At Some Point the Sales Price is Just Too High (HA 1665)

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At Some Point the Sales Price is Just Too High (HA 1665)

At Some Point the Sales Price is Just Too High (HA 1665)

Transcript:

Steven Jack Butala:
Steve and Jill here.

Jill K DeWit:
Hello.

Steven Jack Butala:
Welcome to the Land Academy Show, entertaining real estate investment talk. I’m Steven Jack Butala.

Jill K DeWit:
And I’m Jill DeWit, broadcasting from the Valley of the Sun.

Steven Jack Butala:
Today, Jill and I talk about how, at some point, the sales price of a house is just too high.

Jill K DeWit:
Yeah. Every Wednesday, we shake it up here. We’re doing house academy, because we’ve been looking at numbers, I’m sure you have, too. It’s hard not to walk around and just know what’s going on in real estate. You go to the grocery store, you see signs, you know there’s stuff happening.

Steven Jack Butala:
This was prompted because there are some communities in the metropolitan area of Phoenix and really all over the country that are experiencing five to 10% purchase price, sale price growth in a community, a month. So at some point, it cannot just continue to go up because the pool of buyers will evaporate.

Steven Jack Butala:
Before we get into it, let’s take a question posted by one of our members on the landinvestors.com online community. It’s free. And don’t forget to subscribe on the Land Academy YouTube channel and comment on the shows you like.

Jill K DeWit:
Kim wrote, “Hi, I’m in the process of purchasing a piece of land, but the seller’s deed from 2002 has two properties on the deed. One is their acreage with their house and the other is a parcel I want to purchase. This is a small $1,500 purchase, and I’m hoping to avoid to pay any title agent work outside of the tools we use. Am I safe to purchase this land only and create a deed for the smaller tract? But then the first deed remains in effect for their house. Will my new deed supersede the 2002 deed that remain in effect for the house?” That’s kind of a repeat there.

Jill K DeWit:
You know what? The answer is yes. Here’s what’s so funny. People don’t know that you can buy from somebody five pieces of property on one deed. It has to be the same grantor, grantee, you know what I’m trying to say. Let me back up. It’s coming out all jumbled. Let me-

Steven Jack Butala:
I can answer it.

Jill K DeWit:
Well, no, I want to answer it. I want to say. The answer is yes.

Steven Jack Butala:
In a very positive way.

Jill K DeWit:
You just make a new deed-

Steven Jack Butala:
You answered-

Jill K DeWit:
… with only the legal description of the one that you’re buying on it, and that’s all that you need to do. You don’t have to recreate a new deed, too, by the way, for the other one. There’s no reason that they have to do two new deeds. The other deed is there for the one property that they still own, so that is correct.

Jill K DeWit:
When we buy properties, I love it. My favorite scenario is when I buy multiple properties from one person in the same county. I can buy 20, depending on what the county will record at one time. Sometimes they have a limit like 10 or 15 or something. They’ll say, all right, we can’t have more than this many on one deed.

Steven Jack Butala:
Really?

Jill K DeWit:
Yeah. Sometimes they do have limits.

Steven Jack Butala:
I’ve never heard of that.

Jill K DeWit:
Mm-hmm (affirmative). They do. Because it’s cheaper and easier, too. So if I have the same seller, everything’s all in the same name, I’m buying 10 properties from them, it’s one deed, it’s one recording fee. And it all happens at the same time. And then when I go to sell them, I just then just sell each one individually just like normal

Steven Jack Butala:
In a great way, you answered your own question here, the-

Jill K DeWit:
I did.

Steven Jack Butala:
Yep.

Jill K DeWit:
Yeah, you were right.

Steven Jack Butala:
Yep, you were right. Today’s topic, at some point the sales price is just too high on some of these houses. This is the meat of the show. This is all interconnected. There’s a lot of things that are at play when somebody buys a house and gets a mortgage. How much money they make is a huge factor when they go to get a mortgage on what they can pay. And we just haven’t hit that ceiling yet.

Jill K DeWit:
And their debt.

Steven Jack Butala:
How much debt they have. Interest rates play a huge part to this. When Jill and I were kids, interest rates for a house were 12%, and they’re 3% right now. That’s the lowest they’ve ever been during our lifetime. So a lot less of your payment goes to interest and more goes to principle, which is a great thing. It’s a seller’s market usually, in that case, because you can afford so much more purchase price.

Steven Jack Butala:
At some point though, and I think that we are approaching this, we’re going to hit that ceiling, that sort of glass ceiling of prices can’t just continually keep going up.

Jill K DeWit:
It’s nuts.

