Random Real Estate Thoughts

When the market speaks, listen!

by John Rice

I recently got two written offers on a listing.  I also got a “Suggestion” of what a third buyer would pay for the house to make them write an offer on it that day.  None of these buyers knew each other.  None of them were represented by the same agent.  None of them were represented by agents within the same real estate company.   Funny thing is that they all came up with the same number.  Funnier thing is that this happens all the time.

That is just the way market value seems to work.  Sure, you may occasionally get somebody who will pay more than the other 95% of buyers who are on the same page, but that is pretty rare.  I always tell my people when multiple buyers come up with the same value, the market has spoken.  I think many sellers still subscribe to the thought that a better offer will come later.  That is a theory that may have worked when houses were appreciating.  Back then, you could hold out for, say, 6 months and get more because the house had appreciated.  That ain’t happening today.  ( I think Lexington is past the point where waiting 6 months meant your house depreciated.  We seem to be pretty stable.  Values haven’t really dropped since the tax credits expired.)

See, today’s buyers have access to info like no other time in the past.  Plus, their realtors are looking at the same comps to determine the value for their client.  That buyer I mentioned that may pay more than most is usually represented by an idiot of an agent who hasn’t looked at the comps and/or doesn’t care.  I always love it when an agent I consider to be worthless shows my listings because I know I have a chance of getting my client top top top dollar.

So, what is a seller to do when they keep hitting the same number?  They need to take it.  Sure, it may hurt.  Sure, it isn’t any fun.  But, the next offer you get is statistically going to be the same…..why wait around to find that out first hand?

Stating the obvious ISN’T marketing

by John Rice

You’ve been there.  You’re looking at houses online and the picture looks good to you, so you start to read the marketing remarks about the house…..only the realtors chose to tell you that “NOW IS THE TIME TO BUY.  RATES ARE HISTORICALLY LOW”, but they don’t really tell you much about the house somebody is paying them to sell.  It’s like the message is that you should buy ANY house, not just the house you are looking at.   I’ve always thought it was pretty stupid to waste the short amount of attention you have from a consumer with that stuff.   I mean, think about it.  Anybody reading the marketing remarks about a house, either in print or online, has probably ALREADY DECIDED THEY WANT TO BUY A HOUSE!!!  They’ve come to a website or picked up a flyer to do what?  Look at houses or try to figure out IF they are going to become buyers or not?  Same thing with the old “YOU CAN OWN CHEAPER THAN YOUR RENT”.  Any renter looking at houses doesn’t need to be told this, they already know it.

It isn’t just in this industry either.  Back when I was younger, I had a lawn maintenance company.  That was before the internet and advertising in the phone book was the thing to do.  I would see ads where lawn companies were trying to convince people of all the benefits of having them mow their lawns.  I used the attention I had from consumers looking at my ad to convince them I could do a great job, that I had insurance (something most didn’t at the time) and that I had happy customers.  My thoughts were that if somebody had picked up a phone book, gone to the “L” pages and looked up either lawn care or landscaping, then they had already decided to let somebody else do the work for them.  At that point the goal became to convince them that I was a better choice than the guys who were telling them they should make a decision that had already been made.

Just my 2 cents for the day.

Current Market Trends

by John Rice

It’s that time of year again.  When all the real estate Guru’s look back at 2011 and tell Realtors about “Current Market Trends.”  I never go to these seminars or classes.  See, if somebody has time to put together a Powerpoint presentation with a bunch of bar graphs and is looking backwards in time, then what they are telling you is called history, not current market conditions or trends.

I’m more interested in knowing what is happening right now.   All realtors should really, but I find that most of them can only recite what they have been told.  That’s why there are meetings and seminars for such things.  There are a few in town that seem to be able to analyse the market pretty well.  I like to talk to them because it gives me a broader perspective on the whole. 

So, if you want to know what happened last year, I have plenty of posts from 2011 you can read.  Want to know what is happening right now?  Our current market trends?

1)  This shouldn’t be news if you’ve read my blog recently, but every Monday I check to see how many houses got contracts and what closed.  Houses up to $150k are selling very good.  Then it slows down a lot the higher you go in price.  The closed deals show me what percentage of the asking price the seller is getting compared to their list price.  We’re still holding strong between 96% and 100%.  About the only time I see percentages less than that it is in higher priced houses or ones that the asking price was too high to begin with.  It does drop for surrounding counties.  The Lexington agents seem to want to price a house very close to what it is worth.

2)  Most of the foreclosures we are getting in Lexington seem to be cheaper houses these days.  I think that has really created two markets in town.  When foreclosures first started becoming a large part of our market, many buyers would look at normal sales and foreclosures.  I think we’ve run though most of the middle class and upscale foreclosures, so all that is left are the cheaper ones that investors rent or flip.  A lot of people were caught in a sinking ship when the economy changed back in 2008.  The 2009 and 2010 foreclosures were mostly those folks who were in the wrong place at the wrong time.   I think the foreclosures we are getting now are due to the easy lending practices of yesteryear more so than the economy.  I check the Master Commissioner site every week and it seems that most of the people on that site bought between 2004 and 2007.

