John Payne Team – Cincinnati Realtor

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Running with a Realtor: Pleasant Ridge

Pleasant Ridge is a community within Greater Cincinnati that has a history and a future. Its history is that it was a flourishing community from well into the 1800’s. In the recent 20 years, the neighborhood has been chasing the likes of Oakley and has seen significant struggles during the Great Recession with foreclosures and distressed homeowners. The Community of Pleasant Ridge is going to come out ahead. The geography of the area is positive and is a middle ground between downtown/ Uptown and its booming development and Kenwood. I believe the biggest challenge is that they need to continue to embrace their unique nature and not try to be “like the rest”. Places like Pleasant Ridge can not compete with places like Oakley and Hyde Park/ Rookwood from a development standpoint, but they can and should compete within the secondary markets like Clifton, Northside, Price Hill, Blue Ash, Milford and Madeira. An ambitious plan was presented back in 2014 and I hope that it doesnt come to reality. This community has plenty of space on the street and I don’t think this major shift is necessary! Check this out here. Pleasant Ridge is a fantastic bedroom community within the Cincinnati Public School district. The houses there are a wonderful mix of starter home bungalow style and they go up to the typical Cincinnati mansion! This diversity of home is why this neighborhood will see another day, it will continue to attract and retain Buyers and Sellers.

Inspect your sewers in Real Estate Transactions

We just closed a transaction with a client in Anderson who bought the most wonderful ranch house. During the offer period, it was noted in the disclosures that the house had a disclosed sewer backup in 2014 and that they have not had issue since. I also noticed that they had a mature, 25 year+ Silver maple in the front yard. I informed my client that it was my opinion that we inspect the sewer in addition to the house, which she was receptive too because she just replaced a sewer in her current house in Clifton. The buyer hired Zins Plumbing, a local Cincinnati company to camera the drain. They discovered a major root intrusion and major break in the sewer line. Zins Plumbing was very professional and marked the location in the front yard and recommended that Metropolitan Sewer District (MSD) to be called and they would see if the blockage went into their sewer main. It is the homeowners responsibility to keep the house sewer to the street clear of roots. This is mentioned in multiple documents found on the public service website- http://www.msdgc.org MSD only becomes involved when the pipe is compromised, cracked or shifted from alignment, within the Right of Way (ROW). In our case, the pipe damage was deemed within the ROW and its depth was over 15’ below the surface. The estimate to perform this repair was well over $10k. The cost of inspection was $200, the cost saved was peace of mind and over $9800. That’s a nice return on investment and something that in my opinion more Buyers and Sellers should investigate as they do maintenance on our homes. Knowledge is Power, and as always be careful out there buying and selling real estate!

Buy Equity in a Neighborhood, not a house

I have always been told by respected investors that you make your money when you Close the first time on the property- you buy with equity in the property. I have changed my opinion within major sections of Cincinnati this last year. I believe within the Sellers market regions of Cincinnati, you buy equity in the neighborhood. Equity in a neighborhood is the upward mobility of your immediate area- your neighbors. There are rules to this theory and I believe they are bound by these three rules: the market search of the neighborhood, how close the subject property is to the core of the neighborhood and does it have the housing features of the typical house in that neighborhood. First, the market search is critical. People are not creative when purchasing a house, if they want Hyde Park- they don’t want Oakley, Evanston or Norwood. Some areas of Cincinnati’s MLS simply don’t get searched and their values do suffer because agents and the general public do not know what that neighborhood is named! Second, how close the house is to the core of the neighborhood. Context is everything- your proximity to the center of the neighborhood is critical. A community core can be an obvious “square”, it can be “that house” on the block, it can be adjacent to an iconic park- it’s a place where people want to be. Lastly, the housing features- these are critical. If you buy a 2 bedroom in a 4 bedroom neighborhood- it’s a out of market house! Buy the same style of house that everyone wants or has. If you buy a 2 bed in a 4 bedroom area, you should make sure to have the money to add those additional bedrooms and make it nicer than your neighbors. So don’t get frustrated by the marketplace, accept it, negotiate nimbly within it, but don’t forget- its not a bad place to be on successes’ coat tails! Be careful buying out there!

Home Inspections- the best time for Buyers, the worse time for Sellers!

