Does location matter any more?

I guess a lot of people think being a realtor is about opening doors and cashing checks. I guess there are a lot of realtors who think the same so that is probably the source of the perception.

You don’t need me to help you pick a pretty house. You don’t need me to be there to tell you what you like or dislike about a house. You don’t need me to find houses for you. You don’t need me to walk into the only room with a chandelier and announce it is the dining room. You don’t really even need me at all…….unless you view spending the most money you have ever spent as an investment that you know you will sell someday and want to maximize the return. Oh, I guess you also need me to make sure you don’t pay too much since you won’t really know if you overpaid until you go to sell it.

So here is a quick lesson on how I go about helping people pick a neighborhood. We have all heard that real estate is about location. It is, but I don’t think people really know what that means. I normally break down neighborhoods into 4 categories:

The “A” Neighborhood-These neighborhoods are the ones people know and love for a variety of reasons. Some might be close to something desirable, some might have a lot of charm, some might have lower crime. Almost all “A” neighborhoods have a good performing school district. These are the ones that people know by name. These are also the ones that will always be easy to sell in even a bad market.

The “B” Neighbhorhood-Is like the “A” but may not be as well rounded. It’s popular, but often viewed as an alternative to another “A” neighborhood that is close by.

The “C” Neighborhood-This is one that no buyer has ever mentioned as somewhere they would love to live. It is just average in everyway. Nothing really is wrong with it. Nothing is really great about it either. It is just a neighborhood full of houses.

The “D” Neighborhood-These are like the opposite of the “A” neighborhood. These are neighborhoods where 16 years worth of buyers have told me they DON’T want to live. It is often because of high crime in or around the neighborhood or due to a combination of poorly performing schools. Let’s face it, if buyer’s are telling their realtors they don’t want to live in specific neighborhoods, there’s your sign that it isn’t the best investment.

Why does this make any difference if you’ve found a pretty house you like in your budget? Shouldn’t you be happy just to have found a house in this crazy market? Isn’t finding a house in a less than popular neighborhood better than not finding a house at all? The answer to all of this is that it doesn’t matter at all when you buy the house. It matters a lot when you decide it is time to move on and you want to sell it.

Right now, let’s say there are 100 buyers in the market. There are 20 houses in each of my categories for sale. That means there are 80 houses for 100 buyers. Oh no! That means all 80 sell for at least full price in multiple offers the first day on the market.

But markets change. I am no doomsday person. I don’t think the market is going to crash. It will however, over time, swing back and forth between being a buyer’s market and a seller’s market.

This is what it looks like in a buyer’s market: There are 80 buyers in the market. There are 100 houses for sale, 25 in each of my 4 categories. How do you think this pans out? The “A” neighborhood houses sell first, then the “B” neighborhood houses, then the…….well, you get it. When there are more houses for sale than there are buyers, buyers get pickier. Buyers can’t be picky in today’s seller’s market but they will be able to again. I am sure of that.

My first house was in a “D” neighborhood. I was in my mid 20s and didn’t know anything. Like a lot of first time buyers, I was focused on just finding a house I liked. As I improved my house, I would look out my window and realize that I had no control over my whole neighborhood. Many of the houses around me were owned by investors. There was some crime. I loved the house but not the neighborhood. I sold it for about what I had in it, which meant I didn’t have a lot of equity to carry over to the next house. That is another reason to always pick a winning neighborhood. You will use the equity you’ve built in your old house as your down payment on your next house. You want to maximize that.

So do yourself a favor and always pick the best neighborhood in your price range.

The market wearing you out? Here is an easy way to buy a house!

Let’s face it. A buyer in today’s market is going to pay top dollar for any house. There are two methods of home searching.

The way the home search usually goes for most buyers is like this: They have a search set up on Zillow alerting them when a new listing hits the market. Then they rush out to see it. Also rushing out are the 20-50 other buyers who set up the same alert. You wait in line to see it. You have 5 minutes to make a decision. You write a crazy high offer promising to do anything the seller wants short of naming your next child after them….then you lose the house in multiple offers to the buyer who was willing to name their next child after the sellers.

It is crazy out there!

