Sometimes it's all about the money

Many times in this series, I have cautioned readers not to view a real estate transaction – on either side, buy or sell – as simply an investment. 
 
A house is about so much more than dollars and cents. It’s about a place to “do” your life. It’s an investment, yes, and if you play the long game, it can be a spectacularly good one. But it’s an investment that shelters you, your family, your pets, and occasionally your friends. It sets a stage for the events of your life. It becomes part of your history.
 
But there are times – especially when selling – that I advise my clients to set all that aside and think about the money alone. No emotions. Just numbers.

I worked with a couple who owned two investment properties, one of which was the husband’s first house purchase. They wanted to liquidate one property and use the cash for other things. A lot of meaningful events took place in the “first” house, and for sentimental reasons, they preferred to keep it and sell the other one. But the first house was going to be easier to sell, and after 10 years of ownership, the appreciation had been significant. After some necessary soul-searching, and maybe a few tears, the decision was made to sell it – and enjoy the significant ROI.

Another couple was selling a historic house they had owned for 47 years and had renovated largely by themselves. They raised their children there, planted the gardens, and loved their neighbors. They wanted to sell it to a buyer who would live there with family as they had done, and not to an investor who'd flip it and turn it into something grand and flashy. The house represented a big chunk of their net worth and, obviously, they wanted as much as they could get. So, they had to look at the dollars and accept that the buyer who offered the best price and terms was the buyer who would get it – regardless of what happened after closing.
 
Another seller had an architecturally unique house that needed a lot of work he was unable to do himself – so, it was time to move on. It was a very interesting house, but it didn’t appeal to the average buyer. And, as with the couple above, the house represented a significant part of the seller’s net worth. After receiving and accepting a decent offer, some fairly aggressive negotiations ensued over inspection issues. Tempers flared, and at several points, my seller wanted to tell the buyers to take a hike. But, putting emotions aside and looking at the numbers alone helped my seller embrace the fact that he was going to walk away with more than three times his original cash investment after only seven years of ownership. An excellent return!
 
Sometimes, at the end of the day, it really is only about the money.

Life Cycles

A lot happened in my world last month.
 
Last month, I lost a friend to cancer. He was a good man and a good friend, a loyal supporter in dark times, and a ton of fun in general. He fought the disease right up to the end. The night he died, I was able to visit him in hospice and wish him well on his way. I’ll always be grateful for that opportunity, and for his friendship over the years.
 
Last month, I gained a second grandchild. A boy this time. Healthy, strong, beautiful, and eagerly anticipated. Loved by his parents, grandparents, aunts, uncles, and older sister. I’m grateful for this new life, and for the good times we will have the opportunity to share.
 
Endings, beginnings, departures, arrivals – it’s the cycle of life. 
 
So, what does all this have to do with real estate? Almost everything …

Real estate is about arrivals and departures  People come to Nashville to live, people move away, and everybody needs a place to live. Whether coming or going, the exchange of real estate – even if it’s a lease, not a sale or purchase – is a part of the process.
 
Real estate is about beginnings and endings   Lives begin and end. Jobs begin and end. Marriages begin and sometimes end. Life’s situations and seasons begin and end. What might have looked like a “forever” home at one point, may turn out to be an albatross the next year. A property that looked out of reach one day, may turn out to be the perfect house the next. 
 
Real estate is about life  I tell my clients this all the time, and it bears repeating here: a house is a place to “do” your life. And lives change. Circumstances change. Wants and needs change. So, especially when making real estate deals, we can’t get too hung-up on the past or the future. We must live in the present, make the best decisions we can with what we can see and know now, and accept the reality that things will change. That’s not a bad thing.
 
Come and go, ebb and flow, growth and, occasionally, retreat. It’s all for the good. And I’m grateful for every bit of it.

Up on the roof …

The classic, oh so mellow, tune of the same name recorded by the Drifters (in 1964, and yes, I remember when it hit the charts, and yes, you can do the math if you wish), was a love song to the peace and solace available when sitting on the roof on a warm night and gazing at the sky, far above the noise and hassle of the daily urban grind. A wonderful song, and a big hit.
 
That was then. This is different.
 
The condition of your roof is becoming an inspection flashpoint, an insurance problem, and a possible roadblock to closing ­– something both buyers and sellers need to aware of. 
 
It all starts with insurability. Climate change is causing all sorts of weather issues these days. In our part of the world, it’s tornadoes and hail. We’ve had a lot of both in the past decade and the vulnerability of roofs is making them difficult and/or expensive to insure. If this is news to you, you are not alone. It was news to me, and the situation isn’t going away. Eventually it’s going to affect pretty much everyone.
 
Read on …

Late last year, I helped a client couple get into a deal on a house that seemed perfect for them and their family. As it turns out they are happy with their house, but there was a big bump in the road.
 
While they were under contract, their insurance agent emailed and said that an inspector was going to have a look at the house before they would agree to insure the property. I hadn’t heard of this before, so I called my insurance agent and she told me two things: 1. Get used to it. This is becoming the new normal. And 2. It’s all about the roof. 

