getting ready to sell

August 17th the Y2K for Real Estate?

by John Rice

Here we are just a few days from the date that the media thinks is going to change the entire real estate market.

Leading up to this reminds me of most of the year 1999. Back then, the media took the opportunity to let us know that most computers were never prepared for the year 2000. Doomsday was scheduled to begin January 1st 2000 since the computers would think the year was 1900 instead of 2000. This was called Y2K. People stocked up on cash, water and food in case the world froze up.

Of course, what happened on 1/1/2000 was that everybody woke up to find nothing had changed. Whenever I see a pantry stuffed full of a lifetime supply of canned goods, I wonder if that is somebody’s leftover Y2K stash.

All of us will wake up on 8/17/2024 and find that the real estate market kept going, just as it always has since the first person hired somebody to be their real estate agent whenever that was.

There are a few changes, and they are not at all like the so called journalists predict. Housing prices will not go down. No real money will be saved by anybody. Commissions in my area have dropped a little. I used to see mostly 3% offered to Buyer’s Realtors with an occasional 2.5%. I am now seeing a lot of 2.5% commissions. The change is really more of a technical inconvenience than anything mind blowing.

What will change is basically the equation to get to the same solution that has always existed.

In the “Old days” of right now, the Seller’s Realtor had a certain commission they wanted to make for selling the house. They would add an amount to that for the Buyer’s Realtor. The sum of those two numbers were what the total commission was going to be. By the way, commissions have always been negotiable.

The new model pretty much does the same thing…..at least in my market. A seller will have 3 options when signing a listing agreement with their Realtor: 1) The Seller’s Realtor is paid a larger commission and will offer to give part of it to the Buyer’s Realtor. This is the old fashion way. YES, it still will exist! 2) The Seller’s Realtor will charge their own commission PLUS the Seller will offer an amount to the Buyer’s Realtor to be paid directly by the Seller. 3) The Seller may choose at that time to not offer any commission to the Buyer’s Agent. Option 3 is the one everybody is assuming will change the industry. Well, time will tell if I am wrong, but I don’t really see Option 3 being viable in anything less than the absolute hottest real estate market ever. Why? Because history has proven that Buyer’s want their own Realtor involved. That is why most For sale By Owner listings fail to sell. Almost all Buyers prefer to have their own Realtor involved.

On the Buyer side of all this there are a few things I want to point out: The National Assoication of Realtors (NAR) is wanting it’s members to have Buyers sign an agreement which details how their Realtor will get paid. There has been no change in Kentucky’s state law at all. Why? Because commissions have always been negotiable. The NAR is a professional organization whose membership is voluntary. You can be a real estate agent without being a member of NAR, you just can’t call yourself a Realtor because they own that word. You would have to call yourself a real estate agent. This new NAR rule is really like being a member at a country club and having to wear a tie to dinner because it is a rule.

So back to how things change for Buyers. Well, for those real estate agents that use the NAR form, there will be a place to put what commission is to be paid by either the Buyer or Seller for the Buyer’s Realtor. This has always been on existing Buyer Representation Agreements, so the concept is nothing new. This is the part the media is in a frenzy over……but hold on, there is more to this. Our new offer to purchase contracts have a paragraph now for Buyer’s Realtor commission. Yep. You can write on the offer that you want the commission for your own Buyer’s Realtor to be paid for by the Seller. Aaaaaand this is something I think most all Buyers will want to do since few have the cash to pay for their representation.

There will be Sellers who try not to pay, either directly or indirectly, for a Buyer’s Realtor. They will probably find that not many Buyers look at their home. This is effectively like a For Sale By Owner situation, something most Sellers fail when attempting, largely because most Buyers want their own Realtor involved.

So in the end, what we have is a lot of hoopla with little real change. Most all Sellers will either directly or indirectly pay for the Buyer’s Agent commission one way or another. The Seller now just has a choice of how to do it. The Buyer now has to write in their offer how much, if anything, their Realtor is to be paid by the seller.

