Buying • Commentary • Selling • April 22, 2024

What Everyone Should Understand About In-Law Apartments

by J. Philip Faranda

The term “in law apartment” or “in-law space” has become misunderstood lately by both agents and consumers, so I’d like to clear up what should be fairly straightforward.

First, if a home is a single family house, it is just that: a single housing unit. It is not a multi-unit building. If it has a “in law” attached, that space is designated for non-commercial purposes so that extended family can live in the same house, but more or less separately, and not for market rent. There is no true legal definition of an in-law space in my research, but overall it is visually like a second apartment in what would have been a single family home. It often has its own kitchen and for all intents and purposes appears to convert the structure into a 2 family, and other times it is a separate space with its own entrance that may not have its own kitchen.

“Separate but close” is, in my experience and what I have read elsewhere, the biggest distinction. It could be a living area above a garage, an out building like a cottage, a basement living area with it’s own entrance, or any number of other setups. But what all in law spaces also have in common is that they are not for rental income. Now, to be clear, you might have family in an in law apartment or area who contributes to your mortgage every month. That’s one thing. But if the people who live there and pay you rent monthly came from Craigslist and not from your genome, you are out of compliance.

Recently, we had an accepted offer on a home with a separate space with it’s own entrance that we suggested could be a home office or an in law space. The prospective buyer was sent by his agent to the municipality’s building department to ask if the space could be rented out. They were obviously told that they couldn’t. They withdrew their offer and the agent suggested that the wording in the listing was inaccurate.

I have two thoughts on this:

The consumer clearly misunderstood what an in-law space is.
That agent should have accompanied their client to the building department for obvious reasons. If a client has to do the due diligence, what use is their agent?

In-law spaces cannot be rented out to the public. No building department would sanction this. Moreover, if one decided to get clever and rent out an in law space on the down low, they would be tempting fate. If anything happened on the premises that required an insurance claim like a fire or accident, the insurance company would likely deny their claim because most policies mandate legal use.

Think about that. If you buy a home with an in law space with the intention of renting it out to the public instead of having family live there and the place burned down, you might not have coverage for the loss.

Real estate has lots of catch-22s: Someone might skip getting a permit on an improvement because they are afraid of an increase in their property taxes, but when the time came to sell, they’d have to legalize the work later at great expense to their wallet and they could lose a buyer or two in the process, affecting their sales price. A self employed person might hide taxable income to avoid income tax, but they end up having a harder time qualifying for a mortgage or having to pay a higher rate. In both cases, the short term savings is often washed away in the long run.

It is the same thing with misuse of in-law spaces. Skirting the rules could turn a short term profit into a long term headache (or worse). If you are on septic and rent out the space to a small family instead of having your aged uncle live there, it could overwhelm the system. You could cause a parking problem. You might have a neighbor complain , especially if your tenant doesn’t behave themselves. I’ve already mentioned the liability issues. Anyone who thinks that “in law” is a dog whistle for a multi unit home in the traditional sense is inviting future headaches, and could cost themselves dearly. Just like most real in-laws, proceed with care.

Market • April 6, 2024

Here’s What $439,000 Buys in Highland, NY

by J. Philip Faranda

I LOVE THIS HOUSE!

The dollar goes just a bit further in Ulster County than it does in Westchester, and this decked out cape that my clients closed on this week are ecstatic about their purchase. The prior owner did a marvelous renovation, and in addition to the wood burning fireplace and nearly an acre of level land, they will enjoy some wonderful modern upgrades.

It has a huge renovated eat-in kitchen, a formal dining area off the living room, 4 bedrooms, 3 baths, and some seriously awesome mechanicals: solar power, an ultra modern water filtration system, a backup generator, and ductless central air conditioning. It also offers a dynamite lifestyle, with a huge back yard that looks out at wilderness, a large patio, a turnaround driveway, and maintenance free siding. Just about everything is updated, from the septic system to the roof.

The team can help you find your own piece of paradise, all you need to do is call 914-450-8883 and we will see to it. We wish our clients many happy, healthy years in their new castle.

Buying • Mortgages • Real Estate Tips • Selling • April 4, 2024

Smart Agents Will Excel at Assumable Mortgages

by J. Philip Faranda

If I were asked by a seller what separates me from other agents to get them the best price for their home, I’d answer their question with a question of my own.

What type of mortgage do you have on the house now?

If the answer were an FHA, VA, or USDA mortgage, I’d then ask what rate they are paying.

If their rate were below 6%, for example 4.75% as millions of loans have now, I’d explain how I’d market their home to the buying public as an opportunity to buy a home in 2024 with a mortgage rate of 4.75%.

What sorcery is this? What gimmick? It’s the age old practice of assuming a mortgage.

Right now in the US there are millions of homes with mortgages that are assumable (with bank approval, which is not a significant obstacle for anyone who was buying with a mortgage at the current rates anyway), and a huge number of them have relatively high mortgage balances because those loans didn’t require a large down payment originally. Many buyers are fully prepared to put $100, $200, or $300 thousand down on their next home purchase. And if they have that kind of money down, they can assume an existing home loan with it’s original rate.

Marketing a home in today’s market with the verbiage that “mortgage is assumable at a rate of 4.75%” would attract even higher demand and should command a premium, especially since the fear of under appraisal would be virtually nonexistent. Assuming mortgages is a lost art, and all government insured loans like FHA and VA are assumable with lender approval. And for the average buyer, getting approved at 4.75% for example is far easier than getting approved at 7%.

I’ll draw out a scenario to illustrate the difference.

The home being sold is $700,000.

