Random Real Estate Thoughts

Seeing people’s true colors…..Shining through

by John Rice

Well,  It has been a busy last couple of weeks.  I’ve closed 4 deals and written an offer on another place.  I thought I’d share with you  some of what all went down, good and bad.  By the title of this post, feel free to be humming True Colors by Cyndi Lauper.

Guess I’ll start with the best.  Just a few days before their closing, my clients discovered that a window they had replaced a few years ago had leaked during a heavy rainstorm.  It was just about a cup of water.  I’ll spare you the minor details, but the fantastic thing is that my sellers wanted to make sure this was resolved for the buyers.  Do you know how easy it would have been to have never mentioned the leak?  Unless the buyer did the walk-thru during a heavy rain storm, nooooooobody would have even known.  In my line of work, you see people at their best and their worst.  These peeps were at their best.

I closed one yesterday that had been pretty bumpy.  It all started out okay, but every time the seller’s agent and I had something ironed out, there was always a little bitty change when it came time to put it on paper.  When I got the contract, the seller had crossed out the fridge.    When we wrote up the repair list, the seller’s agent called to say that he would do all the repairs.  When I got the signed list back, the word “Replace” had been changed to “Repair.”  Then she tried to tell me that it was just semantics.  I bit my tongue, but I wanted to say that if both words mean the same to her, why can’t we just use the word “Replace?”  Then this seller wanted to stay in the house after the closing.  The contract said possession with deed, which means you get the keys at closing.  My buyer and I both felt like this seller could not be trusted to be out when he said since he always seemed to be renegotiating everything. 

Fortunately the conference room at the mortgage company was tied up.  The sellers went in an office and did all their stuff, then the buyer and I went in and did our stuff.  Well…….My “Stuff” at that point is to snack on whatever candy they have sitting out.  From what I was told, the seller kept making a bunch of sarcastic remarks while he was in the lobby.  When the title guy went out to the lobby to tell them they were free to go, the husband said “Good, I didn’t like him anyway.”  In my line of work, you see people at their best and their worst.  These peeps were at their worst through the whole thing, and are probably like this anytime they don’t get their way.

At another closing, I found out that the buyer’s were not doing a final walk-thru.  Now, I don’t know all their details, but I just can’t imagine not doing a final walk-thru.  I think if these were my buyers, and they didn’t have time nor didn’t want to do it, I would have been over there checking it out for them.  Once we close, any problem is their problem.  I had the seller, so it really just made it easier for me!  That was a pretty friendly deal.  We had some tough parts during negotiations, but nobody was nasty.   My sellers said that the buyers seemed very nice and she wished them well.  Everybody was at their best.

I had a really wacky deal with another one of my listings that closed last week.   During their final walk-thru, the agent called to tell me there was a stain in the carpet and asked if my people would pay to have the carpet cleaned.  I had to graciously say no since the stain was there long before the buyers ever saw the house.    I sent her the pictures I had uploaded on the MLS showing that the stain was already there.  We’ll count this one as everybody being at their best.

Then I had an offer accepted for some of my all time favorite clients.  The seller is an elderly man who recently lost his wife.  The house is one of those once in a lifetime deals for my peeps, and we are all trying to make it easy on the elderly man.  He lost his wife and now is losing his home since he is moving in with family.  Everybody is already being their best on this one, so I am sure it will continue. 

So, here is the advice I give myself:  Decide how you want to be ahead of time.  If you don’t, it is too easy to make a bad choice if you are trying to make that decision in the heat of the moment.  I haven’t perfected this yet, but I know how I want to be.  I guess past generations called that character.

100% of Real Estate Statistics Don’t Have Anything to do with Your House

by John Rice

I met with a cool family a few weeks ago.  They were going to interview a handful of agents to see what we all had to offer.  I’m always a little freaked out at listing presentations.  See, there are agents that come with power point presentations and go over a whole bunch of junk, crunch numbers, brag about how low the average days on market is for their listings, and then blurt out something like “After looking at the statistics for this price range, you house will sell at 5:46 P.M. exactly 43 days from now.”  That impresses some people I guess.  I’m not one of those that throws out a bunch of numbers.  I kind of like to look at the house.  Assess the positives and negatives that I think buyers will see, then do a CMA to find what I think the house is worth.  I usually do all this wearing a pair of shorts, and often forget to give the people my business card.  I ordered 1000 last year and still have about 993.

