first time buyer

Is building the answer?

by John Rice

A lot of people think that we need to build our way out of the shortage of houses for sale.

I don’t.

The only places left to build in Fayette County are on the edges of town at a time when there is more and more interest in living closer in.  No builder is going to use the little bit of land we have left for anything less than a $173,950 house, which is the base price of the cheapest model Ball Homes will build in Masterson Station.  A quick search on LBAR shows the cheapest actively listed new construction home is $202,900.

I think the problem is affordability for first time buyers.  I have always said that it is the first time buyer who greases the entire real estate market.  They are usually the only group that doesn’t need to sell a house in order to buy.  It is like the bases are loaded and the first time buyer is the one who hits the home run so everybody standing on all those bases gets to move.

A lot of first time buyers are and will continue to look outside of Fayette County.  They will look in Lexington neighborhoods they would not have considered 10 years ago to make their numbers work.   They might even consider a townhouse or condo.

Like my baseball example, the bases are loaded.  The first time buyer is waiting to hit their home run, only there are no balls being thrown.  If more affordable houses come on the market, it will make sellers in all price ranges less worried about finding their next house.  Sellers know they can sell quickly but are worried about finding a house.  Remove that fear and we’ll have more houses for sale.

What working with buyers is like now

by John Rice

Working with buyers these days feels like this guy:

You beat the same bushes everyday in search of something for your people.  It is even harder if somebody needs a certain neighborhood or school district.  It is the toughest market I have ever seen for buyers.  It is harder right now to be a buyer than it was to be a seller after the market crashed.  Most houses get multiple offers.  The deciding factor often comes down to something minor like which buyer has a better closing date, or which buyer has stronger financing.  That is about all you have left to differentiate one buyer from another when all the offers are full price.  I recently got 7 offers on a listing.  The top 4 of those offers were the exact same price.  We went with the one that had a local lender I knew.  That was what got that buyer a signed contract.

 

And when you do finally have a house to show your people, this is what it feels like:

When a house that meets your buyer’s criteria hits the market, you get them in it ASAP.  If they like the house enough to make an offer, you rush to make sure you’ve got a current preapproval letter, you find out when the sellers would prefer to close, what their occupancy needs are….anything the sellers want that might help your buyers look more appealing since you know the best offers are going to be similar in price.

Being a buyer’s agent these days is equal parts boredom and excitement…..but it is all very rewarding when you do get your people a home they love.

Best First-Time Buyer advice ever

by John Rice

A lot of my first-time buyers from 2008-2011 are beginning to sell their houses.

Most of them probably remember me telling them that I wanted to find a house that would be easy to sell regardless of the market when that time comes.  I would tell them that right now, they are just thinking about finding a house they like.  While I wanted that too, I’d tell them I was also thinking about their exit plan.  I would tell them that one day they may have some big life changing event that requires them to move.  I didn’t want the sale of their house to stand in the way of their plans……picking a house that would be easy to sell again and not paying too much for it would set them up for their next move.

See, back then I would see sellers who paid too much and would have to bring money to the closing just to get out of their house.  Since they didn’t have any equity, they ended up renting rather than buying when they moved.  I would see people turn down job opportunities because they couldn’t afford to sit on a vacant house while it was on the market.  I would see a couple where one stayed in their old house while on the market and the other was renting a small apartment in another state for a new job.

Real estate can be a real blessing to your life or a noose around your neck.

Right now we are back to the frenzy of the early 2000s where everybody is all rainbows and unicorns.  Buyers feel lucky to get any house these days.  It doesn’t matter if it has a steep driveway and backs to a loading dock.

But you know what I am saying to my first-time buyers today?  I tell them that I want to find a house that will be easy to sell regardless of the market when that time comes.  I tell them that right now, they are just thinking about finding a house they like.  While I want that too, I tell them I am also thinking about their exit plan.  I tell them that one day they may have some big life changing event that requires them to move.  I don’t want the sale of their house to stand in the way of their plans……picking a house that will be easy to sell again and not paying too much for it will set them up for their next move.

And this advice is all the more important in a seller’s market.

 

 

 

The house that made me a better realtor

by John Rice

“There is nothing wrong with this house that can’t be fixed.”

Being a young, inexperienced home buyer, these words were soothing to hear from the home inspector.

What I didn’t realize was that fixing everything would take all my time and all my money.

It was April 1st 2002.  Closing on April Fool’s Day should have been all the sign I needed.  I bought what was called a “Fixer Upper” back then.  Now we seem to have shortened it to just “Fixer.”  This was before HGTV, but I had the same aspirations as the home buyers always do at the beginning of the renovation shows.

My house had T-111 siding, which is like grooved plywood and lasts for about 30 years if maintained.  My house was 29 years old.  And it hadn’t been maintained.

It had the old crank out Pella replacement windows.  The kind that after about 20 years, you one day crank to open and the aluminum mechanism inside snaps.  That day had happened on all the windows long before I had ever seen the house.

The roof had two layers on it.  On a positive note, the HVAC was only 2 years old.

