Buying • February 9, 2024

Waiving Home Inspection vs “Inspection for Informational Purposes Only”

by J. Philip Faranda

The following is a list of good reasons for a buyer to waive their home inspection:

Never
Waive
Inspection

I’ll table the inspection of apartments for now, condo or co-op. They are a different category from a house on land.

In short, even if a client signs a form holding their broker harmless and indemnifies them from liability, I am uncomfortable with waiving inspections. Yet in the hot market of recent years I’ve seen buyers waive inspections fairly frequently to get their offer accepted by the seller. I understand the rationale. When I am on the listing side, that’s great for my seller client. But if my brokerage is representing a buyer, there isn’t a piece of paper in the world I am OK with a client signing holding my company harmless if they waive their inspection. The risk of not inspecting something as expensive as a house is too high to chance it.

There is a small exception if the buyer intends to dramatically rehabilitate or knock down a house. But in those cases the buyer is really more of a developer. Unless you are a contractor intent on significant renovation of a fixer upper, you’re absolutely nuts not to inspect. For Ken and Barbie buying their house that they’ll move into the day they close? INSPECT.

It’s not just a case of liability as a broker for me. I have a conscience. I am being paid to advocate for clients who will live in the home with loved ones and live their lives there. I could never live with myself if I sold someone a lemon or a money pit when my advice could have prevented them from that harm. I don’t care if it’s a brand new build covered in Saran Wrap and smells like vanilla potpourri. Professional eyes should be brought in.

As a brief aside, house inspections aren’t simply for finding defects, they are informative as hell and are almost a class in home maintenance. Some agents find them boring, but if you put your phone down and imagine yourself as the buyer, they can be fascinating.

In the past few years I have seen buyer agents quasi-waive the inspection with the carefully worded phrase “inspection for informational purposes only,” which suggests that the buyer will not object to anything discovered in the perlustration. I’m closing on a listing in a few weeks where the buyers stated that very thing. They demanded $60,000 off the price after the inspection. While I think that is pushing the envelope of rationality, they obviously didn’t waive the inspection. My sellers ultimately settled with them with some adjustments after discovery, and they weren’t happy about it, but ultimately they are protected too. New York is a caveat emptor state, and if the buyers tried to litigate over something after the closing, the sellers would have significant advantage from the fact that the inspection was completed, regardless of what the buyers promised.

What’s important to realize is that in Westchester and the surrounding areas, inspections are done before contracts are even sent out by the seller’s attorney. This is very different from just about everywhere else where they are the first contingency of the contract. I’m no lawyer, but it seems obvious that in the absence of a signed contract, either party can back out because nothing is signed. If I had a buyer who had an “informational purposes only” on their inspection contingency, they might be stuck.

I’ve been on both sides of this. I can understand why a seller would prefer an “as is” sale where the inspection is waived. But we also live in a world where people litigate, and as inconvenient as the inspection might be for the seller, it is also a defense for them if the buyers come after them later on after the title passes.

I look forward to a more balanced real estate market where buyers are not tempted to jeopardize their future just to get their offer accepted. For now, however, in a cartoonishly low inventory seller market, the discussion must be had.

Commentary • For Agents • February 6, 2024

For Agents: Open House Parking Etiquette

by J. Philip Faranda

This past weekend some agents on my team held an open house for a listing in Mahopac. It was busy, with 25 separate parties and possibly 50 or 60 people walking through the home. The one wrinkle was that street parking was sparce. It had a driveway that could fit up to 10 cars, but only one car wide. This is workable with reasonable cooperative people.

One agent, unfortunately, only parked less than halfway in with their clients behind, and just one car fit behind them. I asked them to move up, and they demurred, promising to just be a “moment.” The “moment” was 20 minutes. I asked a second time, and was told they didn’t want to be blocked in. Well, yeah, waiting a few minutes for others to have their turn is better than blocking them out and not even giving them a chance to enter.

Some people parked down the street a bit where some temporary street parking was plausible. But one couple left, and that sucks.

We are all in this together. Selfish or tone deaf behavior when you are quite frankly a guest at someone’s home isn’t a good look, and it isn’t very collegial either. A minor inconvenience is part of the equation when the alternative is to alienate others. There are multiple offers on the house. It will sell. The seller will be happy. But I can’t get that couple out of my head who were so friendly who waited nearly 20 minutes, then decided to leave. I spoke with them. They should have bene able to enter. That’s not fair to them, and the results notwithstanding, my seller client would want them to have a chance also.

