Buying Advice

What makes a good time to buy? It’s not what you think

by John Rice

In my nearly 20 years of being in this business, I have rarely seen anybody think it was a great time to buy a home.

Most of our perception of when was a great time to buy is retrospective.

2008-2010 was a fantastic time to be a buyer. Rates were really low, inventory was up, prices were down. But know what? Every buyer was scared to death to buy back then. Why, because like any time though history, there were reasons that made it scary. There will ALWAYS be reasons that make any moment in the future seem like a scary time to buy: Wars, recessions, politics, interest rates, employment stats, the price of gas. There will never ever be a time when all of those variables align to make you fell like it is the perfect time to buy a home.

Now I’m not just saying this because I’m a realtor. To most realtors, it is always a good time to buy. Interest rates going down? BUY and save money. Interest rates going up? BUY before they go higher. Inventory is up? BUY while you have options. Low inventory? BUY just to get in the market.

Know what I say? Buy when the time is right for you. It doesn’t matter what the market is like. It doesn’t matter what the interest rates are. Buying will always get you ahead because you will be buiding equity with every payment. You are investing in your furture though real estate, all while having a place to live that you can control. How will you know when you’re ready:

  1. When you can afford the payment and to maintain a home.
  2. When you know you will likely be able to stay in the home for at least the next 4-5 years.
  3. When your life is settled enough that the house you can afford will meet your needs for the next 5 years.

If you are at the point when all 3 of those conditions are met, it’s time to start shopping. Like I have been saying for nearly two decades: Buy a house on a decent lot, with a good floor plan, in one of the best neighborhoods in your price range. These three things will make your house desirable in any market when it is your turn to be the seller.

Buying a home will always be risky. Just be smart about it and minimize those risks though planning and good decisions.

Short term pain-Long term gain

by John Rice

I was showing one of my rental houses to a prospective tenant yesterday. This young lady said she was torn between buying and renting.

Know what I told her…..while she was standing in my house which was for rent?

I told her to buy a house if she could. I said that I think right now it seems scary and might not be any fun to have such a high interest rate, but in 5 years, she will surely look back and be glad she had bought something.

Why? Because history shows us that rates won’t stay high forever. It also shows us that prices won’t stay where they are right now forever. The odds are very strong that you will one day be able to refinance and the odds are even stronger that prices will at minimum rise slowly over time.

Also because when you are paying rent, you are paying down somebody else’s mortgage and are getting absolutely nothing in return other that getting to live somewhere for the next month. When you buy a house, at least part of your payment goes to building equity in an appreciating asset. Then, too, there is the fact that the principal and interest portion of your mortgage payment will NEVER go up, unlike your rent.

About the only time I advise people to rent is when they know they will not be in a house for more than 3-4 years. If you know you will need to move again in that short of a time, you may come out ahead by buying but the difference is so slim that it may not be worth the risk.

So pretty much, I told here that buying right now is a short term pain, but a long term gain. For her own sake, I hope she can buy a house.

Where to buy when you can’t afford the neighborhood you really want

by John Rice

Like everybody these days, I am sure you are running the numbers to see how much house you COULD have afforded when interest rates were around 3%. Quit doing that! All you are doing is making it harder to live in today’s reality of rates over 7%.

Instead of sitting on the sidelines waiting for rates to drop so you can get that dream house in your dream neighborhood, how about still buying something that has a similar vibe but will have a cheaper mortgage payment?

If you love the Tates Creek area, and I mean the part with the 40502 zip code, and you want a house built in the middle of the last century, Lansdowne is likely your dream spot to be. And for good reason. Those giant lots and large homes have been fantastic since Day 1.

But you’re looking at financing most of the $600k to million dollar plus purchase price and your wallet says “No Bueno”. What do you do? Stay where you are and be unhappy? Keep renting and get absolutely no financial gain?

No, you look in Lans-Merik since it is right across Tates Creek Road from Lansdowne. Here you will get almost as large of a lot and the houses are mostly from the 1970s but it has a similar vibe. You will end up spending between $400k to maybe just over $600k.