The most major contingency in the Real Estate transaction is the inspection period. It is typically a 10-15 day period from which you can hire a home inspector to provide you a report of their opinion of condition. In the report, they will provide opinions of defects and they can recommend further investigation and/ or they state that a repair should be completed. The inspector does not include in the report how to correct, they do not recommend companies to do the repair. Your agent may have qualified persons from previous dealings or AngiesList is always an option. The Buyer takes the information in the report and tells the agent what items within the report need to be repaired or resolved before they move forward with the purchase. The Buyers agent provides this list of desired repairs to the Sellers agent on a “Post Inspection Addendum” boilerplate form. After the presentation of this form the Sellers have a negotiated time period to respond to the addendum. We usually write 3-5 days in the purchase contract. The Sellers can negotiate from the Addendum. While it is a request of repair, it is formally a counter offer to the original purchase contract. As a buyer, you should understand that they can say “NO” to any item. Typically, if the request is reasonable, we get this negotiated pretty easily unless a structural or major mechanical system needs addressed. Sellers are hesitant to invest money in the house that they want to Sell, and Buyers are wanting a stable house to move into. It is critical that both agents understand their clients goals; Buyers Agent- Buyer needs a house; Sellers Agent- navigate the Owner to a successful Closing. After everyone is satisfied, the Buyer and Seller sign the addendum and move forward to Closing! If the Buyer and Seller can not be satisfied, then the Buyer is Released from the Contract and retains the Earnest Money deposit because they exited the contract using a negotiated contingency. In the Sellers market that Cincinnati saw the summers of 2014 and 2015, I saw many contracts being emotionally written and then the buyers agents’ used the inspection period to negotiate the transaction to the real market price. It was a tactic used to emotionally invest the Buyer and Seller, then you leverage the fear of the Sellers that the house would look defective if they couldn’t negotiate with the Buyers. It is something to be aware of during the transaction!

How do you buy New Construction homes that are online, but not built?

The process of buying a semi custom or custom house is one of the most enjoyable and potentially stressful things that you can do during your home buying life. The reasons in general why they stress people is because it stress tests your finances, you need to make so many decisions, and you are trusting a new team of experts. The reasons why it is enjoyable is because you get to create your dream- one selection at a time! The process of building a house is easier than renovating, but more complicated than buying an existing house. You need to identify your lot, your builder, your budget and timeline. Some communities have builders who are well financed, or self financed. That means that these builders have enough money on deposit, or a good enough profit margin that they can borrow the money to build the house and still sell it to you for a profit after recouping their “cost of money”. If your builder does not finance the properties, or it’s a semi custom or full custom home, you will be required to get “construction financing” or pay Cash. Construction financing is done by banks who do traditional financing- Locally, I like to use a group of experienced banks, call me 513-500-7474 to get a list of Lenders. The banks manage the construction “draws” and are another protection for you- the consumer. There are two contracts that can be used in buying new construction. The two are- lawyer drawn contract that binds the builder and customer together, or a State of Ohio Realtor Board Contract that binds the brokers to their clients and then attaches addendums to the contract. It doesn’t matter which is used, but if the first is used, I would hire a real estate or contract lawyer to review the contract and explain the details and position of the contract. Whoever draws up the contract will be protected more than who is bound by the contract! Typically, the construction schedule is a 6-8 month schedule and I would always recommend building with a well laid out schedule. Materials can overcome some of mother natures curveballs, but you need to make sure that your specifications match your environmental risks. For all of your site/ builder identification, negotiations and building representation needs, please contact John Payne at 513-500-7474.

Appraisals : a fail safe in the Buyers process

I just represented a client on a house in Anderson which we had under contract, inspected and then it fell apart because of a “short” appraisal. They call it short because it came in under or short of the contracted purchase price. The house was a renovated ranch in an area of renovated ranches. It has two bedrooms upstairs and one legitimate bedroom in the lower level. I call it legitimate because it has an egress window cut into the foundation as means of egress in the case of fire. The yard was amazing and private and it came with a two car garage which was a great bonus in the neighborhood. The problem with the appraisal on the property is that you needed to go more than 1 mile to get a property that was renovated nicely like this one. Also, you are in an “older” circa 1950’s neighborhood which has many original owners who have either not updated before Selling or haven’t moved- causing a draught of comparables. The contract was for over $210,000 and the property appraisal came back over $50,000 short! That’s ¾ of what we thought was market value! The buyers and I knew that they were paying “top of the market” for the house, so no one was surprised that they were not getting a ‘deal’, but I wash surprised when we saw the independent third parties value on the property. You can challenge an appraisal, but you are only going to get a percentage, not bring ¼ of the value back to the property with justified comparables. The Seller is not out anything financially, but more under the pressure of the market to put unjustified value on the property. The point of leverage here is in the Buyers favor as it can be resolved with a price reduction to the appraised value. Also, the Buyer could bring more money to the Closing- so if the appraisal came back at $200,000 and the contract was for $214,000; the Buyer would bring an additional $14,000 (the difference) to the Closing. Not many people can or want to do this financially, not the most viable option. The Buyers at this point had invested $250 in an appraisal, $450 in home inspections and put money into a loan origination. Fortunate for them, all was refunded except the termite and radon inspection fees with the understanding that all of the “players” would remain the same, but it was a stressful exit from a previous very exciting time! The message here is that you have a risk if you are Selling and Buying a property that is an “outlier”. Your most conservative position on buying a house is to understand your market ‘exit’ and what price ceilings you have to monitor as you elect to do your renovations. Even if you didn’t use me to make your purchase, please feel free to call or email with any questions with regards to your homes value or “market position”.