Commentary • Home Improvement • February 2, 2024

Yes, Virginia, You Can Paint That Wood Paneling

by J. Philip Faranda

Formica.
Popcorn Ceilings.
Wood Paneling.

If you envision your grandparent’s house, or the house you grew up in (if you’re old like I am), you’ll know those are the calling cards of a dated home. Why avocado green or harvest gold were upscale colors for appliances or why wood paneling was the rage in the decor of the 20th Century is unknown to me, but they were.

Growing up in my childhood home, we had a playroom that was added in the early 1960s (my mother never grew tired of reminding me that the cement slab was poured the day John F. Kennedy was assassinated), and it was covered in a lighter tan wood paneling. I thought nothing of it growing up in the 1970s, but when I started showing homes as a Realtor, whenever we walked into a home with paneling I’d hear gasps from the buyers about the expense of replacing it. It did make a home, shall we say, a period piece, but the solution is actually not that involved.

Re-doing a room with wall paneling is not a huge expensive project. It can be if you chose to physically remove the paneling and replace it with sheetrock, but you don’t have to. You can simply paint the paneling. Some sources recommend spackling the grooves to make it smooth like drywall, but you really don’t have to.

Here is the least expensive, fastest and simplest way to update the walls:

Apply an undercoat of primer
Paint the color of your choosing
Enjoy the updated room every day the rest of your ownership of the home.

This is what I did. It transformed the room. I’ve done it in more than one house, as my current home’s basement office was all paneling.

If you have reservations about the efficacy of the method or are worried that the panel grooves will make it look clunky, let me assure you this: You have walked through rooms that had painted paneling and you didn’t even realize it. Millions of homes had paneling in the 1960s and 1970s. Those millions of homes that no longer do seldom did a gut renovation of those rooms. They painted over it. I’ve posted screen shots of videos from my office before and after the paneling was painted, and while you can discern the grooves, so what. You were looking. No one notices and even if they did it’s not unattractive.

Just paint it and you’ll love the result. It’s not even a compromise. It’s the easiest and most sensible way to transform a room from 1967 to 2024. You’re welcome!

Commentary • Mortgages • Real Estate Tips • January 24, 2024

The Pre Approval Shell Game

by J. Philip Faranda

Years ago, I was the listing agent on a property where an offer came in significantly below asking price. The pre approval accompanying the offer was for the exact amount offered, tens of thousands of dollars below asking. My client asked why, if they were only approved for $450,000, that they’d even look at a home listed for $500,000.

So I asked the buyer agent. He proudly told me that their loan officer advised them to not disclose what they actually could afford to dissuade the seller from asking for more. So my client asked me to tell them that they would like to counter their offer, but they didn’t appear to afford anything more, so good luck. This is not what the buyer agent expected. But that’s what happens when you play games with a process that’s not meant for gamesmanship.

The purpose of the pre approval is to give the seller confidence that the buy can afford the house. If that buyer actually qualified for a $600,000 home, the seller wouldn’t counter them at $600,000. But they would feet comfortable working with a byer that was so well qualified. But that lesson seems lost on some, as I have seen offers and counter offers with 2 or 3 updated pre approval letters as if proving that the buyer is well qualified is some sort of bad thing. Sellers don’t go for it- if the buyer is qualified for only the amount they are offering, the message being sent is that a small rate hike or tac increase might take them out of the running.

It is the most un-strategic strategy I have ever seen, and I excel in appreciating a good tactic when I see it.

The chief proponents of the practice are loan officers. But negotiation advice isn’t their job; it’s the broker’s job.

The same goes for proof of funds in a cash transaction. I have seen sellers with a $300,000 listing given $310,000 in assets from a buyer and heard them say that this buy is one bad day on the stock market away from no longer affording the listing. When the agent says they have other assets, we have to smile. Assurances aren’t assets. I’m not suggesting that a person worth $10 million share their entire portfolio with us on a $100,000 deal. But I am saying that if you qualify for more than asking price, you should not hide it. Anything that reassures sellers to be confident in your ability to close is good advocacy.

The fear that a seller will counter for more money with a well-heeled buyer is fallacious, as market conditions are so overheated that virtually all buyers are in a multi-offer competition.

There are times to be stingy with disclosure. Giving a seller confidence that you are the best buyer whose offer they should choose is not one of them.

Commentary • January 19, 2024

Sewer vs Septic: The Full Poop

by J. Philip Faranda

Recently, a client shared with me that a friend advised them to avoid homes on septic and to only buy a home with a public sewer connection.

