home-buying

The market is changing

by John Rice

No doubt, there has been a shift this year.

Few sellers have to move. Most just want to. None of them are excited about being a buyer if they need to finance their next home. They don’t want to give up their very low interest rate they got during COVID. They are upset that they can no longer expect to sell their house the first day on the market, get above list price, and the buyer waive a home inspection.

Buyers are only buying if they really need to move. They don’t like the combination of high prices and high interest rates. They have more choices and power in the transaction than ever, but they can’t see the forest for the trees.

First time buyers account for the lowest percentage of buyers in forever. Most first time buyers seem to want to skip the small, boring most affordable houses and rent until they can afford what we used to call the “Move up” house. This is leaving most houses under $250k to investors. Almost every super affordable house I have sold this year has been purchased by an investor. Even in multiple offers, they are easier to work with and will often pay the most for a house.

Basically nobody is happy.

This is the first time in my 20 year career of seeing such pessimism from both sellers and buyers in a fairly good market. The only other time I have seen both parties this discouraged is during the Great Recession. It was an extreme Buyer’s Market so sellers were unhappy. Buyers were worried their house would be worth less than they paid for it after the closing. Nobody was happy.

I think we are stuck here for a while. I don’t see prices going up much in the near future and I don’t see them going down either. I don’t see interest rates going down enough to make much of a difference. I think this is just the new normal.

OK to take a contingency offer?

by John Rice

Well, I don’t really like to do it. Sure, an offer without that type of contingency is better, but there is a good side to this type of contract. Guess what it is? The buyer will typically pay you more with a contingency to sell or close their old house than a regular buyer will without that contingency.

I see it all the time. A buyer with a house to sell or close gets really nervous about not knowing where they will be living. They are desperate to find a house and will pay top dollar for the mental peace of knowing where they are going to land.

The bummer part is if the deal on their old house falls apart, so does your deal. There is an upside though, and it is the home inspection. If the inspection goes okay on the buyer’s old house, it typically means it will too on your house. Short of some catastrophic issue, a buyer will not walk away from your house. Why? There is not enough time to find another house prior to closing their old house…..and remember, they did all this because they do not want to be homeless once they close on their old house.

Negotiating is a lot like playing poker

by John Rice

When I was a little kid, my dad had this old set of poker chips. There were red, white and blue ones built into a little round thing with a handle on top. I remember playing poker as a pre-teen with my friends. I also remember winning a lot. I didn’t do it by bluffing or anything that actually had anything to do with the game itself. What I got good at was studying my friends. It’s pretty darn easy to win when you can tell if your pals have a good hand or not. My dad always told me I was pretty good at reading people and seeing their motives. That has been a useful skill in my career as a realtor. 

I remember a sale many years ago with a great realtor. He did everything he should have done. My clue about the buyer’s motivation was the closing date.  It was the Friday before school started back after Christmas break. Sure, most real estate deals close on a Friday. What made this one stand out to me was how soon it was. Not the usual 30-45 days out. This one was just about 2.5 weeks out. So, I hit Facebook, and sure enough there was a person with the same name with school aged kids who lived in the same surrounding town that was on the check for the earnest money. I also knew that most seller’s wouldn’t want to be moving out of their home the week between Christmas and New Year’s Day. We stood firm and got our price.

I had another deal like that. My listing was in the only neighborhood in its price range to have the very desirable school district that it did. We got an offer so low that we didn’t even counter. The buyer’s realtor told us the reason for the low offer was due to the perceived poor condition of the house. I figured they must really want to be in this school district. I mean, there were tons of new/newer houses within walking distance of this one, but they were in a different school district. I don’t know why somebody would pick a house they didn’t like that much when they can get a better house for the same money. It had to be school district. I went online to see what all choices this buyer had in that school district. The only other house was one with a crazy steep driveway…….so I knew we could hold firm to our price. We did and we got it, despite the other realtor’s great effort to get it for less.

From the lines of that old Kenny Rogers song, “You gotta know when to hold ’em.  Know when to fold ’em.  Know when to walk away.  Know when to run.”

Is a view worth less if it is not as good?

by John Rice

I was driving through the new Peninsula neighborhood the other day. It is over off Richmond Road and backs to the reservoir. I could see the back of the houses on Dew Court, Rain Court and Coolwater Court. For decades the owners of those house have had a rare and fantastic view of the water and the woods where there are now these new houses.

But that has changed. The water is still there of course. The woods are gone.

Question is this: Are those older houses worth less since the view is not as good?

To those owners who have enjoyed the “Old” view, I am sure it is not as good now. They probably think these new houses have impacted the value of their homes. I totally get that vibe. I dealt with something similar. I used to have a peek-a-boo view of the Greenbrier Golf Course from my last home. Across the fairway was a beautiful hillside full of trees. About 6 months after I moved in, I heard bulldozers clearing the hillside. Now there is a neighborhood there. While I did not like the new view as much as the old one, it was still a view. It just didn’t extend past the golf course now.

And that is exactly what the 1980s houses have. They still have a fabulous water view. I mean, the new houses are going to be extremely desirable being on the water and they have the houses from the 80s on the other side of the water in their view. There is no reason to think that somehow the market is going to like the 1980s houses less because they now have a view of the new houses across the water, right?

Something else to consider. Whenever the 1980s houses come up for sale in the furture, no buyer is going to know that the view was better before the new neighborhood was built. All they will know is what is currently there, which is a very rare water view.

Two or more negatives are hard to overlook

by John Rice

Sometimes a bunch of negatives are overwhelming when you have to see them all together. This is something I learned when I bought a fixer upper house that was worn out, out-dated, and in disrepair. I was broke back then so I had to live with it for a couple of years. Man, that was rough. I remember thinking that the carpet wouldn’t look so bad if the walls weren’t so bad, and how together they really make the light fixture unbearable. I guess that is when it first hit me how 2 or more negatives seem to compound their effects when viewed in the same room.

I’ve got a listing in my pipeline that I have been working on for a little bit. In general, it just feels like a rental grade property. It has a nice floor plan and all, but just doesn’t feel like something a buyer will fall in love with. Like I have always said, a seller has more power in the deal if the house comes across as something special. The market is getting a glut of “Average” houses. Now is the time to make your house stand out.

This house already has some pluses that could easily be over looked. Things that I bet most buyers wouldn’t even remember after leaving the house if we didn’t do anything to it. So, what is the plan? We just had it painted. That will unify the space to a buyer. You have to remember that buyers are going from room to room in a 20 minute window. They like it all to be consistent. The next step is going to be replacing the vinyl flooring in the baths and kitchen. Then we’ll clean the existing carpet and stage it.

Now, when a buyer comes in this place, they will see fresh paint, clean floors, and new vinyl in the kitchen and baths. They will also probably now notice the few updated items. See, the goal is to make it the best house any buyer can get in the price range. We do not have to make it perfect, just a little better than the second best house currently for sale. After all, as long as there is one buyer out there, you know they’ll pick the best one.