$400k too much? While it is technically not in the 40502 zip code, Gainesway is literally just across New Circle Road from Lans-Merik. Here you will get a 1960s home on a larger lot in the $250-400k range.

Backup offers are a bad idea except for this 1 reason

by John Rice

Backup offers.

They seem appealing to buyers who missed a house they wanted.

However, they are 99% of the time, a bad thing to do.

Why?

  1. It ties you up. You have an accepted contract on a house contingent on the primary buyer’s contract falling apart. Should another house come on the market that you want to make an offer on, you have to rescind your offer IF you have verbiage in your contract that allows you to do so. If you don’t have that language in the contract, you are stuck. You are missing out on houses you could get right now in hopes that the sale of one you previously missed will fall apart. This is a recipe for never getting a house.
  2. You are really helping the seller more than yourself. Think about it from the seller’s perspective. You are putting them in a spot where they have two people wanting the house. If the primary buyer asks for repairs after a home inspection, the seller is just going to say “Look, I’ve got a backup contract. If you want this house you’ve gotta do what I want you to do. If not, walk away and I’ll just let the other buyer have it.”
  3. You are going to pay a premium. The seller has no reason to accept an offer less than the primary contract they already have. If you’re a seller with an accepted contract for $400k on your house, would you bother with an offer for $390k? This means you are most likely going to have to make an offer stronger than the offer they currently have with the primary buyer.

When is that one single time when it might make sense? If the house is 110% exactly what you want and you are not going to be happy with any other house. If that’s they case, make that backup offer. Pay too much for it. Give the seller all the power. Pray the sale with the primary buyer falls apart. Then wait and see what happens.

If the house is just a really nice one that you liked a lot, just keep looking. Another one always eventually comes on the market. Oh, and remember, the best way to not have to make a backup offer is to have been the strongest offer the seller got when it was on the market. Beat the other buyers when you have a chance. Be that primary buyer that another buyer hopes will not be able to close the deal.

Should you buy that updated house?

by John Rice

It is soooo easy right now to sell a pretty house. Always has been but when there is so little for sale, it is especially easy.

You know the formula: White shaker cabinets, quartz tops, lots of trim, paint as much black as you can, etc.

I get it. Those houses are so pretty. The problem is that a house that’s only attraction is its pretty new finishes might not be a good enough reason to buy it.

I blogged a few weeks ago about a former Airbnb house I showed that sold for way over list price and got a crazy amount of offers. I pointed out to my buyer several things showing it wasn’t all that great of a house. The driveway was sort of steep and in bad shape. The old wood windows needed reglazed. It wasn’t really that great of a house, it was just pretty and most of what made it attractive was the furniture that didn’t stay with the house.

It is great if you get a pretty house but that isn’t enough of a reason to buy it.

At its core, whatever house you buy needs to have more than trendy finishes going for it. Why? Because one day those fancy finishes will either be out of style or worn out and you’ll be left with a house that doesn’t even have one great feature anymore.

Here is how to pick a house:

  1. Most important thing is a good location. I know that phrase that is thrown around a lot, but a good location can mean any reason that spot is desirable. It can be because it is close to something, far away from something, be in a desirable school district, be close to highway access, or just anything that makes it more desirable than somewhere else.
  2. If a house passes that test, then examine the lot. You want the lot to be equal to the others in the neighborhood or be better. Flatter is usually more desirable. Less slope on the driveway is usually better.
  3. Then think about the floor plan. It needs to be functional and fit in with the neighborhood. If you have a closed off floor plan in a neighborhood where most are open concept, then it might be harder to sell in a softer market. If something is odd about the floor plan to you, it will be odd to future buyers as well.

Where do those fancy finishes come into consideration? At the very end. It is always easier to put fancy finishes in any house than it is to change the location, lot or floor plan. If you have an outdated house in a good location with a good lot and a good floor plan, you still have a house that will always be desirable.