Lexington & The Low-Ball Offer: Working or Not?

by John Rice

I have been getting some crazy stupid low offers on my listings lately.  The kind that are so low that the house would probably sell for more than what was offered if it were a foreclosure.  Since everybody wants to feel out the sellers these days, you never know if the buyer is going to get real or if they are just going to waste half of your day.  I recently got an offer from an agent who told me his buyer had seen over 40 houses before making the low offer on my listing. We’ve given him our bottom dollar and they keep coming back with their final offer…….I haven’t been so annoyed at hearing the word “Final” since they canceled Who Wants to be a Millionaire.

So, since there is ice covering everything today and my plans to show houses were prevented, I thought what a great opportunity to look at the most recent sold listings in all of Lexington to really see if any of these crazy buyers are getting any true bargains.

I began with a search for all the sold listings since 10/1/10 in all of Lexington that had asking prices of $100-250k.  If anybody wants me to look over that amount, just let me know, but I picked that range since that is the bulk of the Lex market.  I also went back that far to give us enough of a sample and to be current enough to reflect the market.

There were 264 sales since that date.  I threw out the brand new houses since builders usually list the base price of a house and the sale price is typically more than that once upgrades are added.  I threw out the few auction properties too since that data doesn’t answer my question.  BTW, some of the auction prices were way lower than the asking price, but you must ask yourself if the asking price was fair, why did it take a room full of people with 10% cash to put down and willing to buy it “As-Is” just to get it sold?

I also took out a handful of the foreclosures.  Believe it or not, most of the foreclosed houses sell for closer to the asking price than a normal transaction.  Most that were in this pool I knew something about….such as a foreclosure in my neighborhood that was trashed and had standing water in the basement.  One of those rare ones where there is a disclaimer about mold that says you should wear a mask or hold your breath while inside.  It sold for $155k and had an asking price of $213,015.  It’s potential is about $280k, so I don’t really think $155k was much of a bargain.

So, that leaves us with 211 normal sales and the foreclosures/short sales that you could get FHA financing on…..In other words, ones that were not missing fixtures, cabinets, etc.  Remember, my goal is to see if the buyers out there are getting deals on a house that belongs to Average Joe, not a builder, bank, or Freddie Mac.

Most of those 211 sales sold for within 5% of the list price.  Many sold for just a few thousand less.  I found 52 that sold for more than 5% less than the asking price.  Almost all of those were in the 5-10% less than list price range.  When I got to those, I looked at the pictures and all to see what I thought the house was worth.  9 times out of 10 it was a case of too high of an asking price to begin with…..Like a house in a neighborhood full of $175k houses that was listed for $189,900.  That buyer didn’t get a bargain.  They paid a fair price for a house listed by an agent that didn’t know what it was worth to begin with.

I guess the part you are waiting for is how many of them sold for more than 10% less than the asking price?  9.  Yep.  9.  I took a look at these and figure it must have been a combination of a little bit of an ambitious asking price and a little bit of a motivated seller with equity.  Of these 9, several were older houses where I can see a little old lady having lived there for the past 40 years and having no mortgage.  Here are the best numbers……and remember these are the ones with the biggest difference in list-to-sale price, it doesn’t necessarily mean that they were worth the asking price: 

ASKING PRICE:             SELLING PRICE:

$175,900                         $119k

$177,500                         $131,600

$149,900                        $135k

$159k                              $140k

$172k                              $156k

$199,900                        $160k

$199,900                       $160k (This one was way over-priced to begin with!)

$199,900                       $180k

$235k                             $200

So there you have it.  Looks like 9 of 264 buyers got what appears to be a good deal on a house if you look at just the list-to-sale price.

Seller’s today know the initial offer on their house is going to be low, so go ahead and feel them out.  You’ll be able to get most of them to go as low as they can. But if you want to eventually buy a house, you’re probably still going to pay a fair price…….Sorry, but I’m just putting the REAL in Real Estate for you 😉

Negotiating With Realtors: If They Bluff, You Know They’ll Come Back

by John Rice

Realtors are so predictable.  It’s almost like watching a rerun of a show and you know just what is about to happen.  Sometimes I wonder if there was a class I missed on cliché bluffing phrases to use during negotiations.

I got an offer yesterday on one of my listings.  The original offer was pretty low, but these days everybody always has to try I guess.  One of the things that struck me as odd was that the buyer wanted to close in 25 days…..right between Christmas and New Years.  Nobody wants to move that week unless…..you have to.  Then I did my usual deal where I google the buyer’s name and look them up on Facebook.  Seems this buyer has a couple of small kids.  School starts on January 3rd.  I really think they picked this date to be in the house before school starts.   Naturally, I am wondering what are the chances of this buyer finding not only another house they like as much, but one with a seller willing to be out during that week?

