sellers market

What was I thinking in 2011?

by John Rice

Every once in a while, I like to look through old blog post drafts that never got published.  Well, today was one of those days.  I wrote what is below on 12/29/2011.  The day after my anniversary.  Now, I have no specific recollection of either day in 2011, but I have been married long enough to know that it makes your wife feel good when you can reference your anniversary date…..so that was for you babe!

A lot has changed in nearly 6 years.  All of today’s first time buyers would be amazed that they could have picked from 50-100 houses in their price range back then.  Today, they may have 4 listings on their preferred side of Lexington in their price range.  I remember spending many full days where I never left Masterson Station because there were soooo many houses for sale.  Buyer’s would get confused.  They couldn’t remember one house from another.  I would say stuff like “This is the same floor plan as the 2nd, 5th and 9th house we saw earlier, only this plan is reversed and the vinyl floor in the kitchen is blue instead of brown.”

I had to laugh when I read the draft below because now I have people looking for deals and there just really aren’t any these days.  Also, today the challenge is finding ANY house for a buyer whereas back then it was about helping people pick the needle in the haystack.  Selling listings today is like shooting fish in a barrel.  In 2011, getting a call from a potential seller made your palms sweat because you weren’t sure it would sell.

Here is what I was thinking about late December in 2011:

 

When I was a kid, that Kenny Roger’s song was popular.  You know, the one that said “You gotta know when to hold ’em.  Know when to fold ’em.  Know when to walk away.  Know when to run.”  It was about gambling, but it could just as well be about being a realtor.

Each deal is different.  The people are different.  The house prices are different.  To get the best deal for a client, you have to be able to analyze a bunch of different factors and figure out how something is likely to go down, then take action.

Several months ago, I wrote an offer for a bank owned property.  It was rather unique. They countered our offer, but it was still way too far outside of anything remotely realistic.  We politely said no thanks.  My investor client and I both thought that the time of year, the market, and the ability of other investors to borrow money meant that there really wasn’t much of a market for this property other than him.  We also suspected that the bank would soon want it off their books.  We knew when to “Hold ’em” basically.

Not too long ago, the bank came back and agreed to our original terms.  We’re still working out details, but I’m pretty pumped that my buyer is about to practically steal this property.  Think I’ll buy that song on iTunes and listen to it on the way to the closing…….or that Tom Petty one that says “The waiting is the hardest part.”

Is building the answer?

by John Rice

A lot of people think that we need to build our way out of the shortage of houses for sale.

I don’t.

The only places left to build in Fayette County are on the edges of town at a time when there is more and more interest in living closer in.  No builder is going to use the little bit of land we have left for anything less than a $173,950 house, which is the base price of the cheapest model Ball Homes will build in Masterson Station.  A quick search on LBAR shows the cheapest actively listed new construction home is $202,900.

I think the problem is affordability for first time buyers.  I have always said that it is the first time buyer who greases the entire real estate market.  They are usually the only group that doesn’t need to sell a house in order to buy.  It is like the bases are loaded and the first time buyer is the one who hits the home run so everybody standing on all those bases gets to move.

A lot of first time buyers are and will continue to look outside of Fayette County.  They will look in Lexington neighborhoods they would not have considered 10 years ago to make their numbers work.   They might even consider a townhouse or condo.

Like my baseball example, the bases are loaded.  The first time buyer is waiting to hit their home run, only there are no balls being thrown.  If more affordable houses come on the market, it will make sellers in all price ranges less worried about finding their next house.  Sellers know they can sell quickly but are worried about finding a house.  Remove that fear and we’ll have more houses for sale.

I thought this was a seller’s market?

by John Rice

It is, but that doesn’t mean all price ranges are super hot right now.

I was doing a market update for a listing I have.  I try to keep my sellers up to date with what has been listed, pending sales, price reductions and closed sales that will become comps for an appraiser.

 

Check out these stats for single family homes in all of Lexington:

$100-150k has 34 listings.

$150-200k has 52 listings.

