The Gleneagles? Why buy there?

by John Rice

So, I am hanging out with a friend of mine who also is a Realtor.  We are drinking some coffee and talking about neighborhoods at Calistoga. My friend is into bargains.  He never pays full price for anything.  He is telling me about a house he is considering for himself in the low $200,000 range.  I tell him he ought to look in The Gleneagles.  This dude looks at me like I am nuts because I usually advise people to NOT buy in this area.

What has changed?  Well, for starters, the price.  The part of Gleneagles that has existing houses in the $200-300,000 range have seen some depreciation.  There are several factors of why this happened.  When this was a new area, all the people who wanted this part of town built their brand new house out there because it was really the only option.  Now, here we are 5-8 years later, the newness has worn off, the market has slowed and there are a ton of houses for sale all over Lexington.  It doesn’t help that the school district isn’t that desirable and that there are some rough characters that live in the apartments up by Man O War.  The area I am talking about is about 1/2 mile from the apartments.  All the people that live in this area have to do is drive by them, so I don’t think there is any danger!

Once you are in this area you will find the same houses as you would in much of Andover Hills.  In fact, Barrington, Caversham Park, Blackmoor Park, Dunhill, Shaker Run, Sunningdale and Oakhurst Lane really feel just like Andover Hills.

All this talk about Andover Hills brings me to my point.  When the prices for both neighborhoods were the same, why would you buy in Gleneagles when you can get a better school district and be in a little more established neighborhood?  Well, I guess a lot of buyers had the same thought.  Now there is about a 5-10% price difference between the neighborhoods for a similar house.

So, now I can recommend it to my buyer’s.  I tell them that this area will probably always sell for less than Andover Hills, but if you buy it for less it will be okay.  This area is a real bargain for people that don’t need use of the school district.  My friend and his wife plan to home school, so why not get a nice house in a nice area and pay less.

How cost vs. value really works when updating your home

by John Rice

I am sure you have seen those articles in magazines that say stuff like “Get back 89% of the cost when you update your bathroom.”  It’s not that I think they make that stuff up.  It’s not that I doubt that really happens.  The problem I have with it is that it makes people believe that the money they spend now is guaranteed to make them money in the future.

Here are the factors that are often overlooked when people think about cost vs. value:  Age, condition, style, design and quality are a few.  Why does all this matter?  The reality about value is that your improvements must be both desireable and have enough life left in it for the new owner.  Everything has an economic lifespan.   With updates, you also have style to consider.  New hardwood flooring that most people think is ugly may not add any value.  High end maple cabinets that are now 10 years old (and show it) may not add any value either.  Think I am crazy?  Ever see a high end remodeled bath from the 80’s with a blue toilet and gold fixtures?  Somebody spend a lot of money for that during the 10 minutes it was in style.  Had they sold it THEN, it would have been worth it all.  The same goes for pickled cabinets.  I have them in my house and I am sure they were an upgrade!  Now they hurt the value of a house.

Do you have to update in this market to sell?  No, not at all.  But you aren’t going to get any where near the “Potential Value” for your house.  Believe it or not, that isn’t a bad thing sometimes.  I have a great example.  I sold a house for a lady a few months back.  She built the house new 10 years ago.  She had not put one penny into any updates.  All the appliances were original, the carpet was worn out, the water heater was original…………you get the picture.  We sold it for about 94% of similar houses in the area that had been updated some.  Think about this!  Who really came out ahead here.  The buyer needed to put in all new flooring and paint everything and even then they still have all the original appliances and mechanical systems.  The seller “Lost” that 6% of value (about $15,000) but NEVER, EVER spent a penny over 10 years.  I think she is the winner here.  She got use of all the stuff that typically gets updated and passed them on to the buyer when they were of no value (depreciated).  Most of us would have spent more than $15,000 for updates over 10 years and wouldn’t have come out as good as she did!

That story leads me to the most cost effective update:  Paint!  I really think that if my seller had painted the whole house we could have gotten  a lot more money for it.  Most painters charge $1/square foot of floor space.  To paint a 2400 a square foot house would be about $2400.  If you do it yourself, it is even cheaper.  Paint is the biggest bang for your buck when it comes time to sell.

I will skip the stuff about updates that everybody has seen on HGTV.  I assume everybody knows that you shouldn’t over/under-improve for your neighborhood.  

 The bottom line is that yes you can get most of your investment back when you sell BUT it has got to still be in style and still look pretty new.

Will there be Realtors 50 years from now?

by John Rice

I always hate it when I get asked a BIG question like that, and I just did it to myself!  The short answer is yes there will be Realtors in 50 years, but there will be changes.

Before I get too far into this, let me tell anybody younger than I am how real estate use to work:  The agents were the only ones who had access to what was on the market, what a place was worth, what the comps were, what the PVA records were.  You know, the dark age before the computer put ALL this and more at our fingertips.

Flash forward to today:  I think a lot of agents are scared to death that consumers have the same info they do.  I think a lot of agents wonder if they really are needed.  People sell by owner all the time.  Buyer’s often have more information that the agent does.  To be polite, it really FREAKS out agents!!  I have to laugh when I hear agents talk about the future of real estate.  It reminds me of a scene from Gone With the Wind.  The one where all the southern landowners are sitting in a mansion getting all excited thinking they are gonna kick some Yankee butt because nobody is gonna make them give up their “Lifestyle”.  That’s the way most Realtors are today.  They want to hold on to the past so they can justify getting paid to do what the public perceives as easy.  The MLS is the only real foothold we have left.  You have to list with an agent to get on the MLS (Multiple List Service).

