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How Buying the Worst House in the Best Neighborhood Can Actually Backfire

Scenario: You want a great bargain on a house in one of the best neighborhoods in your area. You’ve always heard that buying the “worst” house in the best neighborhood is the smart thing to do, so you’re thinking that’s the way to go.

Cast of Characters: You (and maybe your family or significant other) and your team of trusted real estate professionals.

Our Advice: Not so fast!

You’ve heard all the old cliches about being a small fish in a big pond, the low man on the totem pole, and you’re ready to apply them to your home-buying experience. According to popular advice, you’re looking for the worst house in the best neighborhood. But this is a tactic that can actually backfire.

Now, if you’re looking to buy in a specific neighborhood because you consider amenities, proximity to certain places, and school district the most important aspects, then by all means, go for it. But if your number one motivator is getting the best value, and you want to build equity quickly, this might not be your best bet.

Why Not?

First of all, do you really want to pay top dollar for a house you don’t love just because it’s in a neighborhood that’s supposedly the fashionable place to be? There’s always a hot new neighborhood in town, so when your currently popular and ritzy area becomes old news, you’ll be stuck there in a house that you don’t even like. In addition, a smaller, maybe less attractive house in a nicer neighborhood isn’t necessarily going to bring you a ton of equity just because it’s cheaper than the surrounding properties. Since the area’s already established, your “worst house” isn’t going to increase in value any faster than the bigger and better properties. In their book Zillow Talk: The New Rules of Real Estate, authors Spencer Rascoff and Stan Humphries break it down like this:

“If the adage were true, the bottom 10 percent of houses would need to perform better than the more expensive homes in their neighborhood. Faster appreciation would indicate that buying the cheapest house in the best neighborhood is a strategy that really does pay off. But—alas—it doesn’t. Instead, we found that only rarely does the bottom 10 percent outperform the top 90 percent of houses in a ZIP code.”

What to Do Instead

Instead of buying a so-so house in a neighborhood that’s been popular for a long time, it’s better to find a great deal on a house in an up-and-coming neighborhood. Not sure how to spot the Next Big Thing? Keep an ear to the ground and an eye on plans for your city, and go where the businesses are going. If you see an older neighborhood with a sudden influx of restaurants, shops, and other businesses, it’s a sure sign that the area is being revitalized. Neighborhoods have cycles. Older areas become new again, and they’re suddenly the place to be. If you can get in on the ground floor, so to speak, in one of these neighborhoods, you should be able to find a reasonably priced home that will build equity faster than that lower-end home in the high-end neighborhood.

The Key Takeaway

It’s just not worth paying a premium for a house that just makes you say, “Meh. It’s not what we wanted, but at least it’s in the right area.” Instead of overpaying for a house that probably won’t have much more resale value than what you paid for it, look for the hot, up-and-coming neighborhood. Find a deal on a bigger, better home than you could afford in the ritzier neighborhood, or snag a fixer-upper with great bones for an even lower price and make it your own. You’ll thank us when you find yourself sitting pretty with a nice amount of equity in just a few years’ time.

Negotiation Mistakes You Might Be Making

Negotiation is an art form. This is a fact that becomes increasingly more evident when a homebuyer and seller are working to reach an agreement in a real estate transaction. While there’s never a blanket negotiation strategy that fits every situation, there are some fairly prevalent mistakes that can absolutely kill a deal. Let’s look at a few of the most common negotiation mistakes people make when trying to buy a home.

Ignoring Your Realtor’s Advice

When you’re in the process of buying a home, the most valuable tool you have at your disposal is your Realtor®. Real estate agents are trained in the art of negotiation and have experience with lots of different scenarios. Put your trust in your agent to guide you through the negotiation process, and take the advice they give you to heart. He or she has pledged to make your best interest their priority.

Overlooking How Long the House Has Been on the Market

Before you make an offer on a home, pay attention to the number of days it has been on the market. If it’s been on the market for less than a few weeks to a month, you’ll want to come in with a strong offer. If it’s been 90 days or more, the owner is probably more than ready to make a deal.

Disclosing the Actual Amount You Can Afford

Never disclose to the seller how much you can actually afford to spend on the home if it’s more than your offer. This means that the pre-approval letter you present to the seller should be tailored for the amount you’re offering for the specific property. Most lenders will be happy to issue a new pre-approval letter for each new offer or counteroffer.

Assuming Everything on the Property Conveys

You know what they say about assuming, right? The old saying definitely applies here. Never assume that everything you see in a house when you tour it will come with the home when you buy it. For example, certain light fixtures, window treatments, and appliances might be considered personal property, and the seller may intend to take them when they move out. It’s not uncommon to see language like, “Refrigerator and dining room chandelier convey” in a purchase agreement. To be safe, you should spell out a request to keep anything that might not be considered a permanent fixture of the property.

