first time buyer

Should you buy that updated house?

by John Rice

It is soooo easy right now to sell a pretty house. Always has been but when there is so little for sale, it is especially easy.

You know the formula: White shaker cabinets, quartz tops, lots of trim, paint as much black as you can, etc.

I get it. Those houses are so pretty. The problem is that a house that’s only attraction is its pretty new finishes might not be a good enough reason to buy it.

I blogged a few weeks ago about a former Airbnb house I showed that sold for way over list price and got a crazy amount of offers. I pointed out to my buyer several things showing it wasn’t all that great of a house. The driveway was sort of steep and in bad shape. The old wood windows needed reglazed. It wasn’t really that great of a house, it was just pretty and most of what made it attractive was the furniture that didn’t stay with the house.

It is great if you get a pretty house but that isn’t enough of a reason to buy it.

At its core, whatever house you buy needs to have more than trendy finishes going for it. Why? Because one day those fancy finishes will either be out of style or worn out and you’ll be left with a house that doesn’t even have one great feature anymore.

Here is how to pick a house:

  1. Most important thing is a good location. I know that phrase that is thrown around a lot, but a good location can mean any reason that spot is desirable. It can be because it is close to something, far away from something, be in a desirable school district, be close to highway access, or just anything that makes it more desirable than somewhere else.
  2. If a house passes that test, then examine the lot. You want the lot to be equal to the others in the neighborhood or be better. Flatter is usually more desirable. Less slope on the driveway is usually better.
  3. Then think about the floor plan. It needs to be functional and fit in with the neighborhood. If you have a closed off floor plan in a neighborhood where most are open concept, then it might be harder to sell in a softer market. If something is odd about the floor plan to you, it will be odd to future buyers as well.

Where do those fancy finishes come into consideration? At the very end. It is always easier to put fancy finishes in any house than it is to change the location, lot or floor plan. If you have an outdated house in a good location with a good lot and a good floor plan, you still have a house that will always be desirable.

The single most important thing when selling your house (or anything really)

by John Rice

I did it again.

I bought another car. For people who know me, this is par for the course. I am always falling in and out of love with cars and trading them like crazy.

If you’re wondering how me getting a new car is related to real estate, it is because of pricing.

The car I bought was not expensive. It is just a little Japanese sports car that is fun to drive. A new version came out during COVID and they have been in short supply ever since. You never see one on a lot. Most are sold before they arrive. Dealers are taking deposits on them and telling people they will call when the car arrives.

I went to a Volkswagon car show with my oldest son and his girlfriend last weekend. We had lunch on the way home. They asked about the deposit I had on another one of these cars at a local dealership. I replied that I was told it should arrive later this month. He then went on a mission of finding me one that was immediately available. He found one about 250 miles away in Indiana.

He called to confirm that it was in fact in stock. It was. I remember thinking to myself “Why is this car in stock, collecting dust on a dealer’s lot when every other one is pre-sold???”

Ahhhhhh……the price!

This dealer wanted $9000 over the MSRP price.

I told the salesperson that I was definitely interested in the car but there was no way I was taking it at $9000 over MSRP. He started telling me what a hot car it was and how many calls they get on it. I am totally sure all that is true. I’m a realtor, so I know how markets for things for sale work. This is a super hot car in high demand, but the reason it hasn’t sold is that it was overpriced.

Here are some truths about any market:

  1. You cannot sell something for more than it is worth.
  2. The whole market determines the value, not just the seller.
  3. A buyer is defined as ready, willing and able. (At $9k over list for a very affordable car, that price pushed the total cost well over budget for the target buyers, thus knocking out the “Able” part of those three requirements.)

Like real estate, you cannot sell the most gorgeous $500k house in a highly sought after neighborhood for $750k. If you try, it will sit on the market and you will reduce the price until those ready, willing and able buyers think it is worth it.

But isn’t the market still hot? Yes, it is. Prices are still going up in our area. That means you still, like always, have to price a house for something a buyer will pay. A hot market doesn’t mean you can sell it for more than it is worth. It just means it will sell quickly and many buyers will want it and be eager to pay top dollar….not more than top dollar. If you ever see a house that is sitting on the market and wonder why it hasn’t sold, literally 100% of the time it is due to price. It may have some odd feature or be in bad shape, but it will definitely sell when the asking price is in line with what Buyer’s think it is worth.