Right now, if a person were to buy that home with a mortgage of $500,000 at 7%, their principal and interest payment would be $3327. Now let’s suppose they instead found my prospective listing as illustrated above with a mortgage balance of $525,000 and the interest rate is 4.75%. There are 25 years left on the mortgage.

In both scenarios, the buyer puts $200,000 down. If they didn’t assume the mortgage, their principle and interest payments would be $3327. If they assume the existing mortgage, their principle and interest payments are $2608. That’s a $700 difference, which might shrink a bit if you add mortgage insurance required on FHA loans. But it gets even better.

The assumed mortgage only has 25 years left, which means the buyer is saving 72 mortgage payments. 72 x $2608 = $187,776.00. Moreover, they have paid the balance down by $25,000, which will take even more years off the life of the loan. And if they sell in the near future themselves, their buyer may also be able to assume the mortgage!

This is not a new gimmick or something that pushes the envelope of creativity. The HUD Website has an excellent page on the practice. My parents assumed the mortgage of the house I grew up in when they bought it in 1957. I’ve sold assumable transactions many times myself. It’s a forgotten art, mainly because tech has driven the industry away from the basics and into a preoccupation with digital everything.

Obviously, an experienced real estate attorney is crucial to make sure the seller has the release of liability for the original loan, which shouldn’t be hard to do. And of course the buyer should also have their attorney making sure their interests are covered as well.

There are millions of these mortgage out there, so they aren’t unicorns. Smart agents who understand this transaction will have lucky clients if the opportunity arises.

Commentary • Selling • April 1, 2024

Bedroom Count and Septic Systems

by J. Philip Faranda

Westchester County has a population of about 1 million residents. Most of those folks who inhabit the 914 area code live in homes that are connected to public sewers, but there are a hefty number of properties, especially in the northern part of the county, that are on septic systems. I’ve said before that there’s no practical difference between the two types of waste management for most people, in that you go, you flush, you live your life. But one aspect of properties on septic that is often misunderstood yet under discussed is the impact on bedroom count.

In general, the number of legal bedrooms for homes on septic is not based on the number of rooms, but on the capacity of the septic system. I once had a listing with what appeared to be 4 bedrooms that was well over 3000 square feet that was considered a 2 bedroom home. We couldn’t call it a 4 bedroom because the septic system was a 2 bedroom septic. There’s a fantastic article on the official requirements here.

The reason for the bedroom count being tied to the septic capacity and not the actual room count is the presumed use for those living in the home. It stands to reason that a 2 bedroom home will have far fewer inhabitants-and therefore use far less water- than a 4 bedroom home.

I said all that to say this: If you have a home that presents itself like a 4 bedroom house but the official septic capacity is for 3 bedrooms, I cannot list it as a a 4 bedroom. You might have the thirstiest septic system in the county. You might have raised a family of 12 in the house with no issues whatsoever. It doesn’t matter. We have to list properties by their official characteristics. Even if I tried to fudge it and sell a 3 bedroom home as a 4 bedroom, the buyer’s due diligence would find the discrepancy and they could attempt to negotiate or, worse, get spooked about the misrepresentation and walk away. I could also be liable for an ethics grievance for not rendering a true picture of the facts on the home. It simply isn’t worth it.

What I can do is refer to the 4th room as a possible 4th quarters or say that the home lives like a 4 bedroom. But I cannot, in the official bedroom count, dissent from what the building department and certificate of occupancy say. The certificate of occupancy, or CO in the biz, should specify the bedroom count, and if it doesn’t, then the building department should have an official bedroom count. What your municipality says is the final authority.

Commentary • March 27, 2024

Solving the Catch-22 on New Development: Build 55 and Over Housing

by J. Philip Faranda

I posted not long ago that one of the reasons why inventory is so low is that we are not building new homes at a rate needed to meet our housing needs. It is estimated that we need another 7 million units to solve this, and that won’t happen overnight. What’s worse is that in many communities like my own home town of Ossining, NY, there is considerable resistance to new development. In reading local community group postings, online, the chief reason for opposing the construction of new housing is the strain it potentially adds on the traffic and schools. The Northeast as a whole does have older infrastructure, and not much wiggle room to widen roads and build new schools, and we already have the highest taxes in the universe.

There is a proposal to build a new school, but the opposition to that will be significant. The last year a new school was built was around 1963, give or take. The population of the town was just over 26,000 according to the 1960 census. The current population stands at over 40,000 residents. Many of the existing schools have been expanded, but that’s been more of a bandage than a long term solution. Something does have to give; we can’t ignore the dwindling housing supply.

Looking back, I’m mindful of just how much times have changed. I recall as a youth in the 1970s that the district actually closed two schools due to the lower birth rate of the time, and new construction went from over 1000 new units in the 1960s to fewer than 250 in the 1970s. But the 1980s saw a resurgence in new development, mostly townhomes and condominiums, and eventually Roosevelt School, which had been closed and converted to offices in the early 70s, was reopened to accommodate the growing student body.

According to my search of public records, building declined in the 90s to 600 units, then mid 200s in the 2000s to only 31 from 2010-2019. That last one was probably due in large part to the Great Recession, but standing here in 2024 housing costs are nuts and any proposed new development always has vocal opposition.

Looking at the big picture of what is sustainable and works best in the long run, my vote would be to break ground on more 55 and over housing. The population is aging (I include my 56 year old self in that statement), and for many of us who are looking at empty nests and eventual retirement the options for downsizing are relatively sparse. There is a large population shift to the sunbelt and more affordable regions out of state, but that doesn’t do much for us locally. Denser townhome or condo style housing devoted to 55 and over should assuage the concerns about building. There would be far less strain on the schools, it broadens the tax base, and it gives more housing options to first time buyers when older folks transition to the new units. I certainly don’t think the commerce enjoyed from the new development would hurt either.