Let’s face it, real estate transactions are not rocket science and Realtors are not scientists.  Most of them only know how to fill in the blanks on the contract, having never really read the document.  These are the ones you see advertising that they can help you find your dream home.  This is especially funny to me when they say that online.  I am thinking, as you are, that anybody who sees that ad online can probably find their own dream home.  Finding a house you like is really easy.

All right, I know this was going to be about the future of Realtors, so I better get there before you hit the back button.  Real Estate has always been about information and it aways will be.  That won’t change.   So many fields are really about information.  I take my kid to the doctor, who asks a bunch of questions, then INFORMS me what the problem is and how to fix it.  If it does not require surgery, the doctor hasn’t had to really DO anything except draw on his experience and training.

I see a future where what we do is to act more as a consultant.  When I take my kid to the doctor I have all the information about his symptoms that I will ever need.  What I don’t know is how to interpret that information into anything that can help him.  So, I go to the doctor.  (Wouldn’t it sound silly if the doctor offered to help you find the symptoms?  That’s what agents that have nothing to offer do.)

We, as agents, need to quit thinking about just the “NOW” of real estate.  It is really easy to find the present value of a house in Lexington.  You find 3 close comps of a similar size, type, quality that are in the neighborhood, then you cut and paste the pros and cons of all in comparison to the subject house.  The end result is the approximate value of the subject house. When a buyer of mine picks a house, I also try to look 5 and 10 years down the road.  I ask myself what external forces are present that will cause the area to improve or decline?  Is the neighborhood large enough to not loose its identity to an adjoining neighborhood?  Does the neighborhood has well defined perimeters?  Good or bad traffic patterns?  How will market fluctuations effect this property?  Does the house fit in with others well (I mean size, building material and all, not socially.)  Why do we need to do all this?  Because there was a time when Split-Level houses were popular.  There was a time when people thought they were going to get 6% appreciation EVERY year.  There was a time when a pool was viewed as a positive.  Heck, there was even a time in my old neighborhood when having Tates Creek Elementary/Middle/High Schools so close drew buyers!

Agents will also need to know more about the legal aspect of real estate transactions.  Most of the nightmares people have when buying or selling a house can be prevented by wording it in the contract.  Most agents write the contract as if there will not be a problem.  There probably won’t be, but if there is, you want to cover your you know what in the contract.  My attitude is that even if you are 100% right, it still sucks to have to go to mediation.  I frequently hear where, say, a seller removed the refrigerator.  The buyer’s agent just wrote “All Appliance come with house”  or “As listed on the MLS”  in the offer.  If the buyer’s agent had written each appliance in the offer, the seller wouldn’t have a leg to stand on.   One thing I do is to never take an amount for earnest money that exceeds the limits of small claims court.  Our contracts have a mediation clause, but better to be on the safe side if mediation goes nowhere fast!

So, yes there will be Realtors in 50 years.  Yes we will need to “See” the future a little more.  Yes we will be needed to help people make wise decisions.  Yes we will need to protect them legally.  I just hope other agents will do these things rather than just offer to help you find your dream home.  The sooner the better!

How I roll…….

by John Rice

You know, being a buyer’s market has really changed the way I do my listings.  It use to be, in a seller’s market, that the goal was to get the listing on the MLS as fast as you could.  It didn’t matter if there was wall paper that needed taken down because SOMEBODY may just buy it before you strip it.  Listings were so hot that you could make adjustments as you went along.

 

Today, I spend ALOT of time trying to make everything just right before the sign goes in the yard and the pictures are uploaded on the MLS.  You have to roll like that now.  Here is a small list of my typical recommendations:  Neutralize paint, strip wall paper, clean, thin out furniture, clean some more, spread some fresh mulch, put the highest wattage bulbs you can do without causing a fire,  get rid of or repair the worst features of your house…………You get the picture.  Now, granted, seller’s don’t always do all this stuff.  But, the ones that are can and are willing to make adjustments are the ones that seem to get an offer and get one that is closer to the asking price.

I had a client whose place needed some painting done.  The place had been on the market for a loooooong time (It was in an older condo complex at a time when there was alot of interest in new condos.)  I had lots of negative comments on the color of the paint.  People left the house remembering nothing more than that paint.  The seller was pretty smart at understanding the market.  I told them what we had to do get an offer.  They got a great deal on painting the whole place.  It dramatically changed the whole place.  They also made some minor changes to the bathroom vanities.  We had our offer before the work was even completed!

Another client had a nice house in a good neighborhood.  I knew this one had a lot going for it.  The seller’s did a good cleaning, moved out all but the bare minimum of furniture, and did a little yard work.  It sold in 9 days.  Their effort got them a good offer and fast!  It was totally worth their effort.  These same clients have another house that currently has a contract.  They already knew what to do, so I didn’t have to tell them much.  The house went on the market one morning and 9 hours later I am getting their signatures on the counter-offer!

My Uncle had a house in an area that really isn’t that desirable.  It had a great lot and a covered patio.  Even though I knew that buyer’s would be drawn to those features, we still pulled out all the stops in an attempt to overcome its location.  The place looked like a model home!!  We had 3 offers with contingentcies.  I suggested we wait for a “Clean” contract.  By the 18th day on the market we had it sold.

I am not trying to float my own boat here, because I do occasionally have a house that stays on the market longer.  I just want to make the point that ALL of my listings that have sold fast have been ones where the seller made their house stand above the crowd.  It is never to late to make adjustments, remember the condo?  It had been on the market for a long time before we painted.