Could this have been the worst house in Lexington to buy?

A house I had listed a long time ago came on the market recently. It sold really fast of course.

Let me tell you a little about this house.

The seller paid $157k for it in the summer of 2006. That was pretty much the peak of the market. We were already starting to hear stories about the market crashing by then.

The seller didn’t want the house any more. Listed it for $166k the summer of 2007. After 291 days it did not sell.

Then it was my turn. I listed it in 2011 for $153,900. It didn’t sell after 129 days on the market.

Late in 2014 the seller tried again with another realtor for $159k. 61 days on the market with no buyer.

Spring of 2015 it sat on the market for 201 days with a list price of $156k with a new realtor. Still did not sell.

Spring of 2017 it was listed for $162,900 with yet another realtor. After 68 days on the market, it sold for $153,500.

So, after 11 years and literally 750 days on the market using 5 different realtors, somebody finally bought it for less than the seller had paid for it in 2006.

What was the problem with this house? The yard. The lot had such a slope that you couldn’t get a car in the garage. It was so steep that your ankles hurt just trying to get to the front door. The backyard was worse. There was a patio, a retaining wall, and a grassy strip about 15 feet overhead.

You can imagine that seeing this house listed for $180k this year got my attention. I’m glad I was sitting down when I saw what it sold for. Can you believe somebody went $20k OVER the listing price for this house? It sold for $200k!!

This house is the poster child for what happens when buyers don’t have many choices. They pick terrible houses and seem happy to have just gotten one. Today is 2005 all over again, but worse. When you have almost no choices, a lousy house seems great. It won’t always be this way though. That is why you should never buy a house that in a buyer’s market took 750 days and 5 different realtors to sell for less than was paid for it during a seller’s market.

Bottom line is this……don’t buy a house that will become a noose around your neck in a buyer’s market. I’ve been saying it for 15 years. Never buy the house with the bad lot, one that backs to something unpleasant, one that backs to apartments or a lot of rental properties, one that doesn’t fit in with the rest of the houses in the neighborhood. If you are the seller of such a property, this house proves now is the time to unload it.

Some numbers that don’t matter

After 15 years in this biz, I’m finally going to drop my opinion on some numbers that don’t matter as much as people think they do…..Let’s go.

Average days on market: This is a snap shot to tell you exactly what it says, the average. If you are a seller, you only care about the days on market of one house, your own. While the average days on market can give you a snapshot of the overall market, there are soooo many variables that it really means nothing. The average days on market is tainted by several things. Thing 1 is that it includes the loser houses that stayed on the market forever. Thing 2 is that it includes new build to suit homes which show either zero days on market or were placed on the market before ground was broken.

Average sale price for all of Lexington or the entire state: You will often see data published that will say what the average sale price is for a specific town, state or even nationwide. Again, it’s just an average and is not at all useful to anybody for any purpose other than people who are writing an article about the real estate market. If more expensive houses are selling, guess what, the average goes up. If more cheaper houses are selling, it goes down. All you care about is your own house, right?

Average appreciation: You’ll read stuff like “The average home value increased by _% this year. That does not mean it is equally applied to every house. Some houses and neighborhoods did better than that, some did worse.

The exact square footage of a house: Sometimes I will encounter a seller who thinks his house is bigger than the PVA or an appraiser says it is. Often that difference is less than 100 square feet. Buyers tend to search within square footage ranges like 1500-2000, 2000-3000, over 3000 square feet, etc. If you have 2050 verses 2150 square feet it is not going to make any difference to a buyer. Which leads me into the next item.

Cost per square foot: This is again an average thing mostly used by people writing articles about the real estate market. The average person reads it and thinks it must be important. If it really mattered, then a very plain 2000 square foot home with ancient HVAC units and a roof that leaks would be worth exactly the same as a 2000 square foot, totally updated home that looks like something out of a magazine and has brand a new roof and HVAC units.

What the PVA says the house is worth: The tax assessor drives by every house every few years in their Toyota Prius, snaps a picture of the outside and places a value on the house for tax purposes. The value is just a number used to determine your tax bill. It is not the market value. They don’t go inside so they have no idea what it is like. Often, it can take years for a house to be reassessed. I bought a house in 2002 for $118,200 that I now rent out. The tax assessment was the purchase price until a neighbor sold in 2004. It then went to $135k. It stayed at $135k until 2018. During that 14 years, the market crashed, stabilized and took off again. The same house is now assessed at $153,300 and appraised earlier this year for $225k. (I hope nobody from the PVA follows my blog….shhhhhhh!)