As it turns out, even though the roof was sound and not leaking, my clients had to replace it, or they could not get insurance, and therefore would not have been able to close. The inspector did a drive-by, saw that the roof was three-tab shingles, not dimensional shingles,* and declined to cover the house. Boom! He didn’t even get out of the car.
 
My clients were aware that the roof was getting old and would need to be replaced sooner rather than later, but they weren’t planning to deal with it right away. An unpleasant surprise!
 
So, what did we learn?
 
One: It’s about the roof  Changing weather has made roofing riskier for underwriters, and therefore more difficult for owners, to insure. This is not going to get better.
 
Two: It’s about the cost of insurance  Homeowners insurance, when you can secure it, is getting more expensive because of these factors. This is not going to get better, either.
 
Three: Forewarned is forearmed  Buyers need to go into a deal ready to take a hard look at the roof during inspection, and have a clear idea of how much homeowners’ insurance will cost. It’s possible that insurance expense could move a monthly payment beyond what a buyer can afford. 
 
Sellers need to know that buyers will be taking a hard look at the roof, and may demand compensation for repairs or replacement in order to close the deal.
 
*A word about shingles: Three-tab shingles lie flat on the roof slope and do not appear textured. Dimensional shingles – also called architectural shingles – at more typical these days. They have a textured appearance. 

The road ahead …

We are beginning a new year. That’s actually a fairly arbitrary distinction, of course, but with the holiday hoopla behind us, we do tend to refocus on the rest of life. The new year always brings questions about what’s up ahead.
 
Aside from the givens – we’ll have some more cold weather, the gym will be crowded until mid-February when the resolution people give up their resolutions, the Super Bowl with happen on February 9, and we will spring forward again on March 9 – it’s hard to say.
 
We look at the past, we look at developing trends, and we make our best guess. As I’ve said – with regret – so many times before, a real estate license does not come with a crystal ball. Not even as an optional extra. 
 
So, what does it look like from here? A few thoughts. A few caveats. Some counsel.

Stats Local inventory is still tight. The local economy is strong, and our population is still growing, placing upward pressure on prices. 

Days on the market are creeping up – nationally as well as locally. But that may change in the spring if a lot of buyers come out of hibernation.

Interest rates have been drifting between 6% and 7% and will likely continue in that range – maybe drifting into the low-6% range, but not below 6% as we had hoped. So, will all those buyers come into the market?

Modest price appreciation (average prediction is 2.9% nationally) helps affordability, that but may also inhibit sellers who are wanting to cash out at a profit.

 
The Outlook Pretty murky! It looks like we might be moving (very) slowly toward a more balanced market. If not totally neutral, less tilted toward sellers than in past years. But as above, there’s a lot of push and pull – factors moving in opposite directions.

A Caveat We have a new presidential administration, and if the past is a preview, we are in for a wild ride. If Trump 2 is as predictably chaotic and unpredictable as Trump 1, all bets are off. 
 
A Word of Counsel Is this a good time to buy or sell? My answer is, as always, yes! Trying to game out the market – waiting for things to move in your direction – almost never works out. It might happen by chance, but rarely by design. A lot of this is just plain dumb luck. 
So … if you need and/or want to buy a house, if you need and/or want to sell a house, now is always the right time. Know – with great clarity – your objectives, get the best realtor you can find (I can give you a suggestion on that), make a plan, and go for it.  

Gratitudes of the Season

This is the time of year when most of us give things, get things, and give thanks. All my shopping is done. Everything is wrapped. I’ve attended and hosted all the parties, and I’m finally slowing down.
 
Time to say thanks …
 
To my clients 
Over my 10 years in this business, with 130+ deals under my belt, I can honestly say that about 99.5% of my clients have been fun and gratifying to work with. Crises and emotions and speedbumps do occasionally come up – that’s part of the process – but, on the whole, it’s been a fabulous bunch. Grateful for all of you! Keep it coming!
 
To Onward RE 
When PARKS sold itself to Compass RE, I knew I didn’t want to go with the sale, so started looking for a new place to hang my license. And Onward was absolutely IT!  So, thanks to Bob and Marie Parks and Jenni Barnett for starting an all-new, all-local brokerage where individuals still matter. And thanks to Scott Cornett, my broker and all the other happy realtors who made the jump and make Onward the best place to work. More of you are coming. Welcome, and believe that the best is yet to come!
 
To friends and family 
You are the bedrock of my ongoing life. Love you all!
 
To Nashville … 
for being such a dynamic, expanding, interesting place to live and work. It wasn’t always this way. When I arrived in 1976 fresh out of grad school, Nashville was so dead, I thought I’d moved off the edge of the planet. What a difference 48(!) years makes. Sure, traffic sucks, but show me a dynamic, expanding, interesting American city where it doesn’t. We’ve joined the big leagues and I’m happy about that – traffic and all. 
 
To everyone who reads this 
Thanks for reading. And thanks for your nice comments, and for trying the cocktails and giving me feedback. More of the same up ahead …
 
Happiness, peace, and prosperity to one and all!