Selling • April 23, 2012

Extend the The Mortgage Forgiveness Debt Relief Act

by J. Philip Faranda

In the fall of 2007, after the sub prime crisis hit but long before the real decline hit the country in the gut, the Bush administration signed a bill into law that allowed regular borrowers to avoid a massive tax bill for the forgiven debt resulting from a short sale. Prior to that time, people who sold their home in a short sale would often get a 1099 for the discharged debt from their bank, causing them to sustain a tax liability. The Mortgage Forgiveness Debt Relief Act changed that.

It is a good law. Americans facing a foreclosure or short sale already face hardship and financial difficulty, to say nothing of stress. To have a tax bill for money you’ve never seen helps no one.

The law is set to end at the end of 2012. Unlike the tax stimulus of 2009 and 2010, which had to end sometime, the MFDRA should not have to end, certainly not anytime soon. The times we are in right now are actually worse than when the law was put into effect, and while it has helped untold scores of people, there are still more who would benefit from extending the law. Almost 30 million homes remain underwater and short sales remain a huge chunk of the market in many parts of the country.

Right here in Westchester County where a starter home can be over half a million dollars, a short sale can involve clients who are often underwater by six figures. To be destitute and forced from ownership with the accompanying credit consequences is bad enough; but to owe Uncle Same tens of thousands of dollars on top of that is unfathomable. The citizenry benefits from a capital gain exemption on their primary residence up to a quarter million for single person and half a million dollars for a married couple. If it simply isn’t the American way to tax people on a capital gain, why should those facing a more substantive hardship on a paper gain?

What will end up happening if it runs out is that more people facing an upside down mortgage (no equity) will instead elect to deed their house back to the bank or hunker down until foreclosure because they fear a massive IRS debt, pushing more foreclosures on the market than we already have to face. Foreclosures have already caused us here in Westchester to lose an average of 25% of property values since the peak, dramatically more in some places. We don’t need a single extra foreclosure. Owner occupant sales, short or not, are a superior alternative. If you complain that a neighbor did a short sale on their house, consider how you’d feel if the place were sold by the bank instead.

There is another consequence to allowing the law to run out, and that is the borrowers who start living off the societal grid out of fear of a ruinous IRS bill. We are starting to see people return to buying again after a short sale now. Would they do so if they had a big tax bill 4-5 years ago when they had a short sale? I doubt it. They’ll hide behind rented curtains the rest of their days. How does that help anyone?

We should extend the law another few years at least if we cannot make it permanent. The millions of people it was passed to help still need that help, and we should not witness them losing protection over something as unfortunate as timing.

Buying • April 19, 2012

Êtes-vous prêts? Partez!

by J. Philip Faranda

25 years ago I was a proud member of the Villanova University rowing program. You might know it as Crew, and we reviled the redundancy of those who would say “Crew Team.” I was a coxswain all 4 years, and my job was not to row, but to be the one crew member who sat in the stern, steered the shell (the boat), and cajoled the rowers down the course. I was the coxswain. And I never said “stroke, stroke,” that is a fallacy. As a matter of fact, much of what I said will remain on the water between me and my guys.

Our home course was the Schuylkill River in Philadelphia, one of the more notable venues in the USA, and there was a regatta (race) virtually every weekend of the spring. To this day, 23 years since my last race, the words “Etes-vous pret? Partez!” get my adrenaline going like few others. The term means “Are you ready? Row!” and those were the words used to start every race. Once those words were spoken, the die was cast for me as a coxswain; The boat needed to be pointed perfectly toward my mark, my rowers needed to be sitting ready with their oars set right in the drink, and their minds needed to be ready to check into The Racing Zone for the next 6 minutes of hell until we crossed the line 2000 meters downstream, hopefully in first place.

In short, once the referee got on the bullhorn and was finished asking “Temple? Set. Penn? Set. Villanova? Set… etes vous pret?…” we knew there was no turning back, no mulligan or do-over, and we had to execute. Like I said, few words get my attention like those to this day. All our practice, training, missed parties, burning lungs, sore legs, calloused hands and wet socks were meant for that moment. It was go time. Batter up. Hike. Go. There was a moment of time standing still after the question, and when we heard the “P-” of the “partez!,” my guys pulled in synchronized fury.

Every endeavor has that moment when it is time to execute. Stop talking, start doing. In real estate, there are times like that as well, and few embody that go moment like the Spring when there are multiple bids on a well appointed, well priced home and the seller asks for all parties to submit their highest and best. Even in a down market like ours, the circumstance does arise on some special homes. They could have a view of the Hudson that no contractor save God could add. The kitchen could be superior to those of even more expensive homes. Whatever it it, when the listing agent calls for highest and best, the buyer agents know that there will be no second chances, no do overs, and no turning back. It is now or never.

For any buyer who is involved in such a transaction, I have two things to advise:

Suspend your disbelief. Not every house is one where the seller can’t exert leverage. Multiple offers do happen, especially in the Spring.
Your highest and best is your highest, and your best. Bid a number that if you don’t win, you are at peace that you gave it 100%. Don’t offer something that is so high you’d regret acceptance or so low that you wished you had another chance. You probably don’t get a second chance.

To the buyer agents out there, the same advice applies. Sharpen that pencil and advise the client to give their highest and best such that they are at peace with any outcome. It is indeed go time, and there is no turning back. Don’t get bogged down in what happens in a few steps because those you are competing with are going to get their clients prepped and revved. Our best outcome in college crew was a first place finish, and I as coxswain would be tossed off the dock into the water to celebrate. The best real estate outcome is a happy long term home.

Market • April 16, 2012

A Busy Spring Doesn’t Mean the Market Has Recovered

by J. Philip Faranda

The cyclical nature of the real estate market has always seen a peak in activity in the spring months. We are busy. This is causing a misconception that the market is “turning around” or that we are finally witnessing a recovery. I see many colleagues and sellers alike announcing that the market is back or similar sentiments.

While I am a member, I have never been one to parrot the NAR ad slogans in the media, and I would warn those of you who think that we have turned the corner to exercise a measure of caution. Consider a restaurant that is busy on a Saturday night. There is a line at the bar, all the tables are filled, and the waitstaff is hustling to fill orders. You might conclude that this is a successful place. However, check back on a Monday lunch or Tuesday dinner. They may not be doing so well then, and you can pay your bills from one or two good days.

