You know, you can find out a lot of people’s motivation if you just listen to their realtor.  Most are big talkers.  Most of them view the deal as practically done once you settle on a price.  They seem to forget that there is usually one more thing to negotiate:  The repairs after the inspection.

Here are some examples of what agents sometimes say right after a contract has been accepted: 

1)  “The sellers have a contingency contract on another house that they were about to lose.”

2)  “The buyer needed to close on a house in time for him to get his family moved down here before he started his new job .”

3)  “The seller is making 2 mortgage payments.”

4)  “The buyer’s lease is up at the end of next month.”

Now, repairs are always the trickiest part of a deal.  The seller is thinking that they have lived happily in the house for so many years and that they let it go too cheap.  The buyer is always thinking that they didn’t get the house as cheap as they wanted and they don’t want to buy the seller’s problems.  That’s just human nature.   It gets rough sometimes.  Usually there is a little compromising, meaning neither party is truly happy.

But when the agent pretty much discloses that their client can’t afford to lose your client, it makes negotiating a little easier.  I’m nice about it and all, but the reality is that the only person whose interest I need to promote is that of my client’s.  If my client gives me a list of things they want repaired, I’ve got to try to get as much of it done as possible.

So, negotiating repairs is really about knowing what is happening with the other party while keeping tight lips about what is up with your client.  It is a lot easier to draw a line in the sand if the other party doesn’t know enough about you to predict what you’ll do next.

I’m in the middle of a deal and we just had the inspection done.  The place has some medium sized issues.  Nothing that is too too bad, but stuff that still needs to be addressed………..and addressed soon! 

As I was explaining to my client how I write a repair list, I thought that might be something good to blog about.  Most realtors just list all the deficiencies and ask them to be repaired.  That sounds easy enough.  Just give them a list of tasks to do and move on.  Buuuuuuuuut, there is a potential problem in doing it that way.  Granted, it rarely comes up, but when a problem does happen, it really sucks!

The problem is that if you ask for a task to be done, you can have a situation where an action was performed, but the problems wasn’t solved.  Don’t get it?  Think of it like this.  You get a home inspection, find out the faucet leaks because it needs a new washer.  You write on the repair list that the seller has to install a new washer.  Seller agrees.  Seller goes to Lowe’s, buys a washer.  Seller installs new washer.  The faucet still leaks.  You tell the listing agent that he didn’t fix the faucet because it still leaks and the agent tells you that all you asked him to do was replace a washer.  See it now?  I don’t see this kind of bickering as much now that we are in a buyer’s market, but it still happens some.  If it is for something minor like my example, the seller and their agent know that you aren’t going to walk away from the deal over something so small.  Even if they agree to go back and fix the faucet, it still causes a lot of stress for the buyer.

The simple solution came from my Dad.  He is the smarted man I know.  He is also a lawyer, so he is pretty good about getting things worded correctly.  I remember asking him to help me word one of my first repair lists.  I started to do it just like everybody else.  Then he said to me that I should word it where a result is to be achieved rather than just a task performed.  It was like a revelation or something.  As soon as he said that, I totally got it.  Since then, I always state the problem that needs fixed and usually add something like “so that it functions properly” at the end.  That way if there is some issue with the work that was done, I can always claim that it isn’t functioning properly.  Also, for plumbing, electrical, and HVAC work, I always state that the work has do be done by licensed, qualified contractors.  That keeps the roofer from working on your furnace and a handyman from getting inside your electrical panel.

Thanks Dad!!

Now that winter is here, I finally have some time to blog about some of my recent experiences.  Guess I’ll start out by telling you about a couple that was referred to me last Spring.  Great young couple.  First time home buyers too.  They were looking for something pretty specific.  The wife reminded me of myself, because she wanted to be on her deck/patio and not see another neighbor.  I am like that too.  I’m probably worse since I have this thing about having a lot that sits higher that the houses around me.

Anyway, we looked at a whole lot of houses, which is always fine with me.  My attitude is the more houses I get into the more useful I am in the future to folks.  It really helps me to know what is typical for the area.  Especially when I am doing comps.

I had been telling them they should by a house that they can see themselves in for a long time.  The way the economy is, who knows what the interest rates would be when they wanted to sell.  If we have inflation like the 1980’s again, there will be a lot of people who can’t afford to move up to a bigger house if interest rates shoot up.  I kind of shot myself in the foot I think since that upped the ante for the house.  But hey, it’s about them not me!

