How much have prices gone up?

by John Rice

Right before dinner last night, I was looking through the closed sales of the day. I stumbled on a sale that got me thinking about how prices have gone up this year. The house I saw was about a 3800 square feet place in Veteran’s Park Elementary that sold for $349,900.

What made that sale jump off the screen to me was the fact that I have been watching values over there for about a year. I had a seller who wanted me to list their house about this time last summer. I told them the house was worth about $325-335k based on the comps. They disagreed, are now on their 3rd agent, and still have not sold because their list price is $20k too high.

Then, late this winter I worked with a family that wanted to be in this school district. When we started looking at houses, the comps were still in the $325-335k range. Then spring brought out the buyers and before we knew it, the comps were mostly in the $335-345k range……and now the most recent comp is practically $350k. That is over 3% appreciation.

In two years or less, those people that didn’t list with me may just get their price 😉

(And I WON’T even mention the house I could have bought in 2011 for $280k that just sold for $337,500 with absolutely no improvements other than new carpet!!)

One of a kind properties

by John Rice

It is always fun to work on the sale of a unique property. Most real estate advice is about playing it safe….you know, beige walls, nothing too bold, or “Too” anything really. Just middle of the road. Safe is predictable and predictable has a broad audience. Conventional wisdom is that broader appeal is better.

So what about a house that is unlike any other? One that somebody has given it’s own bold personality?

They can take a while to sell. I have had several unique listings in the past year. I’ve had a tiny lake house, an old farm house on 5 acres and an old house in downtown Wilmore. All of them were incredible to see. All the sellers had a knack for design and detail and those houses are totally amazing. What tends to happen with these listings is that they get shown left and right, but you end up waiting for just the right buyer to pull the trigger. My parents have somewhat of a unique place. They are often worried about selling it. I tell them what I tell all sellers with one of a kind houses: You will have to wait for the right buyer. The good news is that “Right” buyer will not be deciding between your house and another. They will only want your house.

Marketing a unique property is all about showing off it’s personality. I recently had this at the beginning of the marketing remarks on a listing: “Old. New. Modern. Distressed. Pinterest. IKEA. Style. Functional. Character. Unique. Amazing. These are all words to describe what the seller’s affectionately call their Frankenhouse.”

And what about the buyers? I have had several buyers who have bought unique places. These buyers are not looking for a house that checks everything off their list. It is not a practical decision to them. I rarely get much criteria to go by other than a price range and bedroom count. It is about how the property makes them feel more than anything. They tend to not care as much about the traditional factors such as school district, neighborhood, etc. It is all about their connection to the house. These buyers are a small part of the whole market. That is why I really want to get the best deal I can for them. I also want to make sure they know that it might take longer to dispose of when it is their turn to be the seller. There is nothing wrong with buying such a unique place, I just like all my clients to know the good and bad of everything so they know what to expect.

Negotiation Strategy……Waiting??

by John Rice

I wrote a very good offer on a great house yesterday. I haven’t got a reply yet from the listing agent. See, it has been on the market for 4 days. They wanted to wait to see if any of the 3 showings they have today want to make an offer. I hate being in this position. If I push the listing agent, then she might not want to work with me if there are multiple offers. I decided to wait.

I try to think things though. Right now, the seller is feeling really confident with all the showings. If they counter right now, it would probably be for full price. If there is another offer today, I’ll be in the same place. So I wait.

One thing I have learned about real estate deals is how fast the balance of power in negotiations can change. One minute you are calling the shots, then something changes and you are at the mercy of the other side. That is why I always try to be cordial when I have the upper hand. Never burn a bridge that you might need to cross later.

One thing I thought of that this seller and agent didn’t…..the fact that I will have the upper hand if none of these 3 buyers want to make an offer today.

And that is another reason I chose to wait.

I just saved my buyer $4000

by John Rice

It’s been a fun day. I mean, it isn’t everyday I get to save somebody cash money!