The Zestimate: Is almost never correct. It’s a computer that takes in a lot of data without any wisdom about what makes a house worth more or less than other ones in the neighborhood. It’s sort of like the ultimate use of averaging data. Like the PVA, it can’t take into consideration things buyers factor into picking a house like colors, cleanliness, floor plan, shape of lot, slope of driveway, amount of natural light, number of trees, or a good or bad view. About the only time I have seen it be fairly accurate is in a newer subdivision where most of the houses are similar. The less variation in condition or updatedness, the easier it is to figure out a value because the value range is less broad. The more variation, the more you need an experienced realtor.

There you go. It feels so good to get this off my chest. I hope it helps you better understand the real estate market and how it impacts what is likely your biggest investment.

When everything is right and it still doesn’t sell

It can happen.  I am not going to be one of those agents that pretends all my houses sell fast, like I am some sort of magician.   A lot of selling a house has to do with….the house and the market.  I put the same effort into all my listings.  Most sell quickly, even when the market was terrible.  Sometimes though, a house struggles to find a buyer, even when you’ve done everything correctly and the price is right.

Here are some reasons:

  1.  Too much competition.  If there are like 50+ houses competing for a buyer and all are pretty darn nice and equal to each other, you’re waiting for the right buyer who likes your house just a bit better than the rest.  I am seeing this a lot in a few towns surrounding Lexington where there are a ton of new construction homes.
  2. Bad timing.  Usually the market slows down when school starts in the fall.  The week that school starts is usually really slow because everybody with kids is getting ready for the school year and wants to enjoy that first weekend.  If your house is in a neighborhood with a very popular school district, you may have missed most of your buyers and are waiting for somebody to move during the school year.
  3. There are no buyers….at the moment.  I see this one occasionally.  Sometimes in a certain neighborhood or price range, there just aren’t any active buyers.  This is like fishing when you have the right rod and bait, but there just aren’t any fish there.    I had a listing in a neighborhood of $450-600k houses a while back.  I put my listing on in the late winter.  It got a few showings.  Over the next 6 months there were about 8 houses that also were not selling in this small neighborhood.  It got so bad that all of the agents got together and did a neighborhood open house to try to get some attention for our listings.  Of course, it was a total waste of time and energy because none of them sold any time soon.  It was much later in the year when several of them began to sell left and right.  It wasn’t the neighborhood’s fault.  It wasn’t the fault of all the listing realtors.  All of the houses were priced right.  There were just no buyers at that time and the sellers had to wait for them to enter the market.

 

How many days on the market are best?

One.

One day on the market is best.

A lot of sellers feel like if their house sells immediately that their realtor under priced the house.  Some of them feel like realtors shouldn’t make that much money when a house sells fast.

Here is the truth from 14 years experience:  1)  A house will always sell for market value.  If it was under priced, buyers will bid over the list price.  2)  The effort between selling a house the first day on the market or it taking 6 months is not that different.  Being the listing realtor is a lot like fishing.  You bait a hook with your marketing and cast it in the pool of buyers.  Then you wait for one to bite.

Enough about the realtor perspective, how about why this is somehow great for the seller?

Statistics tell the story.

A seller is much much much more likely to get their full asking price when it is a new listing.

When a house hits the market, every buyer in that price range comes out to see it.   They often see other buyers leaving the house before they see it and/or have other buyers waiting to see it when they leave.  Buyers know that they need to act fast if they want the house.  They know that other buyers may want it too so they better put out their best offer first.  There is a sense of urgency.

If it sells, it will most likely sell for the full list price.

Once all the buyers currently in the market have seen it, a seller will only get showings as new buyers emerge into the market.   There is no frenzy.  No buyer is afraid of losing the house so they want to see how low they can get the seller to go.

A phenomenon that has been happening since buyers have been able to set up their own saved searches on Zillow is that buyers seem to look at a house online only once when it is a new listing.  Few buyers these days will comb through rejected listings.  They opt to just wait for new listings to come on the market…..which means a house that did not sell quickly is unlikely to ever have a buyer reconsider viewing the house.  It is like it doesn’t even exist to them.

So, how many days on the market are best for the seller?

One.

One day on the market is best.