Get it in writing!

In this business, the contract is fundamental. If it’s in the contract, it’s in the deal. If it’s not, it’s not. This is always important, of course, but in this crazy market, a little slip can cost you. 
 
Recently, I’ve had two situations that reinforced this concept big time. One tripped up a buyer’s agent on one of my listings. The other nearly tripped me up. Both situations worked out well, but you never know …
 
In the first, I had a listing with a stampede of showings and multiple offers. One came with a cover e-mail offering, among other things, to pay all my seller’s closing costs. But this provision was not written into the contract attached to the email. 
 
With the buyer paying all closing costs, this offer would be highest and best. Otherwise another offer would be the winner. So I called the agent and asked if her client would agree to a counter offer stating the buyer would pay all closing costs. They did, and they got the deal. 
 
Language in a cover email doesn’t count. Only what’s written in the actual offer itself. 

In the other case, I had the buyers. The listing indicated a $5,000 concession to the buyer for an 80% conventional or better offer. My clients were putting 33% down with conventional financing, so they definitely qualified for the $5,000 and they were delighted. 
 
A few days prior to closing, we got the preliminary closing disclosure and I noticed that the $5,000 concession wasn’t on the statement. A flurry of calls and texts ensued. I got the concession back into the deal, much to my clients’ (and my) relief. But, I had to scramble – as well as rely on the seller’s honor – to get things fixed. 
 
As a rule, if something is stated in the MLS listing, it applies to the deal. But, I relied on that assumption, and it wasn’t written in the actual offer. A big lapse on my part – never to be repeated!
 
So the lesson, especially for buyers in these competitive times, is to say what you mean and mean what you say – and write it into the contract. And work with a realtor who will help you read what’s written. Assumptions and vagary can lead to disaster.

Tips on Flips

Flips. You’ve seen them – houses, especially in transitioning neighborhoods, that have been completely re-done for the purpose of resale. Lately, I’ve had some intense experiences working with buyers of flips, and as always, we learn something new with every transaction
 
One deal involved a cute ranch, that looked wonderful on the surface, but hid all sorts of unpleasant surprises upon inspection. Even more unpleasantness arose when sellers were reluctant to correct defects. There was drama right up to the day of closing, and it continued for a week thereafter!
 
In another, the buyers were aware of a number of things that were obviously done sloppily or just plain wrong. It’s a great house and they wanted it anyway, so they bought it planning to correct the problems, and budgeted money for that purpose. 
 
In the process of all this, I’ve picked up a few pointers.

Eyes Open   Not all flips are as sloppy as the two I cited above, but in a flip there’s an excellent chance corners have been cut somewhere. This isn’t a reason to cross flips off your list. You just need to be aware of this and go forward knowing not to expect perfection.

Inspect!!   Inspect everything and find out whether anything is seriously wrong. If the fundamentals (foundation, systems, wiring, etc.) are good, the house meets your needs, and you like the price, go for it! You can replace a tacky bathroom faucet or repaint the living room later. 

 Know Your Bottom Line   If there are defects the seller needs to correct, know what you ultimately will or will not accept. Then go in and bargain hard – always remembering that civility works best – and know when to walk away if you can’t get what you want.

Budget   If you like the house and you want to live there, and you are deciding whether you can afford it, think about what you will want to correct and budget for that. Cheapo kitchen cabinets are considered an aesthetic issue and the seller won’t replace them. So, if you cannot live with the cabinets, budget to make the change. 

Of course, much of this applies to buying any existing property. With flips, what often trips us up is that they usually look so perfect. Successful flippers load up on the eye candy. Buyers fall in love with what they can see at their first visit and are shocked to learn that the ductwork is falling apart or the brand new roof is so cheap it will last 3 years at best.

Of course, the best tip I can offer is to link up with a good realtor. Especially one who can make you a nice cocktail while you go over your repair request list …

Home - as an Investment

Over the almost-six years I’ve been writing these monthly emails, I’ve said more than once that looking at a house purchase strictly as an investment is missing a big part of the picture. 
 
A house is more than an investment. A house is also a home. 
 
Life – romance, marriage, intrigue, kids, gardening, entertaining, joy, sadness, good food, good friends, hangovers, holidays, the whole ball of wax – happens at home.
 
And yet … Investing in a house can also work in your favor – big time! Right now, in these crazy covid-challenged times, it’s a good idea to look at that side of the equation, too.
 
First, let’s get this one out of the way: ALL investments involve risk. No risk, no reward. Generally, the higher the risk, the higher the potential reward. But of course, with high risk comes the possibility of no reward at all.

So, how do we look at the risk/reward picture with residential real estate?

Let’s compare to the stock market. Gains in the S&P 500 look impressive this year, rising almost 5% from January through mid-August. Unfortunately, that’s entirely due to the gravity-defying performance of six tech stocks: Facebook, Apple, Amazon, Netflix, Microsoft, and Google. Without these six, the index would have dropped by 4.2%. And how long can these six fly so high? Remember Icarus?
 
Bond yields are lousy and values are sinking. Hoarding cash won’t work. The value of the dollar is down 3% so far this year.
 
