real-estate

How I learned a great real estate lesson from a video game

by John Rice

Ever play Sim City? I must admit, I haven’t done it in like 30 years, but I always loved to watch what happened when you built a neighborhood beside an industrial zone, or watch a neighborhood grow when you added a commercial district beside it.

Sim City is a lot like real life in the way something outside a neighborhood can have an impact on what happens within a neighborhood. 

One day many many years ago, I was talking to a neighbor who bought her house brand new back in the early 70’s. We were talking about all the traffic on Pimlico Parkway. She told me that before they opened Man-O War, the only traffic on Pimlico Parkway was just people from the neighborhood. It was just the main drag through the neighborhood, like any other entrance and exit  in your neighborhood…..until something changed.

And I guess that is what is on my mind. How things are always the same, until something changes.

Another example of a road like this is Autumn Ridge Blvd. I remember when it was a new neighborhood. You took Autumn Ridge all the way back, turned on Pleasant Ridge just like you do today, only back then it ended before you got to Andover Forest…..and oh, there was also no Hamburg back then either.

Next thing you know, Hamburg is built and you can get to it straight through Autumn Ridge. It really worked out great for everybody….except those folks that lived on the cut through streets.  They saw a lot of traffic and watched as their houses became less desirable than the same house on a different street in the neighborhood.

So, here is my advice: Don’t buy a house on a road that ends at an undeveloped area.  SOMETHING will eventually be there….just like on Sim City, and odds are it will change the vibe of your neighborhood. Sometimes it changes it in a good way, but most of the time it means increased traffic, which usually means increased crime…..just like Sim City.

Here is some more advice: When you are considering a neighborhood that has roads like that, take a look at a satellite view of the neighborhood. You want to see what is on the other side of the vacant land to see what may eventually be connected to your neighborhood. Also, don’t rely on zoning. I hear people say things like, “Oh, that is zoned for single family, so we’ll be okay.”  Well, lets say that it stays zoned as such. That doesn’t mean that it will be a single family neighborhood similar to your neighborhood? But even more of a big deal is that there are zoning changes all the time.

And you know what usually happens when there is a big change in the neighborhood don’t you?  All your neighbors decide to move at the same time.  Never a good thing for resale value……and Game Over for you!

August 17th the Y2K for Real Estate?

by John Rice

Here we are just a few days from the date that the media thinks is going to change the entire real estate market.

Leading up to this reminds me of most of the year 1999. Back then, the media took the opportunity to let us know that most computers were never prepared for the year 2000. Doomsday was scheduled to begin January 1st 2000 since the computers would think the year was 1900 instead of 2000. This was called Y2K. People stocked up on cash, water and food in case the world froze up.

Of course, what happened on 1/1/2000 was that everybody woke up to find nothing had changed. Whenever I see a pantry stuffed full of a lifetime supply of canned goods, I wonder if that is somebody’s leftover Y2K stash.

All of us will wake up on 8/17/2024 and find that the real estate market kept going, just as it always has since the first person hired somebody to be their real estate agent whenever that was.

There are a few changes, and they are not at all like the so called journalists predict. Housing prices will not go down. No real money will be saved by anybody. Commissions in my area have dropped a little. I used to see mostly 3% offered to Buyer’s Realtors with an occasional 2.5%. I am now seeing a lot of 2.5% commissions. The change is really more of a technical inconvenience than anything mind blowing.

What will change is basically the equation to get to the same solution that has always existed.

In the “Old days” of right now, the Seller’s Realtor had a certain commission they wanted to make for selling the house. They would add an amount to that for the Buyer’s Realtor. The sum of those two numbers were what the total commission was going to be. By the way, commissions have always been negotiable.

The new model pretty much does the same thing…..at least in my market. A seller will have 3 options when signing a listing agreement with their Realtor: 1) The Seller’s Realtor is paid a larger commission and will offer to give part of it to the Buyer’s Realtor. This is the old fashion way. YES, it still will exist! 2) The Seller’s Realtor will charge their own commission PLUS the Seller will offer an amount to the Buyer’s Realtor to be paid directly by the Seller. 3) The Seller may choose at that time to not offer any commission to the Buyer’s Agent. Option 3 is the one everybody is assuming will change the industry. Well, time will tell if I am wrong, but I don’t really see Option 3 being viable in anything less than the absolute hottest real estate market ever. Why? Because history has proven that Buyer’s want their own Realtor involved. That is why most For sale By Owner listings fail to sell. Almost all Buyers prefer to have their own Realtor involved.

