Wow….I was in a house yesterday that has a zero percent chance of selling.  Want to know why?  We couldn’t even see the house. 

Get this:  As we walk up to the front door, there is writing of different colors on the inside of the living room window.  I assume it is erasable, but it was distracting.  Then, I get the key and open the door.  I see two cats that I am nervous about letting out and I hear a TV going full blast.  Naturally, that makes me think that somebody is home, so I spend those first few critical minutes wanting to make sure nobody is about to come out of the shower wearing only a towel.

It doesn’t get much better from here, but at least I think we are alone in the house.  Inside, there is sooooo much stuff all over.  The counter tops are full, and I believe there is a fridge behind all the magnets.  We go downstairs to the basement.  The dryer is going.  There is a sign on the door to the garage that says the dogs are in there….so we just assume it is a typical 2 car garage and go upstairs.

Back upstairs, we see a giant box, filled with towels and toiletries……yes.  It is the bathroom!  Next we go into the master bedroom.  There is a giant pile of unfolded clothes on the bed.  As I go to see the master bathroom, I notice something move out of the corner of my eye.  There is a dog on the floor in a kennel.  There is so much stuff in the room as well as on top of the kennel that I could never have known there was a dog in the room had it not moved.  The funny thing is that just as I was about to tell my client about the dog, I see ANOTHER dog in a kennel on the other side of the room.  After a good laugh, we go out into the hall.  One of the bedrooms doors was shut.  I say to my client that I really don’t want to open the door unless she reaaaaaaally wants to see in.  At that point, she expresses the obvious, which is that she has no interest in this house.

I feel sorry for sellers  and their agents when I see a house like this.  Why?  Because it is NEVER going to sell.  That means a seller who is mad at the listing agent because the house isn’t selling and a listing agent who has to have that uncomfortable talk with a seller about making your house look good for a buyer.  I also feel sorry for buyers who will be disappointed and their agents who have to walk around the house in fear that somebody could be home like I did. 

When we got back in the car.  I asked my client if she remembered what color the cabinets were?  What color the counter top was?  Did the kitchen have tile or vinyl floors?  What color was the carpet?  She didn’t know……and neither did I!!  However, we both had a big list of things we remembered,  just nothing about the house itself.

If you want to sell your house, you must make it something that somebody else will want.  It isn’t about you at this point.  It is about the buyer.  Would you expect to find a dirty vehicle at a car lot when you are buying?  Do you skip over the can at the grocery store with the torn label?  Would you buy something in a box that looked like it had been opened and then re-taped?  If you are a seller, realize that a buyer expects the same things that you would.

I just had a listing of mine sell for $20,000 more than I expected it would.  Was I that off?  The house was in my neighborhood.  I keep up with all the activity out here.  I’ve also been in enough houses out here to know how it compared.  Plus, the comps all testified that my number was much more realistic that the price at which it sold.

What gives?  Well, the bottom line is that the buyer had an agent that must not have done much research.  I see this ALL the time.  I had a listing in Nicholasville this spring where the buyer’s agent called me before they left the house with a verbal offer.  Now, how in the world could she have had time to look at the comps and assess the value of the house?  She obviously didn’t.  My seller was priced on the high side there too, and these people were basing their negotiations off the list price.  That is never a good idea.  FYI, I had an appraiser that was using that house as a comp even call me a few months later asking if the seller had paid any closing costs and if it was an “Arms Length Transaction”…..all of which is real estate speak for asking why did this house sell for so much more than any others on the street.  My answer was “Lazy Realtor.” 

Back when the market was hot and I was a newbie, the house across the street from my old place was for sale.  I was friends with these folks.  They would have used me to list the place, but they had just paid top dollar 2 years earlier and didn’t have the equity for a commission.  The price they asked was waaaaaay over the top for Gainesway.  Well, along comes a nice couple with a tight timeline and a lazy realtor.  The seller got his price.  The price was so high that the appraiser had to use comps from across town to justify the price.  Before long the buyers realized they had paid too much.  Seems they had a tight timeline and had just started looking at higher priced houses.  They saw this one, liked it, and just assumed the value was there.  It obviously wasn’t.

Another story for you.  I met a really great couple who moved down here from a more expensive market.  They ended up with an agent who let them buy the highest priced house on their street…..and got them to pay the full asking price?  To them, everything seemed like a bargain, and they trusted that the person who had a fiduciary duty to protect their interests actually would do so.  Another FYI, I had a buyer for a house recently where the seller had also used this agent when they bought it and paid top top top dollar for the house……and the full asking price.  This agent doesn’t even have an excuse since both of these sold long after the market cooled.

