lexington news

Lexington & The Low-Ball Offer: Working or Not?

by John Rice

I have been getting some crazy stupid low offers on my listings lately.  The kind that are so low that the house would probably sell for more than what was offered if it were a foreclosure.  Since everybody wants to feel out the sellers these days, you never know if the buyer is going to get real or if they are just going to waste half of your day.  I recently got an offer from an agent who told me his buyer had seen over 40 houses before making the low offer on my listing. We’ve given him our bottom dollar and they keep coming back with their final offer…….I haven’t been so annoyed at hearing the word “Final” since they canceled Who Wants to be a Millionaire.

So, since there is ice covering everything today and my plans to show houses were prevented, I thought what a great opportunity to look at the most recent sold listings in all of Lexington to really see if any of these crazy buyers are getting any true bargains.

I began with a search for all the sold listings since 10/1/10 in all of Lexington that had asking prices of $100-250k.  If anybody wants me to look over that amount, just let me know, but I picked that range since that is the bulk of the Lex market.  I also went back that far to give us enough of a sample and to be current enough to reflect the market.

There were 264 sales since that date.  I threw out the brand new houses since builders usually list the base price of a house and the sale price is typically more than that once upgrades are added.  I threw out the few auction properties too since that data doesn’t answer my question.  BTW, some of the auction prices were way lower than the asking price, but you must ask yourself if the asking price was fair, why did it take a room full of people with 10% cash to put down and willing to buy it “As-Is” just to get it sold?

I also took out a handful of the foreclosures.  Believe it or not, most of the foreclosed houses sell for closer to the asking price than a normal transaction.  Most that were in this pool I knew something about….such as a foreclosure in my neighborhood that was trashed and had standing water in the basement.  One of those rare ones where there is a disclaimer about mold that says you should wear a mask or hold your breath while inside.  It sold for $155k and had an asking price of $213,015.  It’s potential is about $280k, so I don’t really think $155k was much of a bargain.

So, that leaves us with 211 normal sales and the foreclosures/short sales that you could get FHA financing on…..In other words, ones that were not missing fixtures, cabinets, etc.  Remember, my goal is to see if the buyers out there are getting deals on a house that belongs to Average Joe, not a builder, bank, or Freddie Mac.

Most of those 211 sales sold for within 5% of the list price.  Many sold for just a few thousand less.  I found 52 that sold for more than 5% less than the asking price.  Almost all of those were in the 5-10% less than list price range.  When I got to those, I looked at the pictures and all to see what I thought the house was worth.  9 times out of 10 it was a case of too high of an asking price to begin with…..Like a house in a neighborhood full of $175k houses that was listed for $189,900.  That buyer didn’t get a bargain.  They paid a fair price for a house listed by an agent that didn’t know what it was worth to begin with.

I guess the part you are waiting for is how many of them sold for more than 10% less than the asking price?  9.  Yep.  9.  I took a look at these and figure it must have been a combination of a little bit of an ambitious asking price and a little bit of a motivated seller with equity.  Of these 9, several were older houses where I can see a little old lady having lived there for the past 40 years and having no mortgage.  Here are the best numbers……and remember these are the ones with the biggest difference in list-to-sale price, it doesn’t necessarily mean that they were worth the asking price: 

ASKING PRICE:             SELLING PRICE:

$175,900                         $119k

$177,500                         $131,600

$149,900                        $135k

$159k                              $140k

$172k                              $156k

$199,900                        $160k

$199,900                       $160k (This one was way over-priced to begin with!)

$199,900                       $180k

$235k                             $200

So there you have it.  Looks like 9 of 264 buyers got what appears to be a good deal on a house if you look at just the list-to-sale price.

Seller’s today know the initial offer on their house is going to be low, so go ahead and feel them out.  You’ll be able to get most of them to go as low as they can. But if you want to eventually buy a house, you’re probably still going to pay a fair price…….Sorry, but I’m just putting the REAL in Real Estate for you 😉

Negotiating With Realtors: If They Bluff, You Know They’ll Come Back

by John Rice

Realtors are so predictable.  It’s almost like watching a rerun of a show and you know just what is about to happen.  Sometimes I wonder if there was a class I missed on cliché bluffing phrases to use during negotiations.