Before I get into statistics for selling houses, I’m gonna expose some tactics agents use to lower their own average days on market.  I was checking out another agent’s blog the other day and she quoted the average amount of time her listings take to sell.  The number she gave was very impressive……not at all accurate, but very impressive.  See, she didn’t bother to include the listings that she had deleted, then relisted with a new MLS number.  Where did that time go?  It wasn’t in her average DOM (Days on Market-I am already tired of typing all those words!)  I am sure to her clients that time didn’t disappear.  Another thing that often gets lost in their average DOM is the fact that it only includes houses that actually sell.  If the listing expires and never sells or gets relisted with another agent, that number doesn’t count.  It would be like quoting your GPA in college but not counting the courses you failed. 

 The same thing happens with the average list to sale price.  Say a listing expired after 6 months at $200k, was relisted at $190k for another 6 months.  Expired again.  Relisted again for $180k, then got a contract for the full asking price that very day.  The agent could say that she sold that place for 100% of the asking price the first day on the market.  But we all know it was a year and a day and 90% of the original list price.

Okay, now I’m going to tell why I don’t worry too much about DOM and list to sale price.  It is because I am only dealing with one house.  Yep.  That’s right.  The only number I care about is the one that will have to do with my listing.  The list to sale price isn’t much help either since that number will be brought down by the over-priced listings that sold for market value.  Also, like most averages, the low and the  high numbers have too much control over the whole.  Plus, there may be a darn good reason why one of the houses you’re using took twice as long to sell as the others in your test pool.  Then you have to look at the history to see if any of the listing agents for the other houses pulled the old delete/relist game to give a false DOM.

The bottom line is that you really never know when the buyer who is going to bite at your house will arrive.   All you can do is price it realistically, make it look great, and present it well online.  When I get a seller that will do all that, their house usually sells in less time that the average DOM.  My average DOM is lower than typical, and I don’t even bother to tell people my number.   I’ve sold several houses in less than 10 DOM and had a 3rd floor walk-up condo in an area that tends to attract retirees take just over a year.  I worked just as hard on all of them. 

So, back to the listing appointment.  I’m on the tour of the house and the husband asked me the average DOM question, and I told him that I didn’t even look at that because I don’t care how long it took other houses to sell, I only care about how long it is going to take his house to sell.  As soon as I said that, I knew I either had this listing or I had just totally blown it.

I think the statistics agent uses them to impress you at first, then uses them to justify why your house hasn’t sold.  C’mon, when you’re asking your agent why your house hasn’t sold yet, are you looking for advice on what to do next or wanting to hear about numbers?

Fortunately this cool couple saw my point and went with me.

Lexington Ky Real Estate: Want fries with your offer?

by John Rice

Okay.  I admit it.  I was watching a real estate show on TLC yesterday.  You’d think when I get a free Saturday, I’d do something that has nothing to do with real estate, but no.

What got me miffed was watching this buyer’s agent do like all of them do on those shows.  The agent is getting ready to write an offer and asks the buyer what they want to offer.  I call that order taking!  May as well ask if they want to super size their offer or if they need fries with that?  I just want to scream at them “Hey, why don’t you tell them what YOU think the house is really worth?”  You’d be pretty miffed if you went to the doctor and he asked you what you thought you should do about your own medical problem, right? 

You’ve just got to know what the house is worth.  Using a terrible agent can cause a lot of problems, but they usually all get worked out by the closing.   If you overpay for a house, that is the one mistake your agent can make that will survive the closing and haunt you later.

How do you know what a house is worth?  Order an appraisal?  Yeah, you could, but the only difference between what we call a Comparative Market Analysis (CMA) and an appraisal is a few hundred dollars and an appraiser’s license.  The steps and values should be the same. 