The same lesson goes for the real estate market. We can’t judge a year based on two or three busy months. We are supposed to be busy in the spring. There should be multiple offers on select, well appointed and aggressively priced properties. But it remains to be seen if a busy April translates into closings in June.

Understanding this will help people avoid mistakes borne of irrational exuberance. Assuming it will always be this way, thinking that our problems are behind us or making plans based on optimistic projections are the very types of mistakes that contributed to our housing collapse. I am seeing sellers resist sensible price adjustments or rebuff buyers because they think another is right behind them. And all too often, when a home remains unsold in the late summer, they wish they could get a mulligan for the buyer they rejected back in the Spring.

I think it is great that we are busy now. I think it is wonderful that people are making offers and contracts are going out on properties that I have listed. But before we start raising prices or strong arming well meaning buyers, let’s do what smart businesspeople do and plan for the worst while we hope for the best. If we are in the early stages of a recovery then it is a fragile time that will not grow from hubris or overconfidence.

Buying • Commentary • Selling • April 16, 2012

What is a Silent Second Mortgage?

by J. Philip Faranda

In all real estate transactions involving a mortgage-which is most of them-all details of the transaction are recorded on a government form known as a HUD-1. A purchase can have more than one mortgage- the bank can loan a second (subordinate) mortgage, or in some cases, the seller can hold a second mortgage as well. In Westchester and metro New York, there are three lawyers at the closing table (buyer, seller lender) along with a title company. And if a second mortgage is permissible by the primary lender and all parties, it is recorded on the HUD-1 and everything is A-OK.

A silent second mortgage is mortgage that is not recorded on the HUD-1. It is considered a “side deal” and is typically a violation of RESPA (Real Estate Settlement Procedures Act). In other words, a silent second mortgage, or any other side deal that is not recorded on the HUD-1 for that matter, is often mortgage fraud.

The temptation to do a silent second mortgage occurs when there is a roadblock in closing a transaction and the parties are trying to avoid the pain of adapting to the circumstances. For example, suppose a house is priced at $400,000 and the seller agrees to a $385,000 sale price with a $10,000 seller concession back to the buyer to help defray closing costs. That would be a $395,000 contract price and the HUD-1 would reflect $10,000 back to the buyer and $385,000 net to the seller.

However, the house does not appraise for the $395,000, but instead only appraises for $387,000. The buyer still needs the $10,000 concession to pay their closing costs, and does not have the extra cash to make up the difference. The deal will therefore either die or the seller will have to absorb the $8,000 shortfall and net only $377,000. The seller is unhappy about this, and proposes to the buyer that instead of the $10,000 being a concession, that the buyer agree to pay back $8,000 to the seller as a second mortgage that is recorded after closing. They cannot put it on the HUD-1 because the mortgage does not allow for subordinate financing. The buyer might agree because they don’t want to lose the house. The seller is trying to avoid netting less money.

This is “fraud.”

While it may be tempting to grease a difficult transaction with a silent second or similar side deal, it can get all parties, including the lawyers and agents, into hot water. And no sale is worth jeopardizing one’s career for. To do the right thing, the buyer either has to get more money elsewhere or lose the deal, or the seller has to take less money. And as much as that stinks for either party, it sure beats losing your license. If something cannot be documented on the HUD-1, it should not be practiced.

Selling • April 13, 2012

What is Buying Your Own House Back?

by J. Philip Faranda

The illusion of the spring market is that of abundance here in Westchester and all over the country for that matter. In spite of the overall down market, April and May are when the buyers are out, looking, making offers, and mainly scooping the cream off the top. Upon occasion, we see a seller get a fairly respectable offer and then fall into the trap of thinking that it is 2005 all over again.

For example, consider a home priced at $500,000 that gets an offer of $450,000, which is not uncommon. A good agent will guide their seller client through the ping pong of negotiations, taking into account the market activity and anything they can read on the other side with the buyer and their agent. A good listing agent will evaluate signs from their counterpart representing the buyer, often speak with the loan officer to double check qualifications, and generally draw on their skill and expereince to advise the seller on maximizing the number that can be gotten from the buyer. After protracted negotiations, the buyer raises their bid to $490,000 (this is a hypothetical example, remember).

The seller is at $500,000. They originally hoped for more money.

They are still getting showings.
Zillow says the house is worth $517,000.
They recall all the work and improvements they made on the place over the years.
A home they were considering buying once they sold comes off the market, taking the edge off the urgency they may have felt a week prior.
Their cousin in Petaluma is incredulous, because the same house out there would be $600,000 easy, or so they say.

The seller, mindful of all these things, makes the fatal mistake of assuming that they could get more money if they held out for another, better offer. After all, these buyers were the clowns who originally offered them a crummy $450,000!

And the seller, against the advice of their agent, tells the agent to make a best and final counter offer to the buyer of $495,000.

The buyer walks and buys another home a few blocks away that just came on.

The seller bought back their house for $5,000. They were the high bidder. They get the house. Again. Three months later in July, they reduce their price to $475,000. They close with another buyer in October for $455,000. That $5000 counter offer cost them $35,000, and another 6 mortgage payments.

This should never happen when a buyer and seller are only 1-2% apart. But it does happen, because the seller is tempted by the sirens on the rocks of the spring rush.

Making that last counter for 1% or less of the asking price of the house is known as buying the house back for $5000. Spring comes but once a year. Be very careful about getting to absorbed in the wheeling and dealing. People don’t want to go back and forth- they want a home. Listen to your agent. If they advise you to take something that close, take them seriously. We all have a story like this.

I know all too well the anecdotes of the pushy agent who jumps up and down for their client to take a lowball offer. This is not one of those times. When the buyer is within a mortgage payment or two of your number and your agent is telling you this is it, strike while the iron is hot. Don’t buy back your own house for a marginal amount. It could save you far more money in the long run and avoid a protracted extension of market time as a stale listing because you let one slip through your fingers.

Commentary • Selling • April 12, 2012

Name Recognition Means Nothing to Home Buyers

by J. Philip Faranda

If you are searching for homes online, do you care who the listing broker is?

I’ll go out on a limb and say that unless you have had a specific negative experience with an agent or broker, if a house fits your needs you could care less if it were listed by Attila the Hun, Rasputin, Herbie the Love Bug, or Kronos, Ravager of Planets.

