lexington real estate

5 things all sellers should know

by John Rice

There are a lot of misconceptions about how selling your house works.  I think a lot of that is because we agents don’t take the time to explain things.  Nobody really understands what we do and I think just like math homework, we should “Show our work.”

So, here are the answers to the most typical questions/comments I get from sellers:

  1.  Don’t we need a lot of wiggle room between the list price and what we think the sale price will be?  No, especially in Fayette Co.  Most agents price their listings close to the market value.  Outside of Fayette County, it is more common to have more wiggle room.  If you have a $230k house that you list for $250k so you have room to negotiate and most sellers are pricing closer to market value, buyers will not be expecting you to have so much wiggle room.  They will be comparing your $230k house with other homes listed for $250k and your house will not be appealing to them.
  2. If my houses sells quickly, does that mean we sold it for too cheap?  Not at all.  Often that means that you had one of the best houses available in your price range.  Even when the market was terrible, it was common for the best houses to sell quickly.  The value of your house and how long it took to find a buyer are not related.  The value of your house is determined by what a buyer will pay.  We figure that out by examining the sales in your area to see what buyer’s have recently been willing to pay.  We are in a time where there are more buyers than there are sellers.  It is pretty typical for most houses to sell quickly.
  3. My house has been on the market for a while and not sold, I think you should do more to advertise it.  If a house isn’t selling, it is due to the price or the condtion of the house.  Very rarely, especially in a seller’s market, do I see a house not sell due to the marketing.  Sure, there is a difference between a good presentation and bad, but let’s face it, when there are more buyers than sellers, buyers will come see a poorly presented house just like they will one that was presented well.  Also, exposure is never an issue these days.  Once a agent puts the house on the local MLS, it is automatically fed to Zillow, Trulia, realtor.com and every other site with listings.  Within 24 hours of your house hitting the market, you can google your address and see pages of websites it is on.  Often when I have had somebody tell me this, I will look on zillow and see that hundreds of people have viewed the listing.  I will also remind them that none of the buyer’s who have come to see their house made an offer.  The big question is why did none of them buy the house?  Price and/or condition.  All an agent can do is attract somebody to the front door.  Once they go inside, the house has to do the rest.  Being a Realtor isn’t about making somebody buy a house they don’t want.  It is about making your house appealing enough for somebody to buy.
  4. I don’t want to paint my house because I don’t know what color my buyer will want.  I often hear this from sellers after I have suggested they paint due to the house needing it or because they have wild colors that I think will turn off most buyers.  Fresh paint is THE biggest return on investment when selling.  Buyer’s don’t have vision.  Just watch HGTV and you will notice that.  People walk into a house before the renovation and just can’t visualize what it is going to look like at the end of the show.  Let’s say it will cost $3k to paint your house.  Odds are it is going to sell for $5k less if you don’t.  The color you pick is whatever is trendy at the moment because everybody likes it.
  5. The list price you suggest is too low.  My house has________________.  It is common for sellers to want to add value for the features their house has that other houses in the area do not.  You have a covered patio and the others houses don’t.  It adds value.  You have granite counter tops and other houses don’t.  They add value.  But, determining value is done by comparing your house to others that have sold in your area.  Agents and appraisers make adjustments for how your house is better or worse than the houses that have sold.  Sellers tend to not realize when those “Other” houses are better than their own house, and we need to make adjustments for that too.  Think of it like balancing your checkbook.  You’ve got deposits and debits.  Once you’ve added and subtracted those, you know your balance.

 

 

The worst house to buy

by John Rice

Want to know the house to stay away from?

It’s the one that has had the same owner for many decades and has never had anything major done to it the entire time.

How do I know this?  I own two of them.

I sometimes stumble across a deal that I can fix up and rent out.  The ones that I have spent the most on are the ones that fit this profile.

Most of the time, there isn’t much you can save.  I usually end up replacing windows, the roof, the furnace, air conditioner, water heater and all the appliances.  Often the kitchen and bathrooms are worn out enough that I end up having to start all over, even though I prefer to keep as much of the original character as I can.

A lot of these houses were built in the 50s and 60s.  Houses from that era are arguably the best built houses ever……I can tell by how hard it is to do any demo work.  Most have bathrooms with lots of ceramic tile.  The kind that goes half way up all the walls.  Only once have I ever been able to keep the tile.  Most of the time there is a really bad section and it can’t be saved, or the vanity needs replaced, but the tile is all around it.  To replace the vanity you end up having to take off the tile and it forces a pretty big renovation.

It’s all worked out pretty well for me, but I was just thinking about how these type of houses are the ones that I am always over budget because they are like that “If you give a mouse a cookie” book where you do one thing that leads to another action, then something else, and so on.

These type of houses appear to be a real bargain to most buyers.  They are usually in pretty cool older areas with big trees.  They have character.  If they are decorated right, they look nice too.  It is only when you do a home inspection that you realize that while nothing is catastrophically wrong with the house, almost EVERYTHING needs some attention, and that attention costs a lot of money.

Why rising rates won’t stop the market

by John Rice

Rates just hit 5%.  They haven’t been that high in many years.