I’ll be blunt: That is terrible advice. With inventory so low, to disqualify such a high number of possible homes is a disservice to oneself. For regular people without some specific need (like running a laundromat out of your basement? Nothing comes to mind), there is essentially no difference. There is data published that says Septic is better for a home’s value, and data that claims that a sewer connection is better for value. Again, you use the bathroom, you flush, you go about your day.

Septic is arguably better for the environment, as natural decomposition is preferable to the chemical treatments that sewer systems use for black and gray water. You have to pay for sewer taxes, but every few years you have to have your septic tank pumped.

Both are problematic if you flush something down the toilet that shouldn’t be flushed, like a tampon or stuffed toy. I’ve owned both personally, and while most of Westchester is on sewer (Trivia: I sold a house in YONKERS once that was on septic), plenty, especially the north side of the county, has septic more often. Again, s ling as what goes down the drain is what should go down the drain, it really makes no difference.

I expound on this a bit more on video if you want to hear the above thoughts in a more nasal voice.

Commentary • January 9, 2024

Sellers: Always Plow Your Driveway After it Snows

by J. Philip Faranda

This past Sunday I covered for one of our agents and met up with some first time homebuyers for their very first home tour. We had a big day scheduled: 5 confirmed appointments, all of the homes looked good, and the clients were excited to get their dream home.

At the first appointment, I smirked a bit. It had snowed the night prior, and the driveway was covered with about 5″ of fresh snow. This is, at best, inconvenient. It’s also a safety issue. It’s not great for the house floor either. The house didn’t make the short list, so we went to the next showing.

The next driveway was also covered in snow. The driveway was longer than the prior one, and it had a bend in it. This was not optimal. The showing concluded, and my clients backed their car out of the driveway. I tried t follow in their exact tire tracks, but I felt my left rear tire go off pavement and on the lawn. I turned the wheel to course correct, and as my front left wheel turned, I felt the car slide further off the driveway. There was, right off the driveway, a slope. I attempted to pull forward to retry the whole operation, and the car slid further. Not realizing or appreciating how steep the grade was off the driveway- or where the pavement ended and the lawn began under all that snow- I felt my car slide completely off the driveway and down about 15 feet where a steep drop into a stream was. An hour later, a tow truck was pulling my car up the hill back to stability. It was a very stressful occurrence for several reasons, not the least of which was that these poor folks with me were having what should be a relaxed tour of homes devolve into a car rescue with AAA.

God bless the clients. We took their car to see the next two homes nearby to complete our tour, and when they dropped me back at my car the good folks from Candlewood Valley Motors were there and took a good half hour to delicately pull the car back up safely.

The moral of the story: That homeowner should have either plowed their drive way cancelled showings until conditions were safe. I am not exaggerating when I say my car could have ended up on it’s side in a stream. The liability the homeowner would have incurred was not insignificant, and it scares me to think of how things could have gone if my client’s car slid down that bank instead of mine.

Commentary • Market • December 21, 2023

How Can We Solve the Real Estate Inventory Shortage?

by J. Philip Faranda

My last two posts have addressed the fact that despite the higher interest rates, it remains a seller’s market because of low inventory of listings. I wrote about why inventory is so low yesterday, and today I’m going to pretend I’m the HUD secretary and Housing Emperor (a position I made up but I’d love that job) to talk about how to get out of the corner the housing market has painted itself into.

I have heard this expressed more in the last two years than the rest of my my career combined:

I’d like to sell, but I have no idea where I can go. There’s nothing out there for me.

To save you a click, I cited 4 main factors as to why listing inventory is at such a meager number:

We aren’t building enough new homes
Foreclosures liquidated by banks are down
The Golden Handcuffs interest rates double what would be move up buyers are faced with
The paralysis of not knowing where to go, which keeps would be sellers in place

That’s a lot to tackle.

So if I were Emperor, what would I do to fix this?

Allow me to wave my scepter.

First, we need to build more, which means people of all political stripes need to find common ground. Resistance to building in my experience has many sources but two reasons often cited are concerns about environmental impact and strain on schools. There are solutions.