Focusing Too Much on Sales Price

Instead of focusing on the total price, look at how much you’ll be spending monthly. Some buyers get that “sticker price” stuck in their head and can’t move forward without seeing it blinking at them like a neon sign. But statistics say that you won’t stay in the home you’re currently buying for the full thirty (or even fifteen!) years of your mortgage. Work with your lender to determine a good monthly payment that fits your budget; then you’ll have a total sale price to shoot for. If it’s still a little high for your liking, use negotiation tactics to bring it down in your favor. For instance, you might ask the seller to pay your closing costs.

Not Being Personal Enough

Sometimes a personal touch will help give you the edge over other prospective buyers. Consider including a buyer’s letter of introduction when you submit your offer. If another buyer presents a similar offer at the same time, there’s a chance your letter will spark a connection with the seller, which means they might choose your offer over the other one.

Making a Lowball Offer

You might think that if you make a low enough offer, the seller will get tired of going back and forth and settle for a lower price. But it almost never works that way. In fact, if your offer is low enough, the seller will probably just reject your offer without even countering. There’s nothing wrong with offering a lower amount than asking price, but it shouldn’t be less than 95 percent of that price unless the property has a lot of issues. Again, rely on your real estate agent’s knowledge and advice here. They should show you a comparative market analysis that will give you a good idea of the house’s actual value.

Friday Five // May 3rd, 2019

It’s Friday once again, which means it must be time for the Friday Five, our weekly roundup of five fun events happening throughout the Charleston area over the weekend. Celebrate visual and performing arts from cultures around the world, take in a few dragon boat races, get dapper for the most exciting two minutes in sports, and more. Whatever you choose to do, the staff and agents at Johnson & Wilson Real Estate Company wish you a safe and happy weekend!

Locals know that once the weather warms up, Patriots Point is the place to be on Friday evenings for Party at the Point, Charleston premier happy hour concert series. This family-friendly event takes place on the beachfront at Charleston Harbor Resort & Marina and features live music, food, and drinks. This Friday you’ll be entertained by the Ol’ 55s, a Charleston-based acoustic trio that takes the high level of instrumentation and tight vocal harmonies associated with bluegrass and blends it with everything from Johnny Cash to Journey, Def Leppard to Bruno Mars, and everything in between. Admission for Party at the Point is $8 for adults and free for kids 12 and under. Gates open at 5:30pm, and the band takes the stage at 6:30pm. Bring cash for entry and to purchase beer and food inside the venue.

New at this year’s North Charleston Arts Fest is the World Arts Expo, a celebration of visual and performing arts from cultures around the world. Take advantage of the lovely spring weather this Saturday and experience a diverse array of music and dance performances by local and regional cultural groups on three stages; live art demonstrations and displays; multicultural food offerings; art and craft vendors; hands-on art activities; roving entertainment; a kids’ zone; and even a pop-up Medieval Village. Admission and parking for this event are free. Lawn chairs and blankets are welcome and encouraged, but please leave your coolers at home. Bring a water bottle and stay hydrated thanks to Charleston Water System’s water buffalo. Food will be available for purchase from the likes of Lola’s Lumpia Food Truck, Happy Thai Food Truck, Roti Rolls, Krystyna’s Polish Food, Kona Ice Charleston, and more.

Also taking place this Saturday from 8am until 4pm is the 12th Annual Dragon Boat Festival at Brittlebank Park. Dragon Boat Charleston is a local nonprofit organization that promotes the physical and mental wellness of cancer survivors and their community through dragon boating. This annual festival is the organization’s main fundraising event, which allows them to provide programs and services all year long. On Saturday, 60 amateur teams will be showcased in a fun day of dragon boat racing. The event is free and open to the public. Come out and enjoy the day featuring costumes, racing, food trucks, and name-your-own-price margarita bar. Cancer touches everyone in some way. Come out and join the celebration of survivorship!

Don’t worry; we haven’t forgotten about the most exciting two minutes in sports, the Kentucky Derby! Get down to The Alley on Saturday from 4pm until 8pm for Bluegrass Bash, the biggest Derby Party in town. Come early and stay late for live bluegrass music from The Bluestone Ramblers; Best Dressed contests (Stallion & Filly); horse-picking contest for a shot at a custom bike from Affordabike; $8 Woodford Reserve Mint Juleps; a special Derby menu featuring Kentucky Hot Browns; a chance to win a four-pack of tickets to the Steeplechase of Charleston; free tickets to Charleston’s Hot Air Balloon Festival & Victory Cup Polo Match for the first 200 people in the doors; and a few other surprises you’ll be glad you didn’t miss! Admission to this event is free, but you must be 21 or older to attend.

