It happens. More than you’d think.
I showed a house about a month ago to a client. There was a line to see it. It got multiple offers that same day.
My client didn’t like it. I didn’t like it.
Why? The floor plan sucked. It had a big two story foyer as soon as you walked in. The living/dining/kitchen area was open. All this sounds great, but the issue was that this was a 1733 square feet home that had no more usable space than a 1300 square foot home. The upstairs hall was wide. The hall from the front door to the living room was wide. The dining area was small but nobody could tell since it was vacant. All the rest of the rooms were equal to what you’d find in a 1300 square foot house.
It made a good first impression though. You walk in that foyer and see space. You walk down that wide hall and see the open living/dining/kitchen. You go upstairs and see that wide hall. The house felt bigger than it was just because when you are viewing a house, you are going through every room in about 15 minutes.
It sold for over $6k more than the list price.
It closed today. The new owners are probably moving in and glad it quit raining. Once they live there for a while, they will probably realize that much of their square footage isn’t usable. They will realize that what they have is a 1300 square foot home with 400 extra square feet of hallways and foyer.
What is the type of house that is the riskiest to buy?
(I’ll pause to give you a minute to think.)
I bet you didn’t come up with a brand new house as an answer, did you?
Now, new homes are built every day all around the country. Most of the time everything goes well. Probably like 98% of the time, but there are some risks involved that I always like to check out before a client decides to build a house. So, why is new construction risky?
- You don’t know what the neighborhood is going to look like until it is done. Ever drive down Wilson-Downing and see that one street with about 12 houses that are much bigger than the rest of Belleau Woods? Those were the first houses in what was going to be a neighborhood similar to Hartland. Until interest rates shot through the roof in the early 80s and the only thing that was selling were small homes. The people who bought their new houses on that street didn’t get what they expected.
- You don’t know what the value is going to be after you build. A brand new sale is a unique sale. It is never going to be brand new again. It will be a “Used” house for each subsequent sale. That is why when I have a client who builds, I like to look at the sales of other “Used” homes in the neighborhood so I can tell them what to expect.
- You don’t know what the builder is like. Building is like most industries where 99% of them are good honest hard working people. The rest are the ones that bring their whole industry down. Many many years ago, there was a custom builder who was flying first class to see every UK basketball game, using his customer’s money to live large instead of you know, building their house. He got arrested because he was telling banks that houses were nearly done so he could get more drawls from the construction loan. There were a few houses that were still vacant lots. This is why I like to check out my client’s builder to see if I think he is going to take their money and run. Usually a long track record of building homes and a good reputation goes a long way with me. I get nervous when the builder has only been around for a short time.
These are just a few things that pop in my mind when a client says they want to build. Like I said, most of the time you never have these issues, but I think it is always a good idea for you to have your own realtor involved.
It happens a lot with sellers.
They have a house that isn’t getting much attention from buyers. It could be due to price, an odd feature of the house, the time of year, competition from new construction, or anything really. They get a lot of showings and all of the feedback is the same, resulting in no offers.
Then all of the sudden they start getting more and more showings. Buyers seem more interested in the house than they have been, but still no offers.
The seller finds this time exciting. They are thinking “Wow, with all these new showings and better feedback, surely my house is about to sell!!!!!
Sellers assume this will last forever but it is a temporary thing. It lasts until other sellers with better houses put their homes on the market.
And here is the lesson to be learned: The market changes every time a house sells and every time there is a new listing. Once the best house in it’s price range sells, it makes every other house look just a little bit better. That is why your house that hasn’t been that interesting to buyers is all the sudden on their radar. Once a new listing hits the market, it has to fit into the hierarchy of all the houses available. If you have one of the better houses for sale, then a house better than your house hits the market, it makes buyers less interested in your house.
When you find the market has it’s eye on your house and you still haven’t gotten any offers, the best thing to do is reduce the price while you have the attention. If you wait, most likely what is going to happen is the market will move on to other houses and you will be right back where you were.
I’m starting to see an interesting thing happen.
We all know that due to the lack of new construction for many years, we have a shortage of houses for sale.
Many people have said the way to solve this is to build our way out of it.
I am starting to see this happen.
In Nicholasville between $200k and $250k, 17 of the 30 houses for sale are new. In Lexington’s 40509 zip code, there are 104 houses for sale between $300k and $500k. 48 of them are new. That’s an incredible amount of houses for sale in the Hamburg part of Lexington. No wonder sales are slowing way down in that price range and I am seeing $10k price reductions left and right.
So what does this do to sales of existing houses?
Most people who buy a new house are only looking at new or newer houses. If you live in an older existing neighborhood, you are probably in good shape. Few buyers will seriously consider a 20+ year old house on a bigger lot with mature trees AND a brand new one on a smaller lot with trees shorter than they are. If you have a house that is less than about 10 years old in this price range, well, you may have a hard time competing with brand new houses.
Any time I have a buyer wanting a newer house in an area with a lot of new construction around them, I always tell them that it might be hard to sell and/or might not appreciate that much until the last new house has sold. The longer they plan to be there, the better. If they tell me they may only be there for 2-3 years, I tell them it might be wise to pick another house.
If you are buying in an area with lots of new homes around you, try to pick one that has some unique feature or has a super good lot. In a neighborhood where most homes aren’t too much different from each other, these small things are the difference between your house selling and always being a buyer’s second choice house.
I’ve got a long history with Masterson Station.
Long before I was The LEXpert, I was a one man lawn care operation. I had a few customers out there in the mid 90s. Masterson Station ended one house past Gateway Park. My wife and I would go see the new model homes by builders such as PSC and Barlow Homes. We would marvel at the trendy finishes like green counter tops and pickled cabinets that were sort of a pinkish white.
Back then, Masterson Station seemed so far out that you felt like you were half way to Frankfort. I remember thinking “Who would want to live this far out of town?” I said the same thing about Hartland back in the mid 80s. I had always lived inside New Circle back then, so I was one of those people who thought the “Real” Lexington was just inside New Circle Road and anything outside the circle didn’t count.
Since then, Masterson Station has grown and grown and keeps growing. It is Lexington’s largest neighborhood and has had non stop construction for about 25 years.
At lot has changed. To begin with, nobody calls it Masterson Station any more. It’s just Masterson now. I’ve changed a lot too. Instead of pulling a trailer full of lawn equipment, I am working inside the houses now and own a house in the neighborhood. I just got an accepted offer on the 41st house I have sold in this area.
It used to be that you picked Masterson because you could get the same house for cheaper than anywhere else in town. It was a good value. As it grew and people didn’t view it as some random neighborhood hung out of the west end of Fayette County, the price difference became less and less. Today the same 1300 square foot home in Masterson sells for maybe $10k less than an identical house in one of the top neighborhoods on the south end of town.
As it grew, a new elementary school was built in the neighborhood. Then Citation Road was built, which was really great. The new road helped with traffic flow and all the sudden, made sense of the way the neighborhood developed over the past couple of decades.
I have always said that all the whole Masterson area needs is some commercial development and it would become a part of town people pick because they like it, not just because its a good value. I drove through the area last night and the gas station/convenience store on Leestown Road is now open. Meijer owns a big corner on Citation. I am starting to see more development along Citation too.
Congrats Masterson. You’re all grown up and we’re glad you’re a legit part of Lexington.