How to make a wise decision when buying

by John Rice

Ever wish somebody could tell you EXACTLY what to do to make sure you don’t buy a house that will depreciate?  That was something that nobody ever thought about just a few years ago.  Back then, any house in this area was selling and selling for top dollar.

Here is my list of what to find in your next house.  The more of these you have, the better your chance of getting a house that will be a wise investment.  Remember, as long as there is a real estate market, people will always buy the best houses that are on the market!

LOCATION:  You hear a lot about this in Real Estate.  A good location really just means that it is convenient to SOMETHING or has a unique asset!  It can be shopping, the airport, the interstate, schools, a park…..really just anything unique or desireable.  A house probably doesn’t have a good location if you find yourself thinking, “Gee, other than being nowhere near anything, that house is great!”  A neighborhood like that will always have to sell on low price.  That is why in large metro areas people buy in the suburbs.

SCHOOLS:  Buy in an area that has at least average performing schools.  People moving within Lexington seem to be fine with a decent school.  Out of town buyers always want to be in the best school district.  Look for an area that has a well rounded mix of elementary, middle and high schools.

NEIGHBORHOOD:  New is nice, but established is always better.  Pick a neighborhood that is large enough to not be negatively impacted by the surrounding ones.  Usually a cheaper larger neighborhood will bring down a smaller nicer one.  The opposite holds true too.  Kenwick use to be an inexpensive area.  It was surrounded by Fairway, Ashland Park and Bell Court.    Its location and surrounding neighborhoods started putting it on people’s radar in the 1990’s.  You also want a neighborhood that has its own distinct identity.  I don’t mean it has to have giant columns in the front with the name chiseled in stone.  Chevy Chase doesn’t have anything that says “You are now entering Chevy Chase”, but you know you are there.  That is identity.  If an area doesn’t have an identity, then it isn’t known for any of the items I am talking about here.

LOT:  Ideally, you want to have a lot that is located well within the perimeter of the neighborhood.  That insulates the impact from cheaper areas that border your neighborhood.  While I am on lots, get one that is at least average size for the neighborhood.  You don’t want one of the smaller ones.  It will turn away a lot of buyers……unless we have another frenzy at the time you go to sell.

FLOOR PLAN:  You want a house that has a useable layout and typical sized rooms.  A tiny kitchen in a 4 bedroom house will not bring in as much money.  You’d need to price it lower than the competition or upgrade it to make somebody be willing to overlook it.  If you find yourself saying things like “If it wasn’t for______, that house would be perfect!”, then you know the person looking at houses when you go to sell will say the same thing.   In a slower market, buyers get very picky.

Basically, the goal is to get a house that will be someone’s top pick when it comes time to sell.  I call this ‘Thinking Outside the House.”  Most buyers just want to find a house they like.  The reality of Real Estate is that a lot of a house’s value is determined by things outside of the house itself.

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.)

Neighborhood Review: Beaumont Enclave

by John Rice

You know, it is amazing to me how spending a little time in an area can change your perception of it.  I have been in Beaumont Enclave several times before.  I always thought it was a nice area in a convenient spot of town, but it never really impressed me as some place that I would want to live. 

I have been working with an out of town buyer who will only be here for 3 years.  They wanted a house in a great school district that would be easy to sell when that time came.  After doing some research on which neighborhoods in SW Lexington seemed to sell the quickest, I determined that Beaumont Enclave would be a wise choice.

This area was built by Cutter Homes, which was later acquired by Beazer Homes.  Many of you may remember a few years back that Beazer replaced the brick and most windows on much of the neighborhood.  During that time, it was a little harder to sell one of them.  That is now history.  With all the repairs done, the neighborhood is pretty hot on buyer’s lists!

Why is that?  Well, for starters, you have the premier elementary school, Rosa Parks, right in the neighborhood.  You also have Dunbar High School very close by.  There is a great, open park with a walking trail.  Many of the houses on Allegheny face the park.  Add all this to the fact that you are in an area where houses usually are priced from $350,000 to over a million dollars, and you can see why people in the $200,000 to $235,000 range want to live here.

Having been in many of the houses, I can say that they have a real livable floor plan.  Most don’t seem to have a formal dining room, but nobody really uses those these days.  All the ones we saw had either a loft upstairs or a huge 4th bedroom.  From the original marketing sheets I have seen, it looks like there was a choice to make that space open or close it off if you needed the 4th bedroom.  I was amazed  that many had walk-in closets even in the secondary bedrooms!

The one by peeps are buying inspected wonderfully.  They even had a radon test done.   I was a little concerned since I have always heard that Beaumont has a higher level of radon than usual.   Their house came in at less than half the level that needs abatement.

Predictions:  This area will stay stable.  Being on the low end of a high end area, I can see new owners doing some major upgrades to their houses.  The area will support it.  Don’t know if this is a trend, but  2 of the sellers I met are buying in the more expensive parts of Beaumont.  That is always a good sign when sellers stay in the area!

Pros:  The park, Rosa Parks Elementary being in the neighborhood, Dunbar High School district, shopping/dining within Beaumont, easy to get on New Circle Road or Man O War, 5 minutes to the airport.

Cons:  Maybe some traffic when school starts and ends.  There is a no left turn sign during specific hours on Sovereign by the school, so that makes me thing there is some traffic.  Some of the houses on Allegheny back to New Circle Road and the Beaumont Apartments.  Granted these apartments are very upscale, but some buyer’s don’t want that.  You’ll probably hear some traffic from the airport, but no more than anybody else living in Southwest Lexington.

I am more of a East Lexingtonian, but if I were ever to move to that part of town, I would put Beaumont Enclave at the top of my list!

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

Helping out a seller…even “By Owner”

by John Rice

I am working with a young couple buying their first home.  It is a big step.  They found a house that interested them, but it was “For Sale by Owner.”    They brought me along since they always say that I notice things that they don’t and mention things that they would not have thought about.  I went, hoping that the owner wasn’t one of those hostile types that hates Realtors.

While I waited for my peeps to arrive, I struck up a conversation with the seller.  He told me that he has had 38 showing, but no offer.  As he told me this, his wife was pushing their young kids in a stroller.  I guess she has done this 38 other times while buyers looked at the house.

My people showed up and we looked at the house.  It was really nice.  The seller bought it 2 years earlier and spent about $18,000 on new windows, roof & a super energy efficient heat pump.  I didn’t think his price was bad.  To get that many showings without the MLS is pretty impressive.

I called the dude the next day to offer him some tips.  He graciously accepted.  He had said that nobody had really given him any feedback.  I spent about the next 25 minutes or so answering his questions and giving him some tips.  My thoughts were that with the price okay, what he needs to do is to make it show better. 

He had a pot rack in the kitchen that was nice, but it made the space seem less open.  Wherever you were, the pot rack made the rest of the kitchen seem like it was behind it.  There was a bay window in the kitchen with some heavy curtains.  I suggested that he take them down so more light comes inside. 

Like every seller, he put a picture of the outside of his house on the flyers.  That is always funny to me, to show somebody a picture of what they are already looking at in person.  For somebody to get that, they have to be right in front of the house!  I told him to put multiple pictures on or put one of the best feature of the house.  The goal is to create interest so people want to see the inside.

I don’t know if the guy will take my advice.  He was a nice guy that seems to have done a lot of expensive work to his house.  I wish him luck so his wife doesn’t have to keep walking around the block with the kids 🙂