Random Real Estate Thoughts

How my fall is shaping up

by John Rice

I’ve been doing a lot of blogging about the market lately. Good stuff, but since I know most of you who will be reading this, I’ve been thinking I better give you all an update on what I have been doing.

I’ve been having a great time the past few weeks.

Yeah, the market is really slow. It’s there. It’s healthy. It is just slow. Few people want to buy and even fewer want to sell. That is okay for sellers and buyers. It is realtors, home inspectors and loan officers who this current gridlocked market affects the most.

I am not complaining though. I have more than enough work to stay comfortably busy.

I have several listings in the pipeline. All of them from people I know. A few buyers too.

I will be listing an amazing ranch in Versailles in a great location, with a great lot, and on a cul-de-sac. It is one of those rare houses that really has no negatives. I am looking forward to selling this for some friends who are moving out of state.

I’ve got a house around Southland that should be on the market sometime this winter or early next spring. It’s an older house with a really good floor plan and several interesting features. I have worked with the sellers several times. It might be the last one unless they were to move back to Lexington after this one sells.

I’ve got a very affordable ranch on the northend that I will be selling for a friend who has used me several times. He is an investor who is parting with several of his properties. I look forward to working with him and his family for probably most of the next year since they will sell one house at a time.

I’ve been working with a large family who has used me a couple of times before. I have really enjoyed getting to spend time with them. We found an ideal home in their existing neighborhood that will serve them well. This house has fairly new HVAC units, replacement windows and a literally brand new roof. I don’t see that Trifecta often. I should be listing their old house here in the next week or so. Their situation was very much like the “Love it or list it” show on HGTV. They loved their neighborhood but their old house wasn’t working. They were entertaining a big addition and remodeling the existing house.

I’ve been working with the mother of a woman that I went to middle school with. I have worked with her once before. Both her and her daughter are so much fun to be around. Once we find the perfect place, I will be selling her old house which is simply adorable. It is on about 3 acres in rural Franklin County. If you had told 6th grade me that I would be a realtor and showing houses to a classmate’s mother 40 years later, I would never have believed it!

Other than committing to wearing long pants every day, it’s shaping up to be an enjoyable fall for me.

Why are rents so high?

by John Rice

It’s because all Landlords are greedy SOB’s, right?

Hahahaha. Well, some might be but that is NOT the real reason rents are so high.

Reason #1:

Inflation. I know you know that word. For some reason, with the price of everything having gone up since COVID, people tend to be shocked that rents have gone up too. Inflation affected everything, including rent values.

Reason #2:

We have been in a housing shortage since the Great Recession ended. That means we don’t have enough housing for everybody, regardless of whether you are renting or buying. More demand than supply means scarcity. Scarcity means higher prices. If there are 99 people looking for a place to live and 100 properties available, prices will go down. If there are 99 properties for rent and 100 people looking, prices will go up.

Reason #3:

Interest rates/Property Taxes/Homeowner’s Insurance. Put yourself in the shoes of a landlord. Why do you think they put up with middle of the night calls about stopped up toilets? It is because they want to make money from letting you move in their property worth hundreds of thousands of dollars for merely the deposit of a single month’s rent and the hope you will pay next month’s rent. If they cannot make money, they won’t do it. Would you go to your job if you didn’t make any money? Rates are higher. Property values have gone up, forcing property taxes to go up. Homeowner’s insurance has gone up as well. They have to pass these expenses onto tenants just as any business has to do.

Reason #4:

The high cost of buying a house. Rent prices are somewhat indexed with real estate prices. Let’s say you live in a house worth $200,000 that you rent for $1500 a month. If you were to put down 3% and buy that house yourself, it would cost you over $1600 a month for a mortgage. (That is principal, interest, taxes, insurance.) Plus you would have to pay out of your own pocket to maintain the house. When you put it in that perspective, renting sounds like a bargain.

The single most important thing when selling your house (or anything really)

by John Rice

I did it again.

I bought another car. For people who know me, this is par for the course. I am always falling in and out of love with cars and trading them like crazy.

If you’re wondering how me getting a new car is related to real estate, it is because of pricing.

The car I bought was not expensive. It is just a little Japanese sports car that is fun to drive. A new version came out during COVID and they have been in short supply ever since. You never see one on a lot. Most are sold before they arrive. Dealers are taking deposits on them and telling people they will call when the car arrives.

I went to a Volkswagon car show with my oldest son and his girlfriend last weekend. We had lunch on the way home. They asked about the deposit I had on another one of these cars at a local dealership. I replied that I was told it should arrive later this month. He then went on a mission of finding me one that was immediately available. He found one about 250 miles away in Indiana.

He called to confirm that it was in fact in stock. It was. I remember thinking to myself “Why is this car in stock, collecting dust on a dealer’s lot when every other one is pre-sold???”

Ahhhhhh……the price!

This dealer wanted $9000 over the MSRP price.

I told the salesperson that I was definitely interested in the car but there was no way I was taking it at $9000 over MSRP. He started telling me what a hot car it was and how many calls they get on it. I am totally sure all that is true. I’m a realtor, so I know how markets for things for sale work. This is a super hot car in high demand, but the reason it hasn’t sold is that it was overpriced.

