new listings

Telling people what they need to hear

by John Rice

Back when I was so overweight, I dreaded going to the doctor. They would always tell me all the ways being overweight would affect my health. It’s not like I didn’t know that. I just didn’t want to accept it.

A lot of buyers are in the same situation today. The reality of what it takes to get a home seems overwhelming. It is easier to just hope somehow it will all work out and you’ll get a house somehow if you submit enough offers.

Reality checks are never fun. One day I accepted everything the doctors had always told me. Once I did that, I knew what I needed to do if I didn’t want to have health issues as I aged.

I sold a house over the weekend to a new client who had lost several houses previously with their last realtor. I didn’t really do anything special. I did my usual good job in trying to make our offer the most appealing to the seller. The hero of this story is the buyer. I was just like the doctors telling me the reality I didn’t want to here. He took in all the information and chose to do something about it.

Like all houses these days, it got several offers the first day on the market. It is normal to go over the list price these days so we did an escalation clause up to a certain amount. The buyer was a little anxious about going that high. I explained that odds are we would not need to go that high, but that he would have hated to have lost the house by just a little bit. He agreed.

Once the offer was sent and I told the Seller’s Realtor a few things, I got a question about not having an appraisal gap waiver. I knew this meant that our offer was one being seriously considered. If we were not the best or one of the best offers they had, why would he ask about it?

I told my buyer this good news. He didn’t really want to risk having to put out more cash should the house not appraise for the sale price. I told him that this is getting more and more common with every house I’ve sold. If we didn’t do it this time, odds are we would be in the same situation on the next house when prices and interest rates might be higher. He agreed.

A few hours later I got a text that he got the house!!!!!

The hero here is my client. All I did was tell him the reality of what would most likely happen just like all those doctors did for me. My client accepted the reality of today’s market. He realized he wasn’t going to magically escape some of these uncomfortable things and end up winning a house in multiple offers. Once he saw that, he knew what he had to do just as I saw what I had to do.

My Dad always said “Living in reality is never fun, but what other choice do you have?” to which I will now add “Plus living in reality with a house is better than not doing so and waiting for the next new listing to hit the market and do it all over again and again.”

The worst thing you can do in multiple offers

by John Rice

This one always drives me crazy. There are a lot of bad things to do during multiple offers when you are the buyer’s realtor, but trying to rush the listing realtor is the worst.

What I mean here is where a realtor sends you over an offer and puts something like a 2 hour deadline for acceptance. I get it. Their goal in this is to make you hurry up and accept their offer before another offer comes in but I have NEVER seen it work in their interest. It usually backfires.

There are three reasons why:

  1. Do you know what happens once that short time frame for acceptance passes? The offer has technically expired. I don’t know about other realtors but the last thing I want is for the listing realtor to think the offer I sent is dead because the time has past. In this market, I usually do the opposite. I know listing realtors are wanting to get several offers and it is common for a seller to not even review all the offers until 2-3 days after the listing went live. I like to give them plenty of time. Why? Because I know I am not going to get them hurry up. They are going to do whatever they want and I want my client’s offer to be valid whenever it is presented. I also want to come across like we will be easy to work with.
  2. It makes the seller not like you. This is an even bigger one. Nobody likes pushy people. We don’t like it when somebody keeps pushing their grocery cart too close to us in the check out line. We don’t like tailgaters when driving. And in the hottest seller’s market in all of history, we sure don’t like it when buyers try to exert some pressure on us.
  3. It makes you question their commitment. I recently had this happen to me. I got a really good offer on a listing the first day on the market. I told the realtor, who was also the buyer, that we were planning on reviewing offers on the following Monday. She pointed out that she had given us a two hour window. I suggested she extend that until Monday. She fought back and said she didn’t know if she was still interested in the house if she couldn’t buy it that day. That tells me two things about her. She was either bluffing or was serious. Both are bad signs to me. If she was bluffing, it tells me she is going to try to manipulate us through the entire sale process. If she was not bluffing, she probably wasn’t totally in love with the house and there was a greater risk of her backing out of the sale before it closed. I told this to the sellers and they agreed that the only way we were gonna sell the house to her was if her offer was the only one we got. Fortunately we got 3 other offers and I was happy to tell her she didn’t get the house…….and I did it before her precious deadline.

How I have benefited from having the smartest Dad in the whole world.

by John Rice

It’s been a good week.

It all started when I had two buyers make offers on houses and they both got them. Both went over the list price of course as that is becoming far more common.

One of them was a house that had come back on the market after a sale fell apart. I called the listing realtor and asked why it fell apart. She told me that before the seller put the house on the market, he had a specific home inspector look over the house and repaired everything the inspector found. Well, the first buyer used a different home inspector and decided they didn’t want the house. The listing agent thought the buyer just cold feet and used the inspection as a way of getting out of the deal. That happens unfortunately.

I know nobody likes it when a house comes back on the market. The house often doesn’t have the same momentum the second time. I also know that sellers start getting nervous about selling their house even in this crazy hot market. It turns out that my buyer had told me who she was planning on using for the inspection and it was the same inspection company the seller had used. I saw this as an advantage. I knew it would be a huge deal to the seller and listing realtor if they knew we were planning on using the same company since there would be no surprises.

