buyer

“If you were me, would you (fill in the blank)?”

by John Rice

I get asked what I would do if I was in my client’s situation an awful lot. So much so that I thought maybe I’d write a little about the most common times this is asked.

  1. “Would you buy a house right now if you were me?“ My answer is always yes. Not because I want to make a sale, but because I am old enough to know that the sooner you buy a house, the sooner you start building equity. You are leveraging time when you buy real estate. Rates go up and down. Prices generally increase consistently over time. You can always refinance later if rates drop. One thing you can never do is go back in time to get a lower price or a lower interest rate…..NOW is always the best time to buy.
  2. “Would you still buy this house knowing what we now know after the home inspection?” My general thought is that no house is perfect. I’ve read probably 600 or more home inspection reports. Most houses seem to have 90% of the same issues as other houses of a similar age. I am rarely shocked at anything a home inspector finds since I’ve seen it all before. I personally think there are only a few times to walk away from a house after the home inspection: When the sum of it’s major immediate needs are just too much for you to handle financially or if there is something found such as structural damage that can make the house harder to sell when you want to part with it. I would not worry about the usual 20-30 minor items that any inspector will surely find on any house.
  3. “I’m only going to be in town for 3 years, would you rent of buy if you were me?” For 3 years or more, I would buy. You should be able to net enough from the sale to cover selling it and your own closing costs. I would look for a house that will not need anything major like a roof or HVAC units replaced because that could wipe out any gain. For 2 years or less, I would definitely just rent.
  4. “Would you move to a town surrounding Lexington to save money if you were me?” I usually tell people to live in whatever town their lives are in. If you work in Lexington and your social life is in Lexington, then you need to stay in Lexington. My first house was in Winchester. My business and all my friends were in Lexington. I felt like I lived on I-64 since I spent most of my time driving between both places. You won’t really save any money doing this even if you buy a cheaper house. Trust me. What you spend extra on gas, tires, extra oil changes and depreciation on your car costs more than you’d save by living in a cheaper town.
  5. “I can’t find a house in my price range, would you buy a townhouse or condo if you were me?” The condo/townhouse market has generally been about 10% of the whole residential real estate market. That means that only 1 out of 10 buyers will consider purchasing your place when it is your turn to sell. I usually tell people to buy a condo or townhouse if that is really what they want. It needs to be mostly about your lifestyle. If you want a low maintenance lifestyle, then it is a good choice. I also suggest getting a condo or townhouse for buyers with a super low budget. If your choice is continue renting, buy a worn out house that needs everything in a sketchy part of town, or buy a decent condo/townhouse in a decent neighborhood…..then buy a condo or townhouse. I have sold several to first time buyers with super low budgets. It was a great way for them to start building equity verses waiting until they could afford more.

The neighborhood that influenced 12 year old me

by John Rice

When I was a kid, I had a paper route. It was everyday after school and Sunday mornings. Other than about 3 houses in my blue collar neighborhood, my route was in a neighboring upscale neighborhood called Inverness.

It was during this time that I started noticing differences between neighborhoods, lots, houses, and everything that makes me The LEXpert today.

I got bullied a lot as a kid. I didn’t really like many of the kids in my own neighborhood. This was back in the days before the internet and cell phones so kids went outside. Even people with cable TV only had like 12 channels, 10 really since one was the weather and another just scrolled what was on the other channels. I remember always dreading delivering papers to the 3-4 houses in my neighborhood. Once I got those done and Inverness was in sight, I always felt relieved and would take a deep breath.

Inverness was a very peaceful and calm neighborhood. It had maybe 50 houses in it? All the lots were very large. There were no street lights or side walks. Most of the houses were built in the late 60s and 1970s. It is very much like Greenbrier in Lexington but it did not have a golf course. I loved this neighborhood and always wanted to live here. I eventually ended up living in a 1980s house in Greenbrier, which I now see was the fruition of this desire.

