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100% fool proof way to time the market

by John Rice

“Is now a good time to buy or sell, or should I wait?”

I get asked this a lot.

My reply is that while there might be times that are statistically slightly better or worse to buy or sell, the timing has more to do with you than the market. I secretly think it is us Realtors who came up with the whole timing the market thing. Ever notice we always have a good reason for right this minute being your best time to buy or sell? Prices could go up, buy now! Rates could go up, buy now! Rates dropped an eighth of a point, buy now! There will be fewer houses on the market in winter to compete with, sell now! More buyers are out in the spring and summer, sell now!

Is there something in your life making it a good time for you to buy or sell? Maybe you are getting married, got a job in a new town, getting divorced, having a child or any personal reason for a move? Then the time for you is now.

Another reason is when the perfect house hits the market.

No two houses are totally identical. Sure, some new ones can be extremely similar, buy even they are not 100% the same. I recently had a friend and his wife find a house for sale on a street they have always dreamed about. We viewed the house. They fell in love. An offer was made and accepted. The time was right because they wanted it and it was suddenly available. Who knows when the next one on that street, which only has 30 homes, would be available?

Sometimes you have no control over the timing.

I recently had a similar experience but with car buying. I am really into older BMWs. A friend of mine had a 1987 BMW 535i that had been in his family since new. It was bought locally and has been in Lexington ever since. It has been maintained by a shop owned by a friend. A family friend was the sales manager at the dealership and I have a document signed in 1987 by him in the glovebox. I had always drooled over this car since it was in really good cosmetic condition. There are few left that are as nice as this one.

My friend called me up one day out of the blue saying it was time to sell it. He asked if I was in the market. I told him I was not actively looking, but I was in the market NOW since the right car presented itself to me. He knew the time was right for him. I knew the time was right for me. He did not wonder if he could have gotten more by waiting. I did not entertain the thought of waiting for the next one.

You are in the center of your real estate decisions. Do what is best for your needs and don’t worry about it…..and according to us Realtors, now is always a good time, LOL!

What’s an old house worth?

by John Rice

I had to run the comparable sales data for a house in the area between Chevy Chase and UK. My buyer wanted to know what I thought a house I showed him was worth. Usually comps aren’t too hard. In a newer neighborhood, they can be really easy since sometimes you can even find three of the exact same floor plans to use.

Older houses are a little harder to comp. For example, the 3 best ones I had to pick from today were all in the same area, but were very different. A lot of realtors would have just divided the sale price by the square footage, maybe added/subtracted for differences such as the number of bathrooms or a garage. (Or even worse, just gone with what Zillow says is the value.) It is all a very logical process of averaging data to come up with an opinion of value. The only problem is that it doesn’t always work.

Back to my story….

The cheapest one was on the edge of the neighborhood near where the commercial section ends on South Ashland. That corner of the neighborhood has a very different vibe than the one I saw with my buyer.  The next one was right around the corner from the house I showed. You’d think that would have been a good one. But, it was much bigger, had been converted to student housing a long time ago, had a surplus of bedrooms, and was handicap accessible. That isn’t going to attract anybody from the same buyer pool as the one we saw. Sorry if this is starting to sound like the real estate version of “Goldilocks”, but the last one was just right.

The last place was similar in square footage, was more updated, had newer systems and would attract buyers from a much broader pool. It sold for less than the asking price of the one we saw.  I had to tell him that I thought the one we saw was over priced.

I also had to tell him that with old houses, you just never know. Somebody could see that place and totally fall in love with it, with the end result being they paid more than any other buyer would.

All this reminds me of 2 houses I had listed on Wabash a long time ago. Both of them were totally and tastefully updated. The first one I listed was everything anybody could want in an old house, with the exception of very rough and very steep steps that went to the converted attic space. It was really nice up there, but getting there was posing a problem. Time after time (not trying to sound like Cyndi Lauper here) the feedback would be that the house was very nice but those stairs were a deal breaker. We did sell it however.  I should add that we actually sold it for much higher than the neighbors and a realtor who lived a few blocks away ever though was possible. The comps didn’t really support the asking price. We kind of pushed the envelope and it worked. The buyer was transferring from California, had a tight time line and everything in Lexington looked like a bargain!

The next house I listed on that road was equally nice. They had remodeled the upstairs, bumped out the roofline of the back and added a killer master bathroom and a walk-in closet. Those are 2 things you don’t see often in an older house, especially for the price range we were in. That house posed a different problem for me. See, the downstairs rooms were sooooo small. If you just looked at the comps, you’d have thought the house was worth about $20,000 more than it was. We had to sell it a little under the comps to make up for the small rooms because this time, there was no California transferee to be found.

So, you really have to have a feel for how buyers will perceive the house as a whole to know where to add or subtract value. That is the art part of the deal. Even to the most unemotional buyer, they still have to like the house to buy it. On the comp sheets that all the realtors use, it has the scientific stuff  like values for square footage differences, bathroom count, a finished basement verses unfinished basement, the number of garage spaces, etc. The problem is that if we don’t throw a little art into the comps we’ll just get them wrong…………unless the house is one of those where 3 identical houses have recently sold!

