Commentary • Market • June 4, 2012

Wow! May 2012 Was Our Best May Since 2007!!

by J. Philip Faranda

May continued the strong spring in the Westchester real estate market with the highest total of closings in 5 years. Overall, the data for single family home sales from the Hudson Gateway (formerly Westchester-Putnam) MLS saw not only an improvement in total closings from last year, but also an increase in median price. The improvement did not stop there.

In all, 364 single family homes closed in May 2012 at a median price of $615,000.
In May 2011, 308 single family homes closed at a median price of $591,625.

That is an increase in median price of 4%. It is an increase in closed sales of 18%. It was also the best month in closed transactions since May of 2007, when there were 401 sales before the housing market collapse began later that summer.

Year to date, 2012 is outpacing 2011 with an increase of 8% in closed sales. Median price is down $15,000 overall, but the gap is narrowing. Currently, 1396 homes are under contract or pending sale at a median asking price of $650,000. This is in keeping with the tendency for the market to trend up as those who sold their starter homes purchase their “move up” properties. It also bodes well for the upward tend to continue into June.

4250 homes are active for sale at an asking price of $650,000, which is the identical median price of the homes under contract. We are seeing balance.

While it is hard to find any bad news in the May results, I cannot be completely bullish for the short run. Are we past bottoming out? I think we are. Consider that in May 2009 there were only 217 single family home closings in the county. That part is good. But there remains a shadow inventory of distressed homes not yet on the market, and banks are putting the robo signing scandal behind them. Expect more foreclosures to temper the good news in 2013. A true recovery is measured in years, not months. Consumer confidence remains shaky and money is still tight.

However, for now, buyer have choices and sellers gained back a little leverage. Expect a good June, and also expect the surrounding counties further out to start to heat up later toward summer and autumn as the dominoes fall here in Westchester.

Commentary • May 31, 2012

Westchester Homes Should be Assessed at Full Market Value

by J. Philip Faranda

My home is assessed for $32,000.
Last week, we closed on a listing where the buyer paid $364,000. The home’s assessed value was $11,400.
I have a listing in Croton on the market for $599,000 with an assessed value of $10,350.

All over Westchester County, municipalities have their properties assessed at numbers reflective of market values from decades ago.
$50,000.
$113,000.
$9500.
$25,100.

These numbers are often less than 1/20 the real value. It makes zero sense.

In order to translate that number to market value, you need a conversion formula or you have to call your assessor’s office. The result is confusing for consumers and can be deceptive for homeowners who don’t know they are over assessed, sometimes grossly so. We often get calls from consumers who see the property taxes are $12,000 on a home but the “assessment” is $18,000. Which do they pay? What does the $18,000 mean? And we have to explain something to these folks that does not really help them get any closer to finding a home.

I am sure I’m not the only one whose time is wasted. I am sure staff at the assessor’s office have to translate these assessed values more times than they care to count.

The answer is simple. The towns and cities should assess homes at full market value and end the practice of using numbers that make no sense. It all speaks to the inertia of the transparent government we deserve but do not get. People should not need a phone call or a scientific calculator to know what their assessed value is. There is nothing remotely forthright or transparent about a $500,000 house being assessed for $25,000.

Would converting to full market value assessment cost money and time? Yes, they say it would. Why? I don’t know. It seems to me that a college sophomore could create a program that would do the job in 3 hours. But a common sense solution like that has never taken hold.
You’d need a committee.
And a task force.
And commission.
And a study.
You’d have to open it up to bidders.

Why? The process has to be transparent.

The mind boggles.

Commentary • May 29, 2012

“What is Your Commission Fee?”

by J. Philip Faranda

According to Gene Kranz in his book, Failure Is Not an Option, “When reporters asked (astronaut Alan) Shepard what he thought about as he sat atop the Redstone rocket, waiting for liftoff, he had replied, ‘The fact that every part of this ship was built by the low bidder.'”

I received a blank email this morning with the following not so cryptic subject line : what is your commission fee. Nothing was capitalized, no punctuation, just the five words in sequence.

I take absolutely no offense to the question. It has in the past been the opening of a discussion about hiring me on any number of occasions, and I truly believe that many consumers don’t know how else to best start the dialogue. The thing to understand about the question is that, while nobody wants to overpay, 99% of the people who ask the question don’t view commission rates as being the most important reason to hire a broker. They want what they pay for, which is service, results, professionalism, and a successful outcome.

