real estate advice

Thinking outside the house

by John Rice

Ever wish somebody would tell you EXACTLY what to do to make sure you buy a house that will always be a good investment?  This is something that nobody was thinking about the past few years.  During COVID and the “Never gonna happen again” low interest rates, all houses were selling quickly and for top dollar……many sold for more than they were worth.

Here is my list of what to find in your next house.  The more of these you have, the better your chance of getting a house that will be a wise investment.  Remember, as long as there is a real estate market, people will always buy the best houses that are on the market!

LOCATION:  You hear a lot about this in Real Estate.  A good location really just means that it is convenient to SOMETHING or has a unique asset!  It can be shopping, the airport, the interstate, schools, a park…..really just anything unique or desirable.  A house probably doesn’t have a good location if you find yourself thinking, “Gee, other than being nowhere near anything, that house is great!”  A neighborhood like that will always have to sell on value since it offers nothing else.

SCHOOLS:  Buy in an area that has at least average performing schools.  People moving within Lexington seem to be fine with any decent school.  Out of town buyers always want to be in the best school district.  Look for an area that has a well rounded mix of elementary, middle and high schools.

NEIGHBORHOOD:  New is nice, but established is always better.  Pick a neighborhood that is large enough to not be negatively impacted by the surrounding ones.  Usually a cheaper larger neighborhood will bring down a smaller nicer one.  The opposite holds true too.  Kenwick used to be an inexpensive area.  It was surrounded by Fairway, Ashland Park and Bell Court.    Its location and surrounding neighborhoods started putting it on people’s radar in the 1990’s.  You also want a neighborhood that has it’s own distinct identity.  I don’t mean it has to have giant columns at the entrance with the name chiseled in stone.  Chevy Chase doesn’t have anything that says “You are now entering Chevy Chase”, but you know you are there.  That is identity.  If an area doesn’t have an identity, then it isn’t known for any of the items I am talking about here.

LOT:  Ideally, you want to have a lot that is located well within the perimeter of the neighborhood.  That insulates the impact from inferior areas that border your neighborhood.  While I am on lots, get one that is at least typical in size, shape and contour for the neighborhood.  You don’t want one that isn’t.  It will turn away a lot of buyers……unless there is another frenzy at the time you go to sell.

FLOOR PLAN:  You want a house that has a useable layout and typical sized rooms.  A tiny kitchen in a 4 bedroom house will not bring in as much money.  You’d need to price it lower than the competition or upgrade it to make somebody be willing to overlook it.  If you find yourself saying things like “If it wasn’t for______, that house would be perfect!”, then you know the person looking at houses when it is your turn to sell it will say the same thing.   In a slower market, buyers get very picky. In a fast market, everything sells.

Basically, the goal is to get a house that will be someone’s top pick when it comes time to sell.  I call this ‘Thinking Outside the House.”  Most buyers just want to find a house they like.  The reality of Real Estate is that a lot of a house’s value is determined by things outside of the house itself.

Can it be both a Seller’s Market & a Buyer’s Market?

by John Rice

I was on the phone with a good friend of mine who is an agent with my office. As usual, we got to chatting about what the market is like right now.

I said that it seems like we are back to a more normal market where the best of the best listing are still going fast and sometimes for over the list price, while everything else is just sitting on the market waiting for a buyer to even notice it is for sale.

I then when on to postulate that this was due to the COVID market. Back then, the new listings of the day were the pending sales of the next day. Instead of Days on the Market, it was more like Hours on the Market. Every house seemed to sell immediately so there was no need to keep mental track of what was on the market. I think that got buyers and their agents in the habit of only looking at new listings and those with fresh price reductions. If a buyer or their agent wasn’t impressed with the house when it was a new listing or had just gotten a price reduction, it is like it disappeared. It was forgotten forever. It has always been hard to get people to revisit a stale listing, but it got even harder after COVID.

I think I went on and on for a little while longer. Then my good friend said he had heard somebody say this about the current market: “The first 10 days a house is on the market, it is a Seller’s Market. After that it is a Buyer’s Market.”

I told him I thought this was an incredibly simple way of explaining where and why the market is where it is right now. Then I went on to tell him that with me being so wordy, I would probably take 500 words to explain that to somebody……..which I apparently did in only the first 225 words of this post!

How much do updates really add in value?

by John Rice

I often run across articles in the news about what specific updates give the most return for the money spent.

While I appreciate that somebody took the time to research this, I sort of roll my eyes as I read them.

For example, if your house is a hot mess but you put a brand new garage door on, trust me, your house didn’t grow in value by 87% of the cost of that new garage door.

Why doesn’t it work that way? Well, because the buyer is looking at the whole house, not each individual feature.