I don’t have a magic wand or housing emperor scepter, but if I did this would happen.

Buying • Real Estate Tips • March 21, 2024

What Buyers Must Know About Buying a Foreclosure in Westchester County

by J. Philip Faranda

Ever since I got in to real estate in the 90s, the public has had a bit of a preoccupation with buying foreclosures. The perception that a bank owned property is a bargain is hard to argue with, but it’s not always a simple or straightforward process. Having specialized in distressed properties for decades, I’ll share some things that buyers really need to know before they purchase something around these parts, because New York is a different animal, and Westchester and the surrounding counties are not like upstate either.

The decision maker is an asset manager at the foreclosing lender. Asset managers have quotas, deadlines, no small amount of pressure to dispense with non-performing loans, and are not touchy-feely. You will never be able to call the asset manager on the phone and talk to them.
The terms of the contract are not open to discussion like other contracts. In a regular transaction, the lawyers often “mark up” proposed contracts until a consensus is reached and the buyer attorney meets with the clients to sign. Sometimes it can take a week. In a bank owned transaction, the attorney for the seller will not remove a comma. This is particularly true in times like we are seeing now where the seller has multiple offers and can just go to the next buyer if the current purchaser’s attorney attempts any pushback.
The home is devoid of the history that would otherwise be available when buying from a seller that has, for example, lived there for 20 years. If a wall appears to once have a doorway, no one can explain what happened. If there is a water mark on the ceiling, you can inspect all you want, but there is no current occupant to share that the source of the leak was remedied. More of a concern is what may not be visible to the naked eye; I have seen instances where the former owner sabotaged the property in some way that’s not visible, like damaged pipes behind walls or some foreign object in the chimney. Inspections are paramount.
Typically the bank will allow you 10 days from contract signing to perform your inspections. These are typically “as is” sales for many reasons, but if there is a serious health or safety issue the lender may be open to addressing it with either a small price adjustment or documented work. But do understand that the vast majority of your findings will simply be on the to do list for when you take ownership.
Deadlines are rigid. The bank attorney might grant a mortgage or closing extension if they have good communication, but even then there could be a per diem charge. I have seen deals get cancelled for missed deadlines.
You will pay the state or municipal transfer tax that the seller would typically pay in a regular transaction. The state transfer tax is $4 per thousand in price, so a $500,000 house would have a transfer tax expense to the buyer of $2,000.

This should go without saying, and I would never impugn the good name of any listing agent on a foreclosure, but you should always use a good buyer agent in a transaction like this. The listing agent works for the seller, and the amount of advocacy needed in a distressed property is much higher than a typical property. A purchase of this magnitude should never be a do it yourself project.

Industry News • March 20, 2024

What Home Sellers Really Need to Know About the Commission Lawsuits

by J. Philip Faranda

When I went to pick my son up from baseball practice earlier this week, a friend came up an smiled at me. “Sorry about your pay cut!” I knew what she was referring to, and as I peruse the news reports on the recent NAR commission settlement, I share many other Americans’ frustration at the failure of our journalism to accurately report on the matter. I know racy headlines get clicks and sell papers, but accuracy in reporting is still important.

There are a few things that home sellers need to understand about what changes they can expect, and please understand that these are my opinions, and not the official stance of my brokerage.

The settlement is still a proposal that still has to be approved by the courts. The wording and meaning of the verbiage may still change.
While the (proposed) settlement may put a rest to the issue where NAR is concerned, almost 100 larger companies with enormous market share are not included. Moreover, Berkshire Hathaway has not settled and continues to litigate. If they prevail, that could change things dramatically.
Contrary to the reports, commissions to brokerages aren’t going away, and may not even go down. What will occur is that the commission the seller pays to their listing agent will be unbundled from the buyer agent’s compensation. Since most buyers cannot pay a commission separately, they will elect to roll it into their proceeds of the sale, meaning the net to the seller will be structured virtually identically to how it is currently. We will just see more paperwork to get there.
This is not a slam dunk win for consumers, especially buyers, under the current proposal. Most buyers, especially first time home buyers don’t have the funds to pay their commission out of pocket, and while many transactions can absorb the financing of the commission not unlike it is done now, the most vulnerable of buyers, namely VA (Veterans Administration) and FHA will not have the cash or equity to pay their agent. They will then face buying without an agent in the largest transaction of most of their lives, or figure out how to come up with extra cash.
The proposed settlement will require buyers to sign an exclusive representation agreement with their buyer agent in order to tour homes and make offers. Now think about that sentence you just read. Every prospective buyer who just wants to check out a house is going to have to become contractually committed to their agent they use just to see the property. That contract will stipulate what the buyer brokerage will be paid in commission . That is a gift to the brokerage community, because we all prefer a consultation at the office first instead of meeting stranger alone in empty homes.
Anyone who thinks that buyers will be fine just dealing with the listing agents don’t understand that they work for the seller’s best interests. Divided loyalty is not good for either party, and buyers dealing with a listing agent will not have an advocate, just a facilitator whose loyalty is to the seller client. Listing agents will not be eager (nor should they be) to have twice the work for the same commission either.
Offers of compensation to buyer brokers will not go away. They will simply not be published in the MLS. I think it is still wise for sellers to offer buyer agent compensation, because it is misleading to think that the buyer broker will be able to collect their fee separately. That should still factor into the seller’s math. Any seller that truly thinks their entire proceeds will be a smaller commission to one agent is ignoring the reality that most buyers don’t have the capital to pay their agent separately.
This will not make housing costs go down. The only thing I have ever seen that causes declines in property values is a national financial collapse like the S and L crisis in the 80s and the sub prime bomb in 2008 that caused the Great Recession. Housing is subject to the same economic forces as any other asset, such as the law of supply and demand. Right now, we are millions of housing units short of what we need. Short supply means high prices.
Commission costs in total will likely not go down either. Making compulsory buyer brokerage contracts the law will give agents a silver platter showcase of their value proposition, and most consumers know that it is folly to make a home purchase a do it yourself project. Good buyer brokers will flourish in this environment, and mediocre ones will leave the industry. That’s good for consumers, and not good for lousy agents. But I can’t see commissions going down in total.
The law of Unintended Consequences will make the journalism on this embarrassing for the media. I’ve already explained that property values and overall commissions will not decrease, but also that cash poor buyers will take it on the chin with this. If it harms the most vulnerable, first time homebuyers who are the backbone of the industry, then I don’t see a win for those consumers.