On the Buyer side of all this there are a few things I want to point out: The National Assoication of Realtors (NAR) is wanting it’s members to have Buyers sign an agreement which details how their Realtor will get paid. There has been no change in Kentucky’s state law at all. Why? Because commissions have always been negotiable. The NAR is a professional organization whose membership is voluntary. You can be a real estate agent without being a member of NAR, you just can’t call yourself a Realtor because they own that word. You would have to call yourself a real estate agent. This new NAR rule is really like being a member at a country club and having to wear a tie to dinner because it is a rule.

So back to how things change for Buyers. Well, for those real estate agents that use the NAR form, there will be a place to put what commission is to be paid by either the Buyer or Seller for the Buyer’s Realtor. This has always been on existing Buyer Representation Agreements, so the concept is nothing new. This is the part the media is in a frenzy over……but hold on, there is more to this. Our new offer to purchase contracts have a paragraph now for Buyer’s Realtor commission. Yep. You can write on the offer that you want the commission for your own Buyer’s Realtor to be paid for by the Seller. Aaaaaand this is something I think most all Buyers will want to do since few have the cash to pay for their representation.

There will be Sellers who try not to pay, either directly or indirectly, for a Buyer’s Realtor. They will probably find that not many Buyers look at their home. This is effectively like a For Sale By Owner situation, something most Sellers fail when attempting, largely because most Buyers want their own Realtor involved.

So in the end, what we have is a lot of hoopla with little real change. Most all Sellers will either directly or indirectly pay for the Buyer’s Agent commission one way or another. The Seller now just has a choice of how to do it. The Buyer now has to write in their offer how much, if anything, their Realtor is to be paid by the seller.

3+3=6

3.5+2.5=6

6-3+3=6

6+0=6

Yay, you get to pick your own equation now. Any numbers you want which will total somewhere between 5-6% commission when selling your house, just as it always has. Keep in mind too that a Seller’s Realtor is not going to do 100% of the work for both a Buyer and Seller for the same price. Also, just like any market, there is a point where it just isn’t profitable to do the work. Commissions can only go so low before Realtors just say no.

Can’t verses Won’t

by John Rice

I’m in the middle of the worst part of all real estate deals…………Negotiating repairs after the inspection. 

The seller’s realtor told me, in great length, why the seller WON’T do a couple of repairs we asked for.  I don’t know about you, but when I hear WON’T, it makes me want to dig in my heals and push back. 

One of the repairs was over an issue in the backyard.  They had a major landscape company come in and do a koi pond and patio.  I think the reason for the WON’T was because they just couldn’t emotionally bring themselves to “Undo” the work they have done.  That being the case, if their realtor had just said something like “I’m really sorry, but after putting so much of themselves into creating that wonderful space, the seller’s simply CAN’T bring themselves to makes the changes your client wants.”  Isn’t that much better than hearing WON’T??  I mean, the bottom line is that they aren’t going to budge on that one, but getting it in a pill that is a little easier to swallow leaves us not wanting to push back. 

So, CAN’T is sooo much better than WON’T, even if the results are the same.  WON’T always comes across as aggressive.  CAN’T at least has a chance of getting some sympathy from the other party.  I don’t remember if it was my dad that told me about CAN’T and WON’T or if it was my old mentor Susan Webb.  Both of them are pretty fantastic, so I guess all that matters is that I learned it.

Minimize negatives >accentuate positives

by John Rice

I woke up at 3:44 this morning thinking about the differences between how a buyer and a seller view a house, and what a seller needs to know.

