Buying Advice

Zillow=TMI

by John Rice

Okay.  I woke up in the middle of the night like a good 40 year old.  I couldn’t get back to sleep because I was thinking about an out of town client who relied on Zillow more than he did me.  It kind of became a real problem for me.

And here is why.  When you check out Zillow and you know nothing about the local market or neighborhoods, you can draw wrong conclusions.  On Zillow.com, there is a tab  that shows you recent sales.  They must mainly sort those by zip code, not the neighborhood.  Often, you see sales from a different neighborhood that can make you think you are about to pay waaaay too much or you are getting a bargain.  If you enter a cheaper listing that is by a nice area, you can think the cost per square foot is a bargain in comparison to those recent sales……….and the other way around.  Apples to apples and oranges to oranges.

Another thing that I had to explain was how the assessed value (Tax Bill) worked.  See, the house he was wanting to buy had been owned by the seller for several years.  It showed a taxable value that was much lower than it’s fair market value.  What’s up with that?  Well, the PVA often only reassess the taxable value when the house is sold.  The new assessed value will be the sale price.  If the house hasn’t sold in several years, usually the taxable value will be lower.

Every so often, the PVA will send out its people in their little white Toyota Pruises to snap a picture of your house and then come back to the office to compare it to recent sales.  They don’t actually go inside the houses.  It is kind of hard to get a feel for value from only the outside of the house.  Plus, they know that tax payers don’t want to over pay, so they are pretty conservative.  That may change in today’s world of budget shortfalls.

I own a house that I know I can sell for about $160,000.  I have been paying taxes on only $135,000.  The house next door sold for that much about 4 years ago and they guessed mine would be the same.  I’m not going to call to tell them that my house is under assessed!

All this leads me right into the next issue.  They have an ariel map of the neighborhood with all the assessed values.  Based on what I just told you above, you are right to assume that most of the dollar figures that appear to be painted on the roof tops of the houses are much lower than what most of them are probably worth. 

You should have seen me trying to explain all this to my untrusting client.  I am sure he must have thought I was making all this up as I was telling it.  What I had to do was pull recent sales from within the neighborhood.  I was able to show him 2 other houses that were the exact same model as the one he wanted and had sold within the past 6 months.  We did a few adjustments for thing like one had a fenced yard and newer appliances, and came up with what the real market value was.   It was much higher than what the seller had been paying taxes on for all those years.

So, feel free to use Zillow.  It is a useful tool.  But realize that you need to know how to interpret the info that they give you.  You always want to compare a house you want to make an offer on to similar ones within the same neighborhood that have sold within the past 6 months.

How to make a wise decision when buying

by John Rice

Ever wish somebody could tell you EXACTLY what to do to make sure you don’t buy a house that will depreciate?  That was something that nobody ever thought about just a few years ago.  Back then, any house in this area was selling and selling for top dollar.

Here is my list of what to find in your next house.  The more of these you have, the better your chance of getting a house that will be a wise investment.  Remember, as long as there is a real estate market, people will always buy the best houses that are on the market!

LOCATION:  You hear a lot about this in Real Estate.  A good location really just means that it is convenient to SOMETHING or has a unique asset!  It can be shopping, the airport, the interstate, schools, a park…..really just anything unique or desireable.  A house probably doesn’t have a good location if you find yourself thinking, “Gee, other than being nowhere near anything, that house is great!”  A neighborhood like that will always have to sell on low price.  That is why in large metro areas people buy in the suburbs.

SCHOOLS:  Buy in an area that has at least average performing schools.  People moving within Lexington seem to be fine with a decent school.  Out of town buyers always want to be in the best school district.  Look for an area that has a well rounded mix of elementary, middle and high schools.

NEIGHBORHOOD:  New is nice, but established is always better.  Pick a neighborhood that is large enough to not be negatively impacted by the surrounding ones.  Usually a cheaper larger neighborhood will bring down a smaller nicer one.  The opposite holds true too.  Kenwick use to be an inexpensive area.  It was surrounded by Fairway, Ashland Park and Bell Court.    Its location and surrounding neighborhoods started putting it on people’s radar in the 1990’s.  You also want a neighborhood that has its own distinct identity.  I don’t mean it has to have giant columns in the front with the name chiseled in stone.  Chevy Chase doesn’t have anything that says “You are now entering Chevy Chase”, but you know you are there.  That is identity.  If an area doesn’t have an identity, then it isn’t known for any of the items I am talking about here.

LOT:  Ideally, you want to have a lot that is located well within the perimeter of the neighborhood.  That insulates the impact from cheaper areas that border your neighborhood.  While I am on lots, get one that is at least average size for the neighborhood.  You don’t want one of the smaller ones.  It will turn away a lot of buyers……unless we have another frenzy at the time you go to sell.