The people that lived in Inverness were mostly middle aged since you often have to work many years to be able to afford such nice houses. They were all very polite to me. I got to know several of them. Many knew I was into houses and neighborhoods and would let me see inside their homes. It wasn’t until last week that I realized the impact this neighborhood had on my whole life. I was early for a showing that wasn’t too far from this area so I thought I would drive around for old times sake.

I started to remember the people, their homes and my thoughts as I would pedal my bicycle through my route, with my bag full of newspapers getting lighter with each one I delivered.

There was one woman who wanted me to leave the paper in a small tin garbage pail by her back door. Once or twice a week, I would open the pail and there would be a bag with a few cookies in it. Another resident had a new 280ZX that I drooled over. I saw my first Audi 5000 with the then new flush windows. There was one contemporary house owned by some big-wig in his political party that I absolutely loved. I became fairly close to one older couple who wanted to move to Florida. I told them all about the community where my Grandparents lived and arranged for my Grandparents to meet them and give them a tour of the area……probably the first realtor like thing I’d ever do.

I would privately critique each house in the neighborhood. My clients will probably laugh when they hear that I would say much of the same things they have heard me say like:

“That’s going to be a difficult driveway to get out of in the winter.”

The columns on the front porch are too far apart and don’t really match the style of the house.”

“This house looks like it was designed on a napkin by somebody who just won the lottery while meeting with their builder at Waffle House.”

“This house is right by the only entrance and exit to this neighborhood and that means EVERYBODY driving in and out of here has to pass your house each time.”

I don’t recall when or why I quit doing this paper route, probably when we moved to Lexington. It sure was a special and influential part of my life.

Telling people what they need to hear

by John Rice

Back when I was so overweight, I dreaded going to the doctor. They would always tell me all the ways being overweight would affect my health. It’s not like I didn’t know that. I just didn’t want to accept it.

A lot of buyers are in the same situation today. The reality of what it takes to get a home seems overwhelming. It is easier to just hope somehow it will all work out and you’ll get a house somehow if you submit enough offers.

Reality checks are never fun. One day I accepted everything the doctors had always told me. Once I did that, I knew what I needed to do if I didn’t want to have health issues as I aged.

I sold a house over the weekend to a new client who had lost several houses previously with their last realtor. I didn’t really do anything special. I did my usual good job in trying to make our offer the most appealing to the seller. The hero of this story is the buyer. I was just like the doctors telling me the reality I didn’t want to here. He took in all the information and chose to do something about it.

Like all houses these days, it got several offers the first day on the market. It is normal to go over the list price these days so we did an escalation clause up to a certain amount. The buyer was a little anxious about going that high. I explained that odds are we would not need to go that high, but that he would have hated to have lost the house by just a little bit. He agreed.

Once the offer was sent and I told the Seller’s Realtor a few things, I got a question about not having an appraisal gap waiver. I knew this meant that our offer was one being seriously considered. If we were not the best or one of the best offers they had, why would he ask about it?

I told my buyer this good news. He didn’t really want to risk having to put out more cash should the house not appraise for the sale price. I told him that this is getting more and more common with every house I’ve sold. If we didn’t do it this time, odds are we would be in the same situation on the next house when prices and interest rates might be higher. He agreed.

A few hours later I got a text that he got the house!!!!!

The hero here is my client. All I did was tell him the reality of what would most likely happen just like all those doctors did for me. My client accepted the reality of today’s market. He realized he wasn’t going to magically escape some of these uncomfortable things and end up winning a house in multiple offers. Once he saw that, he knew what he had to do just as I saw what I had to do.

My Dad always said “Living in reality is never fun, but what other choice do you have?” to which I will now add “Plus living in reality with a house is better than not doing so and waiting for the next new listing to hit the market and do it all over again and again.”

How to make a good choice in a frenzied market

by John Rice

It used to be real estate was all about “Location, location, location.”

Today real estate seems to be more about “Finishes, finishes,finishes.”

This disturbs me. Why? Because one day there will be enough houses for sale that a buyer has a choice on location. Right now, with so few houses for sale, buyers are considering ANY house in their price range. When you only have one or two choices, you can’t afford to be picky.