3+3=6

3.5+2.5=6

6-3+3=6

6+0=6

Yay, you get to pick your own equation now. Any numbers you want which will total somewhere between 5-6% commission when selling your house, just as it always has. Keep in mind too that a Seller’s Realtor is not going to do 100% of the work for both a Buyer and Seller for the same price. Also, just like any market, there is a point where it just isn’t profitable to do the work. Commissions can only go so low before Realtors just say no.

Can’t verses Won’t

by John Rice

I’m in the middle of the worst part of all real estate deals…………Negotiating repairs after the inspection. 

The seller’s realtor told me, in great length, why the seller WON’T do a couple of repairs we asked for.  I don’t know about you, but when I hear WON’T, it makes me want to dig in my heals and push back. 

One of the repairs was over an issue in the backyard.  They had a major landscape company come in and do a koi pond and patio.  I think the reason for the WON’T was because they just couldn’t emotionally bring themselves to “Undo” the work they have done.  That being the case, if their realtor had just said something like “I’m really sorry, but after putting so much of themselves into creating that wonderful space, the seller’s simply CAN’T bring themselves to makes the changes your client wants.”  Isn’t that much better than hearing WON’T??  I mean, the bottom line is that they aren’t going to budge on that one, but getting it in a pill that is a little easier to swallow leaves us not wanting to push back. 

So, CAN’T is sooo much better than WON’T, even if the results are the same.  WON’T always comes across as aggressive.  CAN’T at least has a chance of getting some sympathy from the other party.  I don’t remember if it was my dad that told me about CAN’T and WON’T or if it was my old mentor Susan Webb.  Both of them are pretty fantastic, so I guess all that matters is that I learned it.

Thinking outside the house

by John Rice

Ever wish somebody would tell you EXACTLY what to do to make sure you buy a house that will always be a good investment?  This is something that nobody was thinking about the past few years.  During COVID and the “Never gonna happen again” low interest rates, all houses were selling quickly and for top dollar……many sold for more than they were worth.

Here is my list of what to find in your next house.  The more of these you have, the better your chance of getting a house that will be a wise investment.  Remember, as long as there is a real estate market, people will always buy the best houses that are on the market!

LOCATION:  You hear a lot about this in Real Estate.  A good location really just means that it is convenient to SOMETHING or has a unique asset!  It can be shopping, the airport, the interstate, schools, a park…..really just anything unique or desirable.  A house probably doesn’t have a good location if you find yourself thinking, “Gee, other than being nowhere near anything, that house is great!”  A neighborhood like that will always have to sell on value since it offers nothing else.

SCHOOLS:  Buy in an area that has at least average performing schools.  People moving within Lexington seem to be fine with any decent school.  Out of town buyers always want to be in the best school district.  Look for an area that has a well rounded mix of elementary, middle and high schools.

NEIGHBORHOOD:  New is nice, but established is always better.  Pick a neighborhood that is large enough to not be negatively impacted by the surrounding ones.  Usually a cheaper larger neighborhood will bring down a smaller nicer one.  The opposite holds true too.  Kenwick used to be an inexpensive area.  It was surrounded by Fairway, Ashland Park and Bell Court.    Its location and surrounding neighborhoods started putting it on people’s radar in the 1990’s.  You also want a neighborhood that has it’s own distinct identity.  I don’t mean it has to have giant columns at the entrance with the name chiseled in stone.  Chevy Chase doesn’t have anything that says “You are now entering Chevy Chase”, but you know you are there.  That is identity.  If an area doesn’t have an identity, then it isn’t known for any of the items I am talking about here.

LOT:  Ideally, you want to have a lot that is located well within the perimeter of the neighborhood.  That insulates the impact from inferior areas that border your neighborhood.  While I am on lots, get one that is at least typical in size, shape and contour for the neighborhood.  You don’t want one that isn’t.  It will turn away a lot of buyers……unless there is another frenzy at the time you go to sell.

FLOOR PLAN:  You want a house that has a useable layout and typical sized rooms.  A tiny kitchen in a 4 bedroom house will not bring in as much money.  You’d need to price it lower than the competition or upgrade it to make somebody be willing to overlook it.  If you find yourself saying things like “If it wasn’t for______, that house would be perfect!”, then you know the person looking at houses when it is your turn to sell it will say the same thing.   In a slower market, buyers get very picky. In a fast market, everything sells.