This goes for both consumers and buyer agents. Most sellers get this, but a select few make the mortal error of listing with a name rather than the merit of an individual agent. That can cost. If you want to sell real estate in 2012, you have to understand how buyers and buyer agents think. They input their criteria into the search fields and hit “enter.” The results will come out in a list of homes, and they sift through the places to separate the best from the also-rans. Among the highest regarded choices, curb appeal, condition and price rank highest among reasons for a home making the short list.

No one chooses (or eliminates) a home because of who the listing agent or broker is. It is antithetical to the process. Do you care where the peanuts in the peanut butter were picked? No, you just want peanut butter. Do you care who installed your toilet? Probably not, as long as it flushes. Yet there are a few sellers out there that are hung up on the name recognition of the broker as if buyers care. They don’t. Buyers are tuned in to WIFM- What’s in it for me? I never in 16 years ever heard a buyer say “we bought the house because it was listed with ABC Properties” or “we want to see this house because it is listed with Joe Agent.”

Sellers should hire an agent based on that agent’s qualifications whether they work for a prestigious firm with a name that sounds like a high end law practice or if they work for a mom and pop. It isn’t the company. It is the agent. Their track record, their marketing plan, their references.

Track record.
Marketing Plan.
References.

Those are the things that should matter to the seller. Name recognition is the booby prize. It may sound nice, but it doesn’t sell houses.

Real Estate Tips • Selling • April 11, 2012

Offering a Credit is Inferior to a Price Reduction

by J. Philip Faranda

The market in Westchester County is very price sensitive; with a median price above $500,000, that is understandable. The stakes are high, and goofs cost dearly. In some markets, a cash poor buyer may be attracted by a seller incentive of sorts, such as a small credit for closing costs or repairs. However, there is no way to search for such an offering in our marketplace; you can search by price point, square footage, location, school district and even physical amenities like pools or garages, but givebacks are not a criteria.

The same goes for homes listed where the buyer agent is offered a bonus or enhanced commission. Even if we wanted to get paid more than average for selling a house, there really is no plausible way to convince a client to make a place theirs if it doesn’t feel like home. If they love a place, they’ll want it no matter what their agent is paid. If they hate a place, you could offer me the crown jewels; there is no ethical or pragmatic way to make someone buy a home they don’t want. Buyers are, therefore, often leery of what could be perceived as a gimmick.

My experience with sellers who offer a buyer a credit or their agent a bonus is that they have an attachment to price above net proceeds. Money does talk. And it speaks loudest in the list price. If a sellers wants to throw some money at making their property more attractive, it should be in the form of a price reduction. If a buyer needs help with closing costs, they’ll already know that on the advice of their agent and loan officer and structure that in the offer for the place they want.

The danger with offering a giveback to either buyers or agents is twofold. First, it does not make the place more visible as I explained. But worse, even when a buyer makes their offer and negotiates a seller down from asking price, they will still want their credit back! For example, consider a home listed for $509,000 and the feedback is that the main bath is outdated, and maybe the carpeting is drab. My advice to the seller would be to lower the price to $499,000 for a higher perceived value and more eyeballs on the property. But instead of reducing the price, the seller instead instructs me to offer a $10,000 remodel credit to the buyers. A buyer comes along and negotiates an accepted offer of $488,500. And sometime prior to contracts they’ll also demand that $10,000 credit. Now we have a problem.

There are those who say that the credit can be taken out of the negotiations to avoid suck a pickle. Not that easy. Once offered, you can’t put the smoke back in the cigar. If the credit is for a full priced offer, the buyer will simply view it as a price reduction from the outset, or money the seller was already willing to part with, and use that as a baseline. If a full priced offer is not a condition of the credit, then its removal is viewed as a bait and switch. In other words, it causes more problems than it solves.

If you are a seller, and you want to throw more money in the pot to move a property, do it where it speaks the loudest and with the fewest complications: lower the price.

Commentary • Community News • April 9, 2012

Tappan Zee Greenway: Great in Theory, Bad in Practical Application

by J. Philip Faranda

This past week I had the privilege of attending a Hudson Gateway Association of Realtors Luncheon with Westchester County Executive Rob Astorino. Among the topics often discussed when Mr Astorino is in the room is the proposed Tappan Zee Bridge Greenway project. The idea is to convert the existing structure from a carrying I-287 over the Hudson to a 3+ mile green park once the bridge is replaced by a new structure. I have to admit, the idea of a unique park over the water like that sounds tantalizing: bike paths, the setting over the water, nature on a cantilever, it all sounds pretty appealing. Mr Astorino explained why he didn’t support it, and after hearing him, I am inclined to agree.

Among Mr Astorino’s concerns about the project were cost to maintain a park, the overall health of the bridge, and other pragmatic concerns. While converting the bridge a park might be a less expensive proposition than the 9 figure estimate to dismantle it, I wonder if the project could truly have any long term efficacy in the Northeast. And a Greenway would not be a low cost proposition by a long shot. We would then have two bridges to maintain instead of one. You would have to still deal with wind and salt water; cultivate and irrigate the park somehow; provide services, such as plumbing for bathrooms, police, safety and first aid stations; and provide some sort of amenities, like places to eat. And I don’t see how the weight of several feet of earth the length of that thing would be less stress than actual traffic.

Over time, the long term deterioration of a structure well past it’s projected 50 years coupled with the cost of maintaining an artificial, weighty earth surface on top, would probably render the whole thing fiscally unsustainable.

But even if I am wrong, I have another large concern.

My concern is that the Greenway would be a boondoggle that loses popularity when people learn that the middle of the Hudson is not exactly a pleasant place about 9 out of the 12 months of the year.

Be honest: have you ever been out in the middle of the Hudson any month other than July or August? I don’t mean February- how about April? Or October? If you have, ask yourself what it would be like 40-80 feet above the water. The span is at the widest part of the Hudson, and for much of its length it is more of a causeway than a bridge for good reason. Take it from a former coxswain: the middle of the Hudson is windy. And cold. With the exception of a few extreme sport enthusiasts, nobody is going to go out on that span in the winter, in the cold, or in the rain. And if the temperature falls below 80 degrees, there won’t be many moms wheeling their babes in strollers out there on summer days either.

Don’t forget, the new bridge will be right next to the old one. So not only will it be crazy windy and cold most of the time, you’ll be right next to an Interstate with nothing but the brackish ambiance of the Hudson to act as a buffer. Now imagine all that and our taxes supporting it in perpetuity.