Steven Jack Butala:
Here’s what’s really going on in the West Coast that is perpetuating this. I don’t know if it’s good or bad. I’ll let you decide. People from [inaudible 00:04:50] states like California, where the values are much, much, much higher, property values in general, are coming into a state like Arizona or Colorado. And they have so much purchase power. And a bank looks at this. The bank looks at the previous mortgage that they paid and-

Jill K DeWit:
It was 8 million.

Steven Jack Butala:
Yeah. And so, now they can afford whatever the numbers end up being twice as much house in a different state.

Jill K DeWit:
They can spend nine, 10 million and get three times the house sometimes, even more. It’s nuts.

Steven Jack Butala:
Yeah. And then there’s a bunch of tax benefits that I don’t want to go into it all. But that’s really what’s happening. The prices on the West Coast are being artificially propped up because of the exodus from California.

Jill K DeWit:
That’s what’s going on on the West Coast. It’s happening all over in interesting places, too.

Steven Jack Butala:
Yeah. It’s happening everywhere.

Jill K DeWit:
Like we talked about yesterday, about these people saving up money, if this is not you, you need to know there’s a lot of people sitting on a lot of dough right now, partially I think because they were scared, as they should be, and stockpiling cash. And now they’re feeling comfortable. Now we’re a year, almost two years into this new normal kind of thing.

Jill K DeWit:
And they’re like, all right, I see how it’s going to go now. And now I’m feeling more comfortable. I’m ready to do something. And now I know I’m going to be work from home forever. It’s not going to be just a short term thing. So I really can go wherever. But there’s a lot of people out there with a lot of cash. They’re starting to make different decisions, I guess. I don’t know.

Jill K DeWit:
For me, the whole point was today, it’s getting nutty. It’s almost a little bit ridiculous.

Steven Jack Butala:
I’ll tell you, people ask me all the time, is it too late, did I miss it? There’s a sentiment like it’s over. Not by any stretch. Here’s a great example, Jill and I own a condo in Old Town Scottsdale. Every once in a while, I’ll just pull what’s for sale up and look at it. This is a condo complex where there’s one of two floor plans and that’s it. They’re all exactly the same size, so that you would think that they’re about the same value. Well, one was under contract for 400,000 was under contract for 225. And so, is it too late? No.

Jill K DeWit:
No.

Steven Jack Butala:
No. Go buy the 225 one. Clean it up.

Jill K DeWit:
You could renovate it.

Steven Jack Butala:
Yeah. Go ren it. Clean it up. And don’t spend a ton of money and time.

Jill K DeWit:
Spend 75 and put it on the market four.

Steven Jack Butala:
Just paint it and put carpet. Don’t spend any real time improving it with new appliances. No. There’s amazing bargains to be had in any market at any time. Now’s no exception.

Jill K DeWit:
I completely agree. I feel like there’s some more we need to talk about with this because we’ve seen it. If you’ve not done this, we’re nuts. I know I say this often, but I’m laying in bed looking around at real estate and I always like to go look back at the numbers. I always go look back and see, okay, it’s listed for sale for this now, what did they pay? And what did the guy before them pay?

Jill K DeWit:
It’s really funny. You can find pockets in this country where, whoa, that was expensive. And then, ooh, they took a hit, and ooh, it came back. It’s funny. You can see that, that has happened. We used to talk about it, some of the deals that we picked up. There could be a little reset coming.

Jill K DeWit:
Let me run this by you. We had some properties, I don’t know, 10, 12 years ago in the western part of Phoenix where you could pick up properties for 25, 35,000.

Steven Jack Butala:
Houses.

Jill K DeWit:
Houses, yes. And then they were at one time up to 175, something like that, let’s just say, 175,000. Then the stuff hit the fan in early 2010, late whatever that period was there. Picking them up for 25 to $35,000, then they creep back up. They’re probably now, gosh, at least 300,000.

Steven Jack Butala:
Yeah. 300 is a good number.

Jill K DeWit:
That’s what I think now. So will they hit 400?

Steven Jack Butala:
Yeah.

Jill K DeWit:
And then at one point, you’re like… You got to take a step back and go, shucks, now it’s getting a little nutty.

Steven Jack Butala:
Well, that’s the name of the show today. I mean, at some point, it has to not make sense. This is like everything in real estate. If you really micromanage and look at the statistics, days on market and all kinds of things on a zip code basis, it’s not going to surprise you. You’re not going to get caught. There’s all kinds of indicators that happen months and months and months before… a price won’t drop, but a price stabilization.