The other agent and I trade a bunch of texts, and came $2ooo apart.  Then the agent gives the old “I strongly suggest your seller reconsider this offer given the market.”  I really don’t know how to respond to this politely, so I usually suggest the agent look at the comps and determine if our number is in line with them.  That is what I did this time.  I even asked the agent if he thought the house was worth the number we were currently stuck on.  His non-response answered the question perfectly.

Now for this one, we are only $2k apart, but I have had agents tell me this with an offer that is so low that anybody in their right mind knows it is a ridiculous offer.  I usually check out the agent’s production from the past year to see how much they really know about “The Market.”  My recent fave was an agent who made a verbal low-ball offer on another one of my listings.  He kept talking about how his guy had cash and how foolish my seller was to not sell his house for less that it was worth “In this market.”  Well, turns out that agent had sold all of two houses in the past year…..hardly an expert on “The Market.”

Sorry I drifted there…back to the offer.  Just as predictable, the agent told me that his people were going to look at their second choice house the following day.  He did the old “If anything changes, let me know” drill.  I thanked him for all his hard work and effort.  Why did I do that after being treated like a second class citizen for representing a seller in a buyer’s market?  Because I wanted to make it easy for him to come back to me.  See, many people don’t mind losing the war if you give them a chance to win the last battle.  Good thing because while I was writing all this, he left me a voicemail that said to call him back because he now things we can work something out…….His people are now ready to meet our price, and we should have all the paper work done today.

Resale Value…North LEXington…What?

by John Rice

When you think of resale value/potential, you are probably thinking about things like a preferred school district, the most desirable part of town, etc.  All of those are good things, but what if you don’t have any of that?  You know…..there is a lot of Lexington that doesn’t have a desirable school district, and heck, most people strongly favor the south end of town.  What about those houses on the north end of town?  What is their resale value like?

Well, it is as good as it is on the south end of Lex.  Yep.  Sure is.  The difference is that the prices have always been lower for that part of town, but hey, they seem to be holding their value as well as any other place in town.  In fact, since our market has been hit the hardest over $500k, you could argue that the buyer who spent $100k on a house in 2005 on the north end of town with a less desirable school district has actually come out better than the guy that dropped $1,000,000 on an awesome house in the most expensive zip code, 40502!

Just for fun, I ran some numbers for Area 1 and Area 4 in Lexington.  Area 1 is the NW part of town between Leestown Road and North Broadway.  Area 4 is SW Lexington from Nicholasville Road to Leestown Road.  Area 1’s hook is value.  Area 4 is probably the most desirable part of town for all the things most buyers want.  To be fair, I only looked at houses from $100k-$250k.  Area 4 has a lot of expensive neighborhoods, and I wanted to make the figures apples to apples.  I picked that price range because it represents most of the Lexington market.

So, from Thanksgiving 2008 to Thanksgiving 2009, Area 1 had 431 sales with an average price of $151,110 which got you a 1755 square foot house that took an average of 66 days to sell.  Area 4 had 739 sales averaging $156,643 for a 1745 square foot house that took 62 days to sell.

Here are the numbers for Thanksgiving 2009 to today:  Area 1 had 320 sales averaging $147,559…..1759 square feet….59 Dom.  Area 4 had 617 sales….$159,458….1760 square feet…..57 DOM.  (Okay…..sure you realized that the average price for Area 1 declined while it went up a little for Area 4.  I really haven’t seen this in individual houses….I really think it is because savvy builders built more houses in the $125-140k range for first time buyers looking to take advantage of the tax credit and brought the average down.  Area 4 doesn’t have much new construction….esecially in that price range.)

So….how does the north end of town stay that strong?  I really think it all has to do with value.  I have sold a ton of houses in and around Masterson Station.  All of my buyers saw that they could get a little more house for their money.  They have all been willing to drive to other parts of town for shopping/dining to get a bigger and better house.  This part of town also works well for folks working in Frankfort, those needing to be close to the interstate, and those who work at places like UPS and other businesses that are close by.  Because of the value hook, I think the north end will always need to stay a little less expensive than the south end of town, but there will aways be people who appreciate that value and will buy out there.

