will impress everybody.  Stainless appliances?  Unless you go pro, figure $6k.  Update all the kitchen cabinet pulls, put on those bronze level style door handles….maybe $1500.  So far we have only spent about $20k.  That leaves about $80k for stuff like the master bathroom, new carpet if needed, a killer deck or patio, a man cave basement or anything you want.  Or you could just pocket that when it is time for you to sell!

4 things you need your Realtor to do

by John Rice

I am stuck in my dining room today while the flooring guys put down hardwood in the next room.  What a good time to blog about some of the things that have been on my mind.

I recently met a couple who paid way too too much for their house back in 2007.  They want to sell it now, but they are going to take a big hit.  I know you are thinking that stuff like that is happening all over these days, but there is more to this story that just a slow market.

This couple used a well-known agent in town.  They moved from a much more expensive part of the country.  To them, ALL the houses looked like a bargain.  They told me they didn’t want to use her again since she didn’t tell them that they were buying the most expensive house on the street.  She also didn’t do a Comparable Market Analysis (CMA).

I thought, well maybe there were multiple offers.  Sometimes if a person finds the right house and there are other buyers in the picture, you got to move fast…………Nope.  Not a multiple offer situation.

Well, being a little OCD, I thought that I would do a CMA based on the date they bought it.  It is easy to do.  I just plug in the date of the sale and look back 6 months to see what else had sold that would have been comps for the house.  It was as if it was early 2007.  The exact same info available to the other agent.  The only surprise was that they only over paid by $7-10,000, rather than the $10-15,000 I had suspected.

So, I have 4 things your realtor should do for you.  There are countless others, but these 4 will eliminate a lot of potential bad surprises for you.

1)  You guessed it.  Your realtor should do a CMA.  Sometimes my clients will ask me how much they should offer based on the asking price.  I usually tell them that we first need to find out what the house is worth.  If it is over priced by 10% and you offer 95% of the list price, you have just over paid.  You HAVE to know what the house is worth independent of the asking price.

2)  You need to know who owns the houses around you.  A quick check of the PVA website will let you know if  there are a lot of rental houses around you.  Nothing scares buyers more than buying in a high rental area.  See, the PVA site will tell you where the tax bill is sent.  If it is sent somewhere other than the house in question, odds are the occupant is not the owner.  I once had a client who fell in love with a house and was ready to buy it.  A PVA search revealed that about 40% of the neighborhood was rental.  One of the big builders in town owned about 20%.  I could have sold them that house and saved all the time we spent looking at about 20+ houses after that, but that is not my business model. 

3)  Your realtor should check the crime map before making an offer.  That will tell you what kind of neighbors you’ll have and/or what kind of people are coming into your neighborhood.  Bear in mind that a neighborhood under construction will have a lot of theft from people taking tools, material, copper from vacant houses, etc.

4)  Your realtor should verify the schools for the house.  I see a lot of wrong info on the MLS, especially for schools.  Sometimes agents get lazy and do things like assume that the closest school is the one.  My kids are in a magnet school that you can only get into by lottery.  I was amused to see that one realtor had put the school as the disctricted elementary school.  Can you imagine buying that house and thinking your kid was going there?

There are lots of other things a realtor should do, but to protect yourself, make sure they at least do these 4!