To sum up, home sellers should not expect some great savings here. The lawyers who are spiking the football over their “win” are the only clear winners here in my view. Savvy buyers will not stop the decades old practice of having their own representation in the largest transaction of their lives, and the best professionals will not work for less in any industry, including real estate.

This will separate the wheat from the chaff as less effective agents leave the industry and the scores of side gig, part time agents will diminish dramatically. The consumers should expect that they’ll get more for their money. In that respect, we all win.

Commentary • Selling • March 12, 2024

New York’s New Property Condition Disclosure Statement

by J. Philip Faranda

For more than 20 years, home sellers in the state of New York have been required to furnish their buyer with a form known as a Property Condition Disclosure Statement (PCDS). It is a collection of several dozen questions that the seller is required to answer about the characteristics of the home. The law always allowed sellers to forgo the statement and credit their buyer $500 at closing instead, which is what sellers in this area did all the time. It was small price to pay for the theoretical shield of not making any representation that could be erroneous. As you can see, some questions are not easy to answer.

This is just a snippet from the 8 page, nearly 60 question form, but I can see why the advice was always to issue the $500 credit instead. Our housing stock around here trends older. How would someone know if there was ever a fuel tank on their property 100 years ago, or if there was ever a landfill there? The house I grew up in was on a former peach farm. That sounds harmless enough, but for all we knew there could have been a deep well, or a garbage pit, or a garage or fuel storage 100 years prior.

The law recently changed, and the following is the memo we got from our friends in Albany:

On September 22, 2023, Governor Hochul approved new legislation that provides significant
changes to the Real Property Condition Disclosure Statement (“PCDS”). The new law will go
into effect on March 20, 2024. This notice is intended to provide important information to real
estate licensees.
In advance of the change in law, the Department of State (the “Department”) has updated the
current PDCS, available on our website. Both the existing form and the future form will be
available until March 20, 2024. Real estate licensees are required to use the updated form, for all
transactions, starting on March 20th. Failure to use the correct form may result is liability to both
sellers and licensees. Accordingly, it is important to all parties to use the correct form starting
March 20, 2024.
In addition to new disclosure requirements, a key provision of the new law will be that sellers
may no longer forgo giving the PCDS in exchange for a $500 credit at closing.

The change has caused quite a stir, since there is no alternative to the statement anymore.

Here’s my advice to all home sellers:

Talk to your attorney.

That’s it. That’s my advice. And if you think I’m being glib or passing the buck, let me explain that this is a recent change to a law that requires new paperwork, and the proper source for legal matters and related paperwork is…your attorney, not your broker. It is ethically prohibited for us to give legal advice.

Like any change, this is causing consternation and stress in the real estate industry, and like most changes the angst is worse than the reality. This form was filled out all the time upstate where $500 was not small change, and I’ve never heard of it causing any issue.

Community News • March 8, 2024

Bonnie Meadow Rd, AKA Dick Van Dyke Show Way

by J. Philip Faranda

If you’re my age or older, you probably recall the the old Dick Van Dyke show. Dick Van Dyke Played Rob Petrie and his TV wife Laura was played by the great Mary Tyler Moore. You may not recall the exact address, but the Petrie family lived at fictitious 148 Bonnie Meadow Road, New Rochelle. Bonnie Meadow Road actually does exist! 9 out of 10 Westchester residents over the age of 50 know the show was set in New Roc, but even I didn’t know the address.

In my travels, I actually drove past Bonnie Meadow Road the other day, and I found out that it had been also named Dick Van Dyke show Way. This made me curious, so I did a little googling, and I found out that the local residents petitioned the city of Rochelle to rename the street for the iconic sitcom after Mary Tyler Moore passed away. The approval was around 2018.

That’s not all. Carl Reiner, the producer of the show (and father of Mike Reiner, who played Meathead on All in the Family) lived on 48 Bonnie Meadow Road back in the 1950s. He often stated that the show was based on many of his experiences living in suburban Rochelle at that time.

As I drove down the street, it was very clear to me that the on the set of show was obviously based on split branches that still exist on the street today.

Art imitates life!

Commentary • March 1, 2024

What’s Up With All Those “We Will Pay You Cash for Your House” Signs on Street Corners?

by J. Philip Faranda

If you’ve ever wondered what the story is behind those flimsy looking signs nailed to telephone poles all over the place promising you a fast cash sale on your house, I have the answer.

I’m sure you know the signs I speak of. They are known in the industry as “bandit signs.” Some are professionally printed, others look like they were hand written with an oversized marker. They are meant to get attention, and they do work. It does seem strange, however, that someone with the means to write you a check for your house would be running around planting these signs on road sides and nailing them to poles. Decidedly not glamorous.