So what happened with the car? They came down to $6k over MSRP and I drove up and got it yesterday. I suspect had they priced it at that from the beginning, it would have immediately sold.

Want the lowest price you’ll see in 2023?

by John Rice

I have always said that late winter and early spring are the best times to buy a house if you’re worried about prices.

Why? Very simple.

Regardless of the temperature of the market, you are still buying at last years prices. We never know what the market will be like until the Spring buying season begins. Once the market pops for the year, prices begin to go up. The past few years they really went up.

While I don’t see this year having the same crazy appreciation, there are enough signs that prices WILL go up:

  1. There will be fewer houses for sale since most people bought or refinanced when rates were very low. We are back to people moving because they need to instread of just wanting an upgrade.
  2. Rates are stabilizing and projected to go down a little more. Every time recently that rates have gotten to about 6%, buyer activity really picks up.
  3. Aaaaaaaaand the obvious is inflation is causing the prices of everything to go up!

By the time all the leaves are on the trees, anybody who plans on buying a house will be out there submitting their highest and best offer. Your best chance to get the lowest price for the year is to get out there now. The house you can buy today WILL be worth more by the end of 2023.

Know what I like about this market?

by John Rice

If you just want the answer but don’t care to know why, it is because this market is LOGICAL.

If you want to know what I mean, here we go:

Other than the past few years, the real estate market has always been logical. The best houses sold for the most money and sold the quickest within their price range. The second choice houses sold for less than the more desirable houses. Location mattered. The lot the house was on mattered.

For a few years there, nothing mattered. Any house was selling for more than it should have and it didn’t matter if one house was in a second choice neighborhood or had a terrible lot. It was tough being a realtor back then. You could look at recently sold comparable homes and determine what a house should be worth, but it always sold for more, sometimes waaaaaay more than that. I would tell my sellers “Here is what your house is really worth but here is what it could sell for…..expect anything to happen!” I would tell my buyers “Here is what the house you are bidding on is worth, but here is how much of a convenience fee you may have to pay just to end your misery of losing in multiple offers.”

Today’s market is about logic again and I am glad. If two identical houses come on the market on the same street and on the same day and one of them backs to the interstate and the other doesn’t, the one with the better lot will sell for more. If a house is overpriced, it won’t sell at all.

Why is this? It is because today’s buyer has choices. Yesterday’s buyer had one shot at the only active listing in their price range. Having a little inventory makes a difference. It is still a good market. It is an even better market if you have one of the better houses in your price range. This has always been true. I remember back in 2009. The market sucked yet I was getting multiple offers the first day on the market for some of my listings. Buyers will always pick the very best house that is available and take a pass on those that aren’t. That’s just the way logic works.

My advice to First Time Buyers

by John Rice

I was you once. I had no idea how any of this works. All I knew was that I was ready to buy a house and I had to borrow money to do it.

I had been saving a little. I was self employed running my lawn care business. I had a busy spring and had fallen behind on billing. I totaled up the invoices I had just sent out and to my surprise, I had suddenly had a 5% down payment for a very modest home.

I started working with the only realtor I knew at that time. I got preapproved with the bank that I had my checking account with. After seeing a lot of houses, we decided on one and bought it. There is of course more to that story, but this is really about what I learned as a first time buyer and now many years later a realtor that might help you.

I always think the first step is to find a realtor. A realtor can explain the whole process and prevent a lot of mistakes. When picking a realtor, you want somebody that sells enough houses in your price range to be able to tell you if a certain house is a good one to buy or not. Keep in mind that while it is great to love the house you buy, odds are you won’t be there forever. It is the first step on a path to getting in the house you ultimately want, can’t afford now and that you will be in long term. You want a house that will be easy to sell in any market. Always keep in mind that one day you will sell it because your needs have changed. You will love the next house that suits your needs better and this one can help you get it or ruin your chances. This means don’t use your neighbor’s babysitter who just quit her job at Subway and got her license. Don’t use your best friend who just got their license. Having some experience will benefit you more than you will ever understand. A lot of first time buyers assume they have to pay for their realtor and will try to go at it alone. The commission your realtor gets is offered from the Listing Realtor. The Listing Realtor has an agreement for the Seller to pay them a commission to sell their house. That Listing Agent has offered to split it with your realtor. That means having your own realtor is totally free to you. (Caveat-some realtors do charge what is called an ABC fee of $175-250. I do not do that since I think it is stupid and just a way of getting a little more money.)

