Random Real Estate Thoughts

Welcome to the “Post-Housing Slump Era” (Almost)

by John Rice

I’ve been saying that Lexington is in the “Post-housing slump era” for most of this year.  Yeah, prices have stabilized and buyer’s don’t seem afraid to buy like they did in the past, but I do see one segment of the market that still may have a rough time.  It’s the upscale neighborhoods that are more than 20 years old and aren’t in the absolute best school district in town.  The decline hasn’t stopped, so it shouldn’t be news to anybody except those who currently have their houses on the market and aren’t getting any showings.

I’m thinking of one of my favorite neighborhoods in all of Lexington in particular.  I’ve shown dozens of houses in this area over the past year or so priced from $325k to over $500k.  Most of them are still on the market.  Even after the values dropped significantly over the past few years, this area still is taking a hit.  What gives?

For starters, these houses are all big and most are very outdated.  When you go into a $150k house that is 20 years old, the main thing that looks terribly outdated is all the brass door knobs.  In that price range, there wasn’t a big budget to pimp it out with all that 1991 offered.  When the upscale house was built in that same year, the budget afforded pickled cabinets, gold faucets, and mauve toilets.  The ones from the 1980’s could be the set from Knot’s Landing!  Do you know what it costs to renovate 4000 square feet?    On top of that, most of these lots are big.  Few people these days (at least in Lexington Ky) want to mess with maintaining a big yard.  Everybody I have shown houses to in this area all walk away in awe of the house and neighborhood, but I can tell they are doing math in their head trying to figure out how much they’ll have to spend for updating and upkeeping…..needless to say, all my clients have picked different neighborhood!!

About the only older upscale neighborhoods where I am not seeing this are those in the Rosa Parks Elementary district.  Buyers there seem to be willing to overlook a lot just to get the schools.  I’ve shown a lot of houses in this part of town too, and see a lot of outdated houses.  Unless they are grossly overpriced, have a super steep driveway or are on a main road, they all sell quicker than the rest of the neighborhoods of similar age.

I’ve been watching a house in one of my favorite neighborhoods for about a year now.  It is the only house I have ever been in that double wowed me.  It needs everything but the kitchen updated……a new roof, all new HVAC, and windows too.  I think the current price is just under $400k.  I think it will have to get down to $360k before anybody is willing to take on all that work.

 

Dancing with the Stars? No, Dancing with Realtors (who have two left feet!)

by John Rice

Sometimes I feel like I’m the professional dancer on “Dancing with the Stars” who gets paired with somebody who just can’t dance.  No matter what you do, you’re in a tough spot since you are limited by your partners ability.  It is the same way when working with another realtor as you dance to the closing table together.

I recently had a deal where my buyers made a decent offer on a house.  To sweeten the pot, we decided to check the inspection paragraph that said we had so many days to do a home inspection and would either stay in the contract or give written notice that we wanted out of the contract depending on the inspection results.  We would not ask for any repairs at all.  I like to do this sometimes if the buyer is wanting to get the lowest price possible or if they want to have control of the quality of the repairs and can do them after we close.

I gave the offer to this agent, and told her we had checked what is commonly called “Box 2” for the home inspection.  At that point, the listing agent tells me that the seller will do any major repairs that need done.  (I found that odd……kind of like playing poker and announcing you only have a pair of twos right before the other player places their bet.)

Turns out the house needed a new furnace and the typical laundry list of minor stuff you see on just about any inspection report.  My clients decided not to take the house.  The sellers offered to first pay for half a new furnace, then a whole new one.  My people decided they still didn’t want the house. 

When I called the listing agent to tell her that we wouldn’t be taking the house, she told me she didn’t see how we could get out of the contract.   She said it with a tone like she was a hunter who had just trapped an animal.  Trying to be nice, since you never know when you’ll work with the same agent again, I asked what made her think that?  She told me that since the seller was willing to replace the furnace, we didn’t have a legitimate way to get out of the contract.    I reminded her that we checked “Box 2” for the inspection paragraph on the contract.  She agreed with that.  At this point, I am wondering why we are both using the same part of the contract to justify opposing positions.  Well, that is an easy question to answer.  She has never actually read “Box 2” of the contract.  She told me she thought “Box 2” meant that if the seller agreed to fix anything major, the buyer couldn’t walk away.  I was driving at the time (glad my car has Bluetooth), but I pretty much quoted her what “Box 2” said from memory while merging on the interstate……see, I’ve read the contract.

So, here I was trying to dance with somebody who didn’t even know she had feet.  I totally feel for her clients because how could they have known the terms that they agreed to if their own realtor didn’t??  FYI, that contract is the same one that all 2000+ realtors who are LBAR members use and has been for as long as I can remember, so it isn’t like she has an excuse for never having actually read it.  If you ever have a chance to interview agents, ask if they have read the contract.  If there is ever a problem in a real estate deal, any broker, mediator or judge are going to use the terms everybody agreed to when settling a dispute……so it is pretty important!