There might be a few days or weeks in July or August when the wind and traffic ebb that it would be spectacular. But from October to April you wouldn’t enjoy it out there. This is the Northeast. If this were the Miami Bridge or the Tuscon Bridge that would be one thing. But in the Northeast we have cold weather, and the conditions would be pretty much the same out there as they are now. So if the cost isn’t a winning argument against a Greenway, I would posit that quality of experience -or its absence- is.

We already have a ton of parks on the banks of the Hudson and we’ve done an admirable job in recent years of restoring that land for ourselves up and down the river towns. Let’s not take our eyes of the ball. Rather than create an artificial greenway of dubious quality, let’s do a better job with the green we already have.

Company News • April 8, 2012

J. Philip Real Estate Welcomes Madeline Gomez

by J. Philip Faranda

The stories of new members of the team often go back a year or more. In this case, it goes back almost 4 years! I am really pleased to introduce Madeline Gomez as J. Philip Real Estate’s newest associate broker. I met Madeline nearly 4 years ago when she was with Remax, and weighing a change to a different model to adapt to her lifestyle. Life happens, and she took a detour from brokerage but remained in the housing industry. And she became an awesome friend to the company, referring people to us from time to time and taking a big role in introducing us to several colleagues who have been an integral part of our firm’s growth. That is a true friend.

Madeline has now made the choice to get back in the brokerage game, and we are excited to have her join us. Not every agent takes the next step to become a broker; it is more than an educational designation or certification, and it is one of the things that the public gets as being significant. It certainly isn’t lost on me either. Licensees are all salespersons, but only a small percentage take the step Madeline has taken to be a broker. Technically, brokers can start their own firm. Most associate, but the stature is significant.

Madeline specializes in southern Westchester, specifically Yonkers. She has some excellent experience with investors as well. You can reach her at (914) 230-7904 or email her (email will be updated this week!). We are very jazzed to have her with our firm, and I am sure you’ll feel the same.

Company News • April 6, 2012

On Being a “Competing” Broker or Manager

by J. Philip Faranda

The discussion arises in the real estate agent community about the pros and cons of working in an office where the broker or manager is also in the field actively listing and selling real estate themselves. In offices where the manager is in the field they are considered a “competing” manager, and if they are not active in the field and fulfill only a support and administrative role they are considered “non competing.”

I have heard horror stories about competing managers poaching clients from their own team, and I could certainly tell horror stories about non competing managers. For the record, I am in the field actively listing and selling properties. However, I dislike the label of being a “competing” broker because I do not consider myself in competition with my team for reasons I will get into shortly. I prefer to categorize managers as being in the field or not in the field because competition is very subjective.

The advantage of working for a broker or manager in the field is that they have first hand knowledge of exactly what it is like to work in the current environment. They see homes. They sit at kitchen tables. They go to inspections, deal with appraisers, lawyers and loan officers and get the climate we are all in. Their skills out to be sharp because of this, and if they accompany one of their team on an appointment they can be more valuable. Unfortunately, some managers who are in the field DO compete with their team members, and sometimes that causes issues when they get a client and beat out one of the other agents in doing so.

I can’t say much about managers who do not actively list or sell. I am not one of them, I never worked for one, and the bad experiences I have had are, I hope, anecdotal and could just as well have happened with active managers. For example, a manager who plays favorites with client inquiries doesn’t have to be out f the field to do so. The same goes for managers who tolerate misconduct from their agents (a HUGE pet peeve of mine).

About 5 years ago I got a phone call from one of my agents. He congratulated me on “getting” a listing he had been working to procure. Apparently, the people who called me and subsequently listed their home with me were also advertising their home as being for sale by owner, and my agent was trying to get them to list with him. I felt bad that I won and he lost, so I asked him to co-list the property with me. That was a mistake. I should have entrusted the listing to his primary care. He knew the folks, they liked him, and they would still have access to us both anytime they wished.

My philosophy since is that if I am ever competing with one of my agents for a buyer or seller, I will do everything in my power to secure the client to the company- and see to it that my agent gets the deal. As owner of the company, I win when my people win. I don’t need to be a glutton and shut them out. It is counterproductive to the long term goal of growing and strengthening the team, and erodes morale. But if I make sure they win, we all benefit. This role shifts me from being in competition with my agents to being their biggest resource. They never have to hide anything from me, and they never have to worry that their company is not 100% behind them.

This may sound self serving or self promotional in nature; it is not my intention for this to be a mere fluff piece to recruit more agents. But you know what? It is self promotional. We are growing the firm, and I feel it necessary to put my views out there. People get passionate about the discussion. We only want agents who will operate with the highest standards for our clients, and if that is to be so I have to do the best by the agents.

Commentary • March 31, 2012

Should Zillow Suspend the Zestimate for an Active Listing?

by J. Philip Faranda

Imagine that you can put a home for sale on a really stupendous, popular medium that would give it incredible exposure. In putting the home on the medium (and it could be a website, TV program or print publication- it doesn’t matter), you are told that in addition to your content on the home, the publisher will add something extra: their own opinion of the price.

SO…on your $850,000 listing, they’ll say its estimated value is actually $780,000. And that $400,000 starter? They say it is worth $440,000. Would we have tolerated that for a hot minute back when the New York Times was the ad platform of choice for Westchester homes for sale? What about paying through the nose to get your home on one of those Sunday morning TV shows with all the homes for sale. What if, after you home were shown, the channel posted their own estimate right under your list price and it didn’t match? This is exactly what happens with homes listed for sale on Zillow.

Earlier this week, I was signing papers with some nice homeowners to put their home on the market. Good, educated people. And they asked me to not list their home on Zillow.

I was flummoxed. But their point was that when they were looking for homes, they were skeptical of homes where the Zillow Zestimate (Zillow’s value estimate) was less than the list price. They didn’t want people doing that to them. When I told them that would undermine their exposure, they continued that even if they missed eyeballs on their house, they didn’t want people being encouraged to offer less based on a faulty value estimate.

Now, I love offers, and even low ones are better than no offers because they are a start. But I can tell you that agents in the field have absolutely no love for the Zillow Zestimate. It can help in a general sense in some cases but overall it muddies the waters terribly. Sellers can feel they under-priced their home. Buyers get freaked that they overbid. Even after showing clients the actual comparable sales and explaining how a professional, local broker is not a zestimate, but actually a ZACTIMATE, Zillow injects doubt where we are trying to foster trust. I didn’t make that term up- I got it from Brad Andersohn, industry outreach guy at Zillow and a respected colleague.

