Hey First Time Buyers-Here is how to pick a house

It wasn’t all that long ago that the typical buyer’s choice was between the one house on the market in their price range and no house at all.

We are now back to a much more normal market. Today’s buyer has the luxury of picking the best house among all that are on the market.

This post is mainly aimed at first time buyers, but holds true for any buyer really……its time for a refresher course on how to pick the right house and why!

To most of us, our home is our biggest asset. It’s how we build wealth. It’s where we live. It’s an expression of ourselves.

It can also be a noose around our necks if we need to sell in a tough market.

I got my real estate license in 2005. Many people who had used another realtor to buy their home would call me to sell it for them in the middle of the worst market in history. Back then I wondered why some of them chose the house they did. After seeing the frenzy of having no inventory for the past couple of years, I now see that their choice was the loser home they purchased or no home at all.

Back quickly to why the first time buyer needs to get it right. Most first time buyers are younger. Younger people tend to meet somebody and marry, start a family, climb the corporate ladder, accept a job somewhere else, etc. This means first time buyers typically don’t stay in their homes as long as they will for their subsequent homes. Also, the equity you have when you sell your first home will be used to buy your next home. You want to pick a house that will always be another buyer’s top choice because it will be easy to sell and will net you the most equity to apply towards your next home.

So let’s look at The LEXpert’s Guide to Picking a Home:

  1. NEVER compromise the lot. Things like a very steep driveway, the backyard with the Eiffel Tower looking electrical thing, a backyard that sharply slopes up or down hill, a house that backs to stuff like apartments/commercial/busy roads are big negatives. Try to find a fairly flat lot whose size seems normal or better than average for the neighborhood.
  2. NEVER compromise location. Within every price range, there are preferred choices for neighborhoods. Most of the time the preferences are for things like having shopping/dining/retail/parks close by, school district ratings, crime ratings. Try to pick one of the more desirable neighborhoods.
  3. NEVER buy the house that doesn’t somewhat conform to the other houses in the neighborhood. Buyer’s are usually looking at other houses in your neighborhood and know what is typical. If your house is lacking in something that is considered typical for your neighborhood, it can keep it from selling.

I could go on and on for days but I have found that these top 3 items will eliminate about half the houses on the market.

Why does it matter? Shouldn’t I just pick the house I like best? Because when a buyer has choices, they get pretty picky. If two identical houses are for sale for the same price and one has a steep driveway, which one are you picking? If two identical house are for sale for the same price and one backs up to the interstate, which one are you picking?

I know it is tough to do when your goal is finding a place you love, but think about that day when you need to sell it.

19 0ffers and $40k over list-Fun getting the most for my seller

It’s been an exciting past few days.

This story begins one rainy Friday when I was on my way to a Radwood Car Show in Cleveland with my son. I got a text from a repeat client who I have become friends with. She tells me that her mother is going in assisted living and she wants me to sell her mother’s house.

After a few months, the house was ready to list. Unfortunately the market had really started to cool off since we first discussed the sale.

Full disclosure here…..I don’t think any realtor right now really knows how to price a house unless there are good comparable sales from the past 8 weeks. We usually look back 6 months for comparable sales. Six months ago the market was on fire. That market doesn’t exist today. Gone. Interest rates have nearly doubled. We are all, if we were to be honest with ourselves and the public, shooting from the hip on pricing right now. The market has changed so fast that we lack good data on pricing from this “New” market.

Since the absolute worst thing you can do in any market is to overprice a house, I suggested we put it on at a number I was 100% sure we could get and also expect multiple offers. That number was $185k. I was really hoping we might get multiple offers and I could drive the price up to maybe $200k but I didn’t tell this to my friend.

One investor heard about the upcoming listing and contacted me. I let him and his realtor show it the day before it hit the market. I told them that we wanted to expose the house to the market before deciding. They of course wrote a full price offer and wanted an immediate response. I told my seller that I was sure we could duplicate that offer from anybody since it was nothing special. She agreed.

I put the listing on the market very late Friday night. Immediately it started getting showing requests. By 9:AM the next morning, more than a dozen showings were scheduled. I spent all day Saturday, Sunday and Monday texting and talking to the 72 agents who had scheduled showings on this house. It was overwhelming.

Once the offers started coming it, I went to work on pushing the price up. With every new offer we got, I told the realtor if there was another offer with better terms for price, inspection type, financing type and closing date. The goal is to create the ideal terms for your seller by getting one buyer to change something on their offer so you can use that for leverage to get another buyer to change something.