The next step I would take if I were you is to find a good lender. A good lender is not necessarily the one with the rock bottom interest rate and closing cost. The best lender is one with a competitive rate that can smoothly and efficiently get you to the closing table with the least drama or delay. Pro Tip here…….this lender is typically NOT the bank with your car loan or your checking account. Your realtor probably knows a couple of good lenders.

Then I would start looking at houses. I’d look at a bunch of stuff in your price range all over town. This is a process. I can tell you that few buyers I have worked with ended up with exactly what they told me they wanted. I’ll have people say they want a specific neighborhood and fall in love with a house outside that neighborhood. I’ve had people tell me they wanted an old house end up buying a much newer one. They often apologize to me for the change of plans. I always tell them it is a process to get the right house. Changing plans just means you are more clearly discovering what you really want. The more houses you see, the more you know what you want. The worst thing about the crazy hot market of the last few years is that no buyer in any price range has had a chance to look at more than a handful of houses.

How do you know when you’ve found the right one? Most people leave a house they don’t like pretty fast…..NEXT! People that like a house stay at the house for a long time and keep walking around. Sometimes buyers stay for a while because they love certain features and not others. If you find yourself saying “If only this were different, it would be perfect,” then it probably isn’t the one. If you begin arranging your furniture in the house and are worried about losing the house as you leave it, then it is probably the one. When I say worry about losing it, I mean losing the house. The past few years the market has moved so fast that people have started worrying about losing the opportunity to make an offer. That is a fear of missing out. That has nothing to do with the house. That just means you like it enough to be anxious about losing it while you decide if you want it. If you are worried about losing the house and not just the opportunity, then you know. Also, you’ve been so focused on finding the right place that odds are you are sort of caught off guard when you do find the house. Don’t worry about that. It is common. Often a first time buyer needs to wrap their head around the fact that they are about to take the giant step they have been working towards. I try to give my first time buyers a little space. You need to get past the shock and be ready to sign the offer.

When you are ready to make an offer, please rely on your realtor for advice. I have seen so many buyers just tell their realtor what to put in the terms of the offer and then not get the house should there be multiple offers. In multiple offers, you really only get one change to win the house. Ask your realtor what they think you should do. If you can handle their advice, just do it. Your realtor has done this multiple times in the past month and this is your first time. It is their time to take care of you.

You’re feeling all good now. You’ve found the house. A contract has been signed. Your lender is asking you for a lot of documents. The next step is the home inspection. Not having been though a home inspection, you assume since the house looks good that it is good. As the home inspector you chose starts going over the inspection report, you begin to wonder if you have made the wrong choice. Most home inspection reports I have seen have 20-50 items that the inspector found. Most of these items will be things that are deferred maintenance or things that were not done in the textbook perfect way. This is where a realtor you trust can help you sort through what items are most likely going to be on any home inspection report and which items are specific to this house. I try to break down the items that are most immediate and those that will be the most expensive. Sometimes the house has one or more major items that are deal breakers. Sometimes the sum of all the immediate needs is too much. Most of the time though, 80% of whatever your inspector found at your house will be on the next home inspection report should you walk away from this house and buy another. Why? Because there is no perfect house.

Now we are getting close to the closing. Your realtor tells you that you have to do a “Final Walk Through” of the house right before the closing. All this means is you need to see the house prior to you owning it to make sure any home inspection repairs were done and that the house is in equal or better condition than it was the day you bought it. It can be a fun time too just to get inside the house.

The final step is the closing. Sometimes buyers get anxious about this. They just don’t know what to expect. A closing in my state usually takes about 30-45 minutes. Everybody sits at a table and signs a bunch of documents. You’ll have the most to sign since you’re getting a mortgage. It’s a fairly casual deal. Dress however you want since all anybody cares about is that you brought your Driver’s License and are able to sign your name. You are the star that day. Everybody at the table is there because YOU decided to buy a house.

Now the place is yours. Move in and enjoy building equity!