According to their own statistics, Zillow’s average margin of error for Westchester Zestimates is 8.3%. Only a third of their zestimates are withing 5% of actual value. You have to drill fairly deeply on their website to find this caveat, but they do publish it. Spencer Rascoff, CEO of Zillow, is pretty clear that his company is the business of selling real estate advertising. If so, why put a zestimate on a home listed for sale? If brokers are the zactimate, why not just defer to our list price, since Zillow never saw the house or executed a market analysis? We are, after all, the customers. And as my couple demonstrates, value to the consumer is dubious.

Back to my couple: They weren’t comfortable having a zestimate undermining their asking price. I showed them how an owner could claim a listing and influence the Zestimate by inputting improvements they made to the property and so forth. It isn’t exactly an exact science, but it was something they could do. They agreed to proceed with syndicating their home to Zillow for the exposure, but their reservations about the Zestimate speak to the growing doubt among consumers about Zillow’ methodologies. It isn’t just agents that have issues. And I hope the issues can be worked out. I think that offering Zestimates just for homes off the market and having only list prices for active homes for sale would be a good start.

Full disclosure: I am a paying Zillow customer and find many of their tools to be of value. I also know plenty of Zillow employees and they have been gracious and decent people. And I hope they’ll consider my thoughts here as worthy of serious consideration.

Commentary • Market • March 30, 2012

My Friend is an Agent and She Says the Market is Great

by J. Philip Faranda

Some of my colleagues are funny bunch. They decry a Zillow Zestimate for being inaccurate. They shake their heads when an agent licensed in Illinois gives real estate advice in Trulia Voices to a consumer in Florida, where the laws are different. They shake their head disapprovingly if you mistakenly mark a home as having a walkup attic when in fact it is a pull down stair attic.

And then, in a social situation, when asked how the market in Westchester is doing is by a friend or acquaintance, they step in it.

“The market is really heating up!”
“I think things are turning around!”

My personal favorite, advocated by the seminar gurus is “Unbelievable!” because it is ambiguous enough to mean anything. But there is a clear knee jerk reaction in some agents to become fountains of ebullient enthusiasm when asked about market conditions, as if their cheery outlook will snare them an easy deal. It won’t. It may snare a listing or a looker, but overpriced listings and lookers who don’t buy are not deals.

The truth is that every spring the cyclical nature of our industry kicks in. The holiday season is lower in activity for obvious reasons. The spring is busier because more people want to be moved in and settled by the summer. So springtime is, by comparison, busier than it was 90 days prior. But that is like saying we should build an ark every time it rains. When retailers evaluate a Christmas shopping season, they compare it to the previous Christmas, not the July before. If we are evaluating this March of 2012 in the Westchester real estate market, the only valid comparison is with March 2011. That’s just how it works. If you are an agent and you are busier now than you were in December, that isn’t a turnaround in the housing market, it is you showing up for work in the spring.

I could care less what people say when they chit chat. But it undermines our status as a reliable source of information when our eyes glaze over at the site of tin foil. Agents hate bad information online because it makes their job that much harder when Zillow says a $500,000 home is worth $435,00 or $620,000. Our job is challenging enough without having to overcome an agent’s bad advice given online to a consumer in another state. So why do some agents shoot themselves in the foot with syrupy market opinions when asked?

Lest you think I am being a parade rainer oner, here are some facts courtesy of the Empire Access MLS:

In the first 90 days of 2011, there were 704 single family homes closed in Westchester at a median price of $554,000.
In the first 90 days of 2012, there were, as of this writing, 717 homes closed in Westchester at a median sale price of $505,000.

Which means that volume is up an anemic 2% and median price is down 9%. Prices are now down to to about the median of the second quarter of 2002.

2002.

And in that quarter, there were over 1500 closed sales.

I have an uphill battle when a client wants to list their home at a higher price because someone told them things are looking up. Listings that start out overpriced end up chasing the market-unsold and stale.

Consumers: Don’t ask for opinions. Ask for facts. All real estate is local. And the local market is unique.

Agents: Don’t be afraid to just tell the truth. People want the truth, not spin or the party line. Life is so much easier when you just tell the truth. And it is far harder when you don’t paint an accurate picture.

Selling • March 29, 2012

Market Value is Market Value is Market Value

by J. Philip Faranda

Spring comes but once a year. Once it is gone, wave goodbye. Even in a buyer’s market, a well priced home will get healthy demand and avoid being an October straggler where the buyer exerts leverage because they know they have no competition. This is why I advise my seller clients to understand the crucial importance of pricing correctly. The biggest mistake I see is ignoring an obvious price point that costs precious exposure and opting to pad the price by a small amount-maybe only 1-2%- to “build in a little negotiation room.” In a price-sensitive market like Westchester County, this is a fatal mistake.

As an example, consider a home that a comparative market analysis indicates as being properly priced at $500,000. Typically, we would price the place at $499,900. On occasion, a seller decides that they’d like to try it out for $509,000 to “get a little negotiation room.” The mistaken belief is that the offers will come in higher because they are asking a little more. The reality is that the offers won’t come in.

Many would-be buyers won’t even know the house is for sale because they only looked up to $500,000 (an obvious dividing line for many), and they never saw the house. These people see other homes and buy something else.
Lookers and online market watchers see the house, but refrain from doing anything because they will wait for the price to come down.
Those left over (who wants leftovers?) may see the house but choose a more competitively priced home.
In rare cases, you do get a bold buyer who makes an offer, but not only for what they think it is worth. In other words, the extra “padding” means nothing to them. They’d never offer more just because you asked for more. They might actually bid lower just to speculate.

The argument I get in favor of that extra little padding is that people can just make an offer. But as I have pointed out, by pricing incorrectly, many people either didn’t even see the place or opted to make their offer on a more reasonably priced property. It is human nature. Buyers gravitate toward what they perceive as a better value. Given the huge number of homes in competition with your home, that isn’t a stretch. You cannot manipulate outcomes. Overpricing never gets the seller more money, because buyers will always make offers based on what they want to pay, not what the seller speculatively asks. Market value is market value.