We ended up with 19 offers. We had two cash ones that were very close (especially after I nudged each one of them to go higher to be competitive.) I think one of them figured out I was using their offer to push the other one up higher, and then come back to push them up again. This agent send me a Confidentiality Agreement. That is where one of the terms of their offer is that you can’t disclose any of their offer terms to anybody else. I won’t violate my integrity. In addition to experience, all I have to offer people is trust. I felt like both would go a little higher. What to do? How could I squeeze a little more money out of them for my elderly seller who needed it to live on? I decided to tell each of those two buyers they had the best offers and to send me their highest and best offer. They had one shot. The seller would pick the best one. This move ended up getting about another $4k for the seller.

In the end, the house sold for $225,750. Just over $40k more than the list price.

How the market is changing

This is hard to believe, but I am busier with buyers than I have been all year. Buyers are out there shopping. Many listings I have shown have another showing taking place as I arrive or one coming in as soon as I am locking the door on my way out. There is a lot of activity. I think buyers are excited to have choices now. They seem excited to get to see so many houses. I showed 6 houses yesterday to one buyer. Six months ago I would shown a buyer one house. If they didn’t buy it, we would wait patiently until the next one came on the market.

Buyers seem to be pushing back a little on price. Only a few I have shown have gotten multiple offers. Also, out of maybe 14 or so houses I have shown in the past 3 days to 3 different buyers, only two of them have sold before I could show them to my clients. Six months ago, that number would have been much higher.

It’s going to be a weird rest of the year I think. It has changed so fast. We will have sellers who aren’t living in reality and think they get to call the shots. There will be realtors who also are stuck in the old market and not realize they need to hone their negotiating skills. There will be buyer’s who think it’s a Black Friday sale and want to offer 80% of the list price. This is when having a good realtor who knows what is going on in real time really helps!

Real estate market-No monster under the bed

Quit reading everything about the housing market……well, maybe except for this post.

There is soooo much doom and gloom in the news out there regarding the market. It’s all written to grab your attention. It’s mostly accurate data just misinterpreted by people who are journalists and not actually in real estate. If you want to know how not to end a sentence in a prepositional phrase, ask a writer. You want to know about the real estate market, ask a realtor.

It drives me crazy how much the news impacts people’s decisions. There are so many people out there right now afraid to buy a house or afraid they should sell their house before the market crashes. I totally get that there is an investment side to homeownership. It is typically somebody’s largest asset and those who own their homes tend to have a higher net worth than those who rent.

But, there is another side and that is the fact that you have to pay to live somewhere. If you rent, somebody owns where you live. If you sell to beat any crash, you will still have to pay to live somewhere.

Since you’ve gotta pay to live somewhere and you’ve gotta have somewhere to live, I have always thought that the best time to buy a house is as soon as you can afford it and your life is stable enough where you expect to live there for at least several years. Possible fluctuating values and interest rates don’t matter as much when viewed against throwing money away in rent. If prices were to dip a little, the money you lose will likely be less than all the rent you would have paid over the same timeline. If rates go down, you can refinance your mortgage. If you currently own and home and are happy living there and it serves it purpose well, then stay put until it doesn’t.

The real estate market is just like any other market. It moves like the waves on a beach. It is always going back and forth. Sometimes the tide comes in, sometimes it goes out. It never stays the same for long and nobody should expect that. You can’t control the timing of the market but you CAN control your time in the market.

What’s the rest of 2022 going to be like?

Not fun, that’s for sure.

After working in bad, good and in between markets over the past 17 years, we are entering a period where buyers and sellers are not going to be happy. Buyers won’t like that they missed out on the super low interest rates. Sellers won’t like that they missed out on the absolute hottest real estate market in all of history.

Here are some predictions:

  1. Pricing a house will become difficult. Typically you look back over the past 6 months of sales of similar houses to determine value. Well, we can’t really justify using comparable sales from when the market was so hot that about any house went for way over the list price and had 5-15 offers.
  2. Price reductions. Let me tell you something. A price reduction does not mean the market is bad. It just means the price wasn’t right from the get go. Sellers will be in denial and will want to keep pricing their houses as if buyer’s can still get a 3% interest rate. Trust me, having been in this business during the absolute work market ever, I can attest to the fact that when priced right, any house will sell quickly in any market.
  3. Home inspectors will have to start waking up and working again after practically being unemployed for the past two years.
  4. Realtors will have a whole lot more free time since the number of sales are slowing. This does not mean the market is bad. What determines a good or bad market is not the number of transactions but the balance between sellers in the market and buyers in the market. Just about everybody other than clickbait Youtubers agree that the market is cooling into a slight seller’s market. If there are 2 sellers out there and 2 buyers out there, that is a good, balanced market. Realtors are the only people that care about the number of transactions out there. Why? Because we get paid for transactions.

Want to know what I expect for 2023?

Assuming rates don’t go crazy and the general economy doesn’t collapse, I think when buyer’s emerge next spring they will have acclimated to inflation, acclimated to paying around 6% interest and they will resume buying houses.