FLOOR PLAN:  You want a house that has a useable layout and typical sized rooms.  A tiny kitchen in a 4 bedroom house will not bring in as much money.  You’d need to price it lower than the competition or upgrade it to make somebody be willing to overlook it.  If you find yourself saying things like “If it wasn’t for______, that house would be perfect!”, then you know the person looking at houses when you go to sell will say the same thing.   In a slower market, buyers get very picky.

Basically, the goal is to get a house that will be someone’s top pick when it comes time to sell.  I call this ‘Thinking Outside the House.”  Most buyers just want to find a house they like.  The reality of Real Estate is that a lot of a house’s value is determined by things outside of the house itself.

Some of my Favorite Areas

by John Rice

I spend a lot of time analysing data and giving people advice on property values, school districts, resale potential, etc.  Don’t get me wrong.  I love doing all that, but today I wanted to write about some parts of town that I like just because I like them.  They have a certain vibe that I find attractive. 

Now, it goes without saying that places like Chevy Chase, Ashland Park, and about anything in the 40502 zip would make the cut.  They do, but  I wanted to share some places that most of us can actually afford!

Even though I don’t plan on living in another old house, I still find them attractive.  I spent years in Kenwick, and my first house was almost 100 years old.  I get excited when I see a neighborhood that survived the 70’s and still has it’s original charm.  One such neighborhood is Meadowthorpe.  It used to seem waaay out, but now the new development out that way has it on more people’s radar.  It has a good vibe and a lot of mature trees.   An great neighborhood for taking walks.

2)  Next on my list is what people call “Southland.”  It is that area around Southland Drive/Clays Mill/ Pasedena.  50’s ranches and a few Cape Cods plus mature trees give it charm.  Plus it feels really close in town.  You also get all those shops on Southland, which was the 50’s and 60’s version of Hamburg.

3)  Gainesway is a pretty neat neighborhood too.  I like the larger lots, rolling terrain, plus you are just outside New Circle Road from the Lansdowne Shoppes.  There are a few cool contemporary houses that are interesting  too!

4)  I like Andover Hills a lot.  So much so that I live there!  I liked it when it was new and still like it.  I am not a golfer, but I enjoy seeing the golf course’s lush landscape. It also backs to Jacobson Park and Lakeside Golf Course.  Plus it is 5 minutes to Hamburg.

5)  Eastwood is a great neighborhood.  It is off of Liberty Rd.  It was one of the first neighborhoods out there.  It is just old enough to have been developed with wider lots.  The older parts of the area have the best vibe.  I think for the money it is a great deal.

6)  Hartland is one of the prettiest neighborhoods in town I think.  I really love the landscaped median that run through the whole main drag.  They also have the centers of their cul-de-sacs landscaped.  Plus you get a city park right there too!

7)  Lake Crossing is kind of a hidden treasure.  It is off of Richmond Road just past Man-O-War.  What is cool about this area is that several of the houses back to the reservoir.  There is also really just one way in and out once you get there, so it feels private and secluded.

8)  While it has more than its fair share of negatives to contend with, Eastland is still an area that I like.  The part with the bigger houses sure offers a lot.  Huge lots, big ranches, a handful of contemporaries to admire as well as a handful of 60’s/70’s design disasters.  The vibe I like is one of spread out space. 

9)  Squire Oak is a cool little area.  It is tucked away beyond the Seaton Center.  It has a cool little park with big trees and bridges over the creek.  For sure, one of the most picturesque parks in town.  Also, some of the houses back to one of the big horse farms.  One that you know will always be a horse farm.

10)  Now, this one isn’t for everybody, but if you want to feel like you are in Gatlinburg, then Walden Grove is for you.  It is off of Wilson-Downing near Belleau Woods.  All the house are contemporary.  There probably isn’t another neighborhood in Lex with this amount of trees. It really feels like you are in a cabin in Gatlinburg, just substitute gently rolling hills for mountains.

Well, those are some of my fave areas.  What are your’s?

The Half Million Dollar Surprise

by John Rice

I have a client that is interested in a $490,000 house.  I called to schedule the showing today.  I was totally floored that not only is the place already under contract, but there are several other people who are “in line” if the contract were to fall apart.

This house has been on the market for over a year.  It is in northern Jessamine County where the market is flooded with houses over $500k. 

It just goes to show that as long as there is a market at all, the best houses for the money will always sell, even at this price point!