That said, the construction of the email gave me the distinct impression that this person was email canvassing any number of agents and was deliberately seeking the lowest rate. If that is the case, this person has a long road ahead of them. Hiring a professional just because they are the cheapest is the recipe for a disaster.

Imagine your daughter was in an accident and her face was horribly disfigured. You are told of a renowned reconstructive plastic surgeon right in the city where you live who can make her look like the day she did before the accident. Do you ask how much?

Or imagine returning home from a business trip to an empty house. Your checking account was raided and there are divorce papers on the kitchen counter. Do you go out and get the cheapest lawyer you can find?

Would you jump out of a plane with the cheapest parachute? Would you plan your wedding at a car wash?

While my examples may be incredulous, consider the fact that surgery, legal crisis like a divorce, jumping out of planes and weddings occur very seldom in our lives. Moreover, when they do, the stakes are high. Your health is at stake. Your finances are on the line. Your well being hangs in the balance.

And yet some people, for what is often the largest financial event of their lifetime, decide that they have to be frugal in choosing their agent. It is as if we are all the same, so you might as well get the cheapest for their rubber stamp and save some money. This is of course flawed thinking, and when the inevitable does occur and the low bidder screws up, the consumer feels let down. They should. They let themselves down.

Real estate mistakes are far more expensive than the percentage one theoretically saves when they hire someone who can’t sell their own value except to promise a low rate. Hiring a broker solely because they are the cheapest is the financial equivalent of having a vasectomy performed in the back of a van. And the outcomes are often similar.

Real Estate Tips • Selling • May 21, 2012

Get Your Westchester Home Inspected Before Listing it For Sale

by J. Philip Faranda

One of the more stressful parts of the home sale process is the part where the seller and their agent “sweat it out” while the buyer completes their home inspection prior to contract signing. Often, this yields to a the buyer’s revisiting their “meeting of the minds” price and ask for a reduction in price or repairs to address the inspection findings. This causes no small amount of angst. It is also quite preventable.

Westchester County is filled with older homes, as the post-war baby boom yielded almost full development in many towns. We have almost no new construction. Older roofs, termite damage, outdated electric or heating systems and other signs of long term wear and tear are standard issue. Given this fact, the best way to avoid the home inspection blues is to get out ahead of the matter and do your own inspection prior to listing the home for sale.

For a fraction of the cost of addressing many repairs (typically just a few hundred dollars), the homeowner can know exactly what the latent issues are and address the needed repairs before the buyer can use them as bargaining leverage later. It also give the home seller peace of mind that an 11th hours surprise is extremely unlikely.

Whle the market is showing some signs of life this time of year, buyers have not shed their boldness. The most common statement I’ll hear from a buyer after an inspection is a variation of “If the seller has neglected the (roof, heat, driveway etc), how will we know if the rest of the place isn’t neglected?” Worse, some sellers will go the DIY route and do the duct tape thing as a stop gap repair and make matters worse.

The simple solution is to invest a small amount of money and time into your own pre-listing inspection and address the home’s issues on your own terms without the pressure of losing a buyer and quite possibly enhancing the home’s appeal. An inspection can help you find out if the water heater is about to go, if the circuit breaker panel has a double tap, and dozens of other smaller, potentially incendiary matters that are, in actuality, simple to fix. It goes without saying that more serious things can also be discovered and dealt with. The best part of it is that it puts you ahead of potential problems and more in control.

Commentary • Real Estate Tips • May 14, 2012

Regarding Agents Returning From Hibernation

by J. Philip Faranda

We recieved two voicemails from an agent who had called to show one of our listings. They were so over the top nasty that my Queens-native wife and I looked at each other stunned that a licensee would leave a permanent record of such hostility. I recorded the messages and sent them as an attachment to her manager. We’ll see if that gets any response. I’d certainly want to know if one of my team were to act so unprofessionally.

The details were unimportant except to point out that Centralized Showings, the company we use to set appointments for our listings, had the gall to ask this associate broker for her license number to verify her identity. She balked at this, and a big part of her message to me was that her license was not something she typically carried around with her. In looking her up on the MLS, the bulk of her career has apparently occurred prior to the real estate decline. She has not become acclimated with the New Normal like the rest of us who have been working in this environment since 2007 when the sub prime domino was the first to fall.