A few weeks ago I showed a house that looked absolutely fabulous online. The kitchen and flooring were brand new. It was a total WOW house…..online.

When I pulled in the driveway, I wasn’t sure I was at the same house. I had to check the address!

The exterior of the place was very rough. The original windows had peeling paint and cracked window glazing. The driveway was cracked up and probably hadn’t been recoated since the 80s.

It didn’t get better once I got inside. The lockbox was on the backdoor. The addition on the back that I had to walk through had 1970s paneling that clearly had water damage under that fresh coat of paint. The basement was pretty much lipstick on the world’s ugliest pig.

But oh that kitchen!!!!

Here is the thing. The buyer who sees that kitchen and is willing to pay the seller back for their investment is expecting the rest of the house to be equally as nice. The buyer who doesn’t mind the condition of the rest of the house isn’t going to want to reimburse the seller for that gorgeous kitchen.

I see that all the time having shown houses like this for the past 19 years.

For this house, the seller didn’t really get much of a return. I think they might have sold for almost as much had they not done the kitchen at all. It would have been wiser to have taken the money spent on the kitchen and spread it evenly across the whole house, rather than put all their eggs in that one basket.

When a nice house is a bad choice

by John Rice

Some houses are just a bad choice.

I was out with a buyer this past week. We looked at several new/newer homes in neighborhoods all over town. All within a similar size and price range too.

One house in particular was on my buyer’s radar. It had a 3 car garage. He liked that. Being a car guy, so did I!

Before going to see the house, I looked at the recent sales in the neighborhood. I found that most of the houses were 1400-1600 square feet and were selling for $270-290k. While there were several lots left to build upon, my realtor red flag was raised and frantically swinging when I saw the house we were going to see was also about the size and was priced at $340k. I am probably somebody who personally would pay a premium for that third garage spot, but even I wouldn’t pay $50k more for it.

I thought perhaps the house had some other features that would make it stand out from the significantly cheaper ones that made most of the neighborhood?

Once we got there, it was clear that the third car garage was about the only difference. Upon viewing the house, I noticed that the primary bedroom was sort of small compared to other new homes in the same price range. Also, all the backyards were really small in the whole neighborhood. The location of this neighborhood was also what I would call less than Grade A.

So, what did I do? I told my buyer that I just did not see this house being worth $50k more just for the garage. I also told him that when he goes to sell it, buyers with good realtors will tell their clients the same as well as how the backyard and primary bedroom were small. Long story short, I think this particular house is always going to be harder to sell and likely won’t appreciate as much. I think this neighborhood is a fine pick though for any buyer wanting a new/newer home whose budget tops out at under $300k.

My buyer saw what I was saying and while he would love to have had that huge garage, he chose another house.

Do you really need a Buyer’s Agent?

by John Rice

YES!! YES!! YES!!

I’m seeing a lot in the news that the future of real estate might do without the role of a Buyer’s Agent.

That sort of scares me. Not because half of my work is with buyers. It scares me because buyers need an agent, almost more than sellers need a listing agent.

Having cut my teeth in the worst market in all of real estate history, I can tell you first hand that a buyer doesn’t know if they have made a mistake in picking a house, or overpaid, until they sell their home. It has been a good market for so long that I think most people think all there is to buying a house is picking the one they like…….as if it is as simple as choosing which product to buy on Amazon. One day, every buyer will become a seller. Your home may be a noose around your neck and you don’t even know it yet.

This was a common scenario for me when I was called to list a house between 2008 and 2011:

Seller calls me to list. They say they paid full price in multiple offers to get their house in 2003-2005. They assumed it would always be that way when they needed to sell. Then I have to tell them their house is worth less than they paid and they really should have called me before they bought the place. I could have saved them not only money, but a lot of time, frustration and headache.

I frequently saw where a spouse was transferred here. Their home back wherever they were from was on the market. The spouse was living in a studio apartment here until their house back home sold. The family was separated. Nobody was happy. Trust me, you don’t want to be this buyer.

This is how a Seller’s Market works: EVERYTHING sells for top dollar and fast since there aren’t many options. This is how a Buyer’s Market works: ONLY the choice, Grade A homes in Grade A neighborhoods sell fast and for top dollar. Everything else goes for less. Have a house in a less desirable school district? Have a house with an awkward floor plan? Have a house with a terrible lot (Think steep driveway, no privacy, backing to a busy road, etc)? Good luck selling in a Buyer’s Market because every buyer can get that Grade A house. You need to have a big price difference between those Grade A homes and your home to entice a buyer.

Aaaaaaaand you need a Buyer’s Agent who can tell you these things BEFORE you buy a house.