How long will it take for my house to sell??

by John Rice

I get asked this question on every listing appointment I’ve ever been on.  I normally don’t reply with an amount of time, but with a sequence of events that needs to happen to attract a buyer.  The honest to goodness truth is that any house should sell pretty quickly if the seller will do everything on the list I give them and price it correctly.  Granted, there are exceptions…..million dollar house?  Will take time since there aren’t many buyers in that price range.  A unique house?  May need a unique buyer.  An overpriced house?  Will usually only sell to an idiot with a careless/stupid Realtor.  A normal house in any neighborhood in Lexington Ky?  If done right, it won’t take long.

I’ve been doing this long enough that I know how it usually goes with a seller.  I see the house.  I ask the sellers if they are willing to do any work that needs done to attract the buyers that are out there right now.  Sometimes they don’t/can’t/won’t do anything.  If they don’t/can’t/won’t, I tell them the price I think their house will sell for just like it is.  Usually though, the seller picks a few items from the list.  We put it on the market.  They get positive feedback for the things they have done.  They get negative feedback for the remaining items on the list.   After awhile, the seller starts to realize that they are going to have to do more items on that list.  They do one more item.  Still doesn’t sell or offers are way below where they should be since the buyer has subtracted about 5 times the cost for the remaining items on the list.  I’ve been on the buyer side of this.  They almost always say something like “If I have to paint this whole house I’m not paying a penny more than $XXX,XXX!!”  or “I would need to replace all the carpet and I like hardwood, so let’s just subtract the cost of hardwood from the asking price and go from there.”  Can’t blame them, after all, it is their market these days.

Eventually, the seller plugs away at my list until it sells (And sometimes being realistic about the asking price has been on the top of that list since day one).  See, there is the sequence of events I mentioned at the beginning of this post.  Now that the house is ready, it is going to sell because it is competitive and will almost always fall on the short list of a buyer.

But what happens to the people who do everything on the list from the beginning and price it correctly?  Their house usually sells in a matter of weeks.  Why?  Because buyers want the best house for their money.  Make your house THAT house, and start packing.

Realtors & Car Sales……Here’s Hoping for a Difference Someday!

by John Rice

I’ve been out car shopping this week.  The whole process reminds me of why people hate most realtors.  Let’s face it, nobody likes to be “Sold” anything whether it is a car, a house, or some wacky extended warranty you get hit up with while checking out of Best Buy.

I went to one lot and got the usual pushy guy.  He was talking like it was just a given that I was buying his car and I couldn’t do it soon enough to make him happy.  He called me twice a day.  Then when he got nowhere, he started emailing me.  I replied that I was thinking about going with another car….to which he replied with all the “Special” things his dealership does that I won’t find anywhere else……even though every dealer I have ever been to that sells decent used cars does the same thing.  For some reason, being pushy always makes the person think that the buyer is an idiot.  After deciding a 350Z was too small for my needs, I switched my search to a Mustang Convertible……got to have a backseat or it becomes a big paperweight in the garage.  To get this guy off my back, I told him that I now wanted a Mustang GT Convertible, thanked him for his time, and did the old “Don’t call me-I’ll call you” routine.  He then told me that he had 2 Mustangs on the lot.  I checked, and neither were convertibles.  Which was to be expected, since his goal was to sell me a car and it didn’t matter if it was one I actually wanted.

I went to another lot to look at a Mustang.  This one looked nice on the computer.  Once I got there, it was all scratched up and had worn tires.  I was told that the car was priced under book value.  I was nice to the guy, but I told him that since I was a realtor, I know how value works.  It would have sold by now if it really was such a deal.  The reason it didn’t sell is because I found out that there are much nicer ones with better tires for the same money.  I wasn’t going to pay the same amount for a scratched up one needing new tires as one with new/newer tires and in better shape!

At the end of the day, I decided to have one shipped to a local dealer from up north.  If it looks nice, I’ll take it.  If not, I won’t.  You’ll know if my next video blog is out of a red Mustang convertible.

The whole process reminded me of why so many realtors can’t make it in this business.  See, they act too much like these car sales people-always wanting the consumer to do what they want to see happen rather than wanting the best for them.  People just aren’t into that!  I’ve said it before, one day I am going to write a book on how to be a great realtor.  I’ve also said that nobody would buy it because most realtors don’t want to be great, they want to make easy money.  I must have a lot of saying because I’ve also said personal success comes AFTER you’ve done something for the sole reason that it benefits your customer or client.  The public is looking for somebody they can trust and who has the guts to give them the advice/guidance they need even if it means creating more work and/or less money for the realtor.