I got an offer yesterday on one of my listings.  The original offer was pretty low, but these days everybody always has to try I guess.  One of the things that struck me as odd was that the buyer wanted to close in 25 days…..right between Christmas and New Years.  Nobody wants to move that week unless…..you have to.  Then I did my usual deal where I google the buyer’s name and look them up on Facebook.  Seems this buyer has a couple of small kids.  School starts on January 3rd.  I really think they picked this date to be in the house before school starts.   Naturally, I am wondering what are the chances of this buyer finding not only another house they like as much, but one with a seller willing to be out during that week?

The other agent and I trade a bunch of texts, and came $2ooo apart.  Then the agent gives the old “I strongly suggest your seller reconsider this offer given the market.”  I really don’t know how to respond to this politely, so I usually suggest the agent look at the comps and determine if our number is in line with them.  That is what I did this time.  I even asked the agent if he thought the house was worth the number we were currently stuck on.  His non-response answered the question perfectly.

Now for this one, we are only $2k apart, but I have had agents tell me this with an offer that is so low that anybody in their right mind knows it is a ridiculous offer.  I usually check out the agent’s production from the past year to see how much they really know about “The Market.”  My recent fave was an agent who made a verbal low-ball offer on another one of my listings.  He kept talking about how his guy had cash and how foolish my seller was to not sell his house for less that it was worth “In this market.”  Well, turns out that agent had sold all of two houses in the past year…..hardly an expert on “The Market.”

Sorry I drifted there…back to the offer.  Just as predictable, the agent told me that his people were going to look at their second choice house the following day.  He did the old “If anything changes, let me know” drill.  I thanked him for all his hard work and effort.  Why did I do that after being treated like a second class citizen for representing a seller in a buyer’s market?  Because I wanted to make it easy for him to come back to me.  See, many people don’t mind losing the war if you give them a chance to win the last battle.  Good thing because while I was writing all this, he left me a voicemail that said to call him back because he now things we can work something out…….His people are now ready to meet our price, and we should have all the paper work done today.

Wait til Spring to Sell?

by John Rice

Okay…..I know what’s on your mind right now if you are even remotely thinking about selling your house…..SHOULD I WAIT UNTIL SPRING TO LIST MY HOUSE OR DO IT NOW?

No worries.  Everybody wonders that about this time of year. 

I usually tell people that while Spring is a good time to sell since more buyers will be out, there will also be more competition since many sellers wait until then.  More demand, sure.  More supply too.  Also…..if your house isn’t on the market, you have a 0% chance of selling it.  Plus, people do buy houses in the winter……why can’t it be your’s?

Another thing people wonder about is how buyer’s will perceive a house that has been on the market all winter.  I hate to be a cliché buster, but any buyer who is actively looking at houses in November, and hasn’t found one by March is someone who probably isn’t gonna buy a house anyway.  Don’t worry about them!  Also, with all the inventory we now have, seeing a house that has been on the market 6+ months isn’t that alarming to anybody.

Here is how you get the best of both worlds.  List it now……price it right, do great pictures, express in the marketing remarks what is unique about your house, but if it is still around come spring do these:

1)  Update your pictures.  In the spring nobody wants to see what your house looks like with a foot of snow on the roof.  As soon as the grass is green and you have the first pretty day, get some new pics made!

2)  Delete the listing and put it back on with a new MLS number at the same time.  That erases the days on market from the public side of the MLS.

3) And most importantly, make any adjustments needed before you do all this, or else you may end up not getting a buyer all year again.  If after a few showings, people have said they didn’t like the paint, the carpet needs replaced, or the price is too high, make those changes now.  If there is a problem with how buyers perceive your house now, having more buyers tell you the same thing in the spring won’t really accomplish your goal of selling.

Soooooo, what do you think?

Cash for clunkers = Homebuyer tax credit

by John Rice

One buyer for every 13 houses for sale according to LBAR.  Many more listings than pending sales everyday…..and we aren’t even in the slow season yet.  What gives?

Just like Cash for Clunkers got a lot of new cars sold and then put that industry on life support afterwards, the tax credits that expired April 30th have done the same thing to the Lexington market.   I don’t mean to freak anybody out….or be all doom and gloom, but I think it is going to be a tough time to be a seller until at least next spring.   Cars are selling pretty well again for the new normal, and houses will too.  You just can’t expect to not have some type of backlash when just about any first time buyer who would have bought this year already did.  Like I have blogged about before, those first time buyers pretty much grease the gears of the whole market.  They will come back since people will always graduate, get married, get a new job, have a baby.

