Random Real Estate Thoughts

Real Estate Fortune Cookie Thoughts

by John Rice

Well……I’ve been doing this for a while now.  Long enough to see some things that I’d like to put in  fortune cookies.  So, here goes.

1.   Don’t hire a termite inspector that looks like a bug.

2.  If you brag to friends you got a great deal on a house because of some randomly odd feature, then you will have to sell it cheap enough so the next buyer can also brag to their friends.

3.  You can’t wish away features of a house.  Like, That’d be a great house if only the toilet wasn’t in the dining room.

4.  It is easier to change houses than it is to change your neighbors……….cheaper too.

5.  Don’t expect the benefits of a foreclosure sale without any of the negatives.  Other than a good price, everything else is a negative.

6.  Roof and plumbing leaks don’t cure themselves. 

7.  Purple carpet is never a good idea.

8.  Neither is wall paper.

9.  Loan Officers always believe the glass is half full until the day before closing, then they are all into reality.

10. Realtors never look as good as the picture on their card.

11.  They also are never as great as they think they are.  Even if they have a cool phone.

12.  This years luck numbers are 8000 and 6500, which are the amounts that some buyer’s can get for a tax credit.

13.  Learn  to Speak Realtorese: 

Not a drive by means the house is butt ugly. 

Won’t last means that there is nobody who will want it, so the agent must try to generate a frenzy. 

An adjective like “Copious” or “Adorable” can be applied over and over again to every feature of the house like some Jedi mind control tactic. 

An “Up and Coming” neighborhood means most of it is still trashy, but isn’t expected to be for much longer. 

Close to everything means there is a lot of noise and traffic.

Must see means that the realtor really can’t describe it or doesn’t have good pictures.

Off New Circle Road can literally be ANYWHERE!

 

 

 

 

Zillow=TMI

by John Rice

Okay.  I woke up in the middle of the night like a good 40 year old.  I couldn’t get back to sleep because I was thinking about an out of town client who relied on Zillow more than he did me.  It kind of became a real problem for me.

And here is why.  When you check out Zillow and you know nothing about the local market or neighborhoods, you can draw wrong conclusions.  On Zillow.com, there is a tab  that shows you recent sales.  They must mainly sort those by zip code, not the neighborhood.  Often, you see sales from a different neighborhood that can make you think you are about to pay waaaay too much or you are getting a bargain.  If you enter a cheaper listing that is by a nice area, you can think the cost per square foot is a bargain in comparison to those recent sales……….and the other way around.  Apples to apples and oranges to oranges.

Another thing that I had to explain was how the assessed value (Tax Bill) worked.  See, the house he was wanting to buy had been owned by the seller for several years.  It showed a taxable value that was much lower than it’s fair market value.  What’s up with that?  Well, the PVA often only reassess the taxable value when the house is sold.  The new assessed value will be the sale price.  If the house hasn’t sold in several years, usually the taxable value will be lower.

Every so often, the PVA will send out its people in their little white Toyota Pruises to snap a picture of your house and then come back to the office to compare it to recent sales.  They don’t actually go inside the houses.  It is kind of hard to get a feel for value from only the outside of the house.  Plus, they know that tax payers don’t want to over pay, so they are pretty conservative.  That may change in today’s world of budget shortfalls.

I own a house that I know I can sell for about $160,000.  I have been paying taxes on only $135,000.  The house next door sold for that much about 4 years ago and they guessed mine would be the same.  I’m not going to call to tell them that my house is under assessed!

All this leads me right into the next issue.  They have an ariel map of the neighborhood with all the assessed values.  Based on what I just told you above, you are right to assume that most of the dollar figures that appear to be painted on the roof tops of the houses are much lower than what most of them are probably worth. 

You should have seen me trying to explain all this to my untrusting client.  I am sure he must have thought I was making all this up as I was telling it.  What I had to do was pull recent sales from within the neighborhood.  I was able to show him 2 other houses that were the exact same model as the one he wanted and had sold within the past 6 months.  We did a few adjustments for thing like one had a fenced yard and newer appliances, and came up with what the real market value was.   It was much higher than what the seller had been paying taxes on for all those years.

So, feel free to use Zillow.  It is a useful tool.  But realize that you need to know how to interpret the info that they give you.  You always want to compare a house you want to make an offer on to similar ones within the same neighborhood that have sold within the past 6 months.

1994 Grand Tour of Homes~Thoughts

by John Rice

Sometimes I need something to read before I go to sleep.  Being the house junkie that I am, I found myself looking through the booklet for the 1994 Grand Tour of Homes.  Yeah, I know this is kind of nerdy, but houses and cars are the only 2 things that I am really into.  Since this is a real estate blog, I’ll skip going into all the useless car facts I know such as that the 1968 Corvette was not a “Stingray”, even though the 1967 & 1969 Vette’s were Stingrays.  In fact, the ’67s were Sting Rays (2 words) and the ’69s were Stingrays (1 word).

I remember going into all 29 houses on the tour that year.  The new neighborhoods back then were all outside Man-O-War, mainly out Harrodsburg Road and Todds Road.

I guess  my thoughts on seeing this booklet again is that the higher end houses aren’t worth as much today as you’d think they would be.   Back then, pickled cabinets were all the rage.  The higher end houses had things like gold fixtures and mauve toilets.  I remember thinking that they looked good for right NOW, but like all things high style, they would become tomorrow’s eyesore.