Part of the reason the market is like this has nothing to do with a shortage of listings. Part of it, a small part of it, is that buyers are so focused on new listings. These days, if a house doesn’t sell immediately it is forgotten. Buyers forget about it and opt to just wait for the next round of new listings and repeat the process.

I recently had a friend looking for a house in the $250k range. We got outbid on every offer we wrote. AND WE WERE GOING WAY OVER THE LIST PRICE TOO! One house sold for $30k over the list price and got 17 offers. For that house, all you were doing was trying to outbid some crazy desperate buyer.

Know what I told my friend to do? I told her to stop focusing on new listings. I said let’s look at houses that have been on the market for at least 4 days. There are plenty of them out there. They are the ones that for whatever reason got passed over as a new listings. Sometimes it is because the presentation sucked. Sometimes it is because the price was high. Sometimes it was because the house sucked. Knowing why it was passed over is why you need a good realtor.

So, the next house we see, she decides she wants. And guess what happened? We wrote a full price offer. We put our preferred closing date on the offer. We were able to do a home inspection. It was a pleasant experience. We were also the only offer so guess what? The seller accepted it!

What’s a Buyer to do in this evolving crazy market?

When the market started heating up, the smart buyer’s agent knew to get an offer in ASAP to try to beat other agents to the punch.

Then we all started doing something like saying “Reviewing offers on such and such date and time.” That was nice because you knew that you had time to show the house. If your client couldn’t break away to see it immediately, you could tell them you could do the next day.

Now it has evolved to the point where we are saying “Reviewing offers on such and such date but the seller reserves the right to accept any offer at any time.” So we are back to dropping everything and rushing out to see a new listing ASAP.

What is a poor buyer to do right now to get a house? Make such a strong offer that the seller will want to accept it immediately. Turn the tables and make the Seller chase you! That usually involves 4 big things: Price, inspection, closing date and possession date.

Obviously for price, that means a stupid high number. I can’t believe after spending so many years blogging about not overpaying in a Buyer’s Market, that I am now suggesting people do this. But in this market, it is the difference between getting a home and not getting a home. Instead of “Go big or go home”, it is “Go big to GET a home.”

Inspection…..waive it totally if you can let yourself do it. Having dealt with probably close to 1000 inspections over the past 16 years, I can tell you that I rarely see a house with a deal breaking problem. Most of the issues that would make you want to walk away from the house are typically visible if you look. If it has old HVAC units, well, you know you will have to eventually replace them. Roof have a shingle blown up or need some flashing around a chimney? That’s not worth losing a house over. Plus, most of the time all you can get a seller to do these days is spend $1000 or so on repairs. Most of the items found on a home inspection will probably also be found where you are living now: Some electrical oddities like reversed polarity or an ungrounded outlet in older homes. Various plumbing leaks. A roof, HVAC units or water heater somewhere between new and needing replaced. Most of what is found on a home inspection is deferred maintenance.

A lot of sellers have already bought another home and know when they will be closing on it. Ask their agent what the ideal closing date would be for the sellers. If you can make it work, you have just made your offer much more appealing to them.

Same with the possession date. It’s a pain in the rear to have to be out of your old place the same day you get in your new place. If the house was in reasonably clean shape when you saw it and you don’t think the sellers are terrible people, ask if they need a couple of days to stay in the house after the closing. Some breathing room is always nice. The worst I have seen when this happens is that you often get left some garbage or a dirty house. Most sellers are eager to get to their new place so you don’t really have to worry about them not moving out.

All of these things are a little risky to a buyer. I know. I get it. But the people that do these things are the ones who are going to be moving into that house you fell in love with and were outbid on.

When to walk away after the home inspection

The home inspection is the toughest part of a sale I think.

It can be hard to get past the condition, even a house that inspected pretty good, since your inspector gave you an entire book containing everything that is wrong with what is about to be the biggest purchase in your life.

What I try to tell my buyers is that no house is perfect. They are all in various stages of Mother Nature trying to destroy the home and reclaim the property. Everything has a life span and given enough time, everything on a house will need replaced or some maintenance.

