lexington

Selling “By Owner”

by John Rice

It’s a hot market.  Many people want to go the For Sale by Owner route.  I have no hard feelings towards them.  It is their house after all!  They can do with it whatever they want.  My only real problem with this whole For Sale By Owner process is that the buyers who look at these properties and the sellers BOTH want to save the commission that would be paid to a Realtor.

Okay, the seller is thinking, hey, I can save as much as 6% if I do this myself  The buyer is thinking, hey, I can make a low offer on this FSBO house since they don’t have to pay a Realtor!  That is where the fun begins.  Both parties are viewing the savings as THEIRS!!!!!!!

And let me stick this little bit of trivia in now.  Usually the seller thinks their house is worth more than it is.  Often, they interview several agents who all tell them their house is worth about the same amount.  The seller of course disagrees and puts their house on the market for way more money because you know, they think their house has some magical aura that adds value.  I often call FSBO sellers for my buyers.  Their interest usually ends the moment I tell them the seller’s list price.

Usually the buyer writes an offer than insults the seller.  The seller then says something like, “But I need to get this much out of my house so I can buy my next house on the terms that I want!”  The Buyer then tries to justify their offer by saying something like, “Well, we just can’t pay any more for your house since we are going to have to repaint your baby’s room and replace that ugly carpet in your family room.”  By this time both parties have gotten away from the fact that the goal is to change who owns the house, not to win a battle.  While I did exaggerate things a bit, this type of thing is what keeps agents in the business.  I think this is more the norm than a pleasant FSBO experience.

I have always said that the day people can negotiate without taking things personally, when they can see how the other party thinks, when sellers realize that their house may not be the best one in town, and when buyers realize they don’t have to put the seller in a chokehold, that it will be the end of the road for realtors.   I use to worry about this, but now I know that day will never come.

How I beat Bitcoin

by John Rice

Bitcoin would have been nice to have bought earlier this year.  But wouldn’t any stock be nice to buy that you knew was going to appreciate?  Wouldn’t it be nice to not worry about it all crashing tomorrow?

Imagine an investment that has consistently beat inflation for hundreds of years.  An investment that has only taken two major hits in the past 89 years?

It is called real estate.

I’ve often wondered why so many people are skiddish about investing in real estate.  Sure, it takes a little more time than buying/selling stocks.  And it isn’t as liquid either, but part of what makes stocks so volatile IS how easy they are to buy and sell.

And then there is my favorite part of real estate investing:  OPM (Other people’s money.)

When you buy a stock, you use 100% of your money.  When you invest in real estate, you can end up with 0-20% of your own money in the deal and let tenants pay the rest for you.  You end up owning 100% of the asset without paying anywhere near that much to acquire it.  Anything you make in rent that is above paying your mortgage and maintenance costs is like a dividend.

Here is one of my examples of how to do it:

I bought a house for $100k.  I spent $45k fixing it up.  Now I have a house with new roof, windows, furnace, air conditioner, water heater, hardwood floors, etc.  All brand new.  It appraisers for $180k.  I get a loan for 80% of that, which is $144k.  So, I now have spent some time and effectively $1000 of my own money.  I have a house that is practically new AND $36k in equity as soon as I am done.  The rent covers the mortgage and maintenance.  Life is good.  That is a 3600% return on the investment in about 6 months.

Fast forward a few years and the house is now worth about $210k.  It is on it’s second tenant, so the rent is higher.  More equity too through appreciation and through the tenant paying down the principle.

Rinse.  Wash.  Repeat.  I’ve done it several times.  You can too.

Better than Bitcoin.

 

 

 

Why a price reduction is usually better

by John Rice

I practically wrote this post in my head last night.  I woke up just before 3 and never really went back to sleep.  Then riiiight when I was about to fall asleep, the dog barked at 5:AM and wanted to go out.

As I was lying there, hoping to fall asleep, I got to thinking about those houses that get the same negative feedback from showings and how sellers sometimes respond.

Let’s say a house is getting showings but no offers.  The feedback you get is something such as the buyer didn’t like the kitchen.  The kitchen is plain.

I often get asked by my sellers if they should do something like spend money getting granite.  I probably disappoint them because I usually say it isn’t a good idea.  It is better to reduce the price.

To a seller, this one thing is what appears to be holding back the sale so it only makes sense to remove the negative that has been a common thread in the feedback.

Having done this for a while, I know how it works.

See, the buyer walks in the house hoping it is THE one.  They look around until there is something they cannot live with.  Once they have made the decision that they will not be making an offer, they quit looking at the house.  Sure, they may walk around the rest of the house but they don’t really think about it any more because they know it isn’t the one.  They’ve checked out.

Then you get the feedback that they didn’t like that certain feature.

You spend a lot of time and money fixing that feature.  You turn that frown upside down.  You get a new batch of showings expecting it to sell because well, you’ve resolved the only problem previous buyers had with the house…..then you get feedback and there is a NEW problem.

See, what happened is that the buyers got past whatever problem you fixed.  You did a good job.  They kept looking at the house with serious buyer eyes.  They made it further into the showing this time before the next big negative became the issue.

IF that happens, then you’ve really wasted the money you spent because now your house isn’t selling for some other reason.  That is why I think it is safer to reduce the price verses spending a lot of money.

There has only been one time in the past 12 years where I was wrong on this.  I gave my client this same advice that you have read.  She insisted on getting granite.  LOL, the very next buyer bought the house……So if you’re reading this Tammy M, I hope I have made your day!

 

The hardest houses to sell

by John Rice

I’ve been at this for a long time.  I’ve sold a lot of houses.  In a good market.  In a bad market.  In Lexington.  Outside of Lexington.  In neighborhoods.  In the country.

Want to know the houses that are the absolute hardest to sell?

The ones that are partially updated.

Why?

You would think that a buyer would view a house that has some parts really nice to be a big bonus.  They don’t.  The nice part of the house just makes the rest of the house look worse to a buyer.  Too much contrast between the nice and the average bits of the house.

Who comes to see these houses?

  1.  The buyer who sees the nice new stuff in the pictures.  They get excited but almost always say that the rest of the house needs too much work.
  2. The buyer who see the part of the house that needs updated.  They get excited because they want to renovate the rest of the house, but not give any credit for the work that has been done……meaning they want it for free.
  3.  All the other buyers who come mainly because it meets some or all of their search criteria.  They don’t buy it because they say it needs too much work.

What you have to do with a house like this is try to make the non-updated bits look as good as possible.  You want to minimize that contrast.  You don’t want the buyer to walk in one room and be unhappy, then walk in the next and fall in love, then walk in the next and be unhappy.  The goal is to make them at least feel neutral, then love, then neutral as they walk through the house.  Less contrast is good.

You also have to really emphasis the other features of the house, hoping that the right buyer will see all the other pluses and feel like they can live with the house like it is or take on the updating.  If the house is the best bargain in the neighborhood, walking distance to trendy places, has a park nearby, a desirable school district, is the most square footage for the money…..whatever the house excels at, and all houses have something unique, that is what you want to emphasize.  Anybody looking for one or more of those unique features is usually the one who buys the house.  Why?  Because they don’t have as many choices

What do you really want in a house?

by John Rice

I’ve lived in my house for just over 5 years.

My biggest complaints?  I don’t have taller ceilings and I don’t have a lot of natural light.

What do I like about it?  I’ve got lots of space.  We have some empty cabinets and are no where near running out of room to store stuff.  I’ve got more than average room to park cars.  I’ve got a big lot with a lot of trees.  I like that I sit sort of high on my street and have some open space I can see between and over my neighbor’s houses.

I also like that the master bedroom is upstairs.  I don’t like it when the master is on the main level and is right off of a living space.  I like to feel like I am tucked in far away from any possible noise or distraction when I go to bed.

I find myself always looking out the windows.  I love watching the wind move tree branches.  It is like the trees are dancing.  I’ve got several peekaboo views of a golf course and a pond.

I like that I am on a dead end street about as deep in my neighborhood as possible.  It is very peaceful except when the dogs behind me are barking.

The funny thing about all this is that none of my favorite things about this house were part of the criteria for the search.

Like a lot of buyers, I based my search on logical things:  Bedroom count, square footage, part of town and price range.

I got some bonus things that were not part of that criteria.  I compromised on some things too….like my 8 foot ceilings and lack of natural light due to all the amazing trees that block the sun.

Being a realtor for over 12 years, I know that often the logical criteria gets thrown out the window when a buyer sees a house that triggers something emotionally for them.

For me, I was willing to compromise as soon as I pulled up to the house and saw the landscaping and the wide front lawn.  We were willing to do some updating after we saw the fireplace on the covered patio and all the trees in the backyard.  (We are still willing to do updating….meaning it hasn’t happened yet, haha!)

Almost all my buyers end up buying a house that is slightly different from the logical criteria they tell me they want.  And that is okay.  It’s all about finding a place you love.  Sometimes you don’t know what features you will fall in love with until you see them.