Here is what happened:

I’ve got a client who is buying a piece of investment property. Part of it is vacant and part of it is occupied. The appraiser used the last stated rent value for the vacant part of the building. That value was less than the current rental value of the occupied part. There are 3 ways to value real estate….market value (driven by similar sales), income approach (driven by rental income) and replacement cost (driven by construction costs.) For a piece of investment property, you guessed it, income approach is used. That means you take the total of all rents and multiply them by a cap rate or a gross rent multiplier (GRM).

Since this appraiser used some outdated rent value for the vacant part of this building, that threw off the appraised value since it is such a simple formula. It appraised for $4k less.

I called the loan officer to see what we could do. He said they might be able to use the lease I had to establish fair rent values. I told him to work on that, but I would see if there was any chance of the seller reducing the price to appraised value and NOT to do anything until I found out.

So, I called the listing agent and told her the deal. I told her the potentially complicated steps we might have to go through to get the value up and that any buyer who would be getting financing would have the same issue. After that, I called my buyer to tell him that I though either way, we would be in okay shape. He obviously was on board for the seller reducing the sale price. I told him it was a long shot and not to get too excited.

A bit later, I get a call that the seller will reduce the sale price by $4000. I am kind of shocked since I was really rolling the dice. It really would have been easier for me to have just let the loan officer get the appraised value up to the contract price, but I wanted to see if I could get the place for less for my buyer. One quick call and a cleverly worded presentation saved my client $4000. He is very happy…….and I have never been so happy to make less money!

First Time Homebuyer tips from The LEXpert

by John Rice

I’ve had a sudden flush of first time homebuyers lately. Seems like a good time to share the advice I always give them……..and I can just send them this post so I don’t have to say it multiple times 😉

MY ADVICE TO FIRST TIME BUYERS:

1. Buy as big of a house in as good of condition as possible in a neighborhood that has good resale potential. Right now, a small houses probably seems big to you since you are likely in an apartment. I don’t understand it, but somehow, the older you get the more space you need. The larger the house is, the more likely you are to stay longer. Plus, if interest rates get high, you might not be able to move into the next house you want for awhile. NEVER sacrifice location unless you just got a screaming good deal on a house. Reason is because you will one day need to be a first time seller. You want to be able to dispose of it quickly so you can make an offer on your next house. I have had several first time sellers miss their dream house because they had a hard time getting rid of the old one. Enjoy your first home, but realize it is a tool than can help or hinder your steps up the property ladder.

2. Be ready to pull the trigger when you do find the right one. Most first time buyers have only thought as far ahead as finding the right house. Once they do, there is that point where a decision has to be made. I see many first timers need time to wrap their head around the idea that they are about to buy a house, and lose it to another buyer while they waited. So, think ahead. Do whatever you need to be able to move forward when the time comes.

3. Realize the house is for sale. I know it seems silly, but most first timers kind of feel like the house is reserved for them until they decide if they want it or not. Truth be told, I did the same thing when I was a first time buyer. Unfortunately, there is no calling dibbs on a house until you have a contract to buy it.

4. Don’t be afraid to hire your own realtor……and know that they are free to you. Your realtor splits the commission with the listing realtor, but works only for you. I run into a lot of first time buyers who haven’t hired a realtor because they think they have to pay them.

5. Don’t be too impressed with how pretty the seller’s furniture looks. Most people buy a house on how they feel when we are inside of it. It is sooooo much easier to sell a house when the seller has it decorated really nice. I love it when I am the listing agent for those houses! Keep in mind that all the pretty stuff is going with the seller. Focus on what you are really buying……the house. And, don’t assume a house with a lot of new updates is in good condition. Plenty of people prefer to spend their money on a new counter top or hardwood floors and have a roof or furnace that is on their last leg.

6. Have fun on the journey. It can be stressful at times, but it should be a happy milestone in your life. You only get to be a first time buyer once!