Some agents are not primary bread winners. They can go into hibernation when the market goes pear-shaped and return when the coast seems clear. The problem in 2012 is that when your experience is all with low-hanging fruit and not the current, more difficult climate, the return is not easy. And yes, that even reaches something as seemingly simple and mundane as setting up a showing. In January of this year, three boards merged to form our current Hudson Gateway Association. This caused some difficulty with 3rd party vendors who rely on membership databases, but the remedy, taking 3 minutes to verify your identity, is simple and harmless. Unless of course you are out of practice and you are still operating like it is 2005.

But the details are unimportant. The next thing that those of us in the industry have to be mindful of is that as the market levels off and improves in some areas, that part time and inactive agents will be returning to the fold with a frame of reference that is completely unfamiliar with the current landscape. And they will be neophytes about new mortgage requirements, short sales, and all the other obstacles that are another day at the office for those of us who have been around. They will get their sea legs under them at the expense of clients who are unaware that they have been primarily on the sidelines for years, as well as those of us who will be on the other sides of transactions with them.

Forewarned is forearmed. Beware the agent returning from hibernation if you are a consumer or an agent who may close a deal with one. As I tell prospective clients all the time, the operative question to ask an agent you are considering doing business with is what they have done the past 12 months. If they make a vague reference to Tommy John surgery or a pilgrimage to a Tibetan monastery, ask about the past 24 months. I wouldn’t want to undergo surgery with a doctor who hasn’t held a scalpel since 2009, nor would I want my life defended in court by an attorney who just returned from 3 years in a cabin. Real Estate transactions can have life changing consequences. There are some agents who have not been very active since 2007 or 2008, and they should be upfront about it.

Market Statistics • May 7, 2012

April 2012 Westchester Real Estate Market: Better News

by J. Philip Faranda

If I were not seeing it with my own eyes I would not believe it. But after witnessing bidding wars on 2 of my own listings, one in Ossining and another in West Harrison, I have to say that the Spring real estate market in Westchester is stronger than I expected. It might be the pent up demand after 4 years of malaise, low rates, the simple societal adjustment to the new normal, or all of the above. But April’s numbers did show an undeniable improvement in a variety of ways.

In total, for April, 2012, there were 283 single family homes sales closed in Westchester at a median price of $550,000.
In the same period of 2011, there were 249 closings at a median of $535,000.

That is just under a 14% improvement in transaction totals and a 2.8% rise in median price.

Year to date, the numbers are almost as encouraging.

In the first 5 months of 2012, Westchester had 1014 closings at a median price of $521,250.
In the first 5 months of 2011, the county had only 971 closings at a median price of $550,000.

Median price is down slightly overall, but the public is buying more.

More good news: The number of homes under contract has spiked to 1239 properties under contract or pending sale, and the median asking price is $659,000. That makes sense; once the lower priced homes sell, “move up” buyers purchase more expensive homes. And that is what we are seeing. But even if we put the median price aside, the number of homes under contract is almost 300 deals more than last month. That tells me that April’s numbers were no anomaly, and that May could end up being an even stronger month.

Lastly, there are 4224 homes available in inventory, giving buyers a plethora of choices. That is still roughly 15 months of inventory. It remains a market slanted toward buyers, but a healthier market at that, and in rare cases, the sellers are starting to gain leverage. Time will tell if this strong Spring ushers in a recovery or is a temporary bump. Given the changes I see in buyer attitudes, we may see an uptick in consumer confidence and the seeds of a recovery.

Check out the available homes for yourself. Conditions may have finally hit the sweet spot where prices and buyer sensibilities have made a match.

Commentary • May 3, 2012

60 Seconds of My Life I’ll Never Get Back Again

by J. Philip Faranda

ME: J. Philip Real Estate, this is Phil, how may I help you?
Telemarketer: Is this Mr. Philips?

ME: *sigh* Yes, this is Phil.
Telemarketer: Hi, This is <Whatever> with <Company>, and I am calling to see if you’d like to do business with the 20,000 people who shop at the Briarcliff Manor A & P supermarket in every month? Are you familiar with the Briarcliff Manor A & P?

ME: I know the A & P, but I am not going to buy print advertising on supermarket carriages and walls. We have had more success with our Internet marketing.
Telemarketer: So if someone called and said they found you at A & P you would tell them you didn’t want to sell them a house?

ME: I would never do something that illogical. We are happy to do business with anyone no matter how they find us. I simply don’t think it fair to my clients to devote resources to a marketing effort that is not as finely tuned as my Internet efforts.
Telemarketer: Don’t you think your clients would appreciate you getting your name out in front of the 20,000 people who shop at the A & P every month?