The people who have them posted are typically known as “wholesalers,” and they are more like middle men than the end buyer. The business model is to make the home seller an offer for less than market value, and then assign the contract to a real investor for a markup, which is where the wholesaler makes their profit.

For example, let’s say you are in financial difficulty or facing foreclosure and you see the sign at a red light. You call, and the “investor” comes to take a look at the property. Let’s pre-suppose that your home is worth $500,000 “as is” and maybe $580,000 with some renovations, like new bathrooms and a kitchen. The wholesaler makes you an offer for $375,000 with a fast, “as is” close, and then they work on assigning the contract to an investor, but the investor is quoted $385,000. That $10,000 is how the wholesaler makes their money.

How do I know this? I’ve met many of the wholesalers in this market. I called a few of them, but most of the time they call me, because we have an investment group that buys houses.

The practice is legal for non-licensees but as an agent I would not engage in it. The wholesaling model is no different than buying something at a thrift shop and selling it for a profit on eBay. “Buy low, sell high” is not a new idea. If you ask me if the people who engage in the model are advisable to deal with, my answer would be that it depends. Some of them are fine. Some of them are slimy. I’ve been exposed to both. There is a concern voiced by some that there is potential for abuse here- an elderly person who might have no reason to sell for less than market value might think that $375,000 is awesome because they bought the place 50 years ago for $65,000. I would agree that such an arrangement is exploitation.

Why don’t I do it? The model is dangerously close to selling what’s called a “net listing” in New York, which is prohibited for licensees. But if the question is more broad, like would I offer that little old lady $375,000, my answer would be no. But that’s a far deeper dive for another post. But for today, now you know what those bandit signs are all about.

Market • February 29, 2024

What $705,000 Will Buy You in Ossining

by J. Philip Faranda

If your budget is in the $700,000 range and you’re looking in Ossining, you’ll be pleased to know that you can still buy a 4 bedroom home on over an acre like the one we just closed on this week in town. 5 Ridgeview drive has 4 bedrooms, 3 baths, and a 1.6 acre lot.

The MLS description:

Sprawling ranch on a level acre plus and cul de sac road near all local amenities! Brand new driveway, impeccable landscaping, and delightful curb appeal. Large flat yard with over an acre of a half of room for all you desire outside! first time to market in over 70 years after contactor owner has lovingly maintained the domicile. T shaped layout with 3 bedrooms inclusive of master bedroom/bath, formal dining room, and bright living room with a wood burning stove in the fireplace and bay windows showcasing the stunning private patio. The short hallway to the back rooms with floor to ceiling windows viewing the patio and yard, 4th bedroom with a second master bath en-suite, and family room with lots of windows and sliders to the rear deck overlooking the back yard and wooded bliss. The full basement offers more opportunity for a rec area, home office, storage, or whatever else your heart desires. A stunning home at an unbeatable price point.

Indicative of the market, the home had an accepted offer after 8 days. The sellers were wonderful clients and we wish them the very best going forward. This one is gone, but we have more. Contact me at (914) 450-8883 and my team can help you find your dream home.

Buying • Commentary • Selling • February 27, 2024

It’s February in New York, so Let’s Talk Swimming Pools

by J. Philip Faranda

Swimming pools are probably the last thing on most peoples’ minds but we are still selling homes that have them, and this thought is a bit overdue.

Swimming pools are an improvement, so they add value to a property. They can’t not add value presuming they are in working order, but there’s a but. The “but” is that while pools do add value to a property as an improvement and amenity, they also reduce the number of prospective buyers. There are two chief reasons for this.

The first reason is that, simply put, some folks aren’t pool people. It’s not their thing. They therefore aren’t interested in the added work, expense, and maintenance of a pool. And believe me, pools are all of those things. They represent an additional layer of duties, they come with extra costs, and they require maintenance from the homeowner, a pool company, or both. If you aren’t into having a pool, you will never want that additional layer of headaches like pool furniture, pumps, chemicals, safety precautions, and 100 other joys of ownership.

The second reason is safety. In 2007, when we were looking for a larger home with a 4th baby on the way, we did find one home that checked all the boxes in New Castle out by Millwood. It was an awesome colonial, it had wooded acreage, a woodburning fireplace, a 2 car garage and a full basement. But my kids’ mom vetoed it immediately when she saw that large inground pool in the back yard. Our son had just been diagnosed with autism, and there was no safety precaution in the world that would give us more peace of mind than the simple absence of a large drowning hazard in the back yard. We passed on it.

There is a lid for every pot, so I’m not down on pools despite their smaller “pool” (sorry) of buyers. I’ve never not been able to sell a home due it is having a pool. But over the years the question has been asked, and I think buyers know that the arguments against a pool may not justify a lower price, there are still enough pool people out there to find them worth the money and the additional responsibility.

Real Estate Tips • Selling • February 22, 2024

Price Changes Are No Longer Guesswork

by J. Philip Faranda

When I was first licensed in the 1990s, if a house didn’t sell for a period of time like 30 or 60 days, we would often reduce the price. Sometimes it was because we had too few showings, or because the showings we had didn’t yield any offers. On occasion, some home sellers would voice concern at a price change because no one had seen the house to give them price feedback. We’d have to explain that the feedback was the actual absence of showings. It wasn’t a truly data-driven process, however, because we had no means of measuring who saw the house either through their agent’s analog means (like seeing it in a broker’s binder) or advertised in publications and passed on it. We did have ample evidence that once a price was reduced, that the market responded.

