sellers market

Best First-Time Buyer advice ever

by John Rice

A lot of my first-time buyers from 2008-2011 are beginning to sell their houses.

Most of them probably remember me telling them that I wanted to find a house that would be easy to sell regardless of the market when that time comes.  I would tell them that right now, they are just thinking about finding a house they like.  While I wanted that too, I’d tell them I was also thinking about their exit plan.  I would tell them that one day they may have some big life changing event that requires them to move.  I didn’t want the sale of their house to stand in the way of their plans……picking a house that would be easy to sell again and not paying too much for it would set them up for their next move.

See, back then I would see sellers who paid too much and would have to bring money to the closing just to get out of their house.  Since they didn’t have any equity, they ended up renting rather than buying when they moved.  I would see people turn down job opportunities because they couldn’t afford to sit on a vacant house while it was on the market.  I would see a couple where one stayed in their old house while on the market and the other was renting a small apartment in another state for a new job.

Real estate can be a real blessing to your life or a noose around your neck.

Right now we are back to the frenzy of the early 2000s where everybody is all rainbows and unicorns.  Buyers feel lucky to get any house these days.  It doesn’t matter if it has a steep driveway and backs to a loading dock.

But you know what I am saying to my first-time buyers today?  I tell them that I want to find a house that will be easy to sell regardless of the market when that time comes.  I tell them that right now, they are just thinking about finding a house they like.  While I want that too, I tell them I am also thinking about their exit plan.  I tell them that one day they may have some big life changing event that requires them to move.  I don’t want the sale of their house to stand in the way of their plans……picking a house that will be easy to sell again and not paying too much for it will set them up for their next move.

And this advice is all the more important in a seller’s market.

 

 

 

The 3rd real estate word I created

by John Rice

One of the toughest things about being a realtor is when you make friends with somebody who buys a house from you, then they move out of town.

Phil and his wife were referred to me from their agent when they moved to Lexington.  He had taken a job here and commuting from out of state was not an option.

I had a really good time looking at houses with them.  They were a lot of fun.  We laughed.  It didn’t even feel like work to me.  It was like hanging out with old friends.

Several times a year, Phil and I try to find the best Chinese buffet in town.  We haven’t really found an amazing buffet, but we sure can tell you where not to go for lunch.

Well, Phil is just too good at what he does and now it is time to move on to bigger and better things that are not in Lexington.  Time to sell their house.

I went over to check it out earlier this week.  It was good to see what all they have done to the place.  I had forgotten a lot of details about the house, but I quickly saw why they picked it.  Back then, he had a choice of many houses in that price range.  Today, there might be 20 houses on that side of town in this price range.  I always like to make sure my people get a house that will be a buyer’s top choice even in a bad market.  We won’t have any trouble selling it.

Anyway, as I was looking at their hall bathroom, I said that the tile floor was “Decade Neutral.”  He got a good laugh, said that would make a good blog post, and here we are.

Decade Neutral I guess is my new term for those finishes that are hard to tell when they were done.  His house had 12 by 12 beige tile with a light but not white grout.  Who knows when it was installed.  It could have been the 70s.  Could have been the 80s.  Could have been last week?  It is decade……neutral!

When people ask me about updating their house, I usually suggest things like this.  It is no fun to rip out trendy tile once there is a new trend.  His tile is like a pair of jeans or khaki pants.  It goes with everything and is timeless.

Some other things that are Decade Neutral are:

  1. Hardwood floors.  Not the prefinished kind.  The kind that gets stained and polyed on site.  The Goldilocks kind because it is not too wide and not too narrow. It is just right.  The kind you see in houses from every decade since houses have been built.
  2.  Crown molding.  I’ve never had anybody tell me that they would have to update crown molding.
  3. Recessed lighting.  The beauty of recessed lighting is, well, that you DON’T SEE IT.  (Ok, I guess they did make some a long time ago that had a mirrored gold ring around it…but you can buy covers for THAT kind now.)
  4. Chrome faucets.  While they are more minivan than “Sexy Black Dress”, they get the job done and nobody is appalled to see them in a house.
  5.  Tall ceilings.  Sure, the 2 story foyer isn’t as popular any more, but nobody has ever said they wished the ceiling in the family room was shorter.

That is all I have for now.  I’m gonna miss Phil, but I sure wish him all the success he in due in his new job.  He’ll do great!

Oh, and the other real estate terms I created are “Move out ready” and “Reach-in closet.”  Move out ready is when a vacant house looks like the seller left in a hurry.  It has crumbs in the fridge, you can see the impression on the carpet where the couch was, and there are nail holes in every wall.  A “Reach-in closet” is any closet that isn’t a walk-in.

Which offer to pick when you have more than one?

by John Rice

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This is a house I put on the market late Friday evening.  I own it with a friend.  It is fixed up pretty nice, which is why we had over 25 showings scheduled.  We got 7 offers on it.  We had two more interested buyers, but when I told their agents we had multiple offers, they didn’t want to join the bidding war.

You’d think it would be an easy thing….picking which one to accept.  There is so much more to an offer than just the one with the highest sale price.