Often, by the time sellers get wise to the dynamics of pricing and buyer trends, the window of opportunity is lost. We are then “chasing the market,” as more aggressive home sellers reduce their prices to get sold. The spring rush tails off, and it becomes an all out pricing war and beauty contest where competition suppresses prices. All too often, these are the homes that go into the autumn as stale listings facing a price reduction that is lower than the seller’s original bottom line. Buyers are funny like that; if a home is on the market longer than 60 days, they wonder aloud what is wrong with it! In a market like Westchester County with a median price of over $500,000, that is very costly for the seller.

The high bidder always gets the house. In cases where that bid comes from the seller, they unfortunately keep the property. You can overprice, price fairly, or price to sell. We advise to err on the aggressive side, because that actually nets the seller more and cuts down on the wait.

Company News • March 27, 2012

Rising Star: Stephanie Solano

by J. Philip Faranda

There are some things you can’t teach.

One of our newer agents, Stephanie Solano, who is still in her first year with the firm, has closed another home. It is her 4th transaction in the past 6 months and was not without obstacles. This comes on the tail of two successful January closings, and a virtuoso debut in a November closing. Stephanie showed her true colors in the first transaction, choosing to disclose information she heard on the grapevine to her buyer clients and risk losing the sale, which she felt was better than losing her good name if she kept mum. Her clients were impressed with her forthright advocacy, and elected to go forward, appreciative that their agent was committed to watching their back and being completely transparent. The details are secondary; she put honor above the wallet. We love that around here.

Her latest transaction was another challenge. There was a “lightly seasoned” agent on the other side, and in many ways she did the work of two agents on the deal. She had a knack for asking me for help at the right times (not often) and managing things well on her own the rest of the time with excellent judgement.

Judgement and honor are two things I can’t teach. You either have them or you don’t. So what we have in Stephanie is the real estate version of a 5-tool baseball player: she can do it all. She produces results, and she conducts herself as a good professional should, with high standards. That is what everyone in the public should seek when they get representation.

We are very proud of everything Stephanie has accomplished and how she has gone about her work. She’s the kind of agent you want.

You can connect with her at stephanie@jphilip.com or call her cell at (914) 645-2433.

Buying • March 25, 2012

Dear Moms and Dads of Homebuyers

by J. Philip Faranda

This is an open letter to the parents of the world who have grown children looking to buy a home. I have 4 children myself. While they are not grown, I get the parent thing. I laugh when people mention “18 years” as the length of time for active duty parenting, because if I live to be 110, I’ll still worry about my children when they are in their 70’s and 80s. And I truly appreciate the well meaning parents out there who are assisting their grown children in the purchase of real estate, either financially, with advice, or encouragement. But some parents only end up sabotaging their children’s efforts, and even when you love and care for your children and give them money, you still need to remember that they are their own grown people.

The inspiration for this piece came recently when a client emailed me saying that she spoke with her parent, and that she was going to go with an agent referred to her mother. As a last ditch effort, I asked her to have her mother Google me before making the final decision. I applaud her mother for being open minded, doing so and recanting, saving the agreement I made and retaining me as listing agent. It is my opinion that she did right by her daughter, which was her intention from the start anyway.

There are two things parents of prospective home buyers should always avoid.

Your children should be free to choose their own agent (and other professionals). It is a seldom discussed aspect of real estate that it is a massive financial event. Yet I have seen grown parents insist that their children use Aunt Ethel, Cousin Joe, or an equally unqualified person by mere virtue of the relationship. Aunt Ethel sells 2 houses a year and is asleep by 9pm. Cousin Joe just got his license. Are they really the best person to broker the largest financial event of your life? The same goes for lawyers, which are integral to the real estate process in New York. The toughest deals I have closed (or seen die) are the ones where the attorney is a round peg in a square hole because he’s a relative or family friend.

You’d never ask an eye doctor to set a broken bone. Yet I see litigators begrudgingly used as real estate attorneys, and it never works. Use a specialist. The biggest reason for using the wrong agent and attorney is typically the insistence of the parents, who attach that string because they are contributing financially. They don’t realize the importance of specialization. And that is dangerous. Real estate is a business transaction, not an instrument by which you dole out favors to friends and relatives.

Never be an 11th hour veto. The bane of every agent’s existence is showing a young couple 35 houses, finally finding that perfect place and negotiating a good price for their client, and then being told that the buyer’s parents would like to see it “now that we’ve found it.” Some of the time, the folks come in, say they love it, and everyone goes forward. Sometimes the parents get out of the car with a big puss on their face and they could walk into the Taj Mahal and it isn’t good enough for their baby. Often, these folks haven’t bought or sold real estate since the Reagan administration. Sometimes they just can’t let go of their children growing up and buying their own place.

These parents haven’t been out walking through the rain to homes by the dozen with us. They haven’t seen the slanted floors, dirty litter boxes, barking dogs, roller coaster driveways, swamp back yards, and all the other things their grown, employed, children have sifted through to find the right place. They just come from a world where half the money bought twice the home. And we can’t bring them up to speed before they tell the kids that they’ll be making a huge mistake if they proceed, or some variation. If a parent wants to have veto power, they should be involved earlier. I have no problem bringing the folks on a showing- why would I? But coming in after all the work is done and flushing it all away out of sheer nostalgia is tragic. It isn’t just a waste of work, it causes lost opportunities.

It boils down to letting go and respecting the decision of the very people you yourself raised to be smart enough to live in this world when you are not around. Let them go. Be supportive, and cut the strings.

Commentary • March 24, 2012

No Officer, Despite What Zillow Says, it is Not My Listing

by J. Philip Faranda

Full disclosure: I am a Zillow customer, as well as a paying customer to Trulia and Realtor.com.

Our office received a phone call from the town of Kent Police yesterday to inform us that there was some undesirable activity at my listing. Of course, the only problem with that- aside from youths partying at a vacant house in town- is that the listing isn’t mine. It was listed by one of my agents and expired 2 years ago. But, hey, it said it was my listing on the Internet, so they reached out to me as the broker to see if I could secure the property. I cannot; my firm has not had any authority to market the property since 2010. Despite what the Internet says, I cannot help.

The nearby city of Peekskill contacted me a few months ago on another of “my listings,” and in this case it was a complaint from a neighbor about debris on the property. I never heard of the place. When I asked the lady at the city building department on the phone how they came to believe it was my listing, she said that they looked up the address on Zillow. I explained that Zillow sometimes makes errors. She was fairly understanding, but not happy that she wasn’t any closer to solving the issue than she was before calling me.