Celebrate Latin culture and heritage at the Charleston Cinco de Mayo Festival this Saturday from 7pm until 11pm at the Visitor’s Center Bus Shed. Live music will be brought to you by Gino Castillo & the Cuban Cowboys, Bachata Flow, and DJ Leo, among others. Enjoy delicious, authentic foods from El Pincho Taco, Espettos on Wheels, Sabor CubaRican Cuisine, and more. Drinks brought to you by Jose Cuervo, Estrella Jalisco, and Tito’s Handmade Vodka. Be sure to check out the dance exhibitions as well! The primary mission of the Charleston Cinco de Mayo Festival is to encourage togetherness between diverse communities in the Charleston area. Secondly, the festival promotes awareness of the Charleston Animal Society and helps raise funds for their programs.

8 Things Your Real Estate Agent Wishes You Knew

As real estate agents, we work with people from many different walks of life and many different knowledge bases. We work with people who have done a lot of research about the home-buying or selling process, and we work with people who don’t have the first clue about it and require a lot of handholding. And guess what? We love them all! It doesn’t matter what you do, where you’re from, or how much you can spend on a house. We love helping our clients find the home that’s perfect for them, and we live for the air of excitement and the look of joy on their faces on closing day. But there are a few things we wish our clients understood a little more clearly.

We want to be your partner.

First and foremost, we want our clients to know that we’re on their side. We want to be your partner in the buying or selling process. We’re in your corner, looking out for your best interests before anyone else’s. We want to help you to the finish line that is the real estate closing table, and we definitely want to hear from you from time to time afterward. (So keep those Christmas cards and birth announcements coming! We love hearing from past clients.)

Time is of the essence.

We’ve dealt with more than a few instances where a client took their time to make a decision and missed out on the house they really wanted. There have also been situations where deals have fallen through because one party or the other didn’t complete a task or get paperwork turned in on time. Between the initial offer and closing day, there are quite a few deadlines that have to be met. Buying or selling a home is a huge decision and a major transaction; it’s fine to take the time you need to decide. But once it’s time to pull the trigger, sometimes you have to act fast.

DIY television shows make it look way easier than it is.

Real estate reality shows on HGTV or the DIY Network are a lot of fun to watch, and it’s great to get design ideas and watch the house-hunting process. But one of the biggest things your agent wants you to know is that those shows make the buying, selling, and remodeling process look a lot easier and faster than it actually is. There’s so much that goes on behind the scenes that you don’t see, including the negotiation process and all the otherwise “boring” details that don’t make for great TV.

We want you to be specific about your needs.

It’s good to be flexible and easy to work with, but don’t give us too long of a leash. We want to hear specific needs and desires so we can show you the most relevant homes without wasting your time or ours. At the same time, we don’t want you to paint us into a corner with too many restrictions or too long of a list of “must-haves.”

Pre-approval is so important!

Many agents won’t show a buyer client any homes until they have their pre-approval in hand, and for good reason. Sellers want to know that a prospective buyer is serious about purchasing their home, which means they want to see your pre-approval letter. Having a pre-approval also tells us what your budget is so we don’t waste time showing you homes you can’t afford. Additionally, being pre-approved can help move things along more quickly once it’s time to apply for actual approval for your home loan.

Lowball offers are embarrassing.

Your real estate agent is trained in the art of finding a home’s actual value. If a house is listed for $200,000 and you want to offer $150,000 “just to see what they’ll say,” be prepared for your agent to advise you against it. If that house is actually worth $200,000, bringing a lowball offer to the table like that makes us look like we don’t know what we’re doing. In fact, we’ll probably tell you not to be surprised if the seller doesn’t even come back with a counteroffer.

No home is perfect.

Whenever we show homes to buyers, we hear a lot of, “This one would be perfect, but…” Keep in mind that it’s rare that any one property will tick every box on your list and also be within your budget. The trick is to find the home that’s perfect for you for now. If you can’t seem to find one that meets every need or want, choose the one that checks the most boxes, is in the perfect location, and is within your budget. Most other issues can be resolved later.

We want you to think about resale value.

When you’re buying a home, we want you to be thinking about resale value. You might not have plans to move again anytime soon, but statistics say you will eventually. So even if you don’t need a second bathroom and an area that has a good school district, you’ll want to consider them for resale value later on down the road.