How to pick a winner of a house

Okay…..You are buying a house in Lexington Ky.  You are concerned about resale potential because prices keep going up and up.  You don’t want to lose your shirt if you ever need to sell in a cooler market.  What are you to do?

First off, congratulations for thinking of the exit plan.  Any time you make a big financial decision, it is always good to have an exit plan.  Right now with so few listings, people are most concerned about finding a house and often don’t think about this step.

So, here are some things that will help ensure you will be okay in the future.  Be sure to do them in this order too….by the time you have gone through all of these, you should have a house that will be any buyer’s top pick regardless of the market:

1)  Stick with an established neighborhood.  Brand new neighborhoods are nice, but you never know what they will be like once they go through their first round of resales.

2)  Stick to a good location.  Location can really mean a lot of things in real estate.  Pick something that is convenient to somewhere.  Neighborhoods close to Hamburg, UK, downtown, the interstate, parks, big employers,, etc, all have appeal to a variety of people.

3)  Pick a neighborhood with at least average performing schools.  Sure, a lot of buyers really want excellent schools, but most of them seem to be just fine with decent ones.

Now that we have narrowed down the location, lets take a look at what to look for in the house itself:

4)  Pick a house that fits in with other houses in the neighborhood.  You don’t want that split foyer that looks like a half-timbered English cottage in the middle of traditional homes.

5.  Pick a house that is similar in size to most in the neighborhood.  You don’t want that 5000 square foot McMansion surrounded by 1200 square foot starter homes any more than you want to be the smallest house surrounded by bigger ones.

6.  Stick around the middle of the price range for the neighborhood.  The cheapest house in the neighborhood may be disappointing to a buyer who is expecting more.  The most expensive house in the neighborhood will leave a buyer feeling like the neighborhood is a let down.

7.  Go for a lot that is typical for the neighborhood.  It is okay to have a sloping yard if every other house does too.  Remember….nobody ever complains that a yard or driveway is too flat.

8.  As you look at the house, keep in mind that anything that is a big negative to you will also be a big negative to the next buyer.  Half bath riiiight off the kitchen bug you?  Backyard have no privacy?  These are things we called “Deal Breakers” in a slow market.  They will keep somebody from wanting your house when they have a choice of more than a handful of houses.

9.  If the house made it this far, buy it!

 

Why NOW is the scariest market ever

I think right now is the scariest real estate market we have seen in a long time, for buyer’s at least.

I know, it seems crazy when prices are going up and there is a frenzy to buy any house as soon as it comes on the market……but that is what makes it scary.

When the market was so bad years ago, a buyer had their pick of dozens of houses.  They were able to make a good choice.  If the market dropped even further, you knew it would eventually come up.  You don’t have that luxury when you are at the top of the market.  You just hope it continues to go up more and more and more.  You never know where the peak is until it starts going down the other side of the hill.

I cut my teeth in real estate in the bad market.  Many people who did not use me as their buyer’s agent contacted me to sell their homes when times were tough.  Many of them had bought in the early 2000s when the market was hot.  They would tell me how they had lost several houses and they didn’t want to lose again so they bought the house they now wanted me to sell.  They’d say the market was booming so they didn’t think they could go wrong with a full price offer because that was the only way to get a house.  They were thankful to have even gotten their house.  The very house that at the time they were saying all this, had become a noose around their neck, preventing them from relocating for a better job, dividing families because one spouse had to start a new job while the other stayed behind praying the house would eventually sell.

The market they bought in was just like it is today.

While I don’t think we will ever see the market crash again any time soon, you know the market will go back and forth from being a seller’s market to a buyer’s market.

That is why I think being a buyer in today’s market must really make a wise decision.

Many buyers today, again, feel lucky to have gotten their house that backs to a business, is on a busy road, has a terrible lot.  They just feel lucky to have even gotten a house.  Period.  Many of them will call me when it isn’t as easy to sell because the agent that sold them the house is no longer in real estate.

I wish they’d call me now instead of using their uncle’s neighbor’s cousin’s babysitter who just got into real estate last month.

Here is what I would tell them:

“This market is tough.  There is no easy way to get a good house.  Yes, you will pay top dollar.  Yes, you may lose some houses.  Yes, you may even have to find temporary housing while we wait for a house that will be a good investment.  This market will cost you something-you can be burdened now and end up with a great house, or you can be burdened when you go to sell.  Whatever house you buy should set you up for your next bigger and better house.  You want to build equity to use as your next down payment.  You don’t want to have this house ruin your life should you have to sell in a buyer’s market.  So, let’s pick a winner that you will enjoy and that will be a solid investment for your future.  It isn’t going to be easy, but I am committed to making this happen for you.”