Steven Jack Butala:
That’s what I love about real estate. In the stock market, it the exact opposite. You have to guess. All you’re doing is guessing. With real estate, all you got to do is watch all the data, and it’ll tell you what to do.

Jill K DeWit:
Yeah. Days on market usually don’t change overnight. You watch it gradual like, huh? Days on market, they were 10. Now they’re 20. Huh? Now they’re 40. All right. You could see stuff like that happening. Or you could see inventory shifts like, wow, now there’s a lot for sale. What’s going on?

Steven Jack Butala:
I mean, if you’re a member, you know about the Land Academy House Academy, red, green-

Jill K DeWit:
Red, yellow, green.

Steven Jack Butala:
Red, green, yellow test. That is designed to tell you that, oh, this is a good place, and we’re going to do it and we’re [inaudible 00:10:31] send mail.

Jill K DeWit:
Exactly. The whole point here is you need to be aware of it. We want you to make a smart decision. Please don’t run out and spend crazy money on these properties. Spend some time, do your research and buy it right. You didn’t miss it. I agree, too.

Steven Jack Butala:
No, not at all.

Jill K DeWit:
There’s so many deals out there. That’s what a lot of people I think, too, don’t realize. We do this, too. We’re looking around like, if you don’t do this, you need to. We look at these really expensive things and go, well, great. We just need to send out a mailer. We know we can get a house there.

Steven Jack Butala:
That’s right.

Jill K DeWit:
Sure. Just need to send out some mail. That’s all you got to do. So whatever property you’re like, oh gosh, we missed the boat, dear, we’re never going to be able to afford that, yeah, you are. Even for houses, send out a mailer, get that-

Steven Jack Butala:
Houses-

Jill K DeWit:
… $200,000 thing that’s kind of shabby. So what? Make it great.

Steven Jack Butala:
At the top of the market here, and again, this applies everywhere, I’m seeing houses now being listed and sold for $1,000 a square feet. That was unheard of, unheard of two years ago.

Jill K DeWit:
That’s true.

Steven Jack Butala:
But $1,000 a square foot was the standard in the little beach community in California that we lived in, that we moved from. And so, you don’t want to buy at the top of the market like that anywhere. So what you need to do is go back and look at the data and see where you can find properties for two and $300 a foot in the same market.

Jill K DeWit:
That’s it. You got this.

Steven Jack Butala:
Not tough, right?

Jill K DeWit:
Happy you could join us today. Five days a week, you can find us here on the Land and House Academy Show.

Steven Jack Butala:
Tomorrow is Jack Thursday. And I’m going to talk about how we are all very zip code lucky. You are not alone in your real estate ambition.

Jill K DeWit:
Well, I’m curious now what that means.

Steven Jack Butala:
Some of us live in zip codes where there’s not a lot of trouble and that are conducive to a good life and some of us don’t. I will tomorrow urge everyone to pull up the [inaudible 00:12:32]. I live in zip code data about where to send mail. And I’m now looking at other things that aren’t so financial about these zip codes where we’re buying property, just mostly because I’m interested in it.

Jill K DeWit:
Interesting.

Steven Jack Butala:
And then it became a social thing. Tomorrow’s not really about making money. It’s about social stuff.

Jill K DeWit:
Interesting. Well, I’m proud of you [inaudible 00:12:51]. I’m sorry. You’re saying this has nothing to do with Excel?

Steven Jack Butala:
Nothing to do with money. Sorry.

Jill K DeWit:
Aw. I’m proud of you getting out of your comfort zone. Is that part of 2022?

Steven Jack Butala:
Yep.

Jill K DeWit:
Oh, good. Hey, I have some books you can read.

Steven Jack Butala:
I’ve never been comfortable.

Jill K DeWit:
I’m going to start giving you some inspirational books to read if you’re going to go down this path.

Steven Jack Butala:
What’s a comfort zone? I’ve never-

Jill K DeWit:
What’s a comfort zone?

Steven Jack Butala:
Yeah, I’ve never been in there.

Jill K DeWit:
Oh, no. Yes, you have. I’m your comfort zone.

Jill K DeWit:
Thank you for tuning in. By the way, don’t forget, we are on Clubhouse. Yes, you can find us there on the first and third Thursday of the month. Go on Clubhouse. Log in, follow me, follow Steven and follow the Land Investing Club. And you will see when we are live there, and you can talk to us. We’re Steve and Jill.

Steven Jack Butala:
We’re Steve and Jill. Information-

Jill K DeWit:
And inspiration-

Steven Jack Butala:
To buy undervalued property.

____________________________________________________________________________________________________________________________

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