Something else that disturbs me are all the houses that have been extensively renovated and are selling for twice what a similar non-renovated house is worth in the same neighborhood.

I am not sure why this is but I suspect it has to do with the speed of the market. Nobody has time to do a market analysis and see what the house is worth compared to other recent sales or see if it is overimproved for the neighborhood

This is what I tell my buyers:

  1. Location is still important. Any house can be updated but you can’t easily move a house to a better location.
  2. Only buy at the top of the neighborhood’s price range if there are several other homes equal in finishes and value. You do not want that $400k house that looks like the reveal at the end of an HGTV show and is surrounded by $200k houses. In a balanced market, or even worse in a buyer’s market, potential buyers will love your house but will not buy it. They will be in a $400k price range and expecting a $400k neighborhood. They won’t like the cheaper houses around it. Remember when you buy a house, you are also buying stock in the neighborhood.
  3. Don’t compromise on the lot. Right now nobody cares. Buyers are just excited about any house in their price range. You don’t want the house with the tiniest or oddly shaped lot in the neighborhood. Remember neighborhoods are about conformity……fitting in among the rest of the houses. It’s okay to have the biggest or best lot in the neighborhood of course, but if most of the lots in the neighborhood are flat, you don’t want one that isn’t. If most are large, you don’t want the smallest one. Avoid driveways that are pretty steep. It is better to have a lot where the backyard slopes downhill away the house verses sloping uphill.

Basically, the best thing to remember as you frantically are trying to decide how much over the asking price you want to go is that one day you will be selling the house. The market may not be as tight. You won’t know whether the house you picked was a good decision or a bad one until it is your time to sell it.

So, always go into a purchase being mindful of your exit plan.

Of all the emerging trends, this is my favorite

by John Rice

I’m as tired of talking about COVID as anybody else in the world, but I’ve got to bring it up because it has fueled two trends in the real estate market. One is that everybody is moving up the real estate ladder due to low interest rates and the boost in equity the market has given them. I am seeing far more sales over $1,000,000 in the past year. Some of these buyers are wanting to get into their favorite neighborhood and a lot of them are wanting a place in the country.

The other trend is scaling back. Many people just want a more simple life and/or are into the F.I.R.E. movement…..meaning Financial Independence Retire Early.

I’ve been wanting to scale things back myself the past few years…….including myself since I was so overweight. Here’s my story. I think sitting around the house during the lockdown got me thinking about it more.

I grew up in the 80s. I’m a Gen Xer. I wanted the American Dream just like everybody does. I never considered myself all that materialistic. I knew stuff wasn’t going to make you happy if you were not already happy. I viewed stuff as icing on the cake of life. I have had a good life. I married when I was young and still am happily married 30 years later. I had great kids who I love in a way they will never know until they become parents. Life was and still is good. I thought stuff would make it better. As my real estate career took off, I got the chance to do a lot of things I couldn’t before, some of them I never thought I would do. I took nice vacations. I had a big house in a prestigious neighborhood (that was very outdated because I hate remodeling a house while living in it.) I was able to collect cars and waste a fortune on them. I was able to write 5 digit checks to one of my favorite charities.

The more stuff I had though, the more stress I had. Stuff needs your attention. Stuff needs maintenance. I started realizing that this stuff I thought would be fun to have was actually making my life worse. My friends would tell me to hire people to take care of my stuff for me. While that saves the time of doing it yourself, telling somebody what to do and then checking that they did it still takes a little time and mental energy.

As I was considering upgrading my Porsche 911 S to a 911 GT3, I realized that better stuff wasn’t the answer. Why? Better stuff is still stuff. Remember, stuff needs your attention. Stuff needs maintenance. So, I jumped off that train and decided that I only wanted stuff in my life if it made my life better. I still have far too many cars and I think it is time to let a couple of them go even though I really enjoy them. I just think my life would be better with less since good stuff is still stuff.

Those are the two trends I am personally seeing with my clients. Most of them want to get the biggest and best house they can afford and others are wanting less house than they have had. I’ve personally done both so I get the appeal of each one. It’s fun working with both of these type of buyers since they are both getting what they want.