It’s been a fun day. I mean, it isn’t everyday I get to save somebody cash money!

Here is what happened:

I’ve got a client who is buying a piece of investment property. Part of it is vacant and part of it is occupied. The appraiser used the last stated rent value for the vacant part of the building. That value was less than the current rental value of the occupied part. There are 3 ways to value real estate….market value (driven by similar sales), income approach (driven by rental income) and replacement cost (driven by construction costs.) For a piece of investment property, you guessed it, income approach is used. That means you take the total of all rents and multiply them by a cap rate or a gross rent multiplier (GRM).

Since this appraiser used some outdated rent value for the vacant part of this building, that threw off the appraised value since it is such a simple formula. It appraised for $4k less.

I called the loan officer to see what we could do. He said they might be able to use the lease I had to establish fair rent values. I told him to work on that, but I would see if there was any chance of the seller reducing the price to appraised value and NOT to do anything until I found out.

So, I called the listing agent and told her the deal. I told her the potentially complicated steps we might have to go through to get the value up and that any buyer who would be getting financing would have the same issue. After that, I called my buyer to tell him that I though either way, we would be in okay shape. He obviously was on board for the seller reducing the sale price. I told him it was a long shot and not to get too excited.

A bit later, I get a call that the seller will reduce the sale price by $4000. I am kind of shocked since I was really rolling the dice. It really would have been easier for me to have just let the loan officer get the appraised value up to the contract price, but I wanted to see if I could get the place for less for my buyer. One quick call and a cleverly worded presentation saved my client $4000. He is very happy…….and I have never been so happy to make less money!

Tates Creek. Always a nice area. But it seems to be making a comeback.

I don’t mean Tates Creek inside New Circle. That has always been a popular area since the heydays of The Merrick Inn and John Y Brown living on Old Dobbin. I mean Tates Creek OUTSIDE Man O War.

I remember when it was new. Tates Creek was two lanes past Redding Rd/Armstrong Mill. Man O War was a two lane road with hardly any cars ever on it. There was this new neighborhood out in the middle of nowhere that was the talk of the town. Yeah, Hartland. We had never seen anything like it before in Lexington. A giant planned community way out in the middle of nowhere. Then they build a fancy new shopping center on the corner of Man O War. It was THE. Place. To. Be.

Then came Cumberland Hills, Waterford and Pinnacle. The road was widened. More shopping too. It was all new, and all new always means better. It was the best place to live unless you were one of those people who didn’t consider anything outside New Circle to even be Lexington.

Then, like all neighborhoods/areas, this whole area started it’s cycle of decline. Taking it’s place for the shiny new part of town were neighborhoods like Palomar, Firebook, Andover (Now absorbed by Hamburg) and finally Beaumont. The Tates Creek area never got bad, it just wasn’t the hot new thing any more.

But I think that is changing. A realtor friend and I are noticing more and more people specifically wanting this area. We kind of think that a lot of long time Lexingtonians remember this area in it’s heyday and now consider it a classic. It is an area that is aging well. I never thought I would say this, but they just don’t make neighborhoods like they did in the 80’s and 90’s any more. That was the end of the era for large chunks of available land in Lexington, things like sidewalks on BOTH sides of a road wide enough for two cars to pass and a useable sized yard. Add 20-30 years and you also get nice big trees. No wonder more buyers are being drawn to this part of town!

Let’s say you have an average house, in an average neighborhood. Heck, let’s say you have a below average house in a below average neighborhood. Wonder when the best time of the year is to sell? Winter.

Sure, there are fewer buyers, but there is also less competition. Remember, there are two sides of supply and demand. I have seen countless times where a house keeps being a buyer’s 2nd or 3rd choice all year then sells in the winter. See, those winter buyers don’t have a lot of choices. For a house that has always been the bridesmaid but never the bride to sell, it means all the other better choices have already sold. If you take that average or below average house off the market and put it back on in the spring, it will keep being rejected because there will always be a better choice for a buyer.

What about the above average house? Those are always a buyer’s first choice regardless of the time of year. They sell winter, spring, summer or fall.

If you are thinking about listing your house this winter, make sure it is on the market no later than early February. Most sellers wait until April to list their houses. They want those first few warmer weekends to get their house ready. Most buyers start entering the market as soon as grass comes out of dormancy. You want to be there to catch those late winter buyers because they never have as many choices.