Pretty gloomy, right? There’s always gold, of course. Gold is up 35% this year. But gold can be volatile and – here’s a fundamental question – what can you actually do with gold?
 
Which gets us back to real estate. Not only do values generally increase over time – sometimes dramatically – you can live in a house while it’s appreciating. See paragraph three above. It’s the only investment you can throw a party in, cook dinner in, make love in … whatever. Try any of that with stock certificates or gold bullion. 
 
True, property values sometimes drop, but they always rise again. And in the mean time you have a place to live, which can take the sting out of a – usually temporary – loss.
 
Add to this mix ultra-cheap mortgage rates – currently 3.5% (or less) for a 30-year fixed – and the answer is obvious: Buy a house!
 
One more thing – always work with a good realtor. Preferably one who will mix you a nice cocktail …

Stones in the road – it’s bumpy out there

As Nashville goes through the most challenging year in living memory – tornado damage, a raging pandemic, economic uncertainty, and a long-overdue reckoning on racial equality – the Nashville real estate market seems to sail on, undisturbed.
 
Values are still climbing – more slowly than in recent years, but still climbing. Money is getting even cheaper – currently under 3% for a 30-year fixed – offering increased purchase power for buyers. Inventory is tight, offering a field day for sellers.
 
Sounds like a party!
 
And yet … it can get bumpy. 

Mixed Blessings for Buyers 
Cheap money is great! The rule of thumb is that every one-point decrease in mortgage rates increases purchasing power by 10%. But, as I’ve said in recent months, cheap money brings out lots of buyers, and limited inventory makes the competition absolutely fierce! It’s great to be able to buy, but what if there’s nothing for sale?
 
Mixed Blessings for Sellers 
It may seem odd, but this situation can make life crazy for sellers as well. Especially with listings at $500,000 and under, multiple offers are more-or-less the norm. Often, very juicy offers come in as buyers try to elbow their way to the head of the line. I’ve had several listings that received offers with escalation clauses competing against each other. Assessing which comes out on top requires some serious math, and the price has to be factored in along with the other provisions of the offer to determine highest and best. On top of this, bidders can get really crazy and offer above – sometimes way above – appraisal value, which can open another can of worms. What happens if the house doesn’t appraise at contract price? Challenging for sellers – even with people scrambling to buy their house. 
 
What to do? A few suggestions:
 
Buyers, keep calm. Shop carefully and deliberately. Know what you want, know your limits, and make a strong bid on a house you really want. If you don’t get one, there will be another.
 
Sellers, price it right and stand back. In spite of the general frenzy, most buyers can look at comps and can tell if something is priced too high. If you price it right, they will come and you’ll get an excellent price. 
 
Sellers, remember you are looking for both highest and best. Don’t jump at a high-dollar offer that’s larded with weird provisions and/or potential loopholes for the buyer.

Buyers and sellers, work with a good realtor. Managing challenges and stress factors is what realtors do for a living. Anybody can find a house these days. Most people can more-or-less offer one for sale on their own. It’s the complications, the pitfalls, the terrifying unknowns – stones in the road – that realtors specialize in handling.
 
I’m a realtor BTW, and I’d love to talk with you about how I can help!

What are you waiting for?

It’s baaaack!
 
After falling off the cliff in March with the twin body-blows of the tornado and covid-19, residential real estate in Nashville has come back to life. Big time.
 
Last month, I talked about possibilities, starting off with the question, what happens next? A month ago, it looked like normal activity would return at some point during this year, and I mentioned that some sources were predicting a gangbusters comeback in the fall.

Fall, it seems, has arrived early. Leading indicators tell the story. While actual closings are still depressed, the number of new listings and new bound contracts in Davidson and Williamson Counties this May are actually above the May numbers a year ago. Closings will follow suit next month.

What does this mean? If you’re thinking about jumping into the market – either as a buyer or a seller – but were hesitating because things seemed uncertain, I say this: what are you waiting for? 
 
Money is still really cheap! As of yesterday, the 28th, Freddie Mac’s average rate for a thirty-year fixed mortgage stood at 3.15%. Average rate for a fifteen-year fixed was 2.62%. Those are remarkable numbers. Great news for buyers!
 
Inventory is still tight. Housing starts have not kept pace with demand for years. Everybody has to have a place to live and low interest rates bring swarms of buyers into the market. Great news for sellers of all stripes – both builders and sellers of existing properties. 
 
Is there a fly in this ointment? Well, the future is impossible to predict with certainty. While there has been progress, we are not done with covid-19. Some fear that a too-rapid reopening will result in a second wave of infections, and a second wave could shatter the currently-building confidence. That’s possible, but I think it’s unlikely. See above: everybody has to have a place to live. 
 
Time will tell, but my advice is to come on in. The water’s fine.
 
A word of gratitude. This has been a rough time for all of us – especially for those who are out of work and those who have faced sickness and death. One of my sons is out of work right now, and I have several close friends who have suffered through this terrible illness (clue: this is NOT just a flu), but no one I know personally has died from it. And I am grateful for continued health and for having useful work to do. I am also grateful for all of you who read my emails, especially those who send me such nice comments back. My hope for each of you is that you stay healthy until we are safely past this pandemic.