I always do a CMA before I let somebody make an offer.  I WANT to tell them what I think the house is worth.  After that, I’ll suggest some strategy, then they can tell me what they want to do.  You can’t assume that the asking price indicates the real value of a house.  I’ve had some folks buy a house for much less than the asking price because it was over inflated, and I’ve had people make near full price offers because it was priced on the low-end of the comps.  Neither paid too much.   Maybe this is why I have never had a house NOT appraise.  When the market slowed and lending got really tight, I was always hearing bad stories about houses that didn’t appraise.  Personally, I would be embarrassed if I had done a CMA and then not had the house appraise for one of my buyers.

Something else that bothered me about that show yesterday was that the buyer had flown in from out of town to buy a house.  The one he picked needed $70,000 worth of structural and plumbing repairs.   The buyer wasted his time and money on a trip that produced N-O-T-H-I-N-G!!  I’m not asking any Realtor to be a home inspector, but gez louise, know enough about houses to be able to prevent your clients spending their time and money, not to mention emotional investment, in a house that isn’t going to work.  When people start to get serious about a house, take a look at the roof, the electrical panel, the foundation, check the seller’s disclosure to see the age of the furnace and air conditioner.

Maybe I should have just watched Hannah Montana yesterday instead.

What advice do I give my friends??

by John Rice

I had a friend contact me on Facebook about the possibility of finding a new agent to sell their house.  Seems they haven’t had a lot of showings, and obviously no offers yet.  I’ve crossed out the name of the town that the house is in (and corrected some of my spelling), but I though this would make a good blog post.   I always say that I need to be as good to those I don’t know as I am to friends and family……so here is what I said for anybody with the internet to see:

“Sorry to take so long to get back to you. I don’t know if it is just me, but this isn’t an easy one to answer so I wanted to have time to write you a book.

When you listed your house, it should have had a beginning and an ending time for the listing period. After the contract expires, either of you are free to move on. If that time hasn’t come yet, the agent may let you out of the contract.

I do have a few questions. Is there a board of realtors in XXXXXXXXXX (meaning a local “chapter” for the MLS.) In Lexington, we have the Lexington-Bluegrass Association of Realtors. That is the site that all the local agents use. If there is one specifically for XXXXXXX, you definitely want an agent that is a member of it. If it isn’t on whatever association’s website that XXXXXXX agents use, you may as well have listed it with an agent from another planet. In your case, I would imagine that (major nearby city’s) association probably covers XXXXXXX too. Also, the odds of your agent actually being the one who finds a buyer are very slim. It happens, but odds are another agent is going to see it online and bring their client to your house. That is why online presentation is the most important thing right now.

Question 2. Is your current agent presenting it well online? Go to whatever site the agents use and take a looksie at it. If the pictures and marketing remarks wouldn’t make you want to see it, odds are everybody else feels the same way. While you are there, double check that everything is accurate.

Question 3. Is it priced realistically? Now this is where you will unfriend me, but if you have had XX showings in less than 6 months, it may be priced high. I don’t know the XXXXXXX market, but to have XX people look and not make an offer could mean that the price is too high or………Question #4!

Question 4) Is the feedback you are getting from the showings that there is some fatal negative that buyer’s just can’t look past? If you keep hearing the same thing over and over again, you might have a big negative. Most big negatives can only be conquered with a price reduction. I have a teeny-tiny backyard. I know when I go to sell, that is what buyer’s will be telling me. Most people wanting a decent sized 4 bedroom house in a great school district have kids and want a bigger yard. I’ll have to price it at the low end of the comps unless we have another crazy seller’s market.

So, if you do part ways with this agent, here is what I would look for next. Ideally, an agent that works with at least as many buyers as they do sellers. Most agents just want to list. Listing houses just means you see the one house. An agent that works with a lot of buyers has probably been in a lot of the house that you will be competing against. That agent will be better able to tell you what your house offers to buyers that are out there right NOW! I’d look for somebody that deals in your price range a lot. It always kills me when I see a cheaper house listed by one agent in Lex that deals almost exclusively in high end houses. What does this agent really know about a $100k house when 98% of their work is over $500k? And how much time are they going to put into that listing that will pay $3k verses the ones that will pay $15k. It takes a really etical person to work as hard for both sellers!