3)  I am seeing more buyers staying at the lower end of their price range.  It use to be, and not too long ago, that every buyer would start looking at the bottom of their price range, then move up, up , up and then purchase at the top.  People seem to want to be more fiscally responsible these days.  I think that is a good thing, especially for those of you that own a nice, sensible home in Lexington priced between $100k and maybe $180k.  I’ve also had several buyers not want a lot of square footage.  People aren’t wanting to maintain, heat, cool and clean more house than they will use.  These are mostly the buyers in their 20’s and 30’s.  Use to be that was only something you heard from downsizing empty nesters.   This is bad news if you have a McMansion.

But here’s the truth about any market at any time……Houses that are priced realistically and show well sell.  Buyer’s always want the best house they can get for their money.  Good or bad, there will always be a market.  Location, condition and function play the biggest role in value.  Keep that in mind and you’ll always be able to make good real estate decisions.

2012 Predictions & Where are the sellers going?

by John Rice

Every week, I check to see how many houses in different price ranges go pending.  I look at under $100k, $100-150k, $150k-$200k, $200k-$300k, $300k-$400k and $400k-500k.  I stop there because there are never many sales over half a mil and I don’t do too much work over that anyway.  I have been totally amazed at how many houses are selling in the $100-$150k range….even the week before Christmas we had a bunch of them.

That price range is where the first time buyers are.  Like I’ve always said, you need the first time buyers to drive the whole market.  You need them to push all the more expensive deals through.  I guess these low rates have brought them out.  Just for fun, I checked to see how many sales there have been in that price range in the past 6 months.  There were 432.  During the last 6 months of the tax credit season there were 552.  Right after the tax credits expired, there was no action in most price ranges, especially this one.  Glad to see it come back.  I knew it would.  Regardless of the economy, people are always going to graduate college, get married, start a family, take a job somewhere else, etc.  People will always be moving.

I am scratching my head over something.  If 15 houses in the $100-150k range go pending in a week, shouldn’t about 15 houses in the higher price ranges also go pending?  You’d think all those sellers were moving up.  In the past, these sellers moved up to the $175k-250k range.  Now, I am thinking that some of the sellers of more expensive houses are moving down, that some sellers aren’t buying houses much more expensive that the one they sold, and that some of them just are getting out of home ownership altogether.

Want to know what I see coming in 2012?  It is almost New Year’s Day, so I guess I better throw something out there.  If interest rates stay low, I see the $100k-150k remaining strong.  A lot of people have refinanced, so they will likely stay put for a while.  I don’t see the number of local sales increasing/decreasing much compared to 2011.  There has been a shift in how people view housing, so I think buyers will be a little more modest with their purchases…..meaning folks aren’t going to be shopping for the max amount of their pre-approval letter.   I think the over $300k homes will be hit by this unless the house is unique, has a great location or is in the better school districts.  I don’t mean to scare anybody.  It’s not like the prices are going to drop by much.   You just need to pick a winner.  Investors will likely keep snatching up the deals under $100k and turn them into rentals.  None of this is really earth shattering…..mainly just more of the same.  I also think that our local list to sale price will creep up a bit.  I’m not seeing buyer fear like in years past.  I think that will mean they may not start offers as low, or counter a counter offer multiple times.  They are just going to know they want the house and will be willing to pay a fair price.

That’s all I have for now.  Happy New Year!!

Before & After Shots of my house…..See what paint & carpet can do?

by John Rice

I’ve been pretty darn pumped up to do this post for quite some time now.  It gives me a chance to show off the work I did on this house and gives me a great platform to yell some more about what a difference carpet, paint and presentation can make.  Plus talk about investment property.

See, this is my house.  I bought it to rent it out…..gotta pay for college for my boys and keep my supply of cool cars fresh you know.  I paid $78k for it.  The foreclosures in this area go for in the mid $60’s.  In fact, an identical house to mine on the same street sold for $65k this summer…..So why am I bragging about paying $78k?  Well, I have been in the other one before and after its renovation.  That one needed a new kitchen and bath.  Mine didn’t.  That one didn’t have the wood trim wrapped in vinyl.  Mine did.  That one had a 27 year heat pump.  Mine has a 4 year old heat pump.  Once you get down to the nitty-gritty and compare apples to apples, I paid about $4k more for mine, but didn’t have to spend as much time to get mine ready nor did I have the risk of unearthing expensive issues during a major reno.   In the end, about the only visible difference between the two houses are color choices and I didn’t put in a dishwasher.  That house was flipped and just sold for $95k.  I think I did pretty good since that house was the same floor plan just about 5 houses down the same road….doesn’t get better than that for comparison sake!

These two pictures are of the same master bedroom.  Can you tell which one is the after?  All I did here was paint, carpet, an $80 ceiling fan, and new outlet covers…..and had a professional photographer snap the picture.

These next two are of the kitchen.  The cabinets and counter top were new just a few years ago.  Literally all I did was paint, a new range and a new ceiling fan….well, I did have an electrician add GFCI outlets just to make sure everything would be safe for my tenants.

These last two are of the bathroom.  All it got was a new toilet to conserve water and fresh paint.  The previous owner had recently redone the bathroom and made great selections!

So, there you have it……if this isn’t a testament to what paint, carpet and presentation can do, I don’t know what is.  I dropped about $3500 in paint, carpet, 5 light fixtures, 2 ceiling fans, a range and a toilet, but added at least $15,000 in value.  This is why I always tell sellers to do these little things because they can get such a big return not only in the sale price but also shorten their days on market.  (The other one just like mine was only on the market for a short time while being surrounded by others that have been on the market forever!)