I’ve probably been the Buyer’s agent on well over 400 inspections and gotten repairs lists for hundreds of listings I have had. Know what I have found? Most of the issues that turn up from a home inspection are either deferred maintenance or things that the inspector noted were done a little less than textbook perfection.

Here are some things that are on almost EVERY home inspection report: Windows or door that need caulking, faucets that drip, loose outlets, cracks in sidewalks and driveways, downspouts that are not out far enough away from the house, air conditioner condensation lines that drain too close to the house. Minor plumbing issues are common. Minor electrical issues are common. Often the flashing on a roof needs some attention. Older houses tend to not have grounded outlets. Few houses have weepholes in brick to allow moisture behind the brick to escape. Few houses have flashing where a gutter ends at an exterior wall to prevent water from splashing on the side of the house………and the home inspector I recommend always seems to find loose toilets, lol!

I think the hardest thing for buyers is that they think they have picked a loser house when they have 20-30 of these common issues. It is easy to assume that the house you picked to purchase is the only one with these issues. That you can walk away from this one and the next house you buy will be perfect. I don’t know how successful I have been at convincing my buyers of this, but I normally tell them that 80-90% of the same issues found on their house will be found on any house. I have also joked that there needs to be a rule that the inspector has to inspect the Buyer’s old house first, and anything found at their old house can’t be asked to be repaired at their new house.

Since the topic of this is when to walk away, I guess I better get into that.

If you are a first time buyer or don’t have a lot of money, I guess you walk away if the the big ticket items don’t have much of their lifespan left. If you have a 22 year old roof and won’t have any money to replace it in the next few years, it might be best to walk away.

If you have a house with a problem such as a major structural issue that will impact your ability to sell the house to the next buyer when you move, might be good to skip that house.

When I bought my current home, I had it inspected. It had all the usual issues. I did the inspection type that is very common in this hot seller’s market: I could inspect it but wouldn’t ask for repairs. I would take it or leave it. I of course chose to take it because to be honest, I loved the property so much that there wasn’t anything that was going to deter me from living there. I had all the usual items. Being a landlord, realtor and middle aged man who has owned lots of homes, there was nothing that scared me nor surprised me. It was just a “To-do” list that I prioritized and am getting it all sorted as I find time. Which brings me to something else I tell my buyers. If you will encounter pretty much the same items on any house, why not just stick with the sale of the one you fell in love with after looking at all the other houses you had to pick from? This is especially true in today’s market where you have so few choices and odds are you will pay even more for the next house as prices go up while you wait for it to come on the market.

How I have benefited from having the smartest Dad in the whole world.

It’s been a good week.

It all started when I had two buyers make offers on houses and they both got them. Both went over the list price of course as that is becoming far more common.

One of them was a house that had come back on the market after a sale fell apart. I called the listing realtor and asked why it fell apart. She told me that before the seller put the house on the market, he had a specific home inspector look over the house and repaired everything the inspector found. Well, the first buyer used a different home inspector and decided they didn’t want the house. The listing agent thought the buyer just cold feet and used the inspection as a way of getting out of the deal. That happens unfortunately.

I know nobody likes it when a house comes back on the market. The house often doesn’t have the same momentum the second time. I also know that sellers start getting nervous about selling their house even in this crazy hot market. It turns out that my buyer had told me who she was planning on using for the inspection and it was the same inspection company the seller had used. I saw this as an advantage. I knew it would be a huge deal to the seller and listing realtor if they knew we were planning on using the same company since there would be no surprises.

So, instead of writing an offer with an escalation clause, I called up the listing realtor and pretty much said “Hey, how about we give you so much above the last contract you had on the house AND we agree to use the same home inspection company your seller used before they listed it? Would that keep you from waiting to get more offers and just sell it to us right now?” Fortunately it was and my buyer got the house. She later told me she was prepared to go to a certain number if needed and that I saved her a lot of money. Close to $18k to be exact. Had it gone into multiple offers, odds are she would have paid much more than she did. I just knew what to do to make the seller accept our offer. My dad always said “Think like the other person’s perspective.” I knew the seller was anxious about the home inspection after the sale fell apart and having the same company he used do our inspection would make him feel like the house was really going to sell this time……thanks Dad and Happy Father’s Day!