It’s very different today. We have a number of digital means of measuring the interest -or lack of it- in a listing based on online metrics.

A few examples:

Web traffic. We have access to dozens of websites that can inform us how many people have viewed the property, saved it, and if they viewed it multiple times. Zillow, Trulia, Realtor.com, our own website, and our client platforms all have some form of revealing the listing’s performance.
Saved or Bookmarked listings. The same online assets can also tell us how many people added a listing to their favorite or saved list.
Proprietary client portals stats. Often when a buyer client is working with an agent, that agent’s brokerage has an online client platform (ours is called RealScout) that tells us when a particular listing is opened or saved. This is not like raw web traffic. These are active clients who have a representation contract with an agency and have a login to a concierge type site that gives us rich data on a listing’s performance.
Predictive analytics. This is crazy stuff. The program uses big data and is enhanced by AI, and can give us a far deeper dive into activity around a listing, and also tells us how many registered clients would likely save or match up with a listing by an algorithm fueled by web behavior. Simply put, it will tell me that a listing will garner 40 interested parties at $840,000 but 65 interested parties at $799,000. This is extremely data-driven and granular.
Reverse prospecting. This is in the back office of the MLS and gives a listing agent a list of every instance where a fellow MLS member has sent this listing to a client.

Given that with virtual tours, floor plans, high resolution photos and even drone imaging every listing is virtually an open house online 24/7, we can therefore see if the listing’s performance is in sync with the online metrics, or if a price reduction is in order. Let’s take, for example, two similar listings with comparable characteristics; one is priced at $699,000, the other at $729,000. The 699 home has 500 unique views, 25 favorites, 20 showings the first two weeks, 35 reverse prospecting matches, and 2 offers. The 729 house has 350 unique views, 3 favorites, 8 showings the first 2 weeks, 15 reverse prospecting matches, and one offer below asking. It doesn’t take much to conclude that $729,000, even in this market, is too high.

If a home is under performing on the market, the seller should ask their agent to see the data on the home’s online metrics with consumers. The agent should be able to compare their performance with a comparable property, and even use the predictive model to see what would change with a price improvement. The math defines the path- armed with data, the agent and client should be able to know what the best move should be for pricing.

Upon occasion, we are asked by the seller if the perception of the public will change with a price drop. The concern is that the seller might appear desperate or something like that. Soon, I will write a piece on the things we overthink in this industry. That question will be prominent. In this market, those fears evaporate when the buyer competition heats up with a correctly priced listing.

Commentary • February 21, 2024

How Online Reviews Have Impacted Real Estate Agents

by J. Philip Faranda

Back in 2009, I was approached by Redfin to help them enter the Westchester real estate market as a referral partner. They did not have employee agents here, so referring clientele to other brokerages would be a win/win arrangement to start. I was eager for any new source of business, and took a closer look. Part of their vetting process was to survey my past clients, which was fine, but to also publish my client’s reviews online.

My reviews were very nice, which was gratifying, and for the few years I acted as a Redfin referral partner agent I compiled more good ratings. It was all within their ecosystem, and while it was a tiny bit nerve wracking to wait for the responses, they were all positive.

Enter Zillow.

In late 2010, Zillow announced their own agent review platform, and it was different. Unlike Redfin, which surveyed their own clients’ transactions, Zillow’s reviews would be open to anyone. This concerned me. I wrote in the linked post a worry that the integrity of the reviews could be compromised by competitors and people gaming the system with bogus reviews, among other things.

Well, Zillow did the right thing and ensured that controls would be in place to prevent fraud. And here we are 13 years later and agent reviews are ubiquitous- Zillow, Google my Business, Facebook, and Yelp, to name the most recognizable names. These days we train our agents to get as many reviews as possible. How far we’ve come from the time when 20 reviews was considered a high amount, and my Zillow profile just got my 400th review.

The public now expects reviews for agent just as they do on Amazon products, Uber drivers, or restaurants. Looking back, I think the angst was more about the pain of change than worries that we’d get bad reviews. Real estate is a funny business- anytime transparency is introduced, the address, price or marketing history, and these days the agent commission, people worry that we’ll lose our value proposition. But we’ve never been good gate keepers, and more people use agents to represent them than before the Internet became prominent. The truth has never been our enemy.

Commentary • February 20, 2024

Living Indoors is Not a Fad

by J. Philip Faranda

In some respects, the housing market is like the biggest, longest domino set up in the universe. Chances are, with rare exception like the purchase of an empty house, that the person you are buying your home from is going to be moving somewhere that someone else moved out of, and they in turn are going to move somewhere where someone else is moving from, and so on ad infinitum.

Part of our job as agents as a matter of fact, is coordinating the move out and move in for clients, and it can get a little complex. But the bottom line is when someone does move out of a residential domicile, they are moving into another residential domicile.

Not an igloo.
Not a nomadic wagon caravan.
Not a houseboat.
Not a teepee or wigwam.
And no, they do not begin a new life as an avid camper.

So it amuses me when another agent is taken by surprise that the logistics of my clients relocation might have an affect on their client’s plans. We as agents don’t set closing dates in New York- that is left to the attorneys, lenders and title companies. But I have to have these discussions with my counterpart agents nonetheless. It’s like setting up a lunch date with an old friend.
How’s next Monday?
Oh, Mondays are bad, what does Tuesday look like?
Tuesday is fine with me.
Great! Tuesday it is.

This is not rocket science. But sometimes we make it harder than it has to be.

This text exchange is an example of what I’m talking about. The other agent sent me a text stating that we should be closing in January, to which I replied that we are not, because my clients would not be moving until February. Somehow this caught them offguard.