Is 3.5% Downpayment enough Skin in the Game?

You may think Im an elitist if you read my article Cut FHA PMI- Housing Market going in wrong direction. You’re half right. The fact is that you’re able to purchase a house with little money down is not a problem, its leveraging debt to income and the Lending environments rule. Leverage is a wonderful thing as long as there is a plan in the background! I would recommend that the person comfortable leveraging the numbers would have a successful financing planner working for their money that is not tied up on the house purchase. Also, I would recommend that the person’s accountant would help advise someone with a low down payment in vetting the plan of execution so that your aware of your path towards financial success. My issue with clients with 3.5% down on a house is that when you sell a house, you pay 6% or higher. The broken piece is that your transaction costs and your equity in the property could be imbalanced. In this scenario, when you Sell a house you are gambling on the market appreciation or are you only going to take a clients built equity to pay your agent for that professional service? That doesn’t sound like good business! If you have read my story titled “Is the American Dream, just a dream?” you will have more understanding of the ‘equitable position’ of owning Real Estate. I just had a client in the booming market of Madeira, a suburb of Cincinnati- loose money on a house that they bought in 2010; arguably pre-recovery. On a phone call with the client 2 days before Closing, he said “You know a house is more of an asset if you only do the maintenance, it can be an investment but you need to constantly work to improve it!” That was the best explanation that I have heard to date and I needed to write that down! In summary, I would recommend that if someone is only putting down a minimal amount of down payment, that they have liquidity elsewhere in their life so that the “big gamble” isn’t on the house. Also, this concept of reinvesting constantly makes you wonder if your debt service to income ratio is low enough that you have monthly cash flow for those stabilization projects. As a rule of thumb, you are supposed to have 6 months of ‘Living’ within an investment vehicle that can be liquidated without major penalty in less than 3 days. If you read this and want more information or coaching on the correct next steps for you, I would love to have that conversation and refer you to a professional financial planner so that you can make educated buying and selling decisions. No reason not to Win!

What is Market Value? Avoid the equity loss with sound Strategy!

    As a Listing Agent, I market the property to the active Buyers Market. I evaluate the position of the property within that market based on feedback, data and a dash of gut-guess (trademark pending). The feedback comes from past and present clients as they walk similar homes throughout the region, and then I balance consumers opinions with other agents opinions. The data that I use are the recent MLS sales, the general micro-trends within the market as analyized by National Association of Realtors and finally price per square foot. The gut is typically breaking down the weakest links and educating my client on the perspective of the Buyer when viewing the property. The property that I am highlighting is a property in a suburb of Cincinnati, Indian Hill. Indian Hill is a private municipality that has a shared fire department, independent police and government, independent and highly ranked Schools. It is considered affluent and has some brand recognition among people who know the area as a desirable area if you have had financial success! The topics handled in this entry span- motivation, market position and keeping up with the Market. The topics are many, but none are about how to create financial success, but it is about write an Offer where you have interest, as you NEVER know the motivation of the other person in your transaction. Motivation is what agents talk about when they want to understand how fast they will get paid. If your client is motivated, then the property will Sell quickly, and the result is a Closing. If they are not motivated, then you run the risk of sitting on the market until that “right offer” is brought. If an agent is doing their job of marketing, then the price and inherent motivation of the Seller becomes interpreted public knowledge. I say “interpret” because to a knowledgeable person, with years of information- an agent can make assumptions.  I call them fire sales and am aware of them immediately! The property at 5775 Sugarun, 45243 is the property that I am going to use as an example. The property is marketed as 14 rooms, 5 beds, 5 full baths and 3 half baths on three acres. Its original price on the market on July 19, 2013 for $1,198,000 and after 20 days dropped to $1,096,500. The property expired after 215 days, which during that time it went Pending zero times. The next Listing period began and it was listed with a different agent, but same agency for $1,050,000. It was a Listing period of only 72 days and it was Canceled May 8, 2014. Then, the same company relisted the property for $949,000 and the reduced it at 102 days to $895,000 and then 42 days later, the property went Pending and Closed for $785,000 plus the Seller paid $2500 in Closing Costs! The property Closed for 65.5% of it original List Price and it took 432 Days to Sell! The answer to WHY, lies in how the market values the property. The agents can be faulted, but the agency maintained control of the property during the marketing process, so they must have created confidence with the Seller- more so than the agents who kept being fired! But, the moral of it is that the Seller got market value for their 3 acre outdated property that needed a half million in renovations. Within a ½ mile and 6 months no property has been Listed or Sold under $1M, but the other properties were all decorated and updated- if even superficially. The value of this story is to highlight two major topics- re-invest and move quickly with a Shifting Market. The re-investing part happens after we Sell you the property and as you enjoy that property. The reacting quickly is the responsibility of the agent in our Shifting Market and not allowing the property to become the punching bag for an offer more than $100k or 12.5% of its total value in one offer. Strategically, if the Seller would have reduced the price to $750,000 they may have gotten a better Net, but that is hypothetical in all cases! The responsibility of you, the Owner, is to improve your property to what will make you happy and to maintain a position in the marketplace.  Your requirement to maintain the best position possible is to always re-invest and re-invent to keep up with the Market—as if you do not, your equity built with the property can be lost quickly! Good luck Buying, Selling and as always, please call John Payne and Marcia DeMar (Wycoff) to evaluate, market and List your properties- the Payne Team is your professional Real Estate Advocate!