I’d also look for somebody that has a plan. Don’t go for the agent that spits out their average days on market unless they can specifically tell you what they did to acheive it. Lots of agents can get lucky. You want somebody that will do a market analysis and will show you how they came up with what they think your house is worth. Even if you don’t like the number. Some agents will list a house for whatever price it takes to get the listing. Then they start hitting you up for price reductions. I kind of think it is better to deal with reality now, since you’ll have to at some point down the road.

I hope this helps. Let me know if you have any other questions…..I may turn this into a blog post. (No names of people, places, things though.)”

Fairy Dust & the “SOLD” sign

by John Rice

I was trying to think of something to blog about this morning on the way home after dropping my kids off at school.  I was just about to pull on my street when I saw a house that had sold the first day it was on the market, but is now sitting back on the market with no buyer at the moment.  It got me thinking about how all that works with finding buyers.

This is a nice house.  It has a pretty deep backyard for the neighborhood and is in a good school district.  The sign went in the yard.  It got a contract.  A “Sold in 1 day” sign went up the next day.  Then about 10 to 14 days later the sold sign was gone and I noticed that it was back on the MLS as an active listing.  Probably means something didn’t work out with the inspection or the buyer’s financing.

So, a house that would sell in less than 24 hours on the market, but hasn’t got a contract in the past couple of weeks.  What gives?  Why hasn’t it sold again so quickly?  Well, like I say, there is no fairy dust, no magic in real estate.  Realtors that would have you think selling your house is anything other than working hard and working smart are the ones that can only brag about their good luck.  And good luck is what happened here.  I have no doubts this is a very nice house, and will get another contract, but what happened to make it sell in one day is that the right buyer was right there at the exact time that the house hit the market.  How do I know?  I’ve had it happen to me before.  I had a great little house that I did a great job of presenting it online, working with the sellers to get it ready to sell, and had a professional photographer take the pictures.  It sold in a matter of hours after I put it on the MLS.  Seems the buyer was already looking in that area and then BAM, I drop a great house on the market.  That house would have sold quickly anyway since it was presented well, showed well, and priced realistically.  Those are the 3 best things to focus on when you want to sell.  While I would like to take the credit for getting it done that fast, it was really more about timing.  Most realtors won’t tell you that.  They would like you to think that they sprinkled the fairy dust and that all the events/timing that lead to a sale were due to them.   That’s why I don’t really go around bragging about my average days on market.  While my number is much lower than the average, I know that all I can do is work to attract the buyers that are out there, not make them appear out of nowhere.   I never promise a seller when their house will sell.  What I promise is to have great pictures online, to write marketing remarks that tell buyers what is unique about the property, to work with the seller to get the house ready to sell, and to dot the i’s and cross the t’s throughout the deal.  I guess that is my fairy dust.

While I’m on this topic, I’ll reiterate that the “SOLD” sign in your yard really is just there to promote the agent to your neighbors so they can get more listings.  The sign does no good for you.  Why?  Well, think about this listing.  Do you wonder if anybody else was interested in this place while the sold sign was in the yard and the status was pending on the MLS?  I sure do.  Do you think the seller is wishing the agent had been collecting names and numbers of interested parties?  You bet he is.  I have 3 listings right now that have contracts on them.  I could stick a “SOLD” sign in their yards, but I don’t even own any.  I know that until you get past inspections and appraisals, and until the buyer’s loan gets through underwriting, that the place isn’t really sold yet.  When I get a sign call, or an agent calls me, I tell them the house has a contract on it and that we will accept back-up offers.  They never go for that, but then I have names and numbers of people to call if a deal falls apart.  I have resold three listings over the past five years this way.  Two fell apart after the inspection and the most recent one happened when the buyer’s financing fell apart.  I got back in contracts with all three of them the same day.  Think my sellers would have had that happen if I had proudly stuck a “SOLD” sign in their yard?