As if all this wasn’t enough, the house had a lot of settlement.  That is a nice way of saying STRUCTURAL ISSUES.  The seller gave me an $8k credit for putting piers under the foundation.  The structural engineer (A.K.A.-SALES PERSON) told me the house needed 20 of them.  They were $1k each.  I told him there was no way I could do that since I only had $8k to work with.  Suddenly, he decided that 8 piers would be just fine.

I got what I thought was a bargain. I paid $118,200 and other similar houses were going for $145-150k on the street.

The evening of April 1st, after moving in all day and getting the boy’s beds set up, I decided to take a shower.  As the steam from the shower filled the bathroom, the pea green tiles in the shower slowly started to fall off the wall.  Many had been glued on to what little drywall was left behind them.  It kind of looked like a pizza commercial where the cheese is stretching as somebody pulls out a slice.  The shower had some goofy accent tile that must have been trendy in 1973.  I keep the tile that is pictured below in my office.

Tanforan Tile

Then there was the time we had family over.  I slept on the couch in the basement.  I woke up, ready for my first cup of coffee.  I knew it wasn’t going to be a good day when I heard a splashing sound and my left foot felt wet.  Turns out the basement leaked too.  The seller said they had never had a water problem, although all the neighbors knew otherwise.

But I got a great deal, and there was nothing wrong with the house that couldn’t be fixed.

Oh yeah, now that I am a realtor, I realize that all the other bidders I was up against for this house were investors who were probably offering no more than $90k and wanting to flip it.

So, over the course of several years, I gutted all 3 bathrooms and remodeled them.  New roof.  Some new windows.  New siding. Added a fireplace. Completely gutted the basement since it was wet and moldy.  With some help from my dad and uncle, we turned 2 paneled rooms into one massive space with all new drywall, can lights, new electric and all new trim.

To solve the water issue, I had the leafguard gutters installed, the basement waterproofed with two sump pumps and brought in 3 dump trucks full of dirt and regraded the back and side yard.  Now the house next door gets water in their basement.  I didn’t feel too bad though.  If the builder had graded my yard properly, he would have been getting the water for 30 years.  It was his turn now.

I have always hated this house.  It is sort of funny that I still own it.  We moved out in 2007 and I’ve been renting it ever since.  Part of that is because houses were not selling back then.  Part of it is because after doing all this work to it, I wanted to be the one who benefited from it.

This house was sort of like real estate college for me.  I am a much better realtor having having had these heartbreaking, time consuming and costly experiences.  Having had a house that had just about every problem a house can have and fixing it all has benefited every client I have ever worked with.

And I will never recommend a home inspector who says “There isn’t anything wrong with this house that can’t be fixed.”

Before and after (Circa 2008):

 

My own “First Time Buyer” experience

by John Rice

Back in the late 90s, we didn’t have zillow and few people had the internet.  Searching for a home was about driving around neighborhoods calling the number on the sign, or getting a Sunday newspaper to see which houses were open that day.

I was working with a realtor, but I found a for sale by owner and never thought to call her first.  I was in the car and called the number from my 4 pound cell phone that was 2 inches thick.  I could see the seller get up to answer his landline phone.  Next thing I knew, I had bought a house.

Like a lot of people, I never thought of all the time the realtor had spent with me.  I also never realized how the sum of all the little decisions that she had input on had lead me to THIS house.  I still feel bad about that.

However, I wish she had been involved in the sale.  This was looooong before I became The LEXpert.  I thought “How hard can this be?”  While none of real estate is what I call hard, there is a lot that experience can do to make it a smoother, better process.  I’ve loaded boxes at UPS in the middle of the night.  That was hard.

The seller and I kind of just made up a contract with the help of my mom.  I wish I still had a copy, because I doubt it covered things like if all the appliances stayed, when the seller would move out, what happens if things get sideways and the seller and I need to break up.

I did have a home inspection.  Kind of.  I was a broke twenty-something so a friend of my mom’s did it.  The roof was originally wood shakes with two layers of asphalt shingles over them.  It is a house that today, I would tell my clients to run from.  While we were there, my mom looks at the house two doors down and asks the seller “Is that the house where the shooting was last week?”  The seller told us that that guy only shoots at people he knows.  This is why I keep up with crime and tell people to look at the crime map online.

I had no idea that it was typical to negotiate with the seller to do repairs.  I just thought since I wanted the house still, I would have to deal with any issues.

The seller moving out didn’t go that smooth.  They kind of never fully moved out.  I kept calling him to come get his stuff.  He eventually brought a trailer over to clear out a shed.  As he was loading all the junk, he would occasionally ask if I wanted any of it.  He had several cast iron weights from old windows.  He said they would make great anchors for my boat.  I joyfully told him I did not have a boat, so he could keep them.  This is why I tell clients not to close until the seller is out.  Sometimes I have to be the bad guy and tell the listing agent or seller that they aren’t done moving out and no, they cannot come back later…..we close AFTER we see the place empty.  I’ve had to do that twice this summer.

While this house was a total dump, my wife and I loved it.  We brought both of our boys back from the hospital to this house.   Lots of great memories were made there.  We have since moved 3 times and life has taken me in a direction I always hoped it would.  I’ve been a realtor now for almost 12 years.  The experience of buying this house has helped ALL of my clients because it was one step towards becoming The LEXpert.