Like everybody, they wanted a move in ready house.  Off topic here, but if all the houses on the market were move in ready, we could pull ourselves of the housing slump.  There really aren’t that many move in ready………I mean MOVE IN ready houses out there.    Well, real estate is all about Location, Price, and Condition.  Those are the 3 realities we have to work with.  It is pretty rare to get all 3 in Lexington for under, well, just about any amount, especially under $200k.

So, I started dropping hints that it would  be easier to update a house than they thought……….if we found one that had everything else right about it.  At first, I don’t think they were that interested in that.  Like all home searches that go on for a bit, they started to get tired of looking.  That can be a dangerous point cause then people sometimes compromise toooo much just to end the search.  We didn’t go that far.  If somebody is near that edge, I’ll usually look at houses without them and decide if it is worth showing them.  People can only take so much disappointment.

They started to entertain the idea of painting, new carpet, updating lighting, etc.  Somehow we found the 2 most unreasonable sellers in their price range.  We made offers on these houses, I mean offers that I thought were VERY fair, only to have them rejected or countered on the far side of reality.  (One of those houses was taken off the market and rented and the other one is still sitting there vacant!)

Third time is the charm.  We found a great ranch with nice rooms, a nice lot, in a fine neighborhood.  We also found a seller who smoked, had multiple cats, and probably didn’t own a vacuum.  The place looked pretty bad.  It smelled and it was messy.  If I had taken this couple to this house any earlier, it would have become one of the forgotten ones.

So, we made an offer, it was countered by an agent who kept calling me “Babe,” and yes it was another guy.  I thought that was kind of an odd thing to call another guy as opposed to “Bud”, or “Dude”, but I took one for the team.  Finally they had a house!!

Since I got them into this mess, I figured I better help them with the worst part, which was pulling up the carpet.  Man, it was nasty.  Come to think of it, I don’t remember seeing a cat box in that house!!

While they were painting and making daily trips to Home Depot, I would occasionally get a text from the husband.  It always scared me a little since I never knew if it was going to be something like this:  “Curse U John Rice!  WTH.  Y did U sell us this house.  I’ll get U L8er for this!!”  But it was always just an update of how the reno was going.

This couple spent about 6-8 weeks painting, changing light fixtures, getting new carpet and decorating the place.  I’ve been over there a few times and it really looks great.  They’ve been over to my house, and it is kind of embarrassing for me since their house looks so awesome and mine, well, just doesn’t.

I think they are really proud of their house and that they did all the work themselves.  When you find a house that works for you on so many levels but only needs a decor-ectomy, you should buy it.  Those things are easy to change.  So now they have Location, Condition, and all within their Price.  They got it all, and all it took was 6-8 week.  A happy ending, especially since I also made some new friends in the process.

I’ve spent a lot of time with Beaumont on my radar lately.  I have had 3 buyers this year who picked that area.  That means that before we made the offers, I had to do a lot of research on days on market, what you get for the money & why, compare past sale prices to see how much of a hit the area has taken, etc.

One thing that has really stood out to me is that there is about a $100k gap between an almost new house and one that is about 10 years old.  I mean, we’re talking similar size, features, lots here!  Why the big difference?

It all boils down to the finishes.  The houses I have been in and seen that have or will sell for north of $500k are newer, have granite, trendy lights, hardware, lever style door handles in either bronze or nickel.  The ones that are worth about $400k have laminate counter tops and a lot of brass.  Some of the older ones don’t have as open of a floor plan, but enough do to make me not think that is the only reason for the big gap.

Here is what you do get that is similar:  About 4000 square feet, 4 or 5 bedrooms, 1/4 acre-ish lot,  most have finished basements, same popular school district.  In an era where exotic hardwood in wider sizes is popular, almost all the houses I have seen up to about $550k have the same 2 1/2 inch wide oak in a honey looking stain.

So, what is a buyer to do?  Well, if you have the time and money, I think the way to go is to buy one that is a little outdated and update it.  Let’s take a look at what you can do:  Want a dark stain for the hardwood?  $5-6k will get you floors that look brand new.  Granite?  $5-7k will impress everybody.  Stainless appliances?  Unless you go pro, figure $6k.  Update all the kitchen cabinet pulls, put on those bronze level style door handles….maybe $1500.  So far we have only spent about $20k.  That leaves about $80k for stuff like the master bathroom, new carpet if needed, a killer deck or patio, a man cave basement or anything you want.  Or you could just pocket that when it is time for you to sell!