Do you know where your property lines are?

by John Rice

Based on nearly 20 years of experience, I am going to guess you will say you do.

There are two questions on the Seller’s Disclosure about property lines that make me think this.

One questions asks if you know the property lines. I do not think I have ever had a seller answer no to that quesiton.

The next question asks if they are marked in any way. Many sellers answer no to that question.

I have always wondered how they know where the property lines are if the boundaries are not marked in any way?

The truth of real estate is that most of the time, we do not know where the property lines really are. The only way to be sure is to have a pin and stake survey done. Many people assume that was done when a fence was installed but that is not always the case.

When buying a house, few buyers purchasing a home in a neighborhood care to find out exactly where the boundaries are. Most assume it is the fence or if no fence exists, it is the mutually agreed upon line where the neighbors stop mowing their grass.

And for all intents and purposes , if everybody is happy, then that pretend line is just fine.

Buy if you are going to add a fence or some structure that may encroach on the set back lines of your property, the best thing you can do is get a survey done. Nobody likes to spend a few hundred bucks on something they think they don’t need, but if a neighbor doesn’t like where you put your fence, you better hope your fencing company guessed correctly where the property line actually is. It can get even more expensive if you do something like build a deck within the set back line, which is the minimum space required along the perimeter of your property. If the building inspector finds out, you will either need to remove it or apply for a variance. Neither are fun and will cost more than a survey.

Plus, getting a survey done allows you to answer affirmatively that you actually DO know where the boundaries are because they ARE actually marked.

Best question to ask your Realtor

by John Rice

Where is the best place to spend (insert your budget here)?

That is the single best question to ask your real estate agent if you are buying in an area you know nothing about.

I recently worked with an out of town buyer who found a for sale by owner home in a town not too far outside of Lexington. It was a very nice home. Seemed to offer a lot for the money. Large lot. Great view. Nicely updated.

I could not recommend this house though.

My buyer asked me a few questions about this home. I told them that while it is a very nice house, it is NOT in a neighborhood most people in this small town pick at this higher price point. I then mentioned a very popular neighborhood in this town, saying that is the one most local people find the most desirable. I then said that to local people, that super desirable neighborhood is the one they grew up with as the pinnacle place to live. If they reach the point of being able to afford that neighborhood, they move there. I also told them the house they were interested in will likely sell to an out of town buyer who doesn’t know anything about the local real estate market.

Well, when I went to check on the comparable recent sales in this price range, guess what? Almost ALL of the recent sales were in that exact neighborhood I mentioned. Know what else? My buyer told me that the seller had told them that almost everybody who has seen the house was from out of town.

And all this is why you should ask your real estate agent where is the best place to buy within your budget. You do not want to get stuck with a house that will later be hard to sell because you knew nothing about the local market.

What are escrows & WHY did my mortgage go up?

by John Rice

Welcome to homeownership.

If you are new to this, there is a day coming in your future that happens to everybody who owns their home.

You will be having a perfectly ordinary day. Your life will be going swell. You’ve been excited because the value of your home is going up according to the zestimate, which you frequently check.

Then you go to the mailbox or check your email. You’ve got something from your lender. It’s called an escrow analysis and has a bunch of numbers all over the place. It is almost as confusing as your cell phone bill and all those stupid docs you signed when you bought your house. You have no idea what it all means. All you know is that it says your mortgage payment is going up starting in a couple of months.

There goes that perfectly ordinary day you were having.

Can they do this to you? Yes they can. Here is why and how it all works:

In case you didn’t know, the escrow account is for money you give the mortgage company within your monthly payment to budget for the property taxes and homeowner’s insurance. When those annual bills come due, the mortgage company pays them on your behalf.

Here are the reasons why your mortgage payment may increase due to escrow accounts:

1. The assessed value of the house increased. This is when the PVA looks at houses that have sold around your house and thinks the value of your house has gone up. It’s a good news/bad news thing when this happens. It means your net-worth just went up but also means you’ve gotta pay more in taxes when they increase the assessed value. You will get a letter from the PVA when/if this happens. They have the right to do so annually and there is an appeal process.

2. The tax rate increased. The amount of taxes you pay is a simple math problem. It is your assessed value multiplied by the tax rate. If your assessed value did not change but the tax rate went up…..well, you’re paying more in taxes.

3. Your homeowners insurance went up. (This is happening all over due to the crazy storms we have had.)

4. There was a shortage of funds in the escrow accounts to pay the taxes and homeowner’s insurance. 

The mortgage company collects this money over the course of the year so they have enough in the escrow accounts to pay the property taxes and homeowners insurance on your behalf. If the projected expenses for next year exceed what you are currently paying into those accounts, they can raise the amount you pay into escrow every month to make sure they have enough to pay those bills when they come due. Should you have one year when there is an excess amount left over, the amount you pay for escrow accounts could go down, making your mortgage payment less.

5. And the last reason is sometimes it can be a combination of any of the above reasons.

I sure hope this helps make sense of something that is not at all fun to deal with!