Why buying close to apartments is a no-no

by John Rice

Just read in the paper about a dude that was found shot to death in his apartment near Henry Clay High School.  That got me thinking about the other apartment complexes in that area.

For those that don’t know the area, it has what are now some lower end apartments  near Richmond Road and some of the most desirable homes in the most desirable zip code, 40502.

When I was a kid, the apartments near Richmond Road were okay places to live.  At that time, the now razed apartments off Lakeshore on Laketower were really nice…..although by the late 1980’s the ones called “Two Lakes” were turning into the place for well off college kids to drink beer on the floating dock.

Now, you would think the old “Location, Location, Location” mantra would apply to apartments too.  Not the case.  I’m going to use the old apartments on Laketower as an example.  Here you had two apartment complexes surrounded by super high-end houses, some of the units even backing to a lake.  What happened?  Well, the same thing that happens to just about all apartments in time.  Investors cash flow them to death, sell them for cheap to somebody who cash flows them to death, and this cycle continues until they become cheap enough for an investor to fix up or they get condemned…….or in the case of the Laketower ones, they get torn down!  Is any of this the fault of renters?  Heck no.  It is all in the hands of investors.  I never blame the tenants for this cycle.  Shoot, when my wife and I were first married we lived on Redding Road.  It was a decent, affordable place back then and now it is a dilapidated building that is for sale, probably because the landlord knows it is about to need a lot of money spent on it!

So, stuff like this is why I will always recommend my clients not buy a house that backs to apartments, or one that has car/pedestrian traffic from apartments.  Even the nicest apartment complexes will eventually become a run down eyesore.  If it can happen to a complex that is on a lake, in a great school district, and within a neighborhood full of $400,000+ houses, it can happen anywhere given enough time.

 

Why do prices vary sooooo much in older LEXington neighborhoods?

by John Rice

So, I’ve had the pleasure of working with a buyer wanting to get a house in some of Lexington’s finest older neighborhoods….Chevy Chase and Ashland Park.  Don’t remember which house it was, but the buyer says to me “How come I’ve seen nicer houses sell for less and lesser houses sell for more?”

Good question.  Got me thinking about a way to explain it to him without sounding like a beauty pagent contestant struggling to answer a complex question.

From the get go, any house in any neighorhood has the usual factors like size, location & condition that impact value.  Usually, in an area less than, say, 40 years old, it just comes down to those variables.  For houses that age or less, most are similar in their floor plan since builders were buying their plans out of a book and building multiple versions of the same house.   Also, you don’t see many houses that have had major additions, so it typically just comes down to if a house has been updated or not.  Let’s take Beaumont as an example.  The whole neighborhood is pretty much houses from $350k to over a million, but most are $450-600k and are about the same age and about the same in function and about the same size.  Finding equal comps is fairly easy.  Once you know the hiarchy of streets, you can just cut and paste for the differences in square footage and quality of finishes.  Pretty simple.  Pretty logical.

Once you step into most older neighborhoods, I mean ones build before 1940 or so, you start to rely more on emotion rather than just logic when determining value.  Sure, you’ve got the same variables of location, size and condition, but you also have function (since not all the original floor plans really work today), expandability (since older houses in these Lexington neighborhoods are smallish), the quality/condition of any additions or modifications to the floor plan, and vibe.

In my opinion, vibe is the most important one in determining value in older houses.  People want an old house to feel a certain way.  When I ask buyers of newer homes what they liked about a certain house, they usually list features, like granite, lot size, closet size, etc.  When I ask the same for old house buyers, they usually don’t start with the list of features, they say the house has charm, or character.  Then their list of features usally starts with something like the look of the house, the trees, or what they could walk to.  It’s a whole different approach to value.  That is why you sometimes see two houses the same size with the same features sell for two far apart prices.  One had the right vibe and the other one didn’t.

Since I fumbled around and said “Um” about 100 times when asked the above question, this post is dedicated to Steve.  Thanks for asking it and causing me to write this post so the next time I get asked that question, I’ll be better prepared to answer.

Why are there so many houses for sale on this street?

by John Rice

It’s a question I get asked a lot.  To a buyer, it means there must be some reason why so many people want to get out of the area.  It makes them nervous about buying.

The truth is that rarely is there some circumstance that is causing everybody to sell all at once.  The last time I saw a situation like that was when there was a shooting at an apartment complex in NE Lexington.  The next week, a whole lot of the houses on the street across from it were for sale.

Another situation where I see many people selling all at once is in neighborhoods that were built about 2004-2006.  Many homeowners bought not only before the market collapsed, but they also did the crazy loans that were available back then.  They owe more on the house than it is worth and price it based on what they need to get rather than market value.  There was one builder in town that had their own mortgage company.  I think their credit application only had one question on it:  DO YOU HAVE A PULSE?  If you did, you got a loan for any house they built.  Most of the houses in their neighborhoods have been foreclosed by now though.  In this case, it isn’t that people were wanting to leave, it was that they couldn’t afford to stay.