Now, I can sort of hear what some of my friends at Zillow might say: “Hey! sell her a house!”

Um, no.

When a cop or a building department official calls me about a problem with a property, they are about as likely a prospect as the person behind the counter at DMV when I am renewing my license. They are at work and have a problem to solve. They don’t want to get pitched, and it wouldn’t be terribly responsible to try either. They are cops and code enforcers. They are on the clock. As a tax payer I wouldn’t want them listening to an agent pitch anymore than I’d want them perusing an Avon catalog.

It isn’t just a Zillow issue, as other aggregators have all kinds of accuracy issues. Yet because Zillow has risen so high in search engine results, they bear the brunt of the issue. Does that mean I should give them a break? No.

To Zillow I would say, with great power comes great responsibility. I don’t want to hear “Phil, all you need to do is log on to Zillow, edit your listing and …” because the problem is not that I am neglecting my own listings. The property in Peekskill was not my listing. The house in Kent was not indicated as being for sale, but the public doesn’t always see status of the listing clearly on these sites.

There is a lot that I am leaving out of this post. I won’t go into all the rude calls I get from frustrated people screaming “don’t you know your own listing?” into my ear over a home I never saw where I am listed as a contact. I won’t go into the odyssey I had with a utility company over an old listing I had that was now vacant and abandoned.

The controversy and tension between Zillow and the brokerage community, well documented elsewhere, is one reason why I am sure they are hiring well regarded people like Jay Thompson as the outreach guy to brokers like myself. That is all well and good, but right now there is a data problem that has to be fixed, and I am tired of PR-spun answers. It would be refreshing to get some accountability that does not involved me logging onto their site and doing free work to solve their data problems.

Community News • March 24, 2012

Ossining Chosen as Best Place for Architecture by Westchester Magazine

by J. Philip Faranda

I may be biased; I was raised in the Indian Village in Ossining and I love pre war buildings, so I totally agree with Westchester Magazine’s selection of Ossining as the best place in the county for architecture admirers. Ossining has some absolutely beautiful structures, both buildings downtown and homes around the town. I have posted previously about the stunning beauty of Ossining’s churches as well.

I have sold homes all over the county. Pelham is fantastic for Tudors. Bedford had some amazing contemporaries, and estates to die for. Peekskill has some great Victorians. Bronxville has a downtown that is iconic. There is phenomenal architecture all around. But for one town, Ossining does indeed take the prize in my opinion as well.

In between appointments today I brought my camera and took a few shots to illustrate why they made the right selection.

This is the Mundet Mansion on Osage Drive in the Indian Village. I grew up across the street. It is now an apartment building and has been restored gloriously since being bought in the 1970s.

Downtown. The Bank for Saving has an ornate copper trim that gives it a regal aura.The spires of the First Baptist Church are in the background.

Upper Main Street, Ossining. The buildings were rundown when I was a kid in the 1970s. Virtually all have been renovated and renewed in the past 10 years. The architecture and design have been preserved.

This is a classic Mansard roof. Ossining has quite a few of these beauties, and many homeowners dote on their treasures, painting the trim in flattering fashion. I love the design of the multi colored scallop roof tile on this one.

The judge’s house on Belleview Avenue. I listed and sold this gorgeous home in 2006. The home was built by a judge in the 1920’s with stones from the shore of the Hudson. It was the village speakeasy, and the tavern remained in the basement for over 70 years. I get a kick out of the fact that the judge ran a speakeasy. Peter Faulk of TV fame grew up a few blocks from this home on Prospect Avenue.

A picturesque Tudor on Browning Drive, a street with its share of lovely homes.

Maryknoll Mission. Built in the 1920s, it has been the home to one of the world’s largest Catholic foreign missions in the world. The entire campus, half of which is in the town of Ossining on the New Castle border, is all stone and appealing. But the jewel on the crown is the main building, modeled as an Asian Pagoda.

See what I mean? I live 5 minutes from every structure in this article. And they are all more beautiful in person. Take a drive over and see for yourself. While you’re here, get some espresso at Tuscan Grille or some sushi at Okinawa Hibachi. You’ll thank me.

Company News • March 19, 2012

J. Philip Real Estate Welcomes Mary Kingsley!

by J. Philip Faranda

8 years ago when I was in the mortgage industry, I helped a nice lady refinance her home. She had two beautiful children, worked as a nurse and teacher, and she was an awesome client. I still remember the bank attorney closing the deal at her kitchen table- that was a first. Another thing I recall was that her toddler son loved to play in one of those jumpy swing apparati where the kid can jump like a kangaroo without getting hurt- we bought one, and subsequently wore it out, with our own.

Mary and I remained friendly and in touch. A year and a half back, she got her real estate license and announce on Facebook that she had joined another firm. I remember my jaw dropping. I would have hired Mary in a hot minute had I known she was looking to get into the industry. I was bummed!

So I watched as she seemed to take to the industry, which was no surprise whatsoever. Smart, caring, independent thinking people do well in real estate.

That is why I am REALLY excited and proud to welcome Mary Kingsley to J. Philip Real Estate as our newest associate. I now understand that Mary was an agent in Orange County in a past life, and that experience, along with her natural gifts, make this so exciting an addition for Ann and me. Mary is just an awesome person. Her adoptive son, now 11, has significant special needs as a toddler when I first met him. The updates on his progress I get now are nothing short of miraculous. Only extraordinary people do that. His older sister is an honors student. Not surprising.

There is a special feeling I have with all new associates when I order their cards and set up their back office and email. With Mary, the feeling was electric because I have known her for 8 years and I know what a quality person she is. I know for a fact her clients will be in the best hands they could ask for. If you want a professional who will watch your back like family, who is intellectually agile and committed, you’ll find your match with Mary Kingsley. She serves much of southern Westchester County and the Bronx. Call Mary at (917) 292-5378 or email her at marykingsley@jphilip.com. Then you’ll know why I am so honored to call her an associate.

Commentary • March 15, 2012

On the End of Encyclopaedia Britannica in Print

by J. Philip Faranda

Encyclopaedia Britannica announced yesterday that they would no longer print their reference library, opting instead to have it be available in online digital form only. Just a week or so ago, I wrote a post on my past life in the educational publishing industry, albeit nothing about the books and selling them. But I feel that my 7 years working for a company that was a Grolier distributor and a competitor in many levels with Britannica gives me some insight into the end of that line of books in print.