Bless this agent’s heart. As I’ve said before, it is difficult to explain these things without sounding sarcastic. My clients had a choice: rent their next home or buy something. They chose to rent for the time being. Renting is far less involved than buying, so I’m unclear as to why the fact that they are renting was such a curveball.

Buying • Commentary • Selling • Uncategorized • February 19, 2024

Sale Contingency vs Closing Contingency

by J. Philip Faranda

People live indoors. Its hard to say that without sounding sarcastic, but I am sincere.

It should not come as a surprise to a seller or their listing agent that their purchaser is selling their own home, especially if they are in a higher than average priced property. I shouldn’t have to explain, for example, that the purchaser of a $2 million property (and I count 678 listings in Westchester along active, pending or closed in the last year between $1.75M and $3M) isn’t living with their parents or on a month to month lease of a small apartment. They probably live in a home they own that is less than $2 million (or in the case of the super affluent, downsizing from a $4 million home).

It’s therefore very common for a home buyer to also be selling a home they still own in order to buy their next residence. Sellers shouldn’t be alarmed by this. It’s perfectly understandable for the purchase to be contingent on the sale of the buyer’s home. But the devil is in the details.

There are two distinctions that need to be understood:

Contingent on closing. These buyers have buyer for their home already. If the home isn’t under contract yet it at least has a meeting of the minds with a ready, willing and able buyer. But a signed contract is preferable.
Contingent on the sale. They don’t have a buyer yet. This is not preferable, even in a hot market.

With a closing contingency, there is no uncertainty about the salability or likelihood of closing on the buyers’ property. There’s a buyer. We have a reasonable expectation of success.

With a sale contingency, there is uncertainty. It could take months to find a buyer. It might be overpriced. The buyers might not be truly motivated and have an unrealistic price on their home.

A closing contingency is normal and no big deal.
A sale contingency is not optimal and in many cases downright risky. I would never advise a seller to accept an offer like this unless I had significant assurances that the house the buyers are looking to sell is going to sell. Those assurances could mean that I am, I manage, or I know the listing agent on the contingent home.

Please do bear in mind that this is coming from a broker’s perspective, and that you should consult with your attorney on contractual matters and verbiage, always.

Buying • Company News • Mortgages • Selling • February 18, 2024

Buy Before You Sell Program is Now in New York

by J. Philip Faranda

The conventional wisdom for people with a house they own who want to buy a new home has always been that they sell their current home before they made an offer on a new home because no seller wants a “contingent” deal on their sale. Also known as a Hubbard Clause or a sales contingency, it has always posed a risk for a seller because their sale depends on their buyer finding a buyer of their own. As a listing agent I’ve even had newer agents tell me that once my seller client agrees, their buyer will list their home for sale. Since it’s always been easier to buy than to sell, that seldom worked out.

Times have changed. Many people who might otherwise want to sell don’t, because they have no idea where they will go once they get a buyer for their home. This is common because inventory is so cartoonishly low. Therefore, they want to find something before selling their current home. Given that we are in a strong seller’s market, many sellers are now Ok with this. But the challenge is often that the buyer’s money is tied up in their current home’s equity, and they cannot always even make the earnest money deposit required to secure their purchase.

The solution in some cases is to secure a bridge loan, but that isn’t always a simple or easy process as some clients of mine recently discovered. I’m pleased to share that Howard Hanna and their subsidiary 1st Priority Mortgage have the solution, the Buy Before You Sell program. It allows people to start the purchase of the home they want while it’s still available by tapping into their current home’s equity with a 90 day deferred interest bridge loan.

Here are a few more key points I’ve been furnished with by my colleagues about the Howard Hanna Rand version of the Buy Before You Sell program for Westchester, Putnam and surrounding counties:

Allows the buyer to take Advantage the equity in your current home, now rather than later
Specialized tool for our family – Existing property must be listed with you and will use you to purchase their new home plus use 1^st Priority for their mortgage
Property needs to be in a licensed state
Out of pocket expense less than $400 at time of application; appraisal and credit report
Drive by appraisal only on current home
Low rate of 8% and payment is interest only
Max Term 1year
Payments deferred for 1^st 90 days (interest accumulates)
If loan closes within the first 90 days, we will issue a payoff statement for principal amount along with per diem amount of interest
Existing home to be listed prior to closing with a Howard Hanna agent

Those terms and small print are pretty reasonable and simple. This is for Howard Hanna clients whose home is listed with one of our brands (locally Howard Hanna Rand in Westchester and Hudson Valley or Howard Hanna Coach out on Long Island) and is through 1st Priority Mortgage. I’m a fan of this program; so many people out there would love to sell, but they simply don’t know where they can go! Since moving is a big enough project to begin with, a short term rental or just uncertainty of the next destination or not viable options. This takes the uncertainty out of the equation.

The loan officers who I’ve worked with at 1st Priority are industry veterans whom I have known and respected as professionals for many years. It’s always a pleasure to work with them and my clients have always been in good hands. They also do a great job at keeping our agents informed on the mortgage market, which is incredibly helpful.

If you are thinking of selling but concerned that you aren’t sure where you’ll go, this is a program worth looking into. Call me at 914.450.8883 and I can walk you through it.

Community News • February 15, 2024

My Visit to the Sunshine Children’s Home

by J. Philip Faranda

In 1962, my older brother Paul, then just 4 years old, got gravely ill and was rushed to the hospital.

He would not come home until a year later. His life would be an odyssey of living with diabetes, kidney failure and dialysis, a urostomy most of his life, and all that comes with those conditions. He wasn’t the type of guy who let such things stop him; he graduated from Cornell University and had a successful career in the hotel industry before his untimely passing in 2005 at age 47. While this is not about him, the experience of living with someone with such challenges, and the stories I heard about the hellish year on my family when he was hospitalized always stayed with me.