Okay, back to my recent listing.  The buyer was from out-of-town.  The agent didn’t do much work in Lexington.  They had been looking at more expensive houses, and had just lowered their price range.   It was a cash deal, so we weren’t going to have an appraiser bring us all crashing back down to reality.

So, what can you do to prevent this from happening to you?  First, get an agent that knows what they are doing and actually cares about what happens to you after their check has cleared the bank.  To me, here is a good test, ask them what the house is worth.  If they spit out a number immediately, or say anything that indicates they are working from the listing price rather than recent sales in the area, fire them.  My standard response is always “Let me look at the comps and get back to you.”  Any of my current and past clients that are reading this are probably chuckling right now, having heard that so much.   Have your agent do a CMA (Comparative Market Analysis) on any house before you make an offer.  It is a mini appraisal basically.  That is the standard by which we establish value.  Ask to see the comps.  Also, your agent should know if the sale price had any seller concessions built into it.  A house that sells for $200k and the seller paid $6k in the buyers closing costs really had a net sale price of $194k.  If you don’t know that going into the offer, you can overpay even if the agent did a CMA.

Another time that I see people pay too much is when you change your price range or are in a hurry.  Anytime you go up or down in your price range, look at several listings so you can see what is typical for that range so you can pick the best one.  If you can’t, ask your realtor if the house is typical for the price range/neighborhood.  If you are in a hurry, have your agent do some homework for you.  When I have out-of-town people, I try to get a feel for what part of town they would like, then I’ll preview some houses with my Flip video camera so they can be narrowing the field before they even get here.  When it all works perfectly, and it often does, they have less to deal with while they are in town and can focus on only their best options.

I sure hope this helps somebody because it makes me sick to see people in today’s market pay too much for a house.  

NEXT BLOG?  HOW TO PREVENT DRAMA IN YOUR NEXT REAL ESTATE DEAL.

Aren’t we in a slow real estate market?  Isn’t this a buyer’s market?  Isn’t the ball in my court?   These are the kind of questions going through all buyers minds these days as they look for houses.  The answers are yes, it is slower than in the past, it is in general a buyer’s market, and the ball is in your court……unless you want one of the best houses on the market.  That little twist changes a lot of things.  See, I have been in more multiple offer situations this year than ever before…….two just this week!  Why?  I guess because I have been working with people with good taste and who listen to my advice on neighborhoods (or so I think!)

Here is a little story on one of them:  We find a nice house that was way over-priced in a great neighborhood.  I do a CMA and determine the value.  My folks don’t want to make an offer because the asking price was sooo much more than the actual value…..like almost $50k more.  A week or so later I get a call from the listing agent telling me that the price is going to be dropped by almost $40k.  We write an offer.  Well, it appears we weren’t the only ones who wanted the house and thought it was over-priced, because along came somebody else.  (If you are a seller, this just goes to show that buyers know what your house is worth and usually don’t like to throw out a realistic offer when you are waaaay over the top.)  The fun thing about this house is that there have only been 43 houses in this price range sell in all of Lexington since Jan. 1 of this year.  There are 103 active listings on the market right now.   You would think that NO house in this price range would have multiple offers, but it just goes to show that everybody always wants the best one they can get.  That is why there are “Waits” at nice restaurants and you never see Mercedes-Benz offer 0% financing.  

So, if you are a seller, my advice is to price your house realistically and do things to really make it show well.  FYI:  I have a client right now that has seen dozens of houses and wants me to blog about what a turn off a dirty house is to buyers……and that fresh paint makes a house look so much better.  So there, you have had a real buyer in today’s market tell you what little things you can do to try to get a contract on your house.

My advice to a buyer depends on what kind of buyer you are.  If you’re the type that doesn’t have to have the most updated and move in ready house on the market, then you have a little more leverage since there aren’t many of you out there like that!  If you are the type who wants the WOW! Factor, then you’ll need to act fast since every other like-minded buyer is going to want the same house. 

Coming Next week:  Ever see a house sell for waaaay more than anybody thinks it is worth?  I got a good story about one!

I’ve always heard Realtors say they are “Full Service Agents” when they need to defend their commission.  I’ve always wondered what that really means.  Having been with a “Full Service” company in the recent past, I think it really just means they do a bunch of old school stuff that really serves no purpose other than making the seller feel good.

A prime example of that is that most of your “Full Service” agents will spend about $50 on color brochures to leave out for buyers who have probably already seen the exact same pictures on their computer.  Most buyer’s agents don’t want their clients to take one since it has the listing agent’s contact info on it……or maybe those are there to be self promoting for the listing agent?

