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!

 

How my 4 houses helps me understand move-up buyers

My first house.

7 Ky Street

 

I loved everything about it.  It looked cute.  The mortgage was cheap.  It had two original fireplace mantles.  It didn’t bother me that it didn’t even have a driveway, or that there were some houses nearby that had been converted into cheap apartments.  It was my first home.  The threshold was low and I was happy.

 

My next house.

New outside

 

It was really a dump when we bought it, but I was so happy to have a garage, a master bathroom and to be the trashiest house on a nice street verses the best house on a trashy street.  I quickly grew to hate the trek from upstairs to the garage when I would take my kids to school, and the awkwardness of the split foyer design when people would come over.  The threshold for happiness was still low since having more space, that garage and my own bathroom were enough to get me excited.  It was better than the first house and that was enough.

 

My next house.

1217621_01

 

This is the one where we started getting more picky.  Doing things like wanting to know if any houses around it were rentals, checking out the pantry and school districts.  The first house was better than renting a house.  The second house was better than the first.  That type of thinking wasn’t going to cut it on this move.  I loved living here, although there was no storage or anything.  Also, I was told that my lot was the gravel pit for the neighborhood, which is why the grass never looked good in the front yard.

 

The current house.

1210113_01

 

We weren’t going to settle as much this time.  We looked and looked and looked at many houses.  The yard had to be flat.  There had to be more storage space.  The kitchen had to have a better pantry and more counter space.  The previous houses were more about finding a house we liked.  This one had to be in a certain part of town.  We didn’t have to move.  We wanted to move……which gets me to the point of this post.

And that point is that buyers who have owned several house and are now looking for their pinnacle house, the one they will live in before they start downsizing, are pretty picky.  And that is okay.

These buyers have lived in enough places to know what they want and more importantly, what they don’t want.  They know what they can compromise on and what they can’t.  The gray area that was okay for previous houses is gone.  There is no “Well, maybe that won’t bother me as much as I think it will.”

 

My next house??

640_1david_eichler_architectural_photography_1-1024x682

Maybe something like this.  I love windows.  I love looking out and seeing leaves blowing in the wind, and clouds, and birds in the air.  I want to feel like I am outside even when I am inside.  I want it bright.  I want a view.  Of something.  Trees, water, anything other than the back of my neighbor’s house.  I want to feel inspired by the architecture of my next house.

And the next house will probably be at the center of many posts about downsizing and empty nest buyers.

 

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.”

Is building the answer?

A lot of people think that we need to build our way out of the shortage of houses for sale.

I don’t.

The only places left to build in Fayette County are on the edges of town at a time when there is more and more interest in living closer in.  No builder is going to use the little bit of land we have left for anything less than a $173,950 house, which is the base price of the cheapest model Ball Homes will build in Masterson Station.  A quick search on LBAR shows the cheapest actively listed new construction home is $202,900.

I think the problem is affordability for first time buyers.  I have always said that it is the first time buyer who greases the entire real estate market.  They are usually the only group that doesn’t need to sell a house in order to buy.  It is like the bases are loaded and the first time buyer is the one who hits the home run so everybody standing on all those bases gets to move.

A lot of first time buyers are and will continue to look outside of Fayette County.  They will look in Lexington neighborhoods they would not have considered 10 years ago to make their numbers work.   They might even consider a townhouse or condo.

Like my baseball example, the bases are loaded.  The first time buyer is waiting to hit their home run, only there are no balls being thrown.  If more affordable houses come on the market, it will make sellers in all price ranges less worried about finding their next house.  Sellers know they can sell quickly but are worried about finding a house.  Remove that fear and we’ll have more houses for sale.

Real estate lessons from a bird?

Something happened in my yard yesterday that made me think about how important location is and why buyers need somebody with experience to guide them.

A robin built a nest in one of my bushes.  I have like 50 bushes in my backyard.  This poor robin picked the one right by my backdoor.  And she built it about 2 feet off the ground.

I am sure she thought it would be great to be over there by the dryer vent on these cool spring mornings.

She worked hard building a really nice nest.  It was a great place, she thought, to lay her 3 eggs.

If this robin had asked me, I would have told her I have a dog.  I also would have told her about the neighbor’s cat named Stewart that walks down the fence several times a day.  Stewart is the reason my wife can no longer feed the birds.  Our feeder area became an all you can eat buffet for that stupid cat.

Had she asked, I would have suggested one of the taller bushes at the back of my yard, on the far side of where Stewart cuts between my house and my neighbor’s house to get home.

But there are no realtors for bird houses.

You probably see where this is going.  My dog knocked the nest out of the bush and the eggs fell to the ground.  I can’t really blame my dog for being a dog, but we were looking forward to watching this robin’s journey to motherhood.

When you are buying a house, there is a lot of stuff to process.  It is easy to focus on what you like and assume you are seeing the whole picture.  Even more so when you have to make a quick decision in a fast moving market.  I always try to make sure my clients know everything I know about a location or house.

Some things I’ve told clients:

“I know you like that this house is right across the street from the school.  Between 2:05 and 2:50, there will be 500 moms parked in idling SUVs and minvans in front of this house.  Will that bother you?”

“I know you don’t mind that this house is on a busy road.  I know you’ll have 3 teenage drivers in the next few years.  I wanted to make sure you realized that they won’t be able to park on this street and this driveway is only one car wide.”

“I know this is a great house and any house will sell fast in this market.  I think that only having two bedrooms upstairs and the rest in the basement will make this house harder to sell in a soft market.”

I couldn’t do anything to help this robin, but I can help you pick the right place to live.