ME: My clients appreciate that I built my company through marketing targeted at people who are specifically seeking real estate online, not people seeking milk and eggs.
Telemarketer: OK. Have a nice day.

Buying • April 30, 2012

Buyer Mistake: Not Being Pre Approved

by J. Philip Faranda

I have wagged my finger at both buyers and sellers on the current real estate market, and today it is once again the buyers’ turn. While we are indeed far from an overall recovery, all real estate is local and in Westchester we are in a busy spring sales cycle. In more than a few locales, there are multiple offers on some select, well -priced properties. In those cases, I am witnessing a unique way for buyers to fall on their spear: not providing a mortgage approval letter.

No matter how many times we preach to buyers of the imprtance of being pre approved, there are still those who insist they’ll get one only after they find a house, and there are still to many enabling agents who are willing to show them properties. It is living dangerously of course, because if you don’t know of a mistake on your credit, identity theft or an old debt, you could be in for weeks or months of work you don’t know about until it is too late.

In the sellers’ case, no home owner is going to tie their home under contract with a buyer until that buyer has been rigorously checked out. To not do so would incur the risk of missing out on all those May and June buyers and face going back on the market later in the summer. That is costly, and can easily be avoided in most cases by simply calling a loan officer to verify the buyer’s ability to perform.

In a best case scenario, a well qualified buyer without a pre approval letter can miss a weekend and be outbid by someone with their act together. In those cases, they lose the house. Even if they are comfortably bankable, the house is gone, because they didn’t prove so soon enough and someone else did.

I am seeing two cases where the buyers are out in the cold in the past week. There are competing offers, the other offer has similar price and terms, and guess what? A good solid letter from a lending institution with a loan officer’s signature and direct number for any questions come from their competition. Contrast that with a wink and a promise, and the seller’s decision is easy.

Spring comes but once a year. We are seeing a tenuous balance between the old buyer’s market of the past few years and what we hope is the seed of a recovery, but at the very least a busy cycle of the season. Given the amount of money changing hands in a home sale and purchase, it seems simple enough to spend 10 minutes on the phone with a loan officer to make sure you aren’t wasting your time. Caution is still the operative word on both sides, and it behooves buyers to make sure their house is in order before they find a house they love.

Buying • Market Statistics • April 24, 2012

Cold Spring & Philipstown Market Report 1st Quarter 2012

by J. Philip Faranda

The first quarter of 2012 for the Cold Spring and Philipstown area indicated a very slow quarter compared to the same period last year, according to the sales data from the Empire Access MLS.

In the first quarter of 2012, there were 3 sales in Philipstown and Cold Spring at a median sale price of $392,500
In the first quarter of 2011, there were 8 sales at a median price of $520,000.

To be sure, it is a slow start.

Currently, there are 7 homes under contract pending sale at a median list price of $299,000. Clearly, the buyer activity is on the lower end of the spectrum.

Buyers do have a unique opportunity: There are 64 homes active and available on the market right now in Philiptown at a median price of $549,450. Does this mean that the available inventory is overpriced? No! It just means that the first quarter trended toward lower cost properties. What is available is an awesome opportunity for buyers to choose from a huge inventory of some great homes in a spectacular area.

The villages of Cold Spring and Nelsonville are charming and filled with convenience and beautiful architecture. The Cold Spring train station is right on the Hudson, down the hill from a beautiful downtown filled with shops, art and eateries. It is a well regarded destination for Manhattan weekenders.

In Philipstown outside the villages, you have bucolic beauty, privacy and lots of room to roam. We have a beautiful sprawling ranch on 8 acres listed that even has its own pond! $474,900 buys it and it is worth it. Click here for more information on this great example of Philipstown real estate.

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.

Wow! May 2012 Was Our Best May Since 2007!!

Westchester Homes Should be Assessed at Full Market Value

“What is Your Commission Fee?”

Get Your Westchester Home Inspected Before Listing it For Sale

Regarding Agents Returning From Hibernation

April 2012 Westchester Real Estate Market: Better News

60 Seconds of My Life I’ll Never Get Back Again

Buyer Mistake: Not Being Pre Approved

Cold Spring & Philipstown Market Report 1st Quarter 2012

Extend the The Mortgage Forgiveness Debt Relief Act

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