sell

Are Investors ruining the market?

by John Rice

Are real estate investors who buy single family homes ruining the market for other buyers and driving up rent?

Unpopular opinion, but I say no.

Sure, many of these investors might make terrible landlords. None of us like the robocalls we get asking to sell our houses to them…..but they are not ruining the market and driving up rent. I am by no means defending them or their actions. I am just saying that they are not the root of the problem.

I spent a couple weeks in Florida recently where I read an article saying how large scale investors were ruining the market. They were outbidding other buyers. They were reducing the number of homes available for owner-occupant buyers. They were raising the rent and making housing unaffordable.

This type of logic drives me crazy. Let me pick apart a few things here:

For every house for sale, that means there is both a Buyer and a Seller. If one Buyer is outbidding another, that means there are not enough houses for sale. This is a Supply and Demand issue. Also, the never mentioned seller who is about to become a buyer is happy with the terms they got.

Are they reducing the number of homes for sale? Yes, but isn’t the same true for anybody who buys an available home? Again, the issue is the imbalance between Supply and Demand.

Are they raising rent and making housing unaffordable? This one always amazes me. We have all just survived a crazy period of inflation where the cost of everything went up. Somehow most people single out housing, as if that shouldn’t have also been affected by inflation. Like we are shocked and appalled that housing costs, whether renting or buying, went crazy at the same time when everything else did too?

What this article seems to forget is the tenants. Where would they be if all the sudden there were no properties to rent? It isn’t like investors are buying these houses and keeping them empty. There is just as much demand for single family rental homes as there are for people wanting to buy them and live in them. If rent exceeds market demand, houses will sit vacant and investors will have to lower the rent to get a tenant. Again, Supply and Demand.

Are you seeing a theme here? Supply and Demand. There is a short supply of houses for sale for investors and owner-occupants. There is a short supply of houses for rent for those who cannot afford to buy or choose not to. Having more demand than supply is the problem here.

Some say that the issue is sellers just aren’t selling these days. Okay, true. But let’s think this through. We have far more people wanting to buy AND to rent houses. If all the sudden everybody decided to move, we would still have more people than houses because everybody living in their current house would also need another house. What’s that? Supply and Demand.

Building more homes is the only real solution to this. It is what the writers of the article I read should be encouraging if they honestly feel like everyone should be able to afford to buy or rent a home. The demand is there. The supply is the issue. Until there is a better balance, prices for buyers and tenants will not change.

Well Played Sir, Well Played….Sort of

by John Rice

After nearly 19 years in this business, you sure learn to read the signs. Watching what people do (or don’t do) can often tell you a different story than the one they are telling you with their lips.

I had a buyer interested in a property. We made a formal offer. It was verbally countered. Verbal counters happen. They can be a way of making the negotiations move along faster. They can also be used to “Not” formally counter. See, if a Seller formally counters an offer, they can’t accept another offer without withdrawing their counter. Sometimes a verbal counter is made to keep the other parties options open.

My Buyer decided not to budge from their original offer. I assumed the deal was dead.

A couple of hours later the Seller’s realtor texted saying the Seller maaaaay accept my Buyer’s offer amount if we could close in 3 days. I immediately told the other realtor exactly what my Buyer would do in response. We could not close in 3 days but could within 10 days.

Then I hear nothing.

This is when I start getting suspicious because normally, when a Seller and Buyer agree on a price, everybody usually get really motivated to make a deal work out.

Then I ask again for a reply.

I still get radio silence.

Then out of the blue, exactly what I suspected was happening came to light. There was another offer. The other realtor said another offer had been made which was better than the one my Buyer had made.

So here is what really happened:

  1. By verbally countering our offer, this agent kept our offer alive and could legitimately tell the other Buyer’s realtor that there was another offer on the table. This used our offer as leverage to get the best terms for the Seller from the other Buyer.
  2. By not replying to us in a timely fashion, it hedged the Seller’s bets because if the other offer didn’t work out, they had us as a backup plan.

Was there anything wrong in doing this? Yes and no.

I am not at all upset about the other agent trying to get the best results for his client. I do the same for mine. Kudos to him for this part of his actions.

The only thing I am salty about is that he made a counter and then ghosted me for almost two full days. I think he should have told me in a reasonable amount of time that there was another offer, or that his Seller was either accepting/rejecting/countering the revised terms I had proposed.

What’s 2024 Going to be Like?

by John Rice

I do these type of posts every year. Not to brag, but I am usually spot on. Why is that? I think it is because I don’t concern myself with short term knee jerk reactions to market fluxuation like the media does. I don’t view “Demand” like most people. I think there is always demand because everybody loves real estate and everybody ultimately wants to own their home. How many people are out there buying at this exact moment can vary, but there is always demand.