It sounds like the sky is falling but it is not.

Many first time buyers are freaked out over this since they got used to lower rates.

When I bought my first house, I bragged to my friends that I was getting a 6.5% rate.  I locked as soon as they fell from 6.625%.  Most of my friends who had owned their houses for a few years had rates over 7%.

Several years later, I refinanced my third house when rates dropped to 5%.  I could not believe at that time how low that rate seemed.  I currently have a 3.375% rate on that house.

I’ve watched rates go up and down.  The market change from a seller’s market to a buyer’s market to a seller’s market.  If there is one thing I have learned is that the market keeps going.  There are always first time buyers.  There are always people getting transferred, married, divorced, retiring, and running out of space.  Those things will always happen.  The market is really about life and all the stages and events of it.

Something else I have noticed is that the market tends to pause when there is a big change, whether that change is interest rates, rising prices, dropping prices, etc.  It’s like we say “Now isn’t a good time to do this because it is different that it was.”  Then life happens, we get used to the “New” normal and we buy and/or sell.

We are in one of those times now.  Mortgage applications are down slightly, sales are down slightly.  We are entering what is believed to become a balanced market, meaning the number of buyers will be about the same as the number of sellers.  This won’t last too long because like I said, people will get used to 5%.  It will become the new normal.  The market will go on just as life goes on.

Now really is the best time to buy….REALLY

by John Rice

I know, I know……don’t realtors always say now is the best time to buy?  Or sell?  Or do anything?

It is a phrase that is often used to motivate anybody to do something sooner rather than later, but right now really is the best time to buy all year.

Why?

Let’s get the most commonly used reason out of the way:  Rising interest rates.  Yeah, a quarter or half a point doesn’t seem like much, but over the 7-10 years you may stay in your house, it could buy you a lot of other things, especially now that you probably won’t be deducting the interest you pay on your taxes.

The big reason is that the market has slowed down.  Sure, it always slows down some in the fall and winter, but this seems to be even slower than normal.   I haven’t had a showing where there was a line, or somebody coming or going while I was there in quite a while.  Less competition means you have a better chance of getting a house.  Listings are staying on the market longer too.  I am seeing a whole lot less of houses selling in 0-4 days and a lot more in the 5-20 day range.  That is still a really short time.  I am not saying the market is crashing or anything.  Just that the spring and summer frenzy is over.  Most of the people who were going to buy have done so already.  The ratio of buyers to sellers is more balanced than it has been all year.

I suspect it will be a slow winter followed by another frenzied spring and summer.  While I don’t think prices will go up that much next year, there will be more competition from other buyers than there is now.

So, roll up your sleeves and go buy a house, because it really is the best time!

What to do when you have to sell your old house first

by John Rice

I’ve got several clients right now that need to sell their old house before they can buy a new one.  It’s not a fun spot to be in during a seller’s market.

You would think when almost all houses sell quickly that a seller would happily accept an offer from somebody who needs to sell their old house first.  But, odds are the seller is getting multiple offers, so why wouldn’t they pick the one without a contingency to sell?

Time to clarify a few things:  A contingency to sell is when you haven’t sold your old house yet and nobody has any idea when you can actually close on the new house.  A contingency to close means your old house has in fact sold, and assuming the buyer of your old house makes it to the finish line, so will you.

When you make an offer contingent on selling your old house, it is pretty standard for a seller to counter back with what is called a kickout clause.  That means that the seller will accept your offer, but they will keep their house on the market and hope to catch a buyer without a contingency.  If they do, then you’ll have a limited amount of time to remove the contingency and buy the house without having to sell your old one, or you agree to walk away and let the seller and their new buyer enter into a sale together.  If it is impossible for you to remove the contingency and buy the house, then you will lose the house to the new buyer.

For this reason, I am telling my buyers who need to sell their old house first to not even look at a house until it has been on the market for a while.  Let’s say you are the first buyer to see a house and you make an offer contingent on selling your old house.  The seller accepts it with a kickout clause.  You are feeling good.  Then the next day, the seller gets an offer without a contingency.  You lose it.  If you think about it……whether you buy it the first day on the market or the 10th day on the market, the end result is the same:  IF another buyer comes around and wants it, you will get kicked out.  IF no buyer comes along, then it will still be there when you make an offer after every other buyer has had a chance to see it.  There really is no urgency to write a contingency offer due to this reason, and waiting a bit prevents a lot of heartache for you.

So what’s the strategy then?

If you can, the best solution to preventing this problem is to sell your old house first.  You will then be able to make an offer without a contingency.  You stand a better chance of getting the house you want.  This will also keep your from having to potentially sell your house for a little less than it is worth to ensure it sells immediately and you don’t loose your new house.  The downside of this is that you are moving twice.

You can pay a premium for the new house.  Sometimes if a seller is getting a few thousand more than the next offer, they might choose not to kick you out.  The downside of this route is that you are paying a premium for the luxury of not having to move twice.  Moving twice costs you more and is more of a hassle, so maybe it is worth it to you.

Either way is painful really.  There is no easy button to push when you have to sell your old house to buy a new one.  Not in such a seller’s market.