That is why I think the higher end houses from 15 years ago haven’t appreciated as much if they have not been updated.  It costs a fortune to update any house yet alone a big one.  Plus, the buyers of those big houses don’t want to revisit the trendiest styles of 1994.  Meanwhile, the modestly priced houses back then had chrome fixtures and oak cabinets.  Those finishes are totally acceptable today for buyer’s of  average priced homes. 

Even in my 10-15 year old neighborhood I see the non-updated houses selling for just over $200,000 and the recently updated ones quickly getting over $250,000.  My own house could have been on the cover of the 1998 Tour of Homes.  It has a green counter top and floor PLUS those dreaded pickled cabinets in the bathroom. 

As I update my own house this year, I am going for more of a timeless look.  I don’t want somebody to look at it in 15 years and say “That is sooooo 2009!”

(Kind of random today, but the point is that I recommend NOT getting the trendiest finishes when you build or remodel.  They hurt you in the long run.)

why you can’t believe everything on HGTV

by John Rice

I finally got satellite a few weeks ago.  About the only channel I watch is HGTV.  One of the shows that I get a kick out of is called “Bang for the Buck.”  It is where they feature 3 home owners who have all spend about the same money on a similar improvement.  They bring in a realtor and a designer to evaluate what percentage of the money spent translated to an increase in the value of the home.  Sounds simple, right?

There is more to figuring out the return on investment than just evaluating  the design and materials used in the projects.  Believe it or not, the neighborhood these houses are in play a more important role in determining the “Bang for the Buck.” 

Why is that?  The main reason is that appraisers and Realtors base a house’s value on 3 similar houses that have sold within the past 6-12 months that are ideally in the same neighborhood, or a similar one within a mile radius.  We do that because that gives us an idea about what buyer’s consider a fair price.  It is all about tracking recent buyer behavior.

Here is an extreme example to demonstrate my point.  Homeowner A has a 1300 square foot ranch in Masterson Station.  He spends $50,000 to update his kitchen.  Homeowner B has a 3000 square foot house in Beaumont and spends $50,000 to update his kitchen…….Which one will surely get the highest percentage back on that investment?  The dude in Beaumont will.  Why?  It is easier to convince a buyer for a $350,000 house to pay the seller back for doing the improvement than it is for a buyer of a $130,000 house.  Would you want to pay $180,000 for a house with a pimped out kitchen surrounded by $130,000 houses?

Something else they fail to mention when they talk about adding value is the timing of the sale.  The homeowner’s in my examples are really only going to get a maximum return if the updates are current and in good shape. What happens when all the new flashy stuff is outdated and/or worn out?  It decreases the value of the house.  Think shag carpet, paneling, mirrored walls and gold bathroom fixtures.  People spent good money on all that stuff when it was the latest fad.

~John

Random thoughts on a busy week

by John Rice

Whew!  I have been on the go with 3 buyers lately and a few people that maaaaaay do something sooner or later.  I haven’t been home much at night or on the weekends.  I miss seeing my kids and wife, but I am glad to have the work!

I have had 2 big disappointments this week.  I found the PERFECT house for one of my buyers.  I mean perfect.  The area, size, layout and everything was just perfect!  It had hardwood floors in the main rooms, new carpet in the bedrooms, slate in the kitchen, and all the lighting and hardware had been updated.  I call the agent to tell her that it looks like an offer is coming.  She tells me that they just sold the place a few hours earlier.

Here is one house out of about 200 in its price range in Lexington and 2 people want it.  Can you blame them after my description.  It just goes to show that THE BEST house in any price range will sell.  My gut is that of the 200 or so houses in this price range, more than half are ones that NOBODY wants.  Yet, they are there and make the market look worse than it is.

The next house was totally awesome for under $100k.  The listing agent was new.   This was his 1st listing.  He under priced it by maybe as much as $7000.  Anyway, he told me it had a “Kickout Clause” .  That means that if the seller likes my offer better, the other buyer has a given amount of time to remove a contingency.  As it turns out, the wording on the other offer for the kickout clause was so vague, nobody knew what it meant?  The time to figure that out would have been BEFORE they accepted it, but hey.  My buyer ended up walking away in frustration.  The new agent didn’t have the experience to advise/guide his client with any more than textbook theory.  Oh well!  We found her another house that I think will be good for her, but it isn’t as nice as that one was.

I also got a contract on one of my listings this weekend.  I am totally stoked about it too!  This house is in a neighborhood where the builder is still building and about every 4th house is on the market.  To make matters worse, right after I listed it, an IDENTICAL house came on the market just 3 doors up the road…….FOR $5000 LESS!!!!  Well, I guess this is where marketing and staging comes into play.  I worked with my sellers (who are great BTW) to thin things out, arrange furniture, etc.  I had my totally awesome extrememly talanted (yeah, I am talking about you Shaun) photographer come out.  I know that when people are considering a house, they go back home and keep looking at the pictures as they make up their mind.  That is another benefit of having such nice pictures and marketing remarks that evoke an emotional connection to the place.  Don’t believe me?  Well here is what most agents do:  “Great 3 bedroom house in move in condition conveniently located.  AND THE DISHWASHER IS NEW!!!”  See?  Did that do anything for you?  I didn’t think so!

Well, that is my week so far…………..