Random Real Estate Thoughts

My best and worst day as a realtor

by John Rice

Real estate isn’t really a job or a business.  It’s more of a lifestyle.  The good days are fantastic and the bad ones are terrible.

Here are two of my stories (insert the DUN-DUN sound effect from Law & Order.)

My best day was at a closing in the spring of 2011.  The events that lead up to that day actually began at a closing in the spring of 2010 for the same house.

I had some great clients that bought a cool house.  Immediately after buying it, the basement flooded.  The entire basement was gutted.  Shortly afterwards, the husband’s company downsized.  This was when the economy was terrible and people were getting laid off left and right.  They decided to take a job out of state.  I listed the house.  Only the market was worse than it was when they bought it and the house no longer had a finished basement. 212 days later, it finally sells for $16k less than my people paid for it a year earlier.  Now, if you’re reading this and wondering how that could happen, trust me, the market was totally the opposite from where it is now.  There were tons of houses for sale and values were decreasing.  I hope we never have to live through times like that again.  I don’t think all of my listings from the past year have been on the market for 212 days combined.

I really really really liked this family a lot.  Still do.  I was happy to waive my commission to make the sting of losing money hurt a little less.  It was harder to sell a house back then.  I felt very good about getting it done for them so they could move on with their lives.

I get to relive that day every once in a while because that family occasionally, out of the blue, thanks me for my help.

I think of this family when I have a day like the absolute worst day I’ve ever had in real estate.

That day happened around the same time.

Back then, probably half of my work was random people who would find me or were found by me.  Today, almost all of my work comes from past clients, friends, or referrals from past clients or friends.

Another agent in my old office gave me what we call a “Lead.”  I contacted this buyer who said they had just gotten some giant settlement from a drug company and wanted to buy an expensive house in Scott Co.  I was skeptical at first, but the agent who sent me the lead would get a 25% cut of the commission, and I knew she really needed it so I agreed to work with this buyer.

I scheduled several showings for rural houses all over Scott County.

As I spent more time with this buyer and his family, it was clear to me that they were not really buyers, but were dreamers.  Probably liars too.

The husband supposedly owned all my favorite cars while he was in Germany.  He just got millions of dollars in a settlement but would be doing a VA loan, and he didn’t want to tell me who his loan officer was.

It was a strange day for sure, but it got even stranger.

When we arrived at one vacant house, there was somebody walking around out front.  I thought it was the seller at first.  It was somebody who had stopped to see the house.  He said he wanted to see the house.  I told him that I had scheduled a private showing for my clients and that we had a schedule to keep.  He should call the listing agent to schedule his own showing, who would be very happy to show it to him.  I thought that was over and he would get in his car and leave.  No, he tried to follow my clients into the house.  I stepped in front of him at the door and said the same thing again.  He said he tried calling the listing agent and she didn’t answer.  I told him again that I had scheduled a private showing for my client and that this wasn’t an open house.  I surely didn’t want to let him in after all this.

He walked away.  I watched him out a window.  He keyed my car as he walked past it.

We ended up staying at the house forever waiting for the police to show up, which made us really late to the other showings.

When the police arrived, the buyer’s account of what all happened was a little more dramatic than mine…..turns out that the buyer had also been a bounty hunter too, or so he claimed.  I think the buyer thought he was helping me by embellishing the story a little.  The policeman needed my registration for the complaint.  Turns out my registration had expired.  This was the first car I had ever leased.  The leasing company doesn’t send renewals in your birth month like they do for cars you own.  The policeman didn’t care, but the buyer and his family acted like I was driving a stolen car.

So, by the end of that day, I had wasted a lot of time with a crazy fake buyer and had to get some of my car repainted.  Shortly after this, the agent who sent me these fine people unfriended me on facebook.

I’ve had plenty of other rough days.  When I have them, I try to think about all the great people I have met throughout my career.  The good ones far outweigh the bad.

 

 

 

When will there be more houses for sale?

by John Rice

The simplest answer to this is when sellers feel like moving…..so I guess it boils down to what will it take for that to happen?

Many people who have been in their houses for more than 5 years either got a super low interest rate or refinanced to get one.  It is hard to give up something like a 3.5% rate and buy your next house at the top of the market and do a 5% mortgage.  Right now, all that free equity from appreciation isn’t enough to make somebody want to give that up.

But, eventually there will be a tipping point.

Let’s say you bought a house 5 years ago for $200k.  You put down 5% and got a 3.5% rate for 30 years.  The principal and interest part of your loan is about $900 a month.  Flash forward to today.  The house is probably worth $240k.    You owe about $173k on it and have about $67k in equity.

You decide you want to buy a $300k house.  You finance about $235k after you get the equity out of your last house.  You get a 5% rate.  The principal and interest part of your loan is now $1200 a month.

Maybe you don’t want to spend $300 more each month?

What will it take to make you list your old house?

Maybe another $40k equity in your old house?  Assuming rates stay about the same and the price of the $300k house you want appreciates less than the $240k house you have, this $40k is what it will take to keep your payment about the same each month.  It will take about 3 years for that to happen between appreciation and what you are paying down each month in principal.