$200k-250k has 67 listings.
$250k-300k has 64 listings.
$300-350k has 106 listings.
$350k-400k has 68 listings.
$400k-450k has 38 listings.
$400k-500k has 40 listings.
If you’re a buyer in the $100-150k range you better do whatever it takes to get a house, your market is sizzling.
If you’re a seller in the $300-350k range, I would suggest a price reduction because you are not really in a seller’s market at the moment.
Why is this?  Nobody can say conclusively, but my experience is that most sellers in the $100-200k range move up to the $200-300k range.  Most sellers in the $200-300k range move up to the $400k and up range, so that leaves a vacuum in the $300-350k range.

What amount should you put on the preapproval letter?

by John Rice

I was cutting edge back in the day.  I remember telling buyers and their loan officers why I wanted the preapproval letter to be made out for just the offer amount.  The logic back then was that it comes across better to appear like you “Can’t” go any higher than what you offered verses “Won’t” go any higher.  In fact, you can probably scroll through my blog posts from 7-8 years ago and read more about it.

Times change.

Now everybody does that.  When everybody does it, there is no point in continuing.  The strategy is lost.  Cliche.  Passe.

I don’t do it any more.

Now I spend my time telling buyers and their loan officers why I want the preapproval letter to be made out for the MOST the buyer could purchase.

Today’s market is not only hot, it is fast moving.  You often get one shot to make an offer.  You want to be as attractive to the seller as possible since they likely have multiple offers….and all the offers are good, so the winning offer often comes down to some secondary thing like possession date, waiving inspections or, wait for it, your financing.

All decent realtors know that your preapproval amount is based on your debt to income ratio.  You make an offer of $200k and produce a preapproval letter for $200k, the listing agent either knows you’re bluffing OR $200k is going to use all your debt to income ratio and the loan has more risk of not making it through underwriting.  You produce a preapproval letter that says $275k on that same $200k offer, and suddenly that listing agent knows that you aren’t eating up all your debt to income ratio.

Also, there isn’t any time these days to make an offer with a matching preapproval letter amount, then go back to your loan officer to revise the letter when the offer gets countered for more money.  You’ll lose the house while waiting to get a piece of paper that says you can go a little higher than your first offer was.

A couple of people have wondered if letting the seller know how much you have been approved for somehow means you’ll pay more since they know you could do more.  Well, I’ve been on both sides of that since I do list as many houses as I sell to buyers.  I have never had a seller think that.  And even if they did, you don’t have to pay more than you want……meanwhile it could be the thing that gets you the house in this time of so few houses on the market.

 

911-What is your real estate emergency?

by John Rice

Like Tom Petty said…..The waiting is the hardest part.

That is what I am doing today.  So is my buyer.

We finally found the perfect house for her late last night.  It is everything I want for her and she is in love with it.  She is doing an FHA loan, so I have to be more mindful of things like peeling paint, painted shut windows, loose handrails and all.  This house had none of those issues since the roof, windows and HVAC have all recently been replaced.  It really is everything I could hope to have found for her.

The house had just come on the market.  In fact, there was another agent standing at the front door the whole time waiting to show it.

Sometimes being a realtor in a hot market is like responding to a 911 call.

I had been out all day.  I had just come from showing another client a house.  I hadn’t eaten anything since lunch and it was now close to 8:PM.  That’s a long time for a fat guy.

I rushed to my office (okay, the room over my garage) and fired up the computer.  Ran the comps.  Sent them to the buyer.  Suggested an offer strategy.

Ran downstairs and shoveled down some of the City BBQ my wife had brought home for dinner.  Back up stairs.  Buyers says to pull the trigger.  Tell the listing agent an offer is on it’s way.  Write the offer.  Buyer signs the offer.  Tell the listing agent offer has been sent.

Then I tell the buyer the offer has been sent and I will let her know when I get a response.  Since she is a first time buyer, I detailed what the rest of the process should look like.  I told her it is customary for clients to name a son after me since most people are so thankful for getting a chance to work with me.  I forgot to tell her that if she ever has a girl, LEXperta would be okay too.

Then I ran back downstairs.  Made a cup of decaf.  Watched Designated Survivor with my wife and went to bed.

We should know today about 5ish if we got the house.

My fingers are crossed for my buyer.  She is a super nice person and I have enjoyed working with her and her boyfriend, and I am thankful for the mutual friend that sent her my way!