Green housing. This doesn’t just mean more McMansions with solar panels. While new development can be far more environmentally friendly than even 10 years ago, single family homes are not the only option. Repurposing buildings that had industrial or commercial use into denser condos has been a spectacular move in Yonkers. Driving recently through Providence, Rhode Island I saw multiple examples of old factories being converted into lofts, apartments, and condos. The structures are already there. The infrastructure is already there. The immediate areas are already urbanized and ready. Not one tree needs to be removed for these projects.
55 and over communities. This would be good for reasons beyond all the soul-crushing generational seminars I’ve had to endure where I’ve heard all about the aging baby boomer population. Downsizing and simplifying make 55 and over communities desirable not just for the residents, but the community at large. It present zero additional demand on schools, increases tax revenue, and keeps communities intact because instead of flying south or to more affordable areas, seniors can stay local with smaller, less expensive housing than their empty nests.
More Planned Unit Developments (PUDs). Townhome and condominium communities don’t just house more people at an affordable price point. They also include green space. They have common areas for recreation. They are communities in a box. There is no cookie cutter resident of a this type of development. They are great for seniors because they have less fewer maintenance headaches. They are wonderful for younger families because there is recreational and green space that don’t require a drive elsewhere. And they are more affordable than single family homes in austere, clear cut subdivisions.

I’ve heard the environmental arguments against overdevelopment and the older I get the more the emphasis seems to target development as a whole rather than irrational exuberance with no master plan. People need to live somewhere. And if we have to expand our schools, the development I am talking about will sustainably fund that growth.

The potential for new builds is, in my opinion, the biggest opportunity we have even in the fairly densely populated county we call Westchester. That’s not the only edict I’d issue as Real Estate Emperor.

Bank owned foreclosures need to enter the 21st Century. I could write a book about what is broken with the mortgage system when a borrower defaults, but let’s jump forward to enabling a dignified exit for people who cannot keep up their payments. It shouldn’t take 9 months for a short sale to be approved, and the loan modification process shouldn’t be red tape hell either.

The process of turning over a non performing asset (as a foreclosed home is termed in industry parlance) is stuck in a decades-old model that needs to go away. The Ivy League MBAs who run our financial institutions don’t spend much time in their foreclosure division. When someone stops paying their mortgage in our area, the lender retains a law firm that collects enormous legal fees as the foreclosure process meanders through the courts for years. It used to take 9 months to a year for a house to be foreclosed on. Now 2 years seems fast in New York. The lender sends nice letters offering help, but most borrowers in default are past any bandwidth to work with the lender to modify the mortgage, promulgate a short sale, or work out a solution with a dignified exit. So the property sits, often vacant, as part of a shadow inventory that takes years to resolve. There are better ways, and they all involve forcing lenders to stop the red tape. This involves government intervention, and that means politics, so that’s why change is nonexistent.

The last part of the issue is the Golden Handcuffs issue. The government has been manipulating interest rates for decades, and now we are seeing the results. A little more than a year ago, rates doubled in a matter of weeks. That’s insane. I understand the complexities and concerns about inflation involved, but the unintended consequence has been awful for regular folks trying to live the American Dream.

Government manipulation of rates should be reined in with limits on how much and for how long they intrude on market forces. This may be easier said than done but we can do better than 20 years of artificially low rates
Rate hikes should therefore be capped except for extreme cases, like war, alien invasion, or economic calamity like we saw in 2008.

Some issues, like the effects of rate increases, will simply take time to ease away. But if we did a better job supporting new development and had a better approach to distressed properties, the perfect storm of our current circumstances would be substantially ameliorated.

Market • December 20, 2023

Why is Inventory so Low?

by J. Philip Faranda

Yesterday I wrote about the low inventory and the challenges buyers face with supply not measuring up to demand. I did not address the reason why buyers have so little to choose from, and that’s what I’ll attempt to tackle.

There is no single factor for such a dramatic shortage. It is more of a perfect storm of circumstances at play, and that makes for a conundrum that isn’t very easy to solve.

We aren’t building. In 2007, almost 1200 new builds were entered into the MLS in Westchester County, with another 263 up in Putnam. In 2022, only 263 New builds were listed in Westchester, with a paltry 63 added in Putnam.
Foreclosures and Distress have dropped dramatically. When the pandemic hit in 2020, a moratorium was made on banks foreclosing on delinquent mortgages that lasted until last year. There were 356 bank owned foreclosures listed in Westchester in 2019, the last year before the pandemic. In 2023 there have only been 114 listed. Foreclosure is a judicial process in New York, which means that new cases will be meandering through courts for years before that number goes up appreciably. Foreclosures do more than present a possible bargain. They also have a check and balance effect on values of non-distressed properties. That effect, and the option for buyers, is largely absent.
The Golden Handcuffs. I wish I made up that term. What it means is that the “move up’ sector of the market is ostensibly trapped in properties bought or refinanced when rates were half of what they are now. If you bought a $500,000 house in 2016 with a 3.5% mortgage, buying a more expensive move up type of home with rates at 7% today adversely affects your mobility. This is the case for millions of potential buyers. People expect a higher payment when they buy a bigger, more expensive home but this is a far bigger case of sticker shock than any market we’ve ever seen. A $400,000 mortgage at 3.5% is a principle and interest payment of just under $1800. A $600,000 mortgage at 7% is almost $4,000. Millions of people who might otherwise move are staying put simply because the math doesn’t work.
The Paralysis of Uncertainty is now greatly enhanced. In normal times when the vast majority of people list their house for sale, they may not know exactly what they are going to buy, but they trust that they’ll find their next home with a high level of certainty. The prevailing wisdom has always been to make sure you have a buyer for your home before you start making offers on your next place. Now that narrative is flipped. People who might otherwise list their home for sale are staying on the sidelines because they simply have no idea where they are going to go. With no evident options, more people are staying put.

