How I won in multiple offers

I was working with a client for several months who was buying in Nicholasville.  The market there is even worse than it is in Lexington for a sub $200k buyer since there are only about 8 neighborhoods to choose from.

A great house came on the market.  I scheduled a showing.

I just knew this would be the one.  I checked out the recent sales in the neighborhood to get an idea about what this house was worth.  I even prepared all the docs my buyer would need to sign so we would be ready to go.  All I needed to do was fill in the offer price and have her sign it from her phone.

We looked at the house.  It was a winner.  I call to tell the listing agent that I just sent an offer and was told that there was already one offer on the table and another one was coming.

We revised our offer to be slightly over the list price.  I asked all my usual questions that can help with getting an offer accepted……When would the seller like to close?  Do they need delayed possession?  Would they like the inspection type where the buyer either takes it or leaves it after the inspection?  Other than price, what would the seller’s ideal offer be?

The seller didn’t need anything special, so I knew this one would come down just to price.

A few hours later I get a call telling me that the third offer arrived and it had an escalation clause.  That made me pretty nervous.

I tell my buyer this and suggest we also do an escalation clause.  I tell her that the default setting for most agents is to offer $1000 more than the highest offer, so we better do more.  Otherwise all we would accomplish was knocking out the third buyer.

She agreed to a number we discussed and that she would pay that much higher than any offer up to certain price.  The list price was $192,900 and all the offers were higher than that.

I was a nervous wreck all day.  I really wanted to see my buyer get this house.  It was perfect for her and she had been waiting so long to get a house.

Finally, I get the call that she won the house.  Turns out all the offers were $194k, and the other offeror’s escalation clause was the predictable $1000 that I suspected.

It was sort of funny for me because it was the first time I had ever called to tell a buyer they had just bought a house and they didn’t yet know what they were paying for it.  I tried to make her guess, you know, like she was a contestant on The Price is Right, but she was so anxious that she said “JUST TELL ME THE PRICE!!”

 

Do this if you never want your house to sell

I showed a pretty nice house last night that is going to be very hard for the listing agent to sell.

It was one of the lower prices for a huge house on a gorgeous lot in a very desirable neighborhood.

You’d think that would be enough in any market, yet alone one starved for listings.

This is what it was like seeing the house.  You walk up to a freshly painted facade with recently mowed grass and fresh mulch.  You are feeling good about it.  You go inside.  The foyer is nice.  It is a little strange that you can’t see any rooms from the foyer, but not the end of the world.

You go towards the left and see the dining room.  Wall paper from the 90s.  You go into the kitchen next.  Red wall paper from the 90s.  You go into a really nice sunroom.  What do you see?  Murals painted on the walls.  You go back through all those rooms and then you enter the great room, which was super nice.  Then you see a bedroom.  Ok.  Then you see a bathroom that not only has wall paper, but wall paper boarders on the ceilings and top of the walls, as if they were making crown molding.  The shower curtain is heavy, like the dress Scarlett made in Gone with the Wind.  Then you enter the living room which is set up as an office and has way too much furniture in it.

Heading upstairs, you notice that all the bedrooms are painted a different color.  The basement is pretty normal.

The sellers furniture was nice, but they probably bought all of it when the house was new in the early 90s.  I am not bashing anybody’s stuff because my own house is probably the most boringly decorated house in the whole world, but I am not trying to sell it.  I would need to stage my own house if I were selling because my stuff would make my house feel as dated as this one did.  All of my furniture is stuff my parents gave me and that my wife and I put together from a box.  I’m just not into decorating……maybe that is why I can always see the house past the decor.

It sort of made me sad because I could picture the house vacant and with a coat of fresh paint.  It was nice.  Sure, the house would have still been a little outdated since it was about 25 years old, but it wasn’t terrible at all and typical for the neighborhood.

There was a stack of realtor cards on the table in the foyer.  That means all those people in addition to my buyers said “No” to this house.

What sellers never realize is that a buyer will walk through their entire house in about 20 minutes.  Having too much furniture in a room may suit the sellers needs, but it makes the rooms feel smaller to the buyer.  It is also hard to see the room past the furniture.  I always say that when you live in a house, the room exists to show off your decor.  When you are selling, the decor should show off the room.  Also, colors make a big difference.  A seller may be in one room of their house for a while and then go to another.  The buyer, when walking through the entire house, gets sensory overload if every room is drastically different.  A uniform color can also help when the house has a choppy floor plan too.

I am sure all the feedback on this listing has been that it needs too much work.  If this were my house, I would remove as much furniture as I could stand.  I would put a fresh coat of neutral paint everywhere.  People ask me all the time what is the biggest bang for the buck.  I always say fresh paint.  Nothing makes as big of an impact as fresh paint.

With all the wall paper gone, most of the dated furniture out, and a coat of fresh paint, the house would feel so much better.  The 25 year old finishes were neutral enough that buyers would find them acceptable in the absence of the 25 year old furniture and wall paper.

When I go to sell my current house, I am taking my own advice since my place is very similar to this one.

Where are you going to find anything better for that price?

I remember the day.

I was in a two week class for new agents.  One of those days the topic was CMAs.  That stands for Comparative Market Analysis.  It was how to figure out what a house is worth based on recent sales of similar houses.