I only wish there was a car lot out there that subscribes to my business paradigm.

(FYI-I have a 4 door sedan too…..Don’t want you thinking that if you call me, you’ll have to ride in the Mustang….unless you want to!)

The LEXpert & THANKSgiving

by John Rice

Thanksgiving is probably my favorite holiday all year.  You don’t have to buy anything and it is fun to eat pumpkin pie.  I always am reminded of how lucky I am this time of year.  Since I have always wanted to be in real estate, that is one of the many things that makes me thankful.

Here’s how I got here:

I’ve always been into houses.  I had Lincoln Logs and Legos….always built houses.  As soon as I figured out how to use a ruler as a straight edge, I started designing houses.  My parents always kept me in graph paper.  One box was one square foot on normal sized houses, or two square feet on bigger ones.  For a long time, I wanted to be an architect.  The dream ended when I figured out that most architects spend their days doing mundane things like redesigning new roof lines for Kentucky Fried Chickens. 

About that time Donald Trump started becoming a household name.  Other than the bad hair, I wanted to wheel and deal in real estate like he did.  That was back when all most people knew about him was that he was professionally successful…..long before the divorces and bankruptcies.  My goal was to be a builder, landlord and realtor.  I’ve done two of the three so far.  One day, I am going to have break down and build a house.

By now, I am in high school and thinking about having fun waaaaay too much.  One of my favorite after-school jobs was delivering pizza.  It let me go up and down many streets and get to know neighborhoods…..at least those in 40502 near the old Mr. Gatti’s in Idle Hour.  I’d also drive around neighborhoods all over town looking at houses, only during school hours….didn’t know it then, but I was really doing something kind of like Vocational Education!

I remember I was in a drafting class in high school.  There was a contest to design a house that a builder would use on a lot in Cumberland Hill.  Back then, that was way the heck out Tates Creek Road.  You use to be able to get into that neighborhood off of Tates Creek on Fairhaven Drive.  I’ve often wondered if the person living at the very end of the street knows that the road use to be right where their house is now?  I think I must have designed too nice of a house.  I didn’t win, but it was fun to go out to the site and think about how I wanted the house to turn out.

When I got to college, naturally I took a lot of classes about drafting, building materials & mechanical systems of buildings.  Plus the easier engineering classes about things like calculating live loads and translating that into how thick of a beam you need to keep the building from falling.  I worked at Lowe’s at this time too.  It was good to be able to see the parts that I had drawn while drafting or seen in a textbook.

Another job I had was being an estimator for a contractor.  I started out helping with estimates and running errands.  Once the boss started seeing that I was really good at figuring out how much material we needed to do a job based on the blueprints, I was able to stay in the office more.  My fondest memory was having to go to a jobsite one day and I didn’t have a hard-hat.  The boss gave me his to use.  He was known to be tough to deal with.  As I walked around the site, I wondered why everybody looked at me like they were scared.  When I got back to the car, I saw in the rear view mirror that the hard hat had his name on it.  Most of the workers had never met the boss, only heard of him.  They thought I was him!

I got lucky when I bought my first house since it didn’t need much.  I wasn’t so lucky with my second house.  It is hard to believe that I am now thankful for all I went through with that house.  It needed about everything.  I did a lot of the work myself.  What I learned there that benefits me jobwise is that I know what things cost, how complicated a repair/remodel is going to be, and most of all, I developed a sixth sense about whether a house is junk or not.  I also learned how NOT to pick home inspectors since that guy told me that “There isn’t anything wrong with the house that can’t be fixed.”  I just didn’t know it would take all my time and all my money.  I am glad to be on this side of the work now since all the place still needs is new windows.  I was able to turn it into investment property after we moved out.  When I bought it, I could have never guessed that it would cross “Landlord” off my bucket list.

While I lived in that house, I finally decided to go to real estate school to get my license.  The mother of a high school friend who was also a realtor helped me out by paying for half of it.  Those first few years were slow, even though the market was hot.  I didn’t want to do things like mail time change post cards or chase people who didn’t want to be caught.  I remember telling my broker that I wanted to be spending my time becoming a great realtor rather than licking stamps and trying to find a client.  The market changed.  The public started expecting more from realtors, and I started blogging.

Flash forward to now:  I’ve just had my best year ever.  The past few have been great too.  I wake up everyday and get to see houses, talk to people about houses, study the values of houses, give people advice, be out and about.  I also get to use everything I just wrote about to help other people.  This is what I always wanted to do, and for that, I am very thankful.

BTW, since I don’t send time change post cards, I better remind you that it changes this weekend.  I don’t know who decided it was the responsibility of realtors to make sure everybody know about them.