Wait til Spring to Sell?

by John Rice

Okay…..I know what’s on your mind right now if you are even remotely thinking about selling your house…..SHOULD I WAIT UNTIL SPRING TO LIST MY HOUSE OR DO IT NOW?

No worries.  Everybody wonders that about this time of year. 

I usually tell people that while Spring is a good time to sell since more buyers will be out, there will also be more competition since many sellers wait until then.  More demand, sure.  More supply too.  Also…..if your house isn’t on the market, you have a 0% chance of selling it.  Plus, people do buy houses in the winter……why can’t it be your’s?

Another thing people wonder about is how buyer’s will perceive a house that has been on the market all winter.  I hate to be a cliché buster, but any buyer who is actively looking at houses in November, and hasn’t found one by March is someone who probably isn’t gonna buy a house anyway.  Don’t worry about them!  Also, with all the inventory we now have, seeing a house that has been on the market 6+ months isn’t that alarming to anybody.

Here is how you get the best of both worlds.  List it now……price it right, do great pictures, express in the marketing remarks what is unique about your house, but if it is still around come spring do these:

1)  Update your pictures.  In the spring nobody wants to see what your house looks like with a foot of snow on the roof.  As soon as the grass is green and you have the first pretty day, get some new pics made!

2)  Delete the listing and put it back on with a new MLS number at the same time.  That erases the days on market from the public side of the MLS.

3) And most importantly, make any adjustments needed before you do all this, or else you may end up not getting a buyer all year again.  If after a few showings, people have said they didn’t like the paint, the carpet needs replaced, or the price is too high, make those changes now.  If there is a problem with how buyers perceive your house now, having more buyers tell you the same thing in the spring won’t really accomplish your goal of selling.

Soooooo, what do you think?

Townhouse on 6500 ACRES? Non-Existing School Distirct? Caveat Emptor Baby,Caveat Emptor

by John Rice

As I was doing a search for houses within a certain elementary school district the other day, I thought for fun I would see how many listings had a certain magnet school as the districted elementary school.  For those of you that don’t know, the school I am talking about is one that you can only get into by lottery.  So, in other words, there should be NO houses in all of Fayette County that claim to be in this school’s district.

The sad news is that there are 5 listings that claim to be in a school district that does not exist.  I see stuff like this all the time.  From wrong neighborhood names to wrong school distircts….everyday.  My personal favorite data entry mistake was a townhouse in Andover Hills which had a lot that was 6500 ACRES!!  Yep, that agent checked acre rather than square feet as he/she input the info into the MLS.    Another listing had the lot size as being smaller than the first floor of the house.  Then there are the intentionally deceptive ones.  You’ll see this sometimes if a house is close to a more desirable neighborhood.  I once saw a house in Mount Vernon labeled as being in Chevy Chase.  Another one that was in Southpoint was listed as being in Waterford.

I get a good laugh out of some things like that, but the school district thing really bothers me.  See, somebody may still come look at the 6500 acre townhouse and buy it.  It would be obvious that it didn’t really have almost 3 times the amount of land that was last added to the urban service area.  The house with the lot smaller than the square footage of the first floor should also be easy to clear up.  But a school district?  That is something that you can’t tell from looking at the house.

Being a realtor, I know that my clients look to me to give them an answer.  They assume I know what I am talking about.  That is one reason I usually tell them I am not 100% sure about something unless I am 100% sure…….then I go find out for sure.  Not all agents do that.  I can easily see a buyer, especially from out-of-town, ask their agent about the school district, then the agent look at the inaccurate info that the listing agent provided.  School district plays a big role in a lot of people’s real estate decisions.

On the flip side of this is the seller, who may be in a really desirable elementary school district but nobody will ever know it.  That seller may end up sitting on their house longer and possibly selling for less that the full potential due to a simple mistake.

So my message to both buyers and sellers is to verify all the info.  Sellers, make sure the square footage, lot size and school district are correct.  Also see if your house says whether it has a garage or not.  There is a box to check yes or no when an agent does the input.  The default is no.  If an agent misses this, then to anybody who enters having a garage in their search criteria won’t find your house.  To buyers, check all that stuff too.  If you are concerned about square footage, have your agent measure it for you before you make an offer.  To check the school district for any street in Fayette County, go here:  http://www.fcps.net/tools/street-directory.

And oh, I asked about removing this school from the list of schools in Fayette County.  I thought not having it as an option for agents to choose from might just be in the public’s best interest.  I was given a really logical reason for why we have to continue with something that doesn’t make any sense.

Caveat emptor…….cause nobody is really policing all the info that agents put online.