The 3rd real estate word I created

One of the toughest things about being a realtor is when you make friends with somebody who buys a house from you, then they move out of town.

Phil and his wife were referred to me from their agent when they moved to Lexington.  He had taken a job here and commuting from out of state was not an option.

I had a really good time looking at houses with them.  They were a lot of fun.  We laughed.  It didn’t even feel like work to me.  It was like hanging out with old friends.

Several times a year, Phil and I try to find the best Chinese buffet in town.  We haven’t really found an amazing buffet, but we sure can tell you where not to go for lunch.

Well, Phil is just too good at what he does and now it is time to move on to bigger and better things that are not in Lexington.  Time to sell their house.

I went over to check it out earlier this week.  It was good to see what all they have done to the place.  I had forgotten a lot of details about the house, but I quickly saw why they picked it.  Back then, he had a choice of many houses in that price range.  Today, there might be 20 houses on that side of town in this price range.  I always like to make sure my people get a house that will be a buyer’s top choice even in a bad market.  We won’t have any trouble selling it.

Anyway, as I was looking at their hall bathroom, I said that the tile floor was “Decade Neutral.”  He got a good laugh, said that would make a good blog post, and here we are.

Decade Neutral I guess is my new term for those finishes that are hard to tell when they were done.  His house had 12 by 12 beige tile with a light but not white grout.  Who knows when it was installed.  It could have been the 70s.  Could have been the 80s.  Could have been last week?  It is decade……neutral!

When people ask me about updating their house, I usually suggest things like this.  It is no fun to rip out trendy tile once there is a new trend.  His tile is like a pair of jeans or khaki pants.  It goes with everything and is timeless.

Some other things that are Decade Neutral are:

  1. Hardwood floors.  Not the prefinished kind.  The kind that gets stained and polyed on site.  The Goldilocks kind because it is not too wide and not too narrow. It is just right.  The kind you see in houses from every decade since houses have been built.
  2.  Crown molding.  I’ve never had anybody tell me that they would have to update crown molding.
  3. Recessed lighting.  The beauty of recessed lighting is, well, that you DON’T SEE IT.  (Ok, I guess they did make some a long time ago that had a mirrored gold ring around it…but you can buy covers for THAT kind now.)
  4. Chrome faucets.  While they are more minivan than “Sexy Black Dress”, they get the job done and nobody is appalled to see them in a house.
  5.  Tall ceilings.  Sure, the 2 story foyer isn’t as popular any more, but nobody has ever said they wished the ceiling in the family room was shorter.

That is all I have for now.  I’m gonna miss Phil, but I sure wish him all the success he in due in his new job.  He’ll do great!

Oh, and the other real estate terms I created are “Move out ready” and “Reach-in closet.”  Move out ready is when a vacant house looks like the seller left in a hurry.  It has crumbs in the fridge, you can see the impression on the carpet where the couch was, and there are nail holes in every wall.  A “Reach-in closet” is any closet that isn’t a walk-in.

LEXpert advice on buying rental property

I met with an old friend and former neighbor last night.  He is interested in buying rental property.  Thought some of what I told him might be a good post.

When I first meet with somebody wanting to buy rental property, I like to let them know what I think the pros and cons are of each type, so here we go:

1)  Commercial-Good return, a bit more volatile than others.  When you sell, your only market is another investor or a business owner.

2)  Multi-Family-Good return, a lot of work, and typically more turnover!  The only buyers for this property will be investors.  I have never seen an investor that was willing to pay top dollar.  Also, most investors only sell their properties when they have cash flowed them to death and they are in dire need of repairs/updates.

3)  Single Family Houses-Not a huge return, less turn over.  When you go to sell, you can market it to an investor or an owner occupant.  An investor wants a deal based on the numbers.  An owner occupant will pay retail.  I think this model is the best for most people.

Unless you find a super bargain, entry level single family homes are a better choice than more expensive ones.  The numbers just work out better.  If you ever need to part with one of these houses, you can sell it to a first time buyer in a good market, or somebody downsizing in a bad market.  There were a lot of people selling their bigger houses and buying smaller houses during the Great Recession.

My personal favorite is a simple, one story house on a slab.  One story because it makes it easier to repair or clean gutters and you don’t have windows up high.  A slab because you eliminate the risk of rotting wood and mold under a toilet or tub if there is a leak the tenant doesn’t tell you about.