I think 2024 will be a better year for buyers and a still great year for sellers. We have all been on a roller coaster the past few years:

2020-We thought we were all going to catch COVID and die, or didn’t think it existed at all. We were too busy fighting over everything early on to bother with buying or selling houses….until later in the year when rates got so low.

2021-We partied like it was 1999. We chatted daily about how much our crypto went up. We got a better house, an airbnb or refinanced what we already had like crazy.

2022-We continued to party like it was 1999 but we knew the ball was about to drop. Just like inflation was eroding our purchasing power, we could no longer afford the cost to maintain our enthusiasm.

2023-Was like “Will there be a recession?”, “Are we IN a recession?” and “These rates are crazy high right now!” It felt like when somebody thinks they saw a shark and everybody jumps out of the water. Was there a shark? Who knows, but nobody wants to be the first one to get back in the water.

2024 is looking like the economy has stabilized, rates are going to drop to a level that is historically average, and all those people who are on the fence will come out….just like the opening scene of Bambi. Affordability will remain an issue. Prices will at least stay stable. We will read later in the year that rent prices are dropping but that data is skewed. All the new giant apartment complexes will be competing for the same tenants. Prices for apartments will go down for sure. The single family rental market will remain strong since there are not enough single family houses for anybody in any market.

Ultimately, I think this will be the most normal market we have seen since Covid.

And I welcome it. Bring on 2024!

You won’t believe what happened with their Zestimate

by John Rice

I put on a new listing last week. Like what happens a lot of the time, Zillow’s zestimate was way off of what a thoroughly detailed, comprehensive, professional opinion of the market value was. Usually once Zillow gets the listing from the local MLS, their Zestimate suddenly changes to something more in line with the list price.

Not with this house however.

My seller reached out to Zillow after unsuccessfully trying to claim their home on the site. Zillow was nice enough to send them an email that basically said Zillow has never been in the house, knows nothing about the house or its condition, but somehow is still happy to publish a value. More of a Guestimate than a Zestimate in this realtor’s opinion.

Knowing artificial intelligence is running Zillow, I told my seller that I would play around with the marketing remarks and see if somehow certain keywords might change anything. It was a long shot but it was all we had.

I put words like “Recently” in front of the word “Remodeled” when describing their primary suite bathroom. I removed the word “Original” when describing some of the cool character of the house. I removed the word “Traditional” in a sentence describing the homes in the entire neighborhood. I tried to used words like New, updated and fresh every place I could make it work without looking stupid.

And guess what?

The next morning the Zestimate was up nearly $90,000 and right in line with the list price.

I outsmarted Artifical Intelligence. What’s next for me? I am going to try to outsmart my dog, who seems to have trained me to do what she wants, when she wants.

How my fall is shaping up

by John Rice

I’ve been doing a lot of blogging about the market lately. Good stuff, but since I know most of you who will be reading this, I’ve been thinking I better give you all an update on what I have been doing.

I’ve been having a great time the past few weeks.

Yeah, the market is really slow. It’s there. It’s healthy. It is just slow. Few people want to buy and even fewer want to sell. That is okay for sellers and buyers. It is realtors, home inspectors and loan officers who this current gridlocked market affects the most.

I am not complaining though. I have more than enough work to stay comfortably busy.

I have several listings in the pipeline. All of them from people I know. A few buyers too.

I will be listing an amazing ranch in Versailles in a great location, with a great lot, and on a cul-de-sac. It is one of those rare houses that really has no negatives. I am looking forward to selling this for some friends who are moving out of state.

I’ve got a house around Southland that should be on the market sometime this winter or early next spring. It’s an older house with a really good floor plan and several interesting features. I have worked with the sellers several times. It might be the last one unless they were to move back to Lexington after this one sells.

I’ve got a very affordable ranch on the northend that I will be selling for a friend who has used me several times. He is an investor who is parting with several of his properties. I look forward to working with him and his family for probably most of the next year since they will sell one house at a time.

I’ve been working with a large family who has used me a couple of times before. I have really enjoyed getting to spend time with them. We found an ideal home in their existing neighborhood that will serve them well. This house has fairly new HVAC units, replacement windows and a literally brand new roof. I don’t see that Trifecta often. I should be listing their old house here in the next week or so. Their situation was very much like the “Love it or list it” show on HGTV. They loved their neighborhood but their old house wasn’t working. They were entertaining a big addition and remodeling the existing house.

I’ve been working with the mother of a woman that I went to middle school with. I have worked with her once before. Both her and her daughter are so much fun to be around. Once we find the perfect place, I will be selling her old house which is simply adorable. It is on about 3 acres in rural Franklin County. If you had told 6th grade me that I would be a realtor and showing houses to a classmate’s mother 40 years later, I would never have believed it!

Other than committing to wearing long pants every day, it’s shaping up to be an enjoyable fall for me.