You’ll note that rates should adversely affect demand and cool things off. When rates rose it did have an effect, but as my C.C.O. Joe Rand has often said, when you slow down from 100mph to 65 mph, it’s still pretty fast. Bidding wars that had a dozen offers now have 3 or 4. That’s still a strong seller advantage.

So, with move up buyers staying put, other potential sellers not knowing where they will go, an 80% drop in new builds compared to 15 years ago and a dearth of bank foreclosures, we have a monster with many heads to slay. How does this get fixed?

I’ll opine on that in my next post.

Commentary • Market • December 19, 2023

How Slow is the Market in December and the Holidays?

by J. Philip Faranda

The cyclical nature of the market is a long discussed topic. It’s no secret that the traditional “busy season” is the spring, with the key word “traditionally.” In typical market cycles, the summer remains active, transactions tail off in the autumn, and things get quiet around the holidays and winter time.

But we aren’t in a typical market here in Westchester and the surrounding areas, and we haven’t been since the Covid pandemic. Right now, the low inventory has resulted in a significant amount of pent up demand, and homes listed around the holidays are enjoying attention that makes it feel like spring despite the temperature. There are legions of prospective home buyers who didn’t have much luck in the spring or summer who are still looking in earnest.

Before I explain why inventory is so low, let me draw a picture of what buyers are dealing with by looking at history.

In November of 2019, 365 single family homes were listed for sale in Westchester County.
In November of 2023, 292 single family homes were listed for sale in the county. That’s not an insignificant difference, but let’s look at May of both years:
May 2019: 1285 new listings
May 2023: 733 new listings

522 fewer listings going active in the traditional busy season is going to have a domino effect. The law of supply and demand is unforgiving, and even though rates virtually doubled from the same time last year, it remains a robust seller’s market and with good reason. People still prefer to live indoors. Westchester is a destination for many reasons, not the least of which is that big city a short train ride south of us. Yet this is not just a Westchester thing; inventory is low everywhere, with similar dynamics challenging buyers.

Instead of winter hibernation, buyers remain on the hunt until they can find something they can buy. We’ve always said that anyone looking this time of year is typically more serious than average, and their numbers have grown. Low inventory does that; unsatisfied demand remains until it is satisfied.

Why is inventory so low? I’ll dive into that in the next post. Suffice to say, if you want to need to sell, waiting isn’t necessary. The buyers are active and looking like Easter, not Christmas, is around the corner.

Market • November 10, 2023

What Can You Buy in Irvington for $799,000?

by J. Philip Faranda

Prices are up these days, but $799,000 was all a buyer paid on our recent closing on 21 Beechwood in the Village of Irvington. The home was a fixer upper, and that is indicative of local values for the condition.

Irvington fixer upper colonial on a dead end street

“Bring your contractor! Classic mid century center hall colonial on a cul de sac with a large deck overlooking a spacious yard. Good bones but in need of some love and priced to reflect the condition. Spacious rooms, large great room with fireplace, eat in kitchen with sliders to rear deck, 2 car attached garage and ample parking, and plenty of room for living on each floor. Excellent location, quiet dead end street, huge upside and potential. Fantastic commuter location, close proximity to the river towns and all that they offer, and hard to beat the lifestyle at this price point!”

These homes are rare and don’t last long, so contact me for the first look when they hit the market next time!

Waiving Home Inspection vs “Inspection for Informational Purposes Only”

For Agents: Open House Parking Etiquette

Yes, Virginia, You Can Paint That Wood Paneling

The Pre Approval Shell Game

Sewer vs Septic: The Full Poop

Sellers: Always Plow Your Driveway After it Snows

How Can We Solve the Real Estate Inventory Shortage?

Why is Inventory so Low?

How Slow is the Market in December and the Holidays?

What Can You Buy in Irvington for $799,000?

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