Basically, the goal is to get a house that will be someone’s top pick when it comes time to sell.  I call this ‘Thinking Outside the House.”  Most buyers just want to find a house they like.  The reality of Real Estate is that a lot of a house’s value is determined by things outside of the house itself.

When houses attack

by John Rice

You know what is wild about being a realtor for close to 20 years? The memories.

All the time when I’m driving around town, I will pass a house I have shown at some point and remember something about it or my clients. Occasionally I will be way out in the country on drives with friends and suddenly see a house I showed a long time ago.

My car club had a drive last weekend. A few of us decided to go through Midway on the way home. We went through a neighborhood where I had a listing 12 years ago. I will always remember that house.

Why?

Well, here is the story.

The seller was a friend from high school who was moving back to Lexington. I had already found him his new house and it was time to sell this one. He was out of the country the day it was going to hit the market. I had to run to the house to put a sign in the yard, a lockbox on the door and check on a few last minute items before showings started.

He just had new carpet installed and wanted me to take off my shoes, which I did before I stepped inside. Just then, a very loud alarm started going off. Not the kind that just beeps inside the house. This was like a severe weather siren attached to the outside of his house.

He had told me the alarm would be off.

I decide the best thing to do is turn the power off for the whole house. I run into the garage in search of the electrical panel. I flip the light switch, and it remained pitch black. The bulbs were burned out. I turn on the flashlight on my phone and take my first step into the garage. OUCH!!! Every step hurt like crazy but I was on a mission to get that darn alarm turned off. I turn all the power off for the house. The alarm did not stop. It had a battery backup. I run back, barefoot, into the house in search of the alarm’s back up battery. Meanwhile, I see neighbors starting to gather in the driveway. Ugh, the battery is in a metal box that needs a screw driver to open, so back in the garage to find one. FINALLY, the alarm is off!

Next thing I know, I am outside assuring the neighbors that all is well. Turns out the alarm is not monitored and it wasn’t the first time it has gone off. One of the neighbors told me they hoped the new owners would remove it.

By this time, the adrenaline is wearing off and I remember my feet are hurting. Remember all this has happened with me being barefoot since I was asked to remove my shoes.

I opened the garage door before I left to see what was all over the floor. I had no idea that my client had a hobby of doing something with metal. The whole garage floor was covered with metal shavings which as you can imagine are quite sharp.

This would have made one amazing video on Tik Tok had somebody recorded it.

How much do updates really add in value?

by John Rice

I often run across articles in the news about what specific updates give the most return for the money spent.

While I appreciate that somebody took the time to research this, I sort of roll my eyes as I read them.

For example, if your house is a hot mess but you put a brand new garage door on, trust me, your house didn’t grow in value by 87% of the cost of that new garage door.

Why doesn’t it work that way? Well, because the buyer is looking at the whole house, not each individual feature.

A few weeks ago I showed a house that looked absolutely fabulous online. The kitchen and flooring were brand new. It was a total WOW house…..online.

When I pulled in the driveway, I wasn’t sure I was at the same house. I had to check the address!

The exterior of the place was very rough. The original windows had peeling paint and cracked window glazing. The driveway was cracked up and probably hadn’t been recoated since the 80s.

It didn’t get better once I got inside. The lockbox was on the backdoor. The addition on the back that I had to walk through had 1970s paneling that clearly had water damage under that fresh coat of paint. The basement was pretty much lipstick on the world’s ugliest pig.

But oh that kitchen!!!!

Here is the thing. The buyer who sees that kitchen and is willing to pay the seller back for their investment is expecting the rest of the house to be equally as nice. The buyer who doesn’t mind the condition of the rest of the house isn’t going to want to reimburse the seller for that gorgeous kitchen.

I see that all the time having shown houses like this for the past 19 years.

For this house, the seller didn’t really get much of a return. I think they might have sold for almost as much had they not done the kitchen at all. It would have been wiser to have taken the money spent on the kitchen and spread it evenly across the whole house, rather than put all their eggs in that one basket.