sellers market

Want to know where the market is, TODAY?

by John Rice

I like to do these market updates every once in a while. When I do, I do them in real time. What do I mean by that? I meant that the info is right now. Most of the time when you are hearing about the real estate market, it is from sources that are a month or more behind, or it is from a national source that is giving you a dated snapshot of the market for the entire country. My data is taken from the MLS in the past 20 minutes and is specifically for the Bluegrass area.

I won’t geek out and break down all this data into price range, which town, or property type, but there were 24 existing home sales that went pending in the past 24 hours. Do you want to guess how many of them sold within 2 days of being listed? You would think it would be all of them based on what your realtor friends post online, or what you read in the news. But, of those 24 houses, only 4 of them sold in less than 2 days. There were 8 that sold between 2 and 10 days. 4 sold between 11 and 30 days. 4 sold between 31 and 60 days. And 4 sold between 61 and 90 days on the market.

Let’s look at the houses that closed in the past 24 hours. While pending sales give us a snapshot of what the market is doing right now, freshly closed sales give us a snapshot of where the market was a month ago since it usually takes 30 days or so to close.

How many of the closed sales do you think got full price, or over full price offers when these sales went pending last month? Again, you would assume all of them, right? Of the 23 closed sales posted today, only 8 of them sold for the full list price. 5 sold for over the asking price. One sold for $10k over the list price in a neighborhood where I have seen this happen frequently. That means 10 of the closed sales went for LESS than the full asking price.

I could go a lot of ways with this blog post, but I think I will take this chance to say that you really need an agent that knows when you need to offer the full price, when you need to go over the list price, and when you can make an offer for less than the list price. The market is so fast right now that I think a lot of buyer’s realtors are not looking at comparable sales in the neighborhood. They are just so focused on getting an offer in fast that they don’t really take the time to figure out what the house is really worth. To me, that is the most important bit of info we have to offer a client. I have had many listings in the past year where I had a ton of showings and didn’t get an offer on the first day on the market. Then the next day a realtor is frantically trying to reach me saying they are about to send a full price offer and are so glad the house is still available. Well, if I had 12 buyers look at the listing and didn’t get an offer, truth be told the house probably wasn’t worth the list price……but I am not going to tell the buyer’s realtor that, I just tell them where to send the offer.

That’s the data. I am by no means saying the market is slowing down. It is after all the middle of winter which is usually the slowest time of the year. I do think the market will stay strong for quite some time. I just wanted you all to know that not every house sells the first day on the market for full price or more. I want to help separate the perception of what the market is like compared to the reality.

What is being a realtor really about?

by John Rice

You’d think it would be about houses, but it is not.

You’d think it would be about the market, but it is not.

You’d think it would be about knowing what a house is worth, but it is not.

You would think it would be about marketing a property for sale, but it is not.

You would think it would be about showing houses to buyers, but it’s not that either.

All of these things are important, but they are not what being a realtor is really about.

It is about guiding people to make a good decision using all of the things above. I often describe my job, when asked, as “Talking people into making a good decision and talking them out of making a bad one.”

In the future, realtors might not even be needed for a buyer to view a house. People may end buying real estate like they do anything else online, or there will be an app to open the lockbox on the front door without a realtor. In the future one of two things will happen: Technology will make tools like Zillow’s Zestimate more accurate, or people will broadly accept them as being accurate. Either way, realtors won’t be needed to determine market value.

It all comes down to helping people make a good decision. There are tons of tiny decisions in buying or selling a house that can have huge consequences. Money can be lost. Time can be wasted. Stress can be compounded. Since most people only buy or sell a house a few times in their lives, often they don’t know the difference between a good decision and a better one. It is easy to make a good verses bad decision. Good verses better requires some knowledge and experience.

A realtor friend and I often chat about what we having going on. It makes us both better realtors I think. He had a situation where he had two offers on a listing. One was slightly better than the other, but the people with the slightly worse offer really wanted to live in that specific neighborhood. Do you go with more money and risk losing those buyers if the home inspection didn’t go well? Do you go with the slightly less offer where you know the buyer is less likely to walk away because they have to have that specific neighborhood? I told my friend to go with the higher offer. My thinking was that if the higher offer people walked away after the inspection, which is usually within 10 days, the other buyers who wanted that specific neighborhood will still be around. Best of both worlds.

Since the market is so hot right now, I am seeing lots of sellers saying a neighbor or a somebody they know is interested in buying their house before it gets listed. My advice to anybody today is to put the house on the market and try to get at least two offers. Today’s buyers are used to fighting to get a house. Get two or more buyers competing for a house and YOU as the seller will always come out the winner. Also, a buyer wanting your house because their parents or grown children live on the street will ALWAYS be there too. That buyer is not just looking for any house in your price range. Being close to mom, dad, grandma, grandpa or grandkids is what makes them want your house. They may or may not pay the most for it, but they are not out actively looking for any house in your price range all over town.

Another thing I am seeing more of is the opposite end of this where a buyer thanks me for my time and tells me they have bought a house from a friend. I had somebody this year with a friend who was selling their house by owner. My client bought it. The house had been on the market for quite a while. In today’s hot market, not selling fast is a sure sign that something is wrong. When buyers decide to wait for the next new listing and pass on your house, can you imagine how difficult it will be to sell the house in a cooler market? This is where the whole good verses better decision starts to have big consequences. People who make poor choices as a buyer typically don’t realize they made a poor choice until they go to sell the house. I saw plenty of that from Great Recession sellers who told me they went over the asking price in multiple offers when they bought the house that they were now selling for less that they owed on it.