It should go without saying that this is a trend that affects more than encyclopedias; thanks to e-readers and computers, my grandchildren may never know what it is like to turn the pages of a book. Britannica was also not the first reference set to go out of print. As a matter of fact, they were the last of the Big A-B-C sets to stop killing trees. Colliers ended in 1998, and Encyclopedia Americana was last printed in around 2007. Only World Book, the set I devoured as a child, remains in print.

Having said all that, I do believe that the end of high end encyclopedias in book form was largely self inflicted and under discussed. I believe that, had they changed their model of distribution, Americana, Britannica and Colliers would still be in print in a sustainable way.

Virtually all high end educational references were sold the same way: a salesman would come to your house and sit at your kitchen table. After about a 90 minute pitch, you’d be informed that the whole thing would cost over $1,000, often far more. And if you didn’t buy today, the price would jump and the offer would expire when the representative walked out the door without a purchase offer. With each “no,” they’d throw in more books: children’s books, great classics, you name it, soon people would have a wall of books they’d never finish in a regular life span. It is called a one-call close, and the sales force was a transient, not terribly educated group that was on straight commission.

I know. I hired and trained hundreds. And I was one of them, initially as a trainee and all the way up to a regional manager overseeing the sales in 4 cities. I thrived selling our system, with Grolier’s New Book of Knowledge as the centerpiece of a $1,400 or so set. I was a cowlicked kid right out of college, I believed I was spreading the gospel of literacy, and I knew how to get people to say yes and sign their name on a contract and a check. I closed about one in three people I met with.

However, even I saw the writing on the wall, and in the post I link to above, I explain why I left the company and the industry. The firm closed its doors in 2000; one of the partners now originates mortgages and I have run into him at industry events. He went down with his ship, believing that a 1950’s model for sales would work in the new millennium.

I’ll cut to the chase. In the information era, you can’t generate sustainable revenue having a sales force of clip on tie wearing transients with high pressure schlocky pitches telling people that if they don’t spend $1400 right now, tonight, that they can’t have it. Not when they can Google anything for free or look it up on Wikipedia. Are there some people out there that would happily spend money on a printed encyclopedia? Hell yes, and far more than the 8,000 that Britannica sold of the 2010 edition. People may not buy a Stephen King or Harry Potter in print, but a reference library is still special to many.

The encyclopedia industry never adapted. That print is going away in all books is not the prime reason. People just don’t buy in the 21st century the way they did when I got started in the 1980s. Publishers should have realized that they could sell far more books far more profitably for far less money in perpetuity had they stopped the kitchen table sales and gone with Amazon, Barnes and Noble, and other distributors. Without paying those $250 commissions, rent on offices and phones, and all the other brick and mortar overhead, they could have priced the sets at a fraction of the cost and sold more-far more- for less money. And they could have thrown in an online password for updates to keep current for literally nothing and never worry about anything going out of date.

It is a lesson in failing to adapt that other industries should see as a cautionary tale. There are still enough people who appreciate print. But nobody appreciate a high pressure sales pitch from an individual who isn’t credible, and that was always a problem the industry never addressed.

Now there is no industry. A cautionary tale for the rest of us, whether we are in real estate or not. Change or go extinct.

Buying • March 13, 2012

Real Estate Attorneys: Choose Your Lawyer with Care

by J. Philip Faranda

Upon occasion, an attorney will “kill” a deal. It is part of the business, and I have seen my own client’s attorneys pull the plug on a transaction when things did not look like they were going in the best interests of our client. The attorney’s job, after all, is to handle the contract portion of the transaction, and as they say, the devil is in the details. New York is unique in that it is one of the few places where lawyers are so integral to real estate. In many other states, they are not involved. In Westchester and the surrounding metropolitan area, the contract phase can last a week or more as the lawyers iron out details and verbiage. Two things are done at contract: the principals sign, and the buyer makes their first down payment, or good faith deposit. In our area, a 10% deposit is quite common. I have seen more. I have seen less.

No sooner did I pen this post on Patch about the importance of having a good real estate attorney, I spoke to a prospective buyer on one of my own listings who had recently signed the contract to purchase the home. He informed me that his attorney- with an office 2 counties away- advised him to not bother with the 10% deposit; 1% would do.

1%.

His lawyer did not clear this with our lawyer. No explanation was given.

And with that little maneuver, this lawyer put her client’s purchase in jeopardy.

We see this all too often. Real estate sales is not litigation. There shouldn’t be much arguing. But when a lawyer unilaterally changes terms on a contract by ego, fiat, or simple stupidity, weeks of work on both sides can go down the drain quickly. The house goes back on the market, and the buyer has to hit the streets again seeking another property. Will we save this deal? Perhaps, but there is a backup offer, and if the current buyer does not get their act together, they’ll lose the place for good, as the next buyer probably won’t make the same mistake.

The takeaway here is simple. A chain is as strong as its weakest link. You can have the greatest agent in the world, a fantastic lender, and a world beating home inspector, but if your attorney doesn’t grasp basic protocol or understand local practices, you are not getting the advocacy you are paying for. We advise clients to look for three things in their attorney: specialization in real estate, a strong understanding of local practices, and a commitment to communication.

Extend the The Mortgage Forgiveness Debt Relief Act

Êtes-vous prêts? Partez!

A Busy Spring Doesn’t Mean the Market Has Recovered

What is a Silent Second Mortgage?

What is Buying Your Own House Back?

Name Recognition Means Nothing to Home Buyers

Offering a Credit is Inferior to a Price Reduction

Tappan Zee Greenway: Great in Theory, Bad in Practical Application

J. Philip Real Estate Welcomes Madeline Gomez

On Being a “Competing” Broker or Manager

Should Zillow Suspend the Zestimate for an Active Listing?

My Friend is an Agent and She Says the Market is Great

Market Value is Market Value is Market Value

Rising Star: Stephanie Solano

Dear Moms and Dads of Homebuyers

No Officer, Despite What Zillow Says, it is Not My Listing

Ossining Chosen as Best Place for Architecture by Westchester Magazine

J. Philip Real Estate Welcomes Mary Kingsley!

On the End of Encyclopaedia Britannica in Print

Real Estate Attorneys: Choose Your Lawyer with Care

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