buy

Are Investors ruining the market?

by John Rice

Are real estate investors who buy single family homes ruining the market for other buyers and driving up rent?

Unpopular opinion, but I say no.

Sure, many of these investors might make terrible landlords. None of us like the robocalls we get asking to sell our houses to them…..but they are not ruining the market and driving up rent. I am by no means defending them or their actions. I am just saying that they are not the root of the problem.

I spent a couple weeks in Florida recently where I read an article saying how large scale investors were ruining the market. They were outbidding other buyers. They were reducing the number of homes available for owner-occupant buyers. They were raising the rent and making housing unaffordable.

This type of logic drives me crazy. Let me pick apart a few things here:

For every house for sale, that means there is both a Buyer and a Seller. If one Buyer is outbidding another, that means there are not enough houses for sale. This is a Supply and Demand issue. Also, the never mentioned seller who is about to become a buyer is happy with the terms they got.

Are they reducing the number of homes for sale? Yes, but isn’t the same true for anybody who buys an available home? Again, the issue is the imbalance between Supply and Demand.

Are they raising rent and making housing unaffordable? This one always amazes me. We have all just survived a crazy period of inflation where the cost of everything went up. Somehow most people single out housing, as if that shouldn’t have also been affected by inflation. Like we are shocked and appalled that housing costs, whether renting or buying, went crazy at the same time when everything else did too?

What this article seems to forget is the tenants. Where would they be if all the sudden there were no properties to rent? It isn’t like investors are buying these houses and keeping them empty. There is just as much demand for single family rental homes as there are for people wanting to buy them and live in them. If rent exceeds market demand, houses will sit vacant and investors will have to lower the rent to get a tenant. Again, Supply and Demand.

Are you seeing a theme here? Supply and Demand. There is a short supply of houses for sale for investors and owner-occupants. There is a short supply of houses for rent for those who cannot afford to buy or choose not to. Having more demand than supply is the problem here.

Some say that the issue is sellers just aren’t selling these days. Okay, true. But let’s think this through. We have far more people wanting to buy AND to rent houses. If all the sudden everybody decided to move, we would still have more people than houses because everybody living in their current house would also need another house. What’s that? Supply and Demand.

Building more homes is the only real solution to this. It is what the writers of the article I read should be encouraging if they honestly feel like everyone should be able to afford to buy or rent a home. The demand is there. The supply is the issue. Until there is a better balance, prices for buyers and tenants will not change.

Well Played Sir, Well Played….Sort of

by John Rice

After nearly 19 years in this business, you sure learn to read the signs. Watching what people do (or don’t do) can often tell you a different story than the one they are telling you with their lips.

I had a buyer interested in a property. We made a formal offer. It was verbally countered. Verbal counters happen. They can be a way of making the negotiations move along faster. They can also be used to “Not” formally counter. See, if a Seller formally counters an offer, they can’t accept another offer without withdrawing their counter. Sometimes a verbal counter is made to keep the other parties options open.

My Buyer decided not to budge from their original offer. I assumed the deal was dead.

A couple of hours later the Seller’s realtor texted saying the Seller maaaaay accept my Buyer’s offer amount if we could close in 3 days. I immediately told the other realtor exactly what my Buyer would do in response. We could not close in 3 days but could within 10 days.

Then I hear nothing.

This is when I start getting suspicious because normally, when a Seller and Buyer agree on a price, everybody usually get really motivated to make a deal work out.

Then I ask again for a reply.

I still get radio silence.

Then out of the blue, exactly what I suspected was happening came to light. There was another offer. The other realtor said another offer had been made which was better than the one my Buyer had made.

So here is what really happened:

  1. By verbally countering our offer, this agent kept our offer alive and could legitimately tell the other Buyer’s realtor that there was another offer on the table. This used our offer as leverage to get the best terms for the Seller from the other Buyer.
  2. By not replying to us in a timely fashion, it hedged the Seller’s bets because if the other offer didn’t work out, they had us as a backup plan.

Was there anything wrong in doing this? Yes and no.

I am not at all upset about the other agent trying to get the best results for his client. I do the same for mine. Kudos to him for this part of his actions.

The only thing I am salty about is that he made a counter and then ghosted me for almost two full days. I think he should have told me in a reasonable amount of time that there was another offer, or that his Seller was either accepting/rejecting/countering the revised terms I had proposed.

You won’t believe what happened with their Zestimate

by John Rice

I put on a new listing last week. Like what happens a lot of the time, Zillow’s zestimate was way off of what a thoroughly detailed, comprehensive, professional opinion of the market value was. Usually once Zillow gets the listing from the local MLS, their Zestimate suddenly changes to something more in line with the list price.

Not with this house however.