I’ve driven down Chinoe a zillion times since I moved here in 1985. Most of the time I am just trying to get somewhere or have my head in my to-do list. This is the time of year that I get to catch my breath a bit since sales always slow around Thanksgiving. As I drove down Chinoe this week, I remembered the first time I was on this street.

It was 1985. In the fall. A little earlier in the year than this. We had just moved to a house on Lincoln Avenue. Coming from Frankfort, Lexington seemed like a huge city to me and a very exciting place to be. I was really into riding my bike back then since I was only 15. I was anxious to explore the “Big City” so I biked over to an old family friend’s apartment on Lakeshore Drive. I didn’t know my way around Lexington then. I remember I rode my bike down Richmond Road all the way to Lakeshore then up the hill. I really should have gone up the first block of Chinoe and the turned on Fontaine. Much prettier and slower moving traffic.

After Daniel and I met up, we rode down Fontaine and hit Chinoe. The local people called this road Shin-O-Way. I thought for the longest time that the Shin-O was the street name and the “Way” was the street suffix. I later learned that Shin-O-Way was really how you pronounced Chinoe and that the street suffix is really Road. We have some street names that I hear people mispronounce all the time…..Like is Desha really Da-shay or Desh-ah? Most say Da-shay.

So, Daniel and I are riding up Chinoe. What I love about biking is that you really have time to notice things and catch the vibe of wherever you are. Having moved here from a 1000 square foot house in Frankfort to an old Bungalow in Kenwick, the houses on Chinoe seemed HUGE to me. Fancy too. What I remember most is just how beautiful this part of town is. The houses are wonderful. The trees are fantastic. It is the street Thomas Kincaid would paint if he wanted to do a Lexington scene. I was in awe.

We rode across Alumni Drive to the newer section of Chinoe. There is one big house there that is perpetually for sale. I remember thinking that house was the best one…..probably because it was brand new then. This is long before Castlegate was built behind it and all those late 80’s neighborhoods sprung up on Old Mount Tabor.

I’ve always been fascinated with this area. In high school, I had many friends who lived in this area. I always enjoyed checking out their houses. Once I got my driver’s license, I would wonder around every street in this part of 40502. I’ll never forget the first time I saw the stone house with the wavy glass in the windows on Barrow…..or the day I discovered the big modern red brick house on Warrenwood Wynd.

I’ve spent a lot of the past 28 years in Lexington neighborhoods. Little did I know this day was the beginning for me. I guess that is what makes it such a good memory.

I’ve been watching this particular house since a client of mine made a good offer on it that was rejected. Below is an interesting tale of ALL the things NOT to do if you are a seller:

This house was listed for $259,900 in February of this year. It was waaaaaay over priced. First mistake. Back then, the market was really gaining momentum and houses were selling quickly. It was slowly reduced to the point where my clients wanted to see it. I told them it was overpriced.

The house showed beautifully since the seller had high end furniture and an obvious skill for decorating. Upon closer examination, I could tell that it was really just your average 15 year old home with 15 years worth of wear and tear. The cabinets were in bad shape. Only the downstairs flooring and appliances had been updated…..but it looked pretty.

We made an offer of $232k that was countered for $244,500. All along the listing agent had been telling me how motivated the seller is since they were being relocated. I never buy that line from a listing agent since it usually means their seller is motivated to get top dollar. Motivated sellers price their house just below market value for a quick sale, not over it! My clients came up to $236k, which was right inline with the comparable sales at that time. The seller didn’t budge.

We move on, my people buy another house that was even better. My last email to the listing agent after arguing over comps in the neighborhood, the market and price was “I don’t see them getting more than that, especially once they move out and it is vacant. The house looks fancier than it is due to their furniture. If they don’t take our offer, I would suggest they leave a lot of their furniture to keep it staged.”

The house was reduced, reduced, reduced until it finally got a contract. The last list price was $235k. It closed for $230k……which is $6000 less than they could have had many months ago from my people. What happened????

Lots of mistakes here in addition to starting out too high. To begin with, they were not living in reality, and they paid for it. They thought we were ridiculous to offer a number so far off from their list price. They sat on this house through Spring 2013, which was the hottest seller’s market I have ever seen. That alone should have told them something was wrong if they could not sell then. Next, they moved out and took all their pretty furniture. Now it is late in the summer, the buyer frenzy is cooling off, and their house is vacant. To get it sold, the ended up selling for LESS than it was really worth. Somebody got a decent deal on that house.

Long story short…….a series of bad choices is a good way lose money on your house.