Long story short, you start with the subject house.  If a comparable recent sale was better than the subject house, you deducted money from that sale price.  If the comparable recent sale was inferior, you added money to the sale price.  In the end, you had a bunch of debits and credits for the differences that you either subtracted or added to the sale price of the recent sales….. and then you know what the subject house is worth in comparison to the recent sales.

Very logical.  This is how it has been done for years.  This is how appraisers do it too.

In that class, one of the other newbie realtors asked how it was done before CMAs became the standard.  The teacher said that you just guessed a value.

I sort of feel like we are back to the guessing days now.

I’ve seen recently remodeled houses sell for up to 50% more than what the second highest sale price was in the neighborhood.  Granted, a remodeled house SHOULD sell for more than the average house, but not by 50%.

I sold a house for $160k.  The comps pointed to it being worth about $143k.  We got several offers between $137k and $143k…..then we got one for $160k.  That is $17k MORE than the second highest offer.  Those buyers were desperate.  They had lost several bidding wars and were not going to lose again.

There’s definitely been a shift in how we calculate value, and it appears that it has less to do with logically analyzing recent sales and more to do with it being a tight market.  Something I hear buyers and agents say a lot these days is “Where are you going to find anything better for that price?”  So, value is now determined by availability, just like the lobster prices at a restaurant.  A good day on the water might end up with lower lobster prices.  The very next day the fishermen aren’t as lucky and you pay more for the exact same dinner.  That is sort of scary to me because what happens when the market slows a little and there are more houses for sale?

 

 

 

Best way to get top dollar for your house

I don’t really know how to say this without upsetting some of my realtor friends, but most of the current marketing trends are just hype.

Many agents are doing weekday open houses.  Like a Tuesday or Thursday from 5-7.  Often the house sells before the open house……and if the listing had hit the market that day, that is the exact time buyers would be scheduling their showing anyway.

Many agents are doing these “Coming Soon” listings.  After making everybody wait to see it, the house sells the first day on the market for full price.  Imagine that.  Just like every other new listing that is priced appropriately.

Some say that these are the best ways to expose the listing to a market that is already hungry for new listings, and at a time when there is a shortage of houses for sale.

Here is what I say is the absolute positively BEST way to know you got top dollar:

You put the house on the market late on a Friday.  Why?  So the listing gets fed to zillow and all the other real estate sites in enough time to get on every buyer’s radar but is too late to be shown that night.  Why again?  Because more people are available to look at a house on the weekend than they are during the week.  Why do you want that?  Because you want every buyer to not only see your house, but to also see every other buyer flocking to your house.  Nothing motivates a buyer more than seeing people coming and going during their viewing.

You show the house all weekend.

And this is where the rubber meets the road.  You tell all the agents that the seller is not making a decision until Sunday evening and to submit their client’s highest and best offer.  That gives time for the house to be seen by every interested buyer.  More interested buyers means more offers.  More offers means a better price and/or terms.

 

 

What does this do to my property value?

I get asked that question a lot.

Believe it or not, most of the things we worry about don’t really have all that much effect on the value of a house….so no need to rush out of the neighborhood when there is a big change coming.

A friend of mine was upset because the city made part of his huge backyard into a retention basin to solve flooding issues.  He was worried that it would make his house worth less.

I told him that his backyard is so big, losing this space didn’t have any impact on how he or future buyers would use it.  There was still plenty of room for a pool, swing set, firepit or any outdoor thing people want in their backyard.  I told him that about the only person who might not buy his house now would be somebody who wanted to build a huge garage in that space.

I think part of what is hard for owners to realize is that the person buying your house when you sell won’t have the “Before” picture in their head of how it used to be.  Only the current owner will know what the good old days were like.

I had a friend say that Ball Homes building on the opposite side of the fairway from Greenbrier would hurt the property values.  I told her that while the view of a wooded hillside was preferable to seeing a new neighborhood, it was still nice to have a beautiful fairway to separate them, so it would not have any impact on value.  Only the current owners who remember the wooded hillside will ever know the difference.  The next buyers will say “Wow, look how pretty the golf course is” and how nice it is to have so much space behind your house in Lexington.

Then there are threats of new development.  Andover Hills and Andover Forest residents are afraid that if the foreclosed golf course fell into the hands of developers that their property values would plummet.  The residents of Squire Oak are concerned what several houses, townhouses and 3 story apartment buildings on the property along Armstrong Mill owned by Overbrook Farms would do to them.

There is no need to consider selling if you live in those neighborhoods.  Sure, it would be nicer to have less traffic, fewer homes, not lose the green space if you are lucky enough to back up to it…..but it will not have much impact, if any,  on property values.  Plus, Lexington is only going to become more dense.  We should all get used to it.  I often see houses with terrible lots sell for practically the same amount as houses with average lots.  There are several houses that back to New Circle Road, the interstate, a shopping center, a light industrial area.  They usually sell for within 1-2% of what the houses with average lots do.

This might be the time to discuss the difference between property values and desirability.  A house that used to back to a farm and now backs to a 3 story apartment complex had a prime lot and now has a below average lot.  The value might not change much at all, especially in a sellers market.  What it does do is make the house less desirable.  That just means it might take more showings before catching a buyer in a slower market.  Corner lots or houses on the main drag through their neighborhood experience this already but nobody notices.

Want to know something funny?  YOU have the most control over your own property value.  A clean, updated house that is move in ready will always sell for top dollar regardless of the market and what is around it.