In 2015 I was asked to attend a hearing at the Town Hall of New Castle, NY to hear local residents speak on the expansion of a local children’s hospital, the Sunshine Home. I expected formalities. The expansion of a children’s hospital didn’t strike me as something anyone would oppose.

I was incorrect. While the location of the facility was a 34 acre property in a wooded, sparsely populated area of town, a small number of nearby homeowners were vocally opposed to the project. I will not devote more words than the opposition deserve. It was one of the uglier displays of NIMBY (not in my back yard) I’ve ever seen. I supported the project and spoke publicly at the hearings to dismiss the absurd argument put forth that property values would “plummet.” The other arguments against struck me as contrived and implausible.

I will digress just a moment and observe that I was right about values. In the 6 months prior to that 2015 hearing, homes within a mile of the Sunshine Home had a median sale price of $417,500. Today the median price in the last 6 months in that same footprint is $954,000. That’s right, the median sale price more than doubled. Not only that, sales volume was slightly higher this year.

This past week I was contacted by the Sunshine administration and invited to take a tour of the nearly completed expansion. I was able to walk through with the director and got a tour of the magnificent job they did. In addition to increasing the bed count from about 50 to over 120, the resources available to the patients and their families are so extensive and first class that even my big mouth can hardly do it justice. The physical plant itself doesn’t feel like a hospital. It is a bright, airy, colorful lodge.

It weas surreal to see the improvements. The room for haircuts is a full service spa. The rehabilitation facilities are state of the art. Many medical resources that otherwise would have required transport to outside facilities are now available on premises. The patients even still go to school, in house. Outdoor space is filled with recreational structures, water works, and places for families to sit together and spend time. The sensory gyms are amazing, with interactive electronic touch displays. There is aquatic therapy. The walls and visuals are anything but drab and institutional- it feels more designed by Willy Wonka than the expected utilitarian feel of a hospital. The utility is still there- it’s the presentation, however, that makes such a huge difference.

Their website has more visuals than I can post to do it justice, and when you do see what they have done, you should feel some gratitude that you are only an observer. Parents with a child here are in some of the most difficult times of their lives, and the entire setup is geared toward easing their burden as much as possible. I felt emotional walking through the halls and having the upgrades and additions explained.

And throughout the tour, I was exposed to dozens of professionals doing the work of the angels with these children, some as young as preemies. Everyone was smiling and on their game, engaged with making a difference to the child patient in their care. I could imagine what it would have meant to my parents to be able to have my brother in this setting, and what support the parents of the current patients must feel.

I am gratified that I was able to make my small contribution to making this a reality.

Buying • For Agents • February 12, 2024

Buyer Agents and Due Diligence

by J. Philip Faranda

I’ve posted many times that people seeking to buy a home should use a buyer agent. The transaction is too expensive and complex to not have your own exclusive representation. Recent events have inspired me to address buyer agents themselves, as the role is a huge position of trust from the client.

Buyers don’t need a buyer agent simply because they can open a lockbox and facilitate an offer. To do their job properly, buyer agents have an obligation to perform due diligence on the property they represent their buyers on, and sadly I’m not seeing that all too often. Buyers should expect that their agent will do verify a significant amount of information on behalf of their client:

Building department. The agent should get their physical selves to the municipality’s building department and check the full file on the property- the property card, the certificate of occupancy, any open permits, and in short make sure that the building department data on the house matches what is in the MLS. If the number of bathrooms is off, or there is no CO for a finished basement for example, the client needs to know.
Tax Verification. The agent should call the tax assessor and get the true tax figure on the property for the current year. “True tax” means it is the official bill before any discounts, like STAR or veteran benefits.

These are at minimum. I wrote recently the importance of the home inspection, and a good buyer agent should have a solid contact list of not just inspectors, but all affiliated resources in mortgages, attorneys, title, contractors, and other related industry partners.

Why am I saying all this? Don’t buyer agents already do this stuff reflexively?

Sadly, no. Too many buyer agents rely on what the listing agent provided on the MLS listing, and that’s inviting trouble. I’m not excusing listing agents for inaccurate information, but the system breaks down when it doesn’t account for the necessary checks and balances of human error.

I’ll explain how easily this breakdown can occur. There are hundreds of data inputs required when a listing is uploaded into the multiple listing service. Many of the fields have either drop down menus of pre-loaded choices or long lists with boxes to check. There are 16 options alone for heating type, including “radiator” and “radiant,” which are distinct from each other. Recently, we had a listing with oil heat erroneously checked as “oil tank above ground” when the correct choice should have been “oil tank below ground.” The mistake was discovered in early quality control and rectified. Unfortunately, an agent who submitted an offer on the property printed the listing on a sheet of paper, submitted an offer, and never verified anything at the town building department. That agent’s client made an offer that was initially accepted, paid for a home inspection, and spent a week of their life in the early stages of the process before discovering that the oil tank was in fact buried below ground and would require testing.

The buyer withdrew their offer, and the seller fortunately had another offer waiting in the wings that was acceptable also. But the backup offer could have gone south in that week, and the seller could have been in a compromised position. That buyer wasted time and money on a home they could have passed on had their agent done their job and gone to the building department like they should have. Their excuse was that they lived too far from the property to do so. The cascade effect of lost time, lost money and potential loss of a sale spread out over half a dozen parties: the buyer, the seller, their respective attorneys, and the other parties with offers on the property. This was all because that agent couldn’t be bothered to