So, instead of writing an offer with an escalation clause, I called up the listing realtor and pretty much said “Hey, how about we give you so much above the last contract you had on the house AND we agree to use the same home inspection company your seller used before they listed it? Would that keep you from waiting to get more offers and just sell it to us right now?” Fortunately it was and my buyer got the house. She later told me she was prepared to go to a certain number if needed and that I saved her a lot of money. Close to $18k to be exact. Had it gone into multiple offers, odds are she would have paid much more than she did. I just knew what to do to make the seller accept our offer. My dad always said “Think like the other person’s perspective.” I knew the seller was anxious about the home inspection after the sale fell apart and having the same company he used do our inspection would make him feel like the house was really going to sell this time……thanks Dad and Happy Father’s Day!

How to pick your first rental house

by John Rice

The first thing to know is that you want an exit plan.  You want to buy something that will be fairly easy to sell when that time comes.  That is why I usually suggest a single family home in a decent neighborhood.  When you sell it, your buyer pool will be owner-occupant buyers who will happily pay a full retail price.

The second thing to know is that you pick your tenants through them picking your house.  You have a crappy worn out rental, guess what type of tenant is going to be willing to live there?  You make your house one of the nicest ones in it’s price range and you will attract the best qualified tenants out there.  Also, if you have one of the best houses they could ever afford, why would they move?

Here are some things that I think make a house a good pick:

1.  A ranch house.  Who doesn’t like one?  They are suitable for buyers/tenants in all stages of life.  They are easier to paint by yourself since there is no staircase.  You can clean out gutters with a step ladder.  They are just easier to work on period.

2.  A house on a slab.  When the wax ring around the toilet fails and when water gets splashed out of the tub, there is no wood to rot.  Also there is no water to collect under the house and grow mold.

3.  A smaller house.  Fewer people can live in a smaller house.  That means less wear and tear.  While a 2 bedroom house has a little more limited market when you sell, tenants usually don’t care if a house is 2 or 3 bedrooms.

4.  A simple roof line with not much of a pitch.   The fewer ridges and valleys the better.  Not only are they cheaper to replace, there are fewer places to get a leak.

Here are some things I try to avoid:

  1.  Basements.  They all have the potential to leak.
  2.  Sheds.  They are just one more thing to maintain and tenants usually leave you stuff they don’t want when they move out.
  3. Huge yards.  When they get out of control, it takes a lot of time to bring them back.
  4. Big garages.  I’m talking more than a regular two car garage.  Usually tenants who are attracted to a huge garage have a lot of stuff to store or hobbies that need the space.  Either one means you might need a dumpster when they move out.
  5. Fireplaces.  Do you really want somebody starting a fire in your house?

Now a lot of this is based on paying retail.  If you get a great deal on a house with a huge lot or a basement, take it.  A good deal can make up for potential future headaches.

My ideal house would be a smaller ranch on a slab built after 1960.  It would be 2-3 bedroom and have 1-2 baths.  A normal sized, flatter yard for good drainage.  On the lower end, no garage is okay.  If the house is worth more than about $150k, I would want a garage more for resale than to make a tenant happy.

 

 

The real reason why sales are down

by John Rice

I’m seeing a lot of news articles with accurate data.  My issue is that I think most are drawing the wrong conclusions.

Most seem to want to make you think the sky is falling in real estate because sales are down.

You know who needs to care about the number of sales?  Appraisers, realtors, mortgage people.  Those of us who make money on each transaction.

As a buyer and/or seller, the number of sales isn’t really important to you.  What you care about is supply and demand-the ratio of buyers to sellers in the market.  If there are 3 buyers in the market and only 2 listings, then we have a seller’s market.

I am seeing a lot of articles stating that sales were down in November of 2018 versus November of 2017.  Of course they were.  It happens every election year.  The market pauses until we see which set of morons we will be stuck with.

The ones that really bug me are the ones that say the affordability crisis will hold the market back.  I think they have it backwards.

Sure, we have an affordability issue.  Many people can’t afford to buy a house with rising prices and interest rates.  All I know is that every house under $200k in this town seems to go very quickly, which allows that seller to buy up to their next house and that seller to buy up to their next house and so on.

Back when the market was terrible, I said that it was like a baseball game where the bases are loaded.  The seller on first base needed a buyer without a contingency to buy their house so they could buy the 2nd base seller’s house, who could buy the 3rd base seller’s house.  The first time buyer needed to hit a home run and push all those sales through.

Back then a buyer had a ton of choices for their next home.  The issue was selling their old one.

Today, no buyer really has a huge selection of houses.

For that reason, I think our current market is the opposite.  There are a ton of first time buyers eager to hit a home run and push all those deals through, but what is happening is that the person on 3rd base doesn’t like home plate and has decided to just stand there until they feel like running.

The buyers with the most selection are the people buying their pinnacle home.  The one they stay in forever until they begin to downsize.  These are mostly Gen Xers.  They are in their 3rd base home, which is probably a fairly large home in the $250-350k range.  They want to move up to the $400-600k range, where there are plenty of houses for sale.

Their only problem is that most are just tarted up versions of their current house.  These buyers aren’t getting a better house, a bigger house, or a bigger yard.  They are just getting prettier finishes.  They find the houses in this price range, well, boring.  And we have a TON of them for sale.

So what do these Gen X buyers do?  They wait for the right house to hit the market.  Since they already have a nice house, they are in no hurry.  Because they aren’t in a hurry, that means the people looking to buy their house are in the same position….all the way down to that first time buyer eager to bid their heart out on their first home.

And, that is where we are today.  Sellers wanting to sell but not finding anything they want to buy.