real estate predictions

But don’t we need wiggle room in our list price?

by John Rice

This is one of the questions I get asked a lot when I list a house. I think I probably always freak out my sellers when I tell them that they don’t need to price their house way over what we anticipate it will sell for.

I guess the biggest fear, and I can understand it, is that people will assume that there is wiggle room, and that they are going to have to sell for less…..and that just isn’t the case.

Sure, there may be people who come along and offer waaaay less than you are asking. But you know what? I don’t consider them to be real buyers. When I was a new Realtor, I had some people that would just go from listing to listing making crazy offers. Eventually I would see the writing on the wall and I’d let them keep perpetuating their hobby without me. I doubt any of them ended up actually buying a house. Why price your house based on nuts like that? Doesn’t it make more sense to price it where it will be attractive to the people who may actually buy your house?

Check this out. Back in about 1997 I had a lawn care business. I had grown it to the point where I needed a dedicated truck. I saw an ad for a 1993 Ford F-150 with 48,000 miles on it. The price was $5980. I knew that was a good price. Took it for a test drive. Wanted it. Sat in the little cubicle with the sales man and made him an offer. He blew his chance to remind me that was a fantastic price. What he did was make it a battle. Dude told me that they “Couldn’t sell that truck for one nickel less than that price!” I was floored. Other than during COVID, don’t you always haggle when buying a car? I left to see what else was available since I couldn’t go back there without feeling like I had lost to that guy. After looking at more trucks, I realized THAT truck was by far the best one and was at the best price anywhere in town that day. I just didn’t know what to do. Soooo, I called the wisest man I know…..my Dad. I told him that the truck was the best deal and that I wanted it, but just couldn’t go back there. Being the wise person that he is, he told me to go back and offer them a nickel less. Yep. Offer $5979.95.  I did and I got the best truck at the best price that was available that day anywhere in Lexington.

Guess what? Real buyers will recognize the value of your house. They are looking at every house in their price range just like I did with that truck. Sure, we are accustomed to wiggle room, but people don’t mind paying near or full asking price if the house is worth it. Even in today’s higher interest rate market, I frequently see houses going for over the list price. I once had one where they came back twice with lower offers. We just politely said “No thank you.  Take a look at the comps. We’ve priced this house for what it is worth.” They, like me with the truck, knew it was the best available house at the best price. Here’s the difference though, I didn’t get an attitude with the other agent like my salesman did with the nickel issue. We ended up selling the house for 99.2% of the asking price. We came down just a little so the buyer would feel like they won…..but in reality, we all won that day!

Did you pick the right house?

by John Rice

How do you know if you’ve picked THE right house? What IF a better ones comes on the market after you make a decision? How do you know you WON’T regret your decision?

There is no way that you or I can really answer those questions, so I am not going to try. What I can offer are some tips based on my experience that might prevent you from feeling this way. 

How do you know if it is THE house? I think any house you are afraid somebody else will buy out from under you shows it is pretty high on your list. If you can just totally see yourself  living in the house, it may be the one. Same thing with comparing other houses to it. If you are doing that, it means that one is at the top of your list.

How can you prevent regretting your decision? I think the best thing you can do is to take your time in reaching your decision. Granted, sometimes when everybody else wants the house too, you don’t have that luxury. I like it when people get to see a house for the second time. You always notice more of the bad stuff on the second visit. It is even better if you come back at a different time of day. Rooms will look different with the sun on the opposite side of the house. Something that I’ve always told buyers to do, and not many actually have done it, is to drive around the neighborhood on a nice warm Friday or Saturday night. That will bring out anybody that will be annoying, so you won’t have any surprises later. Tough luck if it is winter.

There are a couple other things that bring on regret: Having a tight timeline and getting so tired of looking that you just want it over with. If you have a tight timeline, preparation is the key. I have done a lot of work for people moving form out of town. They’ll only be in town for a few days and have to pick a house. I try to work with them as soon as I know they will be coming here. It all usually happens by e-mail or text, but we chat about neighborhoods, parts of town I think they’ll like, etc. Then I’ll start previewing houses for them. At this point it is all about eliminating houses. You’re not really looking for the right one, you’re trying to whittle down the list to a manageable amount for them to see when they get here. 

Now, about getting tired of looking. If you find yourself here and can do it, just take a break. It is a really scary place to be. It sneaks up on you like a sunburn. Ignore your Zillow app. Maybe have your agent preview houses. By the time you get to this point, your agent should really know what will work for you and what won’t. 

Okay. One more question left?  How will you know a better house won’t come on the market as soon as you sign a contract? Simple answer. You won’t. I tell people to quit looking at houses online once you get past the inspections. If you don’t look, you’ll never know. And if you are the type that won’t take this advice, remember that sometimes houses look better online than they do in person. You are comparing your house in reality to the select pictures that the listing agents wants you to see……So that other house probably isn’t as good in reality as you are picturing it in your head. You got a good house, now just enjoy it.

Why you shouldn’t care about average days on market

by John Rice

I met with a cool family a few weeks ago. They were going to interview a handful of realtors. I’m always a little freaked out at listing presentations. See, there are agents that come with power point presentations full of market wide data available to every realtor in town, and then blurt out something like “After looking at the statistics for this neighborhood, your house will sell at 5:46 P.M. next Tuesday.” That impresses some people I guess. I’m not one of those that throws out a bunch of statistics. I kind of like to look at the house, assess the positives and negatives that I think buyers will see, then do a market analysis to find what I think the house is worth. I usually do all this wearing a pair of shorts and sandals, often forgetting to give the people my business card. I ordered 5000 back in 2016 and still have about 4983.

Why don’t I worry much about DOM and other statistics? It is because I am only dealing with one house. Yep. That’s right. The only numbers I care about are the ones for your house. We never really know when your Buyer will arrive. All we can do is price it realistically, make it look as great as possible, and present it well online.  When I get such a seller, their house usually sells quickly.

So, back to the listing appointment. I’m on the tour of the house and the husband asked me the average DOM question. I told him that I didn’t even look at that because I don’t care how long it took other houses to sell in the recent past, I only care about how long it is going to take his house to sell right now. As soon as I said that, I knew I either had this listing or I had just totally blown it.

Fortunately this cool couple saw my point and went with me.

Where are the entry level brand new affordable homes?

by John Rice

When the ink on my real estate license was still drying, Lexington was already getting pretty expensive for first time buyers. Yes, I know $150k for a brand new home in Masterson sounds absurdly cheap right now, but there was a time when that was just beyond the reach of your then millennial first time buyer. Back then, your choice for entry level new construction money was a 2 bedroom/1.5 bath townhouse in Lexington or a 3 bedroom/2 bath ranch in Nicholasville.

Nicholasville was close to Lexington. Even closer now. It was just another 20 minutes of driving to get a better house. That was enough for all those My Space loving kids to pull the trigger. You got your own yard, a two car garage and didn’t have to share a wall with anybody.

Where is that happening today? Richmond. A quick search for brand new 3 bedroom/2 bath ranch homes under $300k shows that. Yeah, there are a few in Georgetown but not many. Forget about it in Lexington. Nicholasville? Nope. Nicholasville has become a legit suburb of Lexington. The market there is now more mid and upper level homes for new construction.

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!