Another example that I see is that the “Full Service” agents will hold open houses.  Now, I know sometimes a random, realtorless buyer will walk into an open house and actually buy it.  The last time I heard about that happening was about 2006.  Now I know buyers like open houses, but all the buyers I have ever encountered used them BEFORE they were really serious about pulling the trigger on a house.  So, to the agents that kick their clients out of their own house so my people can get a better idea about what they  want in a house, I say thank you.  Another angle here is that the listing agent gets to meet other people in your neighborhood.  I think that is really what it is all about these days when almost every listing has 15+ pictures online.  How can I be so sure?  I once did an open house where I met the people across the street, listed their house, held it open, met another buyer who bought another house, and I am about to be in my 5th transaction with those same buyers!  Another reason that supports my hypothesis is that EVERY real estate magazine (Both in print and online) talk about open houses as prospecting tools.    None of the articles mention that you might want to do one for, uh, your client that you are providing “Full Service” representation to.

So, what do I consider to be full service?  Some of my sellers found that out a couple weeks ago after we got the repair list from the inspection.  I was over there tightening up aerators on faucets, repairing the tub drain, fixing the toilet tank level.  I was also there to let the contractors in for some repairs that I couldn’t do.  It was like an open house for repairmen.  See, my folks were both professionals who couldn’t easily take the time from their work to be there.  

To me “Full Service” means handling the inspection for my buyer’s who live out of town.  I’ve done that a lot in the past year.  When people fly in to Lexington to buy a house over the weekend, they usually can’t get here for the inspection.   I always take my HD Flip camera to film it, but the houses I have led my buyers to lately didn’t have enough wrong with them to bother filming.

 I’m a “Full Service” agent, but I’ll never use that term since the message it conveys is about the percentage you charge rather than the service you perform.

Anybody got any ideas for a new term to describe how I roll?  (Geez, I really set myself up by asking that huh?)

This is gonna be one of those posts where I’ll look like a prophet or an idiot a few months from now.  See, I’m gonna give my predictions about what will happen to the Lexington real estate market after May 1st.  May 1st?  Yeah, that’ll be the  first day without the $8000 tax credit pumping up the market over the past few months.

No doubt the tax credit has gotten a lot of first times buyers pretty motivated.  My listings are getting shown.  One is sold and another has an offer on the table.  I also have a couple of buyer’s that qualify for it.  Oddly enough, I am not seeing anybody use the $6500 credit for folks who were already homeowners.  All of my clients didn’t qualify for that.  I guess there are too many hoops to jump through for that one.  Reminds me of that old Howard Jones song from the 80’s that said  “You can look at the menu but you just can’t eat.  You’re the fastest runner but you’re not allowed to win.  You can dip your foot in the pool, but you can’t take a swim.”

So, what does a post Tax Credit deadline market look like?  How bad will it be?  Well, I think we’re pulling a lot of the buyers into the market that would have bought this summer and maybe fall.  So I see a little slow down ahead, but keep in mind it will be slower because we got the next several months worth of buyers early…….like a payday advance.

Something else to keep in mind is that the first time buyer market isn’t really a huge percentage of the market as a whole.  They are important because they end up hitting a home run when the bases are loaded, enabling all the home buyers above them who want to move , but not getting eight grand isn’t going to keep them from buying a house when they are ready.  There will always be people who get married, have kids, move to another town, takes jobs, get promoted, etc.  Those things and more is what triggers the purchase of a home.  Eight grand is just the icing on the cake.

I don’t think we’ll see a big price drop like some have predicted.  The prices seem to me to be about the same as before in the first time buyer price range, so there is no reason to expect a decrease.   We might see more days on market as we wait for the new buyers to enter the market.  As usual, the houses that are over priced, in poor condition, marketed poorly, etc, will stagnate on the market just like always.  They are the unsellables, so there is really no need to factor them into any statistics.  They are houses merely with a Realtor’s sign rusting in the front yard.

Something else to consider is the threat of rising interest rates. I really don’t know what to make of them.  I’ve heard good arguments for why they will go crazy as well as why they will stay near historic lows.  My crystal ball isn’t big enough to have much of a prediction there.  But, I do know that even talk of rising rates will motivate people to buy.  So, I kind of think that may become the next bully that pushes people to buy.  I guess the good thing is that will motivate not only first time buyers, but anybody thinking of moving in the next 3-6 months.

Okay, here is the part that will REALLY make me look stupid or brilliant…..Ready?  I would not be shocked if they extended the tax credit again!!  There, I said it.  If they do, I think it will be for less money this time.  Why do I think this?  The government knows that housing has to recover.  They already quit buying those troubled mortgage backed securities on April 1st, and I just have a hard time believing they are ready to totally take housing off of life support.  We’ll see I guess.  If I am wrong, expect this post to be gone on May 1st.