We all bemoan higher interest rates, but lets keep in mind that the reason we don’t like higher rates is because they make the mortgage payments higher.  People have a certain amount they can/will spend each month on housing.  People will always try to stuff as much house into that payment as they can.  I think the day sellers can move up to a nicer house and not pay that much more will be when we see more for sale signs in yards.

It’s like the most boring baseball game ever

by John Rice

I have always said that first time buyers grease the real estate market.  Not that I’ve played much baseball since I was a kid, but I always pictured the market this way:  The bases are loaded with people who needed to buy and sell, then a first time buyer hits a home run and lets everybody else move.  Being the person who didn’t have anything to sell kept the market moving.

That wonderful analogy that I have been using my entire career doesn’t work any more.

First time buyers are struggling to get a house.  The person on first base can’t find their second base house, the second base person can’t find their third base house, etc.  They know selling their old house will be easy, but they dread the thought of being a buyer right now.  So they stay put….and that first time buyer keeps striking out.

Now that I think about it, being a realtor feels just like when I went on a 7th grade field trip to see the Reds play.  There was a lot of waiting for something to happen, and then a brief moment of excitement.  That is how the market is today.  A lot of waiting.  A lot of checking for new listings.  A lot of networking to find houses not on the market yet.  Then when a house that meets your buyer’s criteria hits the market, a lot of excitement.

Where are you going to find anything better for that price?

by John Rice

I remember the day.

I was in a two week class for new agents.  One of those days the topic was CMAs.  That stands for Comparative Market Analysis.  It was how to figure out what a house is worth based on recent sales of similar houses.

Long story short, you start with the subject house.  If a comparable recent sale was better than the subject house, you deducted money from that sale price.  If the comparable recent sale was inferior, you added money to the sale price.  In the end, you had a bunch of debits and credits for the differences that you either subtracted or added to the sale price of the recent sales….. and then you know what the subject house is worth in comparison to the recent sales.

Very logical.  This is how it has been done for years.  This is how appraisers do it too.

In that class, one of the other newbie realtors asked how it was done before CMAs became the standard.  The teacher said that you just guessed a value.

I sort of feel like we are back to the guessing days now.

I’ve seen recently remodeled houses sell for up to 50% more than what the second highest sale price was in the neighborhood.  Granted, a remodeled house SHOULD sell for more than the average house, but not by 50%.

I sold a house for $160k.  The comps pointed to it being worth about $143k.  We got several offers between $137k and $143k…..then we got one for $160k.  That is $17k MORE than the second highest offer.  Those buyers were desperate.  They had lost several bidding wars and were not going to lose again.

There’s definitely been a shift in how we calculate value, and it appears that it has less to do with logically analyzing recent sales and more to do with it being a tight market.  Something I hear buyers and agents say a lot these days is “Where are you going to find anything better for that price?”  So, value is now determined by availability, just like the lobster prices at a restaurant.  A good day on the water might end up with lower lobster prices.  The very next day the fishermen aren’t as lucky and you pay more for the exact same dinner.  That is sort of scary to me because what happens when the market slows a little and there are more houses for sale?

 

 

 

How a hot market really sucks

by John Rice

As I was driving home today after a closing, I got to thinking about how the market is always  changing.

When I got into this, it was much like today.  Buyers felt lucky just to get a house and sellers were drunk with power.

Then there was the looming threat of a nationwide crisis.  We were convinced it wouldn’t  make it to Kentucky.  We all said things like “We didn’t see the crazy appreciation like California, Arizona or Florida did, so we won’t see any changes.”  Only we said that with the same fear in our voices as the kids from that Stephen King movie when they talked about Pennywise the clown.

Then “IT” happened. (See what I did there?)

It slowly went from being a seller’s market to a buyer’s market.

Nobody was happy.

Seller’s were bringing cash to the closing to payoff their houses.  Buyers were afraid their new house would continue to depreciate.  Buyers were hitting sellers up with big repair lists.  They felt the seller should just appreciate that they picked their house among the other 50 houses in the neighborhood for sale.

Then in late 2012/early 2013 we had this euphoric time.  Sellers were happy because their houses were selling in less than 6 to 12 months.  Buyers were happy because prices had stabilized.  Sellers were okay to do whatever repairs were requested since they were happy to have sold their house.  Buyers weren’t asking for as many repairs since they were happy too.  They knew the house wouldn’t be worth less by the time of the closing.  It was great!

Only it didn’t last.

Prices started going up.  Fewer houses were on the market.

Prices kept going up.  Even fewer houses were on the market.

Prices went up even more.  And even fewer houses were on the market.

And now we are back to where we were when I started, only a little worse.  Prices are sky high.  Buyers resent it but know they have to pay the price.  So, they are hitting up the sellers with big repair lists.  Sellers feel like they are doing a favor to the buyer just by accepting their offer.  They don’t want to do repairs.

Basically, nobody is happy right now.