Is the American Dream, just a dream?

Is the American Dream, just a dream? Or, is it still the investment that our families had during the post war buildup of our modern day communities. I believe that with the correct frame of mind, you can still position yourself in the buying and selling of property- but it is getting more and more difficult! Broadly, People buy homes for two reasons- To gain a tax deduction because of mortgage interest. To further surround themselves with ‘Like persons’. As I was cutting my grass this Spring, cutting every 4-5 days to avoid massive clumps of grass from littering my yard- I had an idea- I should rent a house where I want to live, negotiate the exterior services into the lease and purchase a multi-family property as an investment! I stopped and laughed about the idea, while answering my phone getting a Buyer lead off of a sign. The Buyer was calling for a $1.3M condo with a City view and they couldn’t put together 5 words to utter “how much is this house”. I cordially answered the question and informed her that its only the top floor and its two bedrooms. While you may think that I’m complaining about the fact that someone is interrupting my mowing, the moral of the story is simple- people are looking for Real Estate all the time. It’s a compulsion for some- enough that the industry brands them ‘Looky Loos’ (this Open House is for you!). Real Estate is a fun hobby for some Buyers, it’s a luxury for some Sellers’ within some niche markets, it’s a business for builders and it’s a lifestyle for me as an Agent. Definitions are hard, but the reason why it’s a lifestyle is because it is the sweat on my brow. I get fist pump happy when the phone call comes in to List, when a call is received and the recipient is responsive, and when I successfully negotiate a deal. What most don’t understand about Real Estate is that it’s all risk. My house has yet to write me a check and I tend to over improve our homes which pushes me further into the red. For the group of us who are Agents, Builders and true investors (longer ownership than 10 years) that is built around the risk/ reward model. If you take high risks, your rewards should be sharp and high. If your risk is low, your reward should be equal. The pendulum can only swing so far! The solution to mitigate this is the model that I brainstormed… or a version of such. Balancing the ownership risk is a tough balance. My advise is that look at your home as a flatline asset and never appreciate it over a 10 year course and this is why I would recommend, first, trying to buy the property right. It’s the first real rule of Real Estate, buy with equity, which means you need to buy the ‘shell’ with money in it for improvements. This is critical if your Buyer is needing to preserve an equitable position in the ownership of the property. If the owner has already “written off” the successes of the property, then you can bludgeon, otherwise, approach with caution. Per HGTV “(http://www.hgtv.com/home-improvement/which-home-improvements-pay-off/index.html) The importance of different maintenance issues varies with geographical location, too. Roof replacement (average cost: $11,376) was very important to buyers in the east, according to Remodeling, where homeowners recouped an average 96.3 percent of the cost. In the Midwest, the average return for the same improvement was just 71.1 percent. Cincinnati is more within the numbers of the Eastcoast, but does display strong characteristics of the Midwest. So, I am going to make the assumption of 90% return of investment. With these numbers, the way that I would justify it is that you have a TIP: Know your situation better than your neighbor. You can accomplish this by hiring John Payne and our Team of experts to Buy and Sell your properties. If you would like a free market analysis, please call me at 513-500-7474 or email at john@payne-team.com