A buyer is going to come in a house, stay for 20-30 minutes if they like it, and wander around all the rooms.  They view the house as a whole at this point.  They are trying to decide if they like the whole thing since they can’t cut and paste features.  This is the main difference.  When a buyer goes from room to room and all colors are different, that just seems random to them.  A seller sits in each room for longer periods of time and tends to view the house as different individual spaces.  Same thing for finishes.  When a buyer sees nickel door knobs, a gold light fixture, and maybe black cabinet hardware, it throws them off.  It has a confusing vibe for them, just as it would for you if I spent the next few paragraphs talking about the Olympics and how much more I like coffee from South America than I do from Kenya.

If you are a seller, the best thing you can do is to give your house that cohesive vibe.  Paint all the walls the same color.  Makes things match.  It sounds silly, but those things have a calming effect on people.  People want to feel calm/relaxed in their home and this is one way to make  a buyer feel that way.  If two houses are side by side and identical, the one with the cohesive vibe is going to sell before the one with every room a different color.

Now I don’t want to make this about updates.  I think HGTV and Tik Tok have us convinced that   white shaker cabinets and shiplap are all it takes to make ANY house sell.  I’ve been in  houses that are totally random, but have these upgrades.  You know what happens if the house has the random vibe?  All a buyer does is want to cut and paste those features to another house.  They say they really like this or that feature, but they don’t buy it. 

Often, real estate is more about minimizing negatives than accentuating positives.

AVOID houses with these issues

by John Rice

There are 3 things that are never good to see when you view a house.  Since I have a drafting/building material/architectural/construction/landlord background, I tend to always be in mini-home inspection mode when I look at houses with my clients.

I absolutely hate to see cracks in the brick that have been repaired multiple times.  I don’t know if you have ever seen this, but it also can happen to a concrete block wall.  It is where somebody filled in the crack, the crack came back, then it was filled again……….maybe over and over again.  You can tell because often the colors of the caulk or mortar are different.  The bottom line is that the house has movement.  That isn’t going to go away and can’t really be fixed totally.  Yeah, there are expensive things that can be done, but not of them can make it all good again.

Another thing I hate to see is when the seller has gone to great lengths to direct water away from the house.  Sure I appreciate the effort, but that tells you that the house has a big annoying problem.  You know this when you see big black corrugated drain pipe running all around the house.  Maybe if the driveway is right beside the house there will be globs of caulk at the joint.  To me, that just tells me there has been water in the basement before.

I have a house that fit this bill, but I did some permanent fixes.  I say permanent because running drain pipe all over doesn’t really change the way surface water runs to the house.  It just deals with the water running off the roof.  After trying all these cheap fixes and still getting water in the basement, I went into overdrive.  I had the basement water proofed.  That kept water out of the inside of the house, but didn’t keep the water from eroding the soil under and around my foundation.  So, I hired a dude with a Bobcat and a dumptruck to regrade the backyard so surface water ran around my house instead of through it.  I also installed the one piece gutters that don’t clog, buried the downspouts and ran them where they wouldn’t be anywhere near the house.  Since I had one corner that I couldn’t really create positive drainage, I made a valley so that water would run parallel to the house.  Now my neighbor’s basement leaks instead of mine.  I hate that for him, but the reality is that if my house had been graded properly when built, he’d have gotten a lot of it anyway.  It has been over 17 years since I did all that and there has never been another issue.

 You may ask why I tell people to run when this happens if I fixed it in my own home.  The reason is because I think people should feel a sense of peace while they are in their home.  I did all this, but every time it rained hard or the ground was saturated, I was a nervous wreck.  See, the sump pumps could fail or we could have that one time where all my engineering can’t handle the amount of water.  I rent this house out now, but I still worry about it.  That isn’t the homeownership experience I want for my folks!

The next thing that can tell you a lot about the history of a house, even if the seller said in the disclosure that the basement is dry, is when you go down there and they have everything up on pallets.  Or maybe the washer and dryer are sitting on bricks.  People always do that when there has been water in the basement.  See, some sellers feel like if the basement only has a little water, or it only happens every once in a while, that you won’t mind when it happens to you!

These are the 3 things that always make me give a house a thumbs down.  I’d rather see a roof past it’s expiration date, or a furnace that is an antique than any of these.  Water and soil stability issues usually end with nature winning in its battle with man.