Most of the time, when you see a street with many houses for sale, it has more to do with how fast they are being sold than any problem with the street.   If you have a street in a neighborhood with slow sales or over-priced listings, they just don’t go away…..they just stay on the market.  Meanwhile, another neighbor puts their house on the market too….and it doesn’t sell fast.  Well, before long, you end up with every house on the street for sale.  In a neighborhood that moves faster, you still might have the same number of people moving in the same amount of time, but since their houses sell faster, you don’t see all the signs in the yard all at once.

In most of these situations, I usually advise my clients not to buy.  I always tell people that backing to apartments, multi-housing or commercial usually bites you in the rear at some point, as the people across from that apartment complex discovered.  When all the houses were getting foreclosed in the builder/mortgage company’s neighborhood, I told people that there was a good chance that investors would buy them as rentals, so let’s skip it.  I think the only real risk a buyer takes on a street with a lot of sellers is that they might have a tough time selling when it is their turn to do so.  Often, the reason for the slow sales is that it is a second or third choice neighborhood in a time when most buyers can still get into their first choice location.  If the buyer is okay with that and can get it for a price that takes that into consideration, I give it a thumb’s up.

When to RUN from a pretty house you like

by John Rice

I’m showing a house in Richmond this week.  Place looks nice.  Lots of updates and new things.  Price seems good too.  As my people are walking around ooooohing and ahhhhhhing the place, I’m checking out the condition.  While this house sure looks pretty, I’m less than impressed.

The 2nd house I ever owned was worse than a money pit.  By that I mean it was the type of place that not only sucks your wallet dry, but takes all your time and leaves you totally discouraged.  I never want that to happen to any client of mine.  While I totally hated that house (and still do!) it did teach me a thing or two about knowing when to RUN away.

The first thing I notice about this house is that there are concrete block columns behind the closet doors in the basement along the wall that is completely underground.  They don’t go high enough to touch the joists, so I know they are not part of the structure of the house.  Then I notice that the basement has been waterproofed.  Not the kind where they jackhammer up the slab and install drain-tile around the footer, it was the kind where they install something that looks like a huge baseboard that collects the water.  Then, I notice that the carpet in the basement is actually carpet tiles, or squares.  As we look under the carpet squares, I notice that some of the cracks in the slab have been caulked, some are filled with dirt/dust, and some are just open with nothing in them.

Playing house detective, I conclude that the house not only has some recurring structural issues, but also that it still has a water problem.  Those concrete columns?  There to keep the foundation wall from deflecting inward due to the load behind it.  The water-proofing?  It had been caulked repeatedly.  Why would it need layers of caulk if it did the job?  When you combine a house whose foundation shifts/moves periodically and a water problem, it is easy for that kind of water-proofing system to come unattached from the wall and effectively serve no purpose.  The carpet squares?  They were there so that only the sections that ever got wet could be easily replaced.  The cracks in the slab?  The caulked ones were places where water had come through.  The ones that didn’t have dirt/dust in them had recently opened, meaning they open and close periodically since there is so much movement in the foundation.  I learned at my old house that a crack that happens and never moves again eventually gets filled with dirt/dust/whatever is on the ground. 

My advice on this house?  RUN!

How Hot is the Market? Depends

by John Rice

I scheduled an appointment to show a house in Beaumont Reserve recently.  I’m thinking it is going to be like usual, where my client and I leisurely show up to a vacant house……only, there is another agent in the house, and two other agents with their clients waiting to see it.  There are cars and people everywhere like the seller’s was having a yard sale.  The house wasn’t priced low, it was just a fair asking price for a non-updated house with lots of wallpaper……oh, and this is the house’s first day on the market.

I call on a house on Old Cassidy in Chevy Chase to schedule an appointment.  After just hours on the market, it has a contract already.  That contract didn’t work out, so the agent tells me I can see it.  I schedule a 2nd showing the very next day and it has sold.

I’m inside an awesome house on Colony in Chevy Chase.  Look out the window, and another agent is waiting to show it.  Two hours later, the listing agent calls me to say that an offer is coming, and it isn’t from the agent that was coming in as I was leaving.

I’m in a house in Palomar.  It’s the first day on the market and I’m showing it at noon.  It has already been shown 3 times.

Another house on Chenault in Chevy Chase gets shown 11 times the first day on the market.  The seller is so full of confidence that he doesn’t even respond to the more than fair offer my client made.

Then, you probably know I just bought a house the first day on the market that had 3 other offers on it.

Here’s what’s going on with the Lexington market:  Everybody is wanting the better houses in the better neighborhoods.  I don’t mean just high-end ones, I mean the buyers are wanting the nicest houses and the best neighborhoods in all price ranges.  Prices for houses that meet that description have gone up, while the rest remain flat.  It is a hot market again, but this time it is just for the “Right” properties……it’s still 2011 for all the other sellers.