Here are some truths about any market:

  1. You cannot sell something for more than it is worth.
  2. The whole market determines the value, not just the seller.
  3. A buyer is defined as ready, willing and able. (At $9k over list for a very affordable car, that price pushed the total cost well over budget for the target buyers, thus knocking out the “Able” part of those three requirements.)

Like real estate, you cannot sell the most gorgeous $500k house in a highly sought after neighborhood for $750k. If you try, it will sit on the market and you will reduce the price until those ready, willing and able buyers think it is worth it.

But isn’t the market still hot? Yes, it is. Prices are still going up in our area. That means you still, like always, have to price a house for something a buyer will pay. A hot market doesn’t mean you can sell it for more than it is worth. It just means it will sell quickly and many buyers will want it and be eager to pay top dollar….not more than top dollar. If you ever see a house that is sitting on the market and wonder why it hasn’t sold, literally 100% of the time it is due to price. It may have some odd feature or be in bad shape, but it will definitely sell when the asking price is in line with what Buyer’s think it is worth.

So what happened with the car? They came down to $6k over MSRP and I drove up and got it yesterday. I suspect had they priced it at that from the beginning, it would have immediately sold.

Always make this your first priority when picking a house

by John Rice

Let’s face it, most houses in any price range are all pretty similar. It is rare in Lexington to get something unique in the sense of a feature or design that is different from anything else. We have old houses that mostly have the same character from the time period they were built. We have new houses with their open floor plans. We have updated houses. We have outdated houses. We mostly have houses with average lots. We also have houses with less than average lots. Basically you can pick what part of town you want, what age house you want, whether you have to have it updated or not and just like that, you’ll find about every house that makes your list is pretty darn similar to every other house on your list.

While this isn’t necessarily a bad think, it can make your house harder to sell whenever the market softens……which right now appears will never happen.

Tastes change. Things go out of style. The 90s saw a bread drawer in the corner of every kitchen plus a built in desk. Cherry cabinets were the rage. It won’t be all too long before white shaker cabinets and shiplap will become negatives to buyers rather than something that makes them want the house.

What should you do to make your house be among the best when you go to sell it? The best thing to do is pick a good lot. Why? It never goes out of style and never needs updating.

I recently sold a townhouse in a nice complex on the edge of downtown. The location is great and always will be. The thing is that about half the units are totally identical to each other. The one I sold was an end unit. That means you only share a wall with one neighbor. It also gives you windows on the other side. This unit backed to the houses in a historic neighborhood. You looked out your rear windows and saw trees and grass with the neighboring houses far away. The other units all backed to each other. This unit was on the edge of the complex. It had some greenspace across the street out front. All the others faced other units. There was plenty of guest parking and since it was on the edge of the complex, it is the least likely to be used. This was the best lot in the entire complex.

I told my buyers to picture it is 2008 all over again. They decide to sell when there are 15 other identical units for sale at the same time. Which unit is that one buyer in the market going to pick? Their unit, because the lot will never go out of style and never need updating.

My first open house in 13 years

by John Rice

I did my first open house since 2009 recently. None of the people who came to the open house bought it.

Why?

Because open houses do not help a seller get their house sold.

Who comes to an open house?

1) People who are so new in their search for a home that they are not ready to make a decision.

2) Neighbors.

3) People who just like houses and real estate.

Why do realtors seem to love doing them?

Because they get to meet all those people who are not going to buy the house they are standing in but may buy something later.

Why then did I do one?

For my seller. We put her house on the market right before Thanksgiving. That is statistically the absolute worst time to put a house on the market……and Thanksgiving 2022 was pretty much the worst market since 2011. Interest rates had just put all buyers in a state of shock and very few were out actively shopping.

My seller was one of the nicest clients I have ever had. She needed to get this house sold so she could get married, move and start a new life out of state. All that was in the way was selling this house. It was very discouraging to her that it didn’t sell fast. The market did a major shift so quickly last fall. FYI-It is much better now. Buyers are getting used to today’s rates and are not as shocked/mad/afraid to buy a house. Back then all the headlines were how terrible the market would get. Prices would fall. Zillow and Redfin went from predicting things like 14% annual gains to declines of 10% or more in value.

Long story short, she needed a little encouragement and the least I could do was give her part of one Sunday afternoon.

It had been so long since I had done an open house that I didn’t even have any signs. The first step was to buy the bigger open house sign to put in the yard and get it scheduled online. On my way to her house, I placed the brand new directional signs so people could find the place.

Where I hadn’t done one in so long, I had no idea what to expect. My plan was to get my 10,000 steps done for the day by pacing around her house. I had many pleasant surprises that day. The first of which was that the seller had candy in practically every room and had baked fresh cookies. I ate so many of them that I should have walked 1,000,000 steps that day. We had a huge number of people show up. So much so that I didn’t really have time to play solitaire and sudoku on my phone. I also ran into two people I knew that I hadn’t seen in forever. Overall, it was a successful open house in the sense that it gave my seller the encouragement she needed.

Selling a house is very stressful. Most of my job is giving practical advice and taking care of tasks. Sometimes it is about doing something that says “We’re in this together.”

The house sold a few weeks later to a young couple who feel in love with it. The seller was very happy they loved the house as much as she did.