Updates

What working with buyers is like now

by John Rice

Working with buyers these days feels like this guy:

You beat the same bushes everyday in search of something for your people.  It is even harder if somebody needs a certain neighborhood or school district.  It is the toughest market I have ever seen for buyers.  It is harder right now to be a buyer than it was to be a seller after the market crashed.  Most houses get multiple offers.  The deciding factor often comes down to something minor like which buyer has a better closing date, or which buyer has stronger financing.  That is about all you have left to differentiate one buyer from another when all the offers are full price.  I recently got 7 offers on a listing.  The top 4 of those offers were the exact same price.  We went with the one that had a local lender I knew.  That was what got that buyer a signed contract.

 

And when you do finally have a house to show your people, this is what it feels like:

When a house that meets your buyer’s criteria hits the market, you get them in it ASAP.  If they like the house enough to make an offer, you rush to make sure you’ve got a current preapproval letter, you find out when the sellers would prefer to close, what their occupancy needs are….anything the sellers want that might help your buyers look more appealing since you know the best offers are going to be similar in price.

Being a buyer’s agent these days is equal parts boredom and excitement…..but it is all very rewarding when you do get your people a home they love.

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

153 Madonna - 001.jpg

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.

153-madonna-014

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.

 

153-madonna-008

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!

 

Common mistakes sellers make

by John Rice

Besides thinking the people on HGTV really know a lot about real estate, below are the most common ways sellers shoot themselves in the foot.  Granted, we are in a hot market and buyers are easier to please these days, but there are 228 houses in Lexington in the $100-500k range that have been on the market for more than 60 days…..not EVERY house in town is selling in multiple offers the first day on the market.

Here goes:

1. When sellers don’t finish moving out. If you are no longer living in the house, get ALL of your stuff out. You know you are going to have to do it anyway, right? It will make your house look better. Better looking houses sell quicker. Time is money.

2. When you don’t paint because you think you are somehow doing the buyer a favor by leaving it up to them to paint. I hear this a lot: “I don’t know what color the buyer will like and most buyers always paint after they move in anyway.” I can tell you that bad paint keeps a buyer from making an offer. If it doesn’t look good, they don’t want it. Fresh neutral paint is the cheapest thing you can do you make your house easy for a buyer to say YES to.

3. Leaving a lot of room for negotiating. An over inflated price usually drives buyers away. I see all the time where a seller will list for far more than the house is worth and eventually sell it for a little less than it is worth. The best model is to price it right from the start. If a house has been on the market for a long time, buyers assume there is no risk of losing it so they make a low offer just to see what you will take.

4.  Not doing any obvious repairs.  As a seller, your goal is to make it easy for a buyer to say yes to your house.  You want them to be excited and fall in love.  If a buyer walks in and immediately sees work that needs done, they begin to subtract whatever they think it would cost to change it, and they usually overestimate the cost.  You want your buyer to be walking around your house falling in love with it rather than subtracting repair costs off your list price.

I hope this helps you when it is time to sell.  The worst thing that could happen if you did all of this is that you sell your house for top dollar in multiple offers the first day on the market.

How cost vs. value really works when updating your home

by John Rice

I am sure you have seen those articles in magazines that say stuff like “Get back 89% of the cost when you update your bathroom.”  It’s not that I think they make that stuff up.  It’s not that I doubt that really happens.  The problem I have with it is that it makes people believe that the money they spend now is guaranteed to make them money in the future.

Here are the factors that are often overlooked when people think about cost vs. value:  Age, condition, style, design and quality are a few.  Why does all this matter?  The reality about value is that your improvements must be both desireable and have enough life left in it for the new owner.  Everything has an economic lifespan.   With updates, you also have style to consider.  New hardwood flooring that most people think is ugly may not add any value.  High end maple cabinets that are now 10 years old (and show it) may not add any value either.  Think I am crazy?  Ever see a high end remodeled bath from the 80’s with a blue toilet and gold fixtures?  Somebody spend a lot of money for that during the 10 minutes it was in style.  Had they sold it THEN, it would have been worth it all.  The same goes for pickled cabinets.  I have them in my house and I am sure they were an upgrade!  Now they hurt the value of a house.

Do you have to update in this market to sell?  No, not at all.  But you aren’t going to get any where near the “Potential Value” for your house.  Believe it or not, that isn’t a bad thing sometimes.  I have a great example.  I sold a house for a lady a few months back.  She built the house new 10 years ago.  She had not put one penny into any updates.  All the appliances were original, the carpet was worn out, the water heater was original…………you get the picture.  We sold it for about 94% of similar houses in the area that had been updated some.  Think about this!  Who really came out ahead here.  The buyer needed to put in all new flooring and paint everything and even then they still have all the original appliances and mechanical systems.  The seller “Lost” that 6% of value (about $15,000) but NEVER, EVER spent a penny over 10 years.  I think she is the winner here.  She got use of all the stuff that typically gets updated and passed them on to the buyer when they were of no value (depreciated).  Most of us would have spent more than $15,000 for updates over 10 years and wouldn’t have come out as good as she did!

That story leads me to the most cost effective update:  Paint!  I really think that if my seller had painted the whole house we could have gotten  a lot more money for it.  Most painters charge $1/square foot of floor space.  To paint a 2400 a square foot house would be about $2400.  If you do it yourself, it is even cheaper.  Paint is the biggest bang for your buck when it comes time to sell.

I will skip the stuff about updates that everybody has seen on HGTV.  I assume everybody knows that you shouldn’t over/under-improve for your neighborhood.  

 The bottom line is that yes you can get most of your investment back when you sell BUT it has got to still be in style and still look pretty new.