So, being a realtor is really about using your experience and knowledge to help people make the best decisions possible. There is nothing that feels better than knowing your seller got the best deal possible, or that your buyer landed a house that will always be easy to sell when that time comes.

How COVID will affect what people want in a home

by John Rice

It won’t change a thing.

I don’t know about you, but all the news I have been reading is saying buyer’s wants have shifted due to quarantining. They say people are wanting a place to work from home, wanting bigger houses, wanting great outdoor spaces, and a less open floor plan.

I personally think that writers of such stories don’t know much about real estate and just have to write something because that is their job.

When have people not wanted a bigger house? When have they not wanted a better backyard? When have they not wanted a home office? Okay, the wanting a less open floor plan is something that has been emerging for the past few years but isn’t really possible in a smaller house. To do a less open floor plan you need a big enough house so it doesn’t feel like you have a bunch of super small rooms. People may covet these features a little more right now, but it definitely is not a new trend in housing.

I think the biggest effect COVID has had on what people want in a home is simple……..to just find one they like, pay at least the full list price, possibly waive inspections, and take advantage of incredibly low interest rates. Beyond that, the buyers of average priced homes are not all that picky.

Kicking a buyer to the curb made my seller $10k

by John Rice

My seller was impressed that I sold his house so fast.

Big whoop.

Just about every house sells fast these days. back in 2008-2011 was when selling a house fast was something to brag about.

Today, I think the most valuable thing a realtor can do for a seller is helping them pick which offer to accept and taking some strategic steps to keep the deal glued together…..or strategic steps to easily get into an equally good contract should the one you have fall apart.

So, the house I am talking about was priced at the tippy top of the market. It got a ton of showings and the only offer we got was from somebody who had a house to sell. People with a contingency have to come in stronger than a buyer without one, so getting no other offers and a full price one from this buyer is a sure sign we got 100% the full market value.

The offer was contingent on the buyers selling their old house. I never like those, but I don’t mind them if I can get the buyer to accept an immediate kickout clause. A kickout clause is when you can keep the house on the market, but if some other buyer makes an offer the seller wants to accept, the first buyer has to be given the change to get the house if they can buy it without having to sell their old house. Usually the time period for the first buyer to either put up or shut up is 24-48 hours. Naturally, a lot of buyers and their realtors don’t like to show houses with kickout clauses. It can be heartbreaking if the first buyer actually can remove their contingency and buy the house. BUUUUUUUT, with an immediate kickout clause, the seller can enter into a contract with the new buyer and all they have to do is tell the first buyer they just lost the house. It is the best of both worlds for the seller. You get to keep the buyer who is paying top dollar for your house and you get to keep looking for a better buyer. There is nothing to lose.

There is a third great thing about having a contingency contract with an immediate kickout. It is called leverage. One reason I advised the seller to accept the offer if the buyer would do an immediate kickout clause was because I wanted to be able to tell future buyers that we already had a full price contract with the immediate kickout.

Well, a few days later, we did get an offer that was about 95% of the list price. I told the other agent that we had a full price offer on the table with an immediate kickout, and her buyer would need to go full price in order to make the seller kick the first buyer to the curb. They agreed to it. Without the presence of that first buyer’s contract, I would have had no leverage to get the new buyers to come up $10,000.

I more than paid for my own commission by strategically positioning my seller to get the most money.

Could this have been the worst house in Lexington to buy?

by John Rice

A house I had listed a long time ago came on the market recently. It sold really fast of course.

Let me tell you a little about this house.

The seller paid $157k for it in the summer of 2006. That was pretty much the peak of the market. We were already starting to hear stories about the market crashing by then.

The seller didn’t want the house any more. Listed it for $166k the summer of 2007. After 291 days it did not sell.

Then it was my turn. I listed it in 2011 for $153,900. It didn’t sell after 129 days on the market.

Late in 2014 the seller tried again with another realtor for $159k. 61 days on the market with no buyer.

Spring of 2015 it sat on the market for 201 days with a list price of $156k with a new realtor. Still did not sell.

Spring of 2017 it was listed for $162,900 with yet another realtor. After 68 days on the market, it sold for $153,500.

So, after 11 years and literally 750 days on the market using 5 different realtors, somebody finally bought it for less than the seller had paid for it in 2006.

What was the problem with this house? The yard. The lot had such a slope that you couldn’t get a car in the garage. It was so steep that your ankles hurt just trying to get to the front door. The backyard was worse. There was a patio, a retaining wall, and a grassy strip about 15 feet overhead.

You can imagine that seeing this house listed for $180k this year got my attention. I’m glad I was sitting down when I saw what it sold for. Can you believe somebody went $20k OVER the listing price for this house? It sold for $200k!!

This house is the poster child for what happens when buyers don’t have many choices. They pick terrible houses and seem happy to have just gotten one. Today is 2005 all over again, but worse. When you have almost no choices, a lousy house seems great. It won’t always be this way though. That is why you should never buy a house that in a buyer’s market took 750 days and 5 different realtors to sell for less than was paid for it during a seller’s market.

Bottom line is this……don’t buy a house that will become a noose around your neck in a buyer’s market. I’ve been saying it for 15 years. Never buy the house with the bad lot, one that backs to something unpleasant, one that backs to apartments or a lot of rental properties, one that doesn’t fit in with the rest of the houses in the neighborhood. If you are the seller of such a property, this house proves now is the time to unload it.