25 Random Things to Know About Building a New House

by John Rice

Since these “Random Things” are so popular, I thought I would write one about the stuff you need to take into consideration when you are building a new house in a new neighborhood:

1)  Check the zoning of the undeveloped areas around you.  Agricultural could turn to residential, but industrial hardly ever changes to residential.

2)  Check to make sure that some of that land around you isn’t going to be high density apartments or commercial.  Neither will benefit the resale value of your house.

3)  Ask where things like utility stuff and telephone poles will be. 

4)  Verify the school districts for the neighborhood.

5)  Find out what the Home Owner’s Association will be like?  Rules? Fees?

6) Realize that things change.  Have you seen those nicer, bigger houses near Wilson-Downing as you approach Belleau Woods?  That whole neighborhood was going to be larger houses until the interest rates shot through the roof in the early 80’s.  The builders then built the smaller houses that were selling.  The same thing is happening now as sales of houses over $250k are slow.

7)  All those lines on the blueprint for the lot mean something.  Can you tell if there will be a storm sewer drain in front of your house?  Are there any easements for utilities that will prevent you from adding on to your house later?  Also, if the side yard setback is 5 feet, that means that likely the houses next to you will be 10 feet apart from your house.

8)  As you pick a lot, think about what the traffic patterns may be like down the road.  If there is a big street that abruptly ends, it is likely that it will keep going as more houses get built.  Autumn Ridge Drive is a prime example.  That was a nice quiet street, even though it was the main drag for the neighborhood.  Who would have ever thought 15 years ago that it would become a cut through to Hamburg?

9) Think about how the water will drain from the lots around yours.  You don’t want every body’s water to come to your yard.

10) If there are enough houses built, drive around and see what other models are built.  You don’t want to pick the 4000 sq ft model and find out that most of the neighborhood is going to be 2000 sq ft houses.

11)  Don’t go overboard with the upgrades.  Most of them don’t add any value to your house when you go to sell.  A few add value, but it is less that they cost.  Pick them only if you are content knowing this.

12) Think about the future as you make your selections.  Ever walk into a house that hasn’t been updated from the 70’s?  The reality is that all that stuff that you pay for now will be out of style sooner than you’d like.  Neutral is always better for resale.

13) These are tough times for builders.  Avoid giving them a bunch of money to start the house.  It is unlikely, but occasionally builder are robbing Peter to pay Paul.  When it catches up with them they have no cash left to finish your house.  Years ago there was a custom home builder who was taking huge sums of money from people to build their dream homes.  Turns out he was using that money to live large. 

14) If you don’t know much about the builder, ask for addresses of other houses they have built, check the BBB, check the PVA to see how many other lots they have, and check to see how many houses they have on the market.

15) Find out what kind of warranty they offer.  Most will either do a 1 Year Written Warranty that they provide, or they will buy a 2-10 warranty that is kind of like insurance.  It includes 1 year coverage for workmanship, 2 year coverage on the systems of the house, and a 10 year structural warranty.

16)  Before you write the offer, check to see how many other houses the builder has on the market.  They can only borrow so much money.  Sometimes you can get them to be a little more flexible on price if they need to sell something before they borrow more money, but not a HUGE amount.

17)  Read the contract!

18) Most of the contracts that I have see allow you to have the house inspected before the closing date.  Some use wording that says you can ask for repairs, but then go on to say that the builder will fall back on Building Inspector for the decision.  Guess what, the building inspector has already said it is okay if the city issues a Certificate of Occupancy.  That means that they really are saying that they DON’T have to make any repairs!

19) I aways recommend an inspection.  Occasionally something gets over looked in a house even with the best builders.  The worst case I have ever heard of is where a house had no insulation in the attic!  The owner didn’t find that out until he sold the house and the new buyer’s…………had it inspected!

20)  A lot of builders like to finish minor stuff after you close.  I always try to get them to get it all done before the closing.  It is the only leverage that you really have.  If it is a builder that I know nothing about, I insist. 

21)  Sometimes things don’t get done before the closing.  Sodding is one of the most common items since it is a seasonal thing.  Since the contract is consummated at closing, make sure that you put something in writing that will survive the closing.  Most builders will come back, but I am not that trusting when it comes to your money.

22)  Make sure that the builder has obtained a Certificate of Occupancy from the city.  If you are getting a mortgage, odds are that you wouldn’t even be at this stage if there wasn’t one issued.  The lender wants to make sure that the house can be lived in too. 

23)  I always recommend buying Owner’s Title Insurance.  Especially for people that will have a lot of equity.  Your lender has you buy Title Insurance when you get a mortgage, but it covers THEM!  It is rare that there is a title defect, but if it happens you will wish you had spent a few hundreds bucks to protect yourself.

24)  Close the deal

25)  Move in and enjoy!