What do I see in the mean while?  A few lucky sellers and a lot of houses on the market going into the peak buying season of spring.    I am already starting to see more reduced prices than usual for this time of year.  Smart sellers start reducing their prices this time of year with the hopes that somebody will come along so they don’t have to sit on their house during the dead period of Thanksgiving to New Years Day.

If you are a seller and can do so, you should reduce your price to be as competitive as possible.  We are starting to see more comps from after the tax credit expired….they are different from those comps from before.  Most of the time you can go back 6 months to look at sold comps, but right now I think it is wise to try to find ones as recent as possible.  Even though the tax credit expired April 30th, there was still lots of time left to close those deals.    So it has only been about the last 8-12 weeks that we are seeing comps from the “New Normal.”

If you are a buyer, let me tell you a hard reality.  Just because it is your market doesn’t mean you are going to go in and steal somebody’s house.  I see the list-to-sale percentage every time I log on to lbar, and I am not seeing anybody get a heck of a lot knocked off the asking price.  The few I have seen that sold for 80-90% of the asking price were, in my opinion, overpriced to begin with.  Paying 80-90% of an inflated asking price is probably more like paying 95-97% of what it should have been.  You should be in the driver’s seat though for things like closing date, appliances, maybe some closing costs, a home warranty, plus come out smiling with your home inspection repair negotiations.

Don’t be all bummed out…..We’ll be loading the pipeline with a fresh batch of first timers to get things moving again soon!

Lexington Ky Realtor News: C’Mon down, YOU’RE the next seller in today’s market!

by John Rice

It is no news that the market is really slow right now in Lexington.  Ever wonder how that happened?  How the market works?  How the recent tax credit factored in?

Well, here is how the market works.  It is like the food chain, and first time buyers are the bottom feeders (no offense-just mean you guys are the entry point that drives the whole thing.  You are really the most important people out there!)  The entry-level houses get bought by people who don’t have to sell a house, which enables the sellers of entry-level houses to move up, which allows the mid priced home seller to move up to a more expensive house, and so on and so on.  The bottom line is that the bases are loaded, and the first time home buyers get to be the ones that hit a home run and clear all the bases.  Without them, everything gets stuck since most other buyers need to sell first.

So, this first time home buyer tax credit comes along, starts pushing through a lot of sales.  Just about any first time buyer who was going to buy this year wrote an offer by April 30th.  The entry-level seller got to be a mid priced home buyer, and the mid priced home seller got to be a higher end buyer.  Since most closings seem to take place about 30 days after an offer is accepted, that means a lot of activity for everybody in a short period of time……a time that is past.

Right now, the amount of houses on the market is rising.  Personally, I think we have seen an increase in listings because many sellers saw all that activity in the early summer and thought they’d jump in.  More listings and fewer buyers means……well, that it sucks to  be a seller right now.

Where is this thing going?  Lexington has always had a pretty stable market.  I figure that if we weathered the past few years and came out with only a few scratches and bruises, we can survive anything.  This can’t last forever you know…..and all the people who put their house on the market and priced them based on what they need out of it aren’t going to sell their houses anyway.  As long as there is a market, the best houses will always sell.

What is a seller to do?  If you read my blog, you know I am thinking about great pictures and marketing remarks to make it stand out online……but the SINGLE thing that buyers are attracted to now is P-R-I-C-E!  In the past, sellers could throw in closing costs, a TV, vacation, or offer a bonus to the buyer’s agent to get attention.  Those things are as yesterday as solid surface counter tops.  Here are some truths about this market:  You can have a beautiful house that won’t sell if the price is wrong.  You can have a fantastic location, but never get it sold if the price isn’t right.

When I typed that last sentence, it reminded me of one of my favorite childhood shows, The Price is Right.  I always got a kick out of the people who made it to the Showcase Showdown, then over bid the value of the showcase, lost, gave the winner a hug, and walked away.  Just like the showdown, you either win or get to hug the person who did.  If you’re a seller, which person do you want to be?