My seller reached out to Zillow after unsuccessfully trying to claim their home on the site. Zillow was nice enough to send them an email that basically said Zillow has never been in the house, knows nothing about the house or its condition, but somehow is still happy to publish a value. More of a Guestimate than a Zestimate in this realtor’s opinion.

Knowing artificial intelligence is running Zillow, I told my seller that I would play around with the marketing remarks and see if somehow certain keywords might change anything. It was a long shot but it was all we had.

I put words like “Recently” in front of the word “Remodeled” when describing their primary suite bathroom. I removed the word “Original” when describing some of the cool character of the house. I removed the word “Traditional” in a sentence describing the homes in the entire neighborhood. I tried to used words like New, updated and fresh every place I could make it work without looking stupid.

And guess what?

The next morning the Zestimate was up nearly $90,000 and right in line with the list price.

I outsmarted Artifical Intelligence. What’s next for me? I am going to try to outsmart my dog, who seems to have trained me to do what she wants, when she wants.

How my fall is shaping up

by John Rice

I’ve been doing a lot of blogging about the market lately. Good stuff, but since I know most of you who will be reading this, I’ve been thinking I better give you all an update on what I have been doing.

I’ve been having a great time the past few weeks.

Yeah, the market is really slow. It’s there. It’s healthy. It is just slow. Few people want to buy and even fewer want to sell. That is okay for sellers and buyers. It is realtors, home inspectors and loan officers who this current gridlocked market affects the most.

I am not complaining though. I have more than enough work to stay comfortably busy.

I have several listings in the pipeline. All of them from people I know. A few buyers too.

I will be listing an amazing ranch in Versailles in a great location, with a great lot, and on a cul-de-sac. It is one of those rare houses that really has no negatives. I am looking forward to selling this for some friends who are moving out of state.

I’ve got a house around Southland that should be on the market sometime this winter or early next spring. It’s an older house with a really good floor plan and several interesting features. I have worked with the sellers several times. It might be the last one unless they were to move back to Lexington after this one sells.

I’ve got a very affordable ranch on the northend that I will be selling for a friend who has used me several times. He is an investor who is parting with several of his properties. I look forward to working with him and his family for probably most of the next year since they will sell one house at a time.

I’ve been working with a large family who has used me a couple of times before. I have really enjoyed getting to spend time with them. We found an ideal home in their existing neighborhood that will serve them well. This house has fairly new HVAC units, replacement windows and a literally brand new roof. I don’t see that Trifecta often. I should be listing their old house here in the next week or so. Their situation was very much like the “Love it or list it” show on HGTV. They loved their neighborhood but their old house wasn’t working. They were entertaining a big addition and remodeling the existing house.

I’ve been working with the mother of a woman that I went to middle school with. I have worked with her once before. Both her and her daughter are so much fun to be around. Once we find the perfect place, I will be selling her old house which is simply adorable. It is on about 3 acres in rural Franklin County. If you had told 6th grade me that I would be a realtor and showing houses to a classmate’s mother 40 years later, I would never have believed it!

Other than committing to wearing long pants every day, it’s shaping up to be an enjoyable fall for me.

Last nail in the coffin for the Pandemic era market

by John Rice

All throughout real estate history, we have had value differences due to location. Similar houses in the best locations got top dollar and the less desirable locations were worth less.

Except for the COVID era market.

During the pandemic, supply was so short and demand was so strong that pretty much the same house would sell for the same price regardless of things like what part of town it was in, what school district it was in, and even what condition the house was in.

This was especially true for the more affordable houses. Back then, a small 3 bedroom, 1 bath house without a garage was going for about $200k regardless of whether it was in a Grade A, Grade B or Grade C location. That was because the market was so tight that people didn’t have a choice in location. Buyers were shopping all over town, looking at any house in their price range. There were so many buyers doing this that location didn’t seem to matter much. It was about getting a house, not getting a house where you want it to be.

We’re not wearing masks. Rates aren’t 3%. That crazy market is in the past now.

Now that we are starting to see some houses staying on the market for more than a few hours, it’s back to location being important. As this happens, I think we will see the Grade A neighborhood prices remain stable. The Grade B and Grade C locations that recently had been getting the Grade A money…..well, they aren’t any longer. That is one reason we are seeing so many price reductions now. It just shows that the market is returning to normal. It isn’t crashing.

Back during the pandemic, I would have people ask me what a house was worth. I would tell them I can easily determine what it is worth, but the value and the sale price were not related for that brief time. I would tell my Buyers to view the sale price as paying what the house was worth plus a “Convenience Fee” for winning the house in multiple offers. Now that we aren’t seeing multiple offers on every single new listing, we are back to a house’s value and its sale price being the same.