The lowest offer was way under the asking price and the buyer wanted us to pay $4200 of their closing costs.  When 4 of the 7 offers came in over the list price, that one was rejected with a good laugh.  I am glad I got it because I used it to force the next buyer into bringing their highest and best offer.

I had priced the house competitively. I knew that there was not much on the market.  I knew we had done a really good job making the house appealing.  What I didn’t know was how many buyers there would be.  You don’t know that until you list it and watch it unfold in real time.

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Most sellers would be thrilled to have offers over the list price.  While I was excited, I was also thinking about the appraisal.  Anybody doing any type of loan will need to do an appraisal.  And I wanted an offer that would result in a CLOSING!  All of the loan types the buyers were doing made me nervous about the appraisal.  Plus, most of them wanted us to pay their closing costs too.

 

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So, I really wanted a conventional loan buyer.  Since we were over the list price already, I wanted somebody who did not need us to pay any of their closing costs.  The closing cost issue was a really big deal.  Why?  because if the house only appraises for the original list price of $138,750 and the buyer needed $3000 in closing costs paid by us, we would only net $135,750.  If we have to reduce the sale price to match the appraised value, I don’t want to also deduct the buyer’s closing costs from that value too.

Fortunately the house was so nice that I knew all I had to do was wait until the right offer came in.  Once it did, we accepted it.

This is one of many things I take into consideration for my clients.  It was fun to do it for myself this time!

 

Best way to negotiate

by John Rice

Most people think negotiating is making the other party do what you want.   That works when one party has the power to force the other into submission.  Like if you’re an 18 wheeler trying to make a slow car get out of your way.  If you’re the President and can threaten nuclear war.  Fist fights.

Not in real estate.  That behavior typically is counter productive because the other party can usually find somebody nicer to work with and still come out better.

It is a seller’s market now.  Sellers have the upper hand since there are fewer houses for sale.  But they still can’t make a buyer do more than the buyer is willing to do.

Negotiating is getting the other party to do the most they are willing to do for you.  You get them there by thinking of which terms are the most important to them.  In a sale, you have price, inspection repairs, what stays with the house, closing date and possession date.  You also have to know which terms you have some wiggle room on.

Sometimes the timeline is more important than a little more money.  When I bought my current house, there were several other offers.  To compete, I asked the listing agent what plans the seller had made for moving.  They had not found a new house yet.  Since I was keeping my old house as a rental, I did not care when they moved out.  They had lived in the house for 20 years and taken good care of it, so I was not worried about them trashing the place.  I wrote the offer with us closing in 30 days and agreed to let the sellers rent back from me until they found a new house.  They stayed for 3 weeks after the closing.  Now, I know not many people can be THAT flexible, but it is a prime example of giving the other party something really appealing that was really of no value to me.  Conversely, I’ve had clients who needed to be in or out of a house on a short timeline.   I’ve even had clients who had a new fridge and let the seller take the one in the house for agreeing to a better price.

I sold a house last night and it is a prime example of good negotiating.  The buyer had a price in mind.  My seller had a price in mind.  It wasn’t the same price unfortunately.  We were $1000 apart.  This was a cash sale.  The house was sitting vacant.  The buyer offered to close sooner than originally stated and agreed to not ask for any repairs unless there was something majorly wrong with the place.

To my seller, this meant less interest to pay for a house to sit vacant.  Less to spend to insure and heat the place in the dead of winter.  No concern for having to do repairs.  All in all, it probably added up to $1000 in saving for him.

So, the buyer got his price and the seller effectively got his price too.  All because the buyer gave the seller something that was not important to him, but was of value to the seller.

This is how it should be done.

 

Winter really IS the best time to sell

by John Rice

There are two kinds of listing:

  1.  The listings that are so desirable based on price/condition/location that EVERY buyer currently in the market wants it.
  2. All the other listings.

If you have one of those houses that makes people hear angels sing as soon as they walk through the door, are in an extremely desirable neighborhood, have priced your house to sell, or any combination of all that, congrats, your house will sell quickly any time of the year.  You have nothing to be worried about.  Spring is good.  Summer is good.  Fall is good. And yes, winter is good too.

If your house isn’t one of those, then you need to tweak everything you can if you want the coveted “SOLD” sign in your front yard.  You have what I call the Bridesmaid house because you know that saying, right?

Every year, people ask whether they should wait to list, or take their house off the market until spring.  My answer has always been no.

Why?

Because if you have a Bridesmaid house, there is always going to be a better house on the market all other times of the year.  I see it happen all the time.  A listing that is always the buyer’s second or third choice stays a second or third choice as long as those better houses keep coming on the market in the spring, summer and fall.

In the winter, there are far fewer buyers but there are also far fewer great listings.  Winter buyers typically have to settle for what is left over from the fall.  Picture this…..you’re at a Chinese buffet for lunch.  It’s 12:55.  There is one greasy looking Crab Rangoon.  All the General Zhao’s Chicken left are those thin, hard looking pieces that you think are really cat meat.  You are the only one at the buffet and nothing looks good.  Then, somebody comes out from the kitchen with some fresh food.  Even if it is just Pork Lo Mein, you eat it because it is the best thing available.

That is how the winter market works.

So, if you are ready to sell your house now, there is no need to wait until spring.  If you have been on the market without an offer, now really is your best shot at selling.