lexington

What is it worth?

by John Rice

What is it worth?

That is a question I get asked a lot.

Sometimes I can do a little quick math in my head and come up with a ballpark number.  Most of the time my default answer is that I need to study the recent sales….AKA “The Comps.”

When the market was flat, it was easier to do it all in my head.  I could think “Oh, I sold that house over there a couple years ago, and I remember showing that one down there last year and it sold for this much.”  The past couple of years the market has been appreciating so much that the best answer is to look at the comps.  When values are going up (or down) you should always look at the most recent sales to determine value.  It’s a big purchase for a client and they need an agent who will put in the time to make sure they don’t over pay.

I love studying the comps.

Some times they are easy.  Like in a newer neighborhood developed by a mass builder.  Most of the houses are the same age and in the same condition.  It doesn’t take long to come up with a pretty accurate value.

It gets harder when the house is more unique.  Like an older house where every house in the neighborhood has a different floor plan,  and all are in varying conditions.

I think the most challenging ones are rural properties.  I LOVE rural properties.  Part of my reason for enjoying them so much is purely selfish.  I love driving out in the country so it is always a treat just to get there.  It is also interesting to see these properties, whether listing them or working with a buyer.  No two are alike.  Also, there is a relationship between the house and the land that must work.  I often have buyers who like the house but don’t like the land, and the other way around.  That is why I always try to depict both when I list rural properties.  I know that is important to the buyers.

Here are some of the things I look for when determining value for rural properties:

  1.  Location-The closer to the subject house the better.  This can be a challenge because there are fewer properties and fewer sales in the country.
  2. Age-You often find a wide range of ages in the country, which also means a wide range of floor plan types.  If I have a mid 90s house that I am trying to find the value on,  I try not to use a brand new house or one from the 1960s even if they are next door.
  3. Lot size-The closer in size to the subject house the better.  If I’m trying to find the value of a house on 1 acre, I might use houses on up to 3 acres.  If I have a 5 acre lot, I might compare up to 10 acres.  Most 1-10 acre buyers just want to be in the country.  Most 1-3 acre buyers just want a big yard.  Some 5-10 acre buyers have horses or need that space.  Over 10 acres and you are often looking at somebody who wants a working farm.

A good rule of thumb when using recent sales to determine the value of a property is the fewer adjustments you need to make, the more accurate the value will be.  Looking at the comps is really studying buyer behavior.  You are saying a buyer paid this much for this house, and the house I’m trying to figure out the value on is 300 square feet bigger, so it should sell for the same price PLUS the value of that extra 300 square feet.  That is why beginning with the best 3-4 houses is key to ending with an accurate value.

I showed a house last night to some friends of mine.  They asked what I thought it was worth.  I pretty much told them everything you have just read.  When I went to look at the recent sales this morning, I found 3 houses on the same street that had sold within the past year that were all on similar sized lots, and were similar sized houses that were all built around the same time.

Sometimes comping rural properties can be easy too I guess.

Why is this the dullest blog post ever?

by John Rice

This is probably going to be the dullest blog post I’ve ever made in a decade of blogging.

Flood insurance.

Seeing all the news about the hurricane and flood insurance has it on my mind I guess.

It is a boring topic but there are some important things to know about it.

In Lexington, we don’t really get flooding.  Our basements sometimes fill up with water when we have two feet of rain in a short period.  Some intersections might have a foot of water in them.  People who back up to a creek might have their backyard under water.  That is about the worst.  We don’t have a river in a heavily populated area.  We are too far from the ocean.  It isn’t a wide spread problem here.

But we still have several houses that require flood insurance.  These are mainly ones that back to a creek.  In the past 12+ years as a realtor, I am guessing I see about 1 in 20 houses where the seller has checked on the Disclosure that the house is in a flood plain and requires flood insurance.

Almost always, I suggest that my buyers don’t even look at the house.  Why?  Most people don’t understand what flood insurance is, how it works or what it means.  When people don’t know how much, if any, water to expect and they don’t know what it will cost, most buyers move on.  It scares them, and when you are scared, you normally retreat.  So, being in a flood plain and requiring flood insurance is a stigma for most buyers.

There are two exceptions where I can feel good about rubber stamping my approval on purchasing in a flood plain:

  1.  When the house is in a higher price range.  An extra $100 a month to a buyer in the sub $150k price range is a big deal.  The buyer considering a $500k house isn’t as worried about the extra $100 a month or whatever the insurance will cost.  To them, it is just a fee to have the nice view that often comes with backing to a creek or pond.
  2. When the lot is just soooooo worth it.  I sold relatives of mine a house in a flood plain.  It is never fun to pay for it and occasionally deal with a creek that just can’t stay within it’s banks…..but any other time they have a huge, wonderful backyard that backs to a picturesque creek.  It is so beautiful back there that we were all silent when we first saw it.

Why this is my favorite house in the whole world

by John Rice

I recently sold a house for an old friend.  It was her father’s house.  It was a little tough to finally sell it since she had so many memories of her dad at his home.

That got me thinking about houses I have a connection to like that.  While I have a few, the one that means the most to me is this one:

55 Manners 1

This is 55 Manners Avenue in Bangor Maine.

My great-grandfather built this house.  My grandmother was born here.  It stayed in my family until just a few years ago.

I have only been at this house twice in my life.  Once as a child and once when we scattered the ashes of my grandparents.  Both times I always got a little laugh as I heard people call that little brown building on the right “The baaaaaaahn.”  Nothing like hearing a Maine accent when you’ve been in Kentucky most of your life.

This place will always remind me of my grandmother and her life here.  Which makes me think of her and my grandfather, which makes me think of my mom and the rest of our family tree.

I remember my grandmother and other family telling me about my great-grandfather building the house.  As I look at this wall of built-in cabinets, I think about what their 1920s clothes must have looked like inside them.  I wonder if they were originally stained wood.  I wonder whose room this was and what my grandmother’s day would have been like here as a child.

55 manners 2

After my great aunt passed, my family no longer needed the home.  We had a 90+ year run with it.  I didn’t really want anybody else to have it outside of our family.  For a brief moment, I thought about buying it.  Then I realized that I couldn’t really keep it just for the sake of memories.  I do have this though:

55 manners 3

This is an original wood shake from either the roof or the siding of the house.  At some point, somebody in my family painted this picture of the house on it, before “The baaaaaahn” was built.  It looked a lot different when it was a new house, long before all the changes the house has encountered.  It blows my mind to think that my great-grandfather, who passed away long before I was born, has touched this wood shake.

I am glad I have this to remind me of my family and our history at this home.  I hope my friend has something from her Dad’s home that will always remind her of him and their time at his house.

What neighborhood is the winner in this market?

by John Rice

Masterson.  Formally know by it’s full name, Masterson Station.  While the whole neighborhood has seen values really go up, I think the true winners are the single story homes in the 1000-1350 square foot range.

Many many years ago, half of Masterson was in foreclosure.  That happened to a lot of the newer neighborhoods where the first owners bought at the top of the previous hot market with sketchy no money down loans.

I remember I would often spend ALL day with first time buyers just in Masterson when the market collapsed.  I would schedule 8-10 houses, all just blocks apart.  It would get confusing after a few.  I would find myself saying stuff like “This is the Roxbury plan by Schneider Homes.  It is the same floor plan as the 2nd, 3rd and 6th house we saw earlier, only this one has blue vinyl in the kitchen instead of tan, and it has a deck instead of a patio…..oh, and this one has a fenced back yard too.”  Then my client would say something like “I thought the 2nd and 6th house were the two story houses?”  Then I was like “No, it was the 4th house that was the two story.  It was a Ball Home plan.  The Fairfax is the name I think…..yes, that is it.  The Fairfax is the one I told you about that sometimes has an open loft instead of the 3rd bedroom, and realtors often call that a 3rd bedroom because they know nobody will come see it if they said it was REALLY a 2 bedroom house.”  Then my client would ask “What was the 5th house?  I don’t even remember it!”  I’d reply “The 5th house was the only occupied house we saw today.  The water was on and we both used the restroom.”  Client be like “Oh, I remember now. How do you keep all this straight?”  And I’d be like “It is taking every bit of concentration I have.”

Back then, $125k was like $155k is today.

Then the market improved.  I was amazed these houses were selling around $130k.

Then it got better.  I started seeing a lot of $140k houses a year ago.

Now a decent one is $150k, some are even higher!

That is a huge turn around from half the neighborhood being vacant houses that took 6 months to sell.

 

Best time to be a buyer?

by John Rice

It is right now.

Why?

Real estate is like traffic.  Do you want to be driving on Nicholasville Road at 2:PM or 5:PM?  Timing makes a huge difference.  This might be a bad example because personally, I don’t want to be on Nicholasville Road at ANY time of the day.

At 2:PM there is still a lot of people on the road, but fewer drivers.  By 5:PM, everybody who is going to be on that road IS on that road.

In the market, spring and summer are when there are the most buyers out snatching up houses.  It starts to slow down some about the time school starts.  Then it slows down more around Thanksgiving.  Then it really slows down around Christmas.  Then in January it starts picking up again.

We are in that sweet spot where buyer activity will be slowing down some and we are also seeing a good amount of new listings too.   Later in the year, buyer activity will slow down more, but there won’t be as many houses.  It will be like driving down Nicholasville Road in the middle of the night…..sure, there is no traffic, but that is because nothing except Wal-Mart and a few gas stations are open.

Also, sellers tend to get a little nervous the later in the year it gets.  The Lexington sales graph is like a gentle rolling hill.  It gently rises to it’s peak in the late spring and early summer and settles down in the fall/winter.  Some of the surrounding counties look like Mt. Everest.  Their market is dead, then they have 3 months of steep sales increases, then decrease back down to nearly nothing in the fall and winter.  Most sellers assume fall and winter are bad times to sell and plan accordingly, but it is a non-issue for Fayette Co sellers.

We still are likely to have more buyers than houses in the sub $250k range, so I am definitely not saying that it is going to change to a buyers market, just that you may actually have a chance of buying a house without competing with 5 other offers.  Over $250k with the exception of the most popular neighborhoods, you have a better chance of not getting in multiple offers this time of the year.

So be encouraged if you are a buyer and go get you a house!