Random Real Estate Thoughts

What’s the market like?

by John Rice

Back when I was with another real estate firm here in town, my office building backed to a creek.  There was a tunnel where the creek went into one of those round concrete tubes and came about under a parking lot behind a bank about 40 feet away.  One of my best memories of that building was a day I had both of my then very young boys with me.   My boys and I hung out behind my office for what seemed like forever, dropping leaves and twigs in the creek on one side of the tunnel and then running to see where it would come out and how long it took.  You could drop a stick in the same place twice, but it would never come out in the same place or in the same amount of time.  (Another favorite memory is the helium tank we had.  I’d suck in the helium and make the funny voices for my boys…..but that doesn’t really go with this post that well.)

Hope this isn’t too far of a stretch for you here, but that day reminds me a lot of the real estate market.  See, it too never stays the same.  Too many variables with prices, interest rates, the economy, what people read in the news, to ever stay still.  Back in 2005 any listing would sell in a heartbeat.  All the agents wanted listings.  Then, if you had a buyer, it was like gold.  Then, only houses under $150k seemed to be selling well.  Then rates started dropping, and all the sudden over $300k was doing good.  Then it was hard to sell new construction.  Then the tax credit frenzy and subsequent bust, then…..not much.  Now, we’re almost back in a mini-frenzy again.

Yeah, it is really like a little frenzy, especially with the better priced and/or better located properties.   I’ve got 6 houses pending right now.  One is in a neighborhood that just a few years ago was considered one of the least desirable areas for the price range.  I keep getting call after call on it.  If I had put a sign in the yard of this house a year ago…..well, it would have been there until now.  Another one is a sweet little house.  It sold a year ago for just a little less than my buyer is paying for it.  The seller took a new out of town job.  There is no better proof of a stable market than the same house selling for a bit more just a year later.  Oh, I forgot to say we almost had multiple offers on it.  I’m also having buyers tell me they want to see a certain house, then it turns out that it has already sold before they can go see it.

So where does this leave buyers and sellers?  If you’re a seller and you’re not seeing this action, your price is wrong.  Period.   If you’re a buyer, you need to realize that there are a lot of people out there shopping too.  I think I’d get pre-approved with a lender so that if you do find “THE” house, you are ready to pull the trigger.  If you see something online that looks nice, go see it.  Don’t mull it over for a few days.  Get out and check it out.  I guess the bottom line is not to be on the fence too long for a property you like enough to consider.  Decide if you want it or not pretty quickly.  I always try not to push people into a deal, but I do sometimes push people to make a decision if I think the place won’t last.  I’ll tell them to figure out if they want it or not.  If they don’t, cool, we’ll move on.

Oh, my old office building?  Just to show how everything is always changing in real estate, it is now in a landfill somewhere and a brand new bank building is in its spot.  The creek is there though…….and I’ll find a way to use the helium tank story in another post.

 

Do you know what neighborhoods have the most crime??

by John Rice

People ask me all the time if a neighborhood is “Safe”.  That’s when I often start verbally blogging about the difference of what we perceive to be safe and the reality that crime happens everywhere.  I kind of think that most people see a pretty street with well-kept lawns as a “Safe” location……and a cheaper area with lots of chain link fencing and junk in the yard as unsafe.

I own 4 houses.  3 of them are rented and I live in, of course, the nicest one.  One is downtown and is worth less than $20k.  The other two are around Man O War near Alumni Drive.  The one I live in is near Hamburg.  Which do you think has had the most and least crime in the past 4 months?  You’d think my own house located on a cul-de-sac in a desirable neighborhood with the best school district in this part of town would have the least crime, right?  And my little rental shack off of 3rd street would by far be the most dangerous?  Well, you’d be wrong.

Below is a link to the crime map.  Before you click it, think about some of the neighborhoods you think would have the most/least crime then look at them on the map.  I bet you might be as surprised as I was.   I will add this though…..As somebody that checks the crime stats frequently, it seems that crime like cars and houses getting broken into seem to come in waves.  My neighborhood has always been pretty low on crime, but last fall and winter all those crooks made their unwelcome appearance in my area.  Once it starts happening frequently enough for the police to patrol more often, they move on.  They may be in your neighborhood next.  That is one reason it is better to look at the crime from a longer vantage point than just the past month.  I tell people looking back over the past 6-12 will scare the heck out of you, but should give you a realistic view of what you can expect before you buy.

Here is the link:

http://www.raidsonline.com/?address=Lexington,%20KY

 

MY first house

by John Rice

Well, I’ve been working with a lot of first time buyers lately.  It all has me remembering when I was a first timer myself.

This was my first house.  Before we found it, my wife and I drove all over every neighborhood we thought we could afford.  This was back when rates had dropped ALLLLLL the way down to just over 7%, so you didn’t get as much house for your money back then.

This place was for sale by owner.  There was just a sign in the yard.  We called and were able to go right inside since they were home.  We fell in love with it immediately.  I was on an old house kick back then, so the mirrored double mantled fireplace with green subway tile did me in.  Looking back, it was really a dump.  I should have figured it out when all my friends tried to conceal their reaction when they came to see it…..but I was in love.

The house didn’t have central air, and only had a giant floor furnace to heat the whole house.  The room with the furnace would get like 110 degrees in the winter, then the room beside it would be 80, the next room 60, and by the time you got to the end of the house you didn’t even think there was any heat at all.  But we took care of that by using the Buck stove insert the house had.  Every morning before I left for work, I would stack about 8-10 pieces of wood by the back door for my wife to burn.  It would take about 2 hours for her to even get a good fire going.  In the evenings, it was so funny because we would have to time how long we would be gone.  A trip to Wal-Mart meant we threw on one log while we were gone to keep the fire going.  Dinner and a movie was a two log deal.

I have some crazy memories of this place.  The local driver’s education class at the high school would use my street as the training route.  On the weekends, before the big test, I’d look out my window to see every 16 year old using MY car to parallel park.  I never understood why there was something so sacred about parallel parking in front of my house when the only thing you need was at least one other car?  The fire department would use the alley behind my house to do their annual driving tests too.  They had to back up the alley, which mean you’d hear a diesel engine running and the “BEEP-BEEP-BEEP” of an ambulance backing up.  Then there was the train.  We knew there was a track very close, but we didn’t know there was a spot just up the track where they would connect the train cars together.  Don’t know if you’ve ever heard that, but it sounds like two 18 wheelers crashing into each other………every 15 minutes…….all day and night.

I’ve got a lot of good memories too.  We brought both of our boys home from the hospital to this house.  My parents had central heat put in so our first born wouldn’t feel like he was born during Little House on the Prairie times.  We painted the nursery and got new carpet.  Then the next little boy showed up to the party.  We had great birthday parties for them with great friends in the backyard.  I did a lot of landscaping, and thanks to the neighbors busted sewer line, the Sweet Bay Magnolia tree on the right grew really fast!

I’m having a good time with all my first time buyers.   It is cool to know that I had a little part of the memories they are about to create.

 

Appraised/Assessed/Market Value & Finding a Dunkin Donut

by John Rice

This is the time of year that I get a lot of questions about value.  Some buyers like to quote the PVA value since it is usually lower, and some sellers like to tell you what their house appraised for when they last refinanced.  Thought I’d touch base on WHY there is such a difference between taxable, appraised and market value.

Think I’ll get taxable, or PVA value out of the way first since it really has nothing to do with the actual value of the  property.  There are two ways the PVA comes up with the assessed value for any house.  The first is the sale price. Somebody pays $125k for a house, it is going to be assessed at that.  If enough time goes by, the PVA people will send somebody in a white Prius down your street to take a picture of the outside.  They then go back to the office, make a cup of coffee, and compare the basic info about your house to recent sales.  The big thing to remember here is that they don’t go inside the house.  I paid $118,900 for a house in 2002.  The typical house on that street was worth about $140k at the time.  My PVA value was $118,900 for years.  Then, we had a sale on the street in 2005 right next door.  My assessed value went up to $135k, which was the sale price of the one next door because they were  the same size.  At that time, I hadn’t put on the new roof or siding.  The inside was waaaaaaay superior to my neighbor’s house, but the PVA peeps had no way of knowing that.  They haven’t been out to reassess since then, so I’ve been paying taxes of a value of $135k ever since.  Since my $135k assessment, the value of the house rose and fell.  Market value is really like ordering lobster at a restaurant.  The price can change on a daily basis.  Every new sale or new listing has an effect on the value of any house.  Bottom line, PVA is only a value to base taxes on.  Nothing else.  It shouldn’t be used for anything but that.

The next is appraised value.  Whether for a refi or a purchase, the thing to keep in mind here is that the appraiser is really just trying to justify a number they already know.  This is kind of like reverse math.  You already know the answer, you’re just trying to come up with numbers that reach the conclusion you want.  Say the number you need for your refi to work is $250k, the appraiser is going to work to see if he/she can honestly say that your house maaaaaay be worth that amount.  They pull comps, do their cut and paste formula and try to come up with $250k.  Like all formulas, the numbers you stick in make a big difference.  Want a cheaper appraisal value?  Pick 3 cheaper houses.  Want a higher appraised value?  Start with the most expensive 3 sales for comparison.  It is similar for a purchase.  The appraiser already knows the contract price.  Remember my house that I bought for $118,900?  Even though the house was rougher than most of the street full of $140k houses, the appraisal came back at $118,900.  Why?  Because that was the number that the appraiser was hired to justify.  When I refinanced about a year later to start the renovations, it appraised for more than I could have sold it for because we were trying to justify a different number…….and there is nothing wrong with that because the purpose makes a difference.  Just keep in mind that an appraisal is really more about comparing your house to recent sales, so the focus is on the other houses.  Market Value is about just your house.

So how do you know what a house is really worth?  I think good realtors know.  Market Value is really all about the number a seller will sell for and what a buyer is willing to pay.  Realtors are best at figuring out market value since we are the ones that see how buyer’s respond to different things.  Where an appraisal is all science, figuring out market value is part science and part gut.  For example, there is nowhere on an appraisal to deduct value for a house that has a pet odor, but any decent realtor knows you are going to get less for that house.  Same with a steep driveway, wild paint, a lack of privacy in the backyard, etc.

So, what value matters most?  It all depends on what you are needing it for.  You want to know what your house could possibly sell for, get an appraisal.  You want to know what your house is worth, ask a realtor……saying that reminds me of one of my favorite lines from my all time favorite movie, Raising Arizona:  “You want to find an outlaw, hire an outlaw.  You want to find a Dunkin Donut, ask a cop.”

No showings? Showings, but no offers? Here’s why

by John Rice

Since I’ve got a bunch of listings now, I thought it would be a good time to do a post about what you can deduce from your showings.

Sooooooo…….

IF you aren’t getting any showings:  More than likely your price is too high.  It could also be your realtor, but as much as I hate to confess this, a house that is priced well seems to sell even if the agent is lame at presenting it online.  If all the data on the listing is correct (schools, size, neighborhood, zip code, etc) more than likely you aren’t getting showings because buyers and agents can tell just from what they see online that the price is too high.  Now, if you have a gazillion dollar house or something very unusual like a 3000 square foot tree house on 10 acres in the middle of downtown, you aren’t going to get many showings anyway since the buyers for those properties are few and far between.

IF you get showings, but no offers:  This is a little more tricky.  Let’s assume that the house is presented accurately online……meaning no creative tricks like hiding the fact that the house backs up to a McDonald’s drive-thru, or that there is a toilet in the middle of the dining room.  If there are no shenanigans, that means the buyers and agents feel that the house is probably priced realistically from what they see online, but the house doesn’t meet their expectations once they get there.  It’s usually something they didn’t expect like the floor plan or the condition of the house.  This is where you have to listen to the feedback.  I know this sucks to hear for a seller, but if 7 out of 10 buyers didn’t like the house due to pink carpet in the bedrooms or the like, you are going to have to address that or wait around for a pink carpet lover to show up…..and in all my experience, I have not met that buyer yet.  You need to change what you can to make it palatable for the buyers, even if you don’t understand it nor agree with it.  Yes, carpet is easy to change for the buyer, but few will do it, and it is just as easy for you.  Yes, you don’t know what color a buyer will want, but we know it ISN’T pink, so that’s a start.  If the feedback is something you can’t change, like a steep driveway, your only option is to reduce your price to the point where a buyer gets more excited about the price than they are disappointed in the slope.

Bottom line is that you want to make adjustments to make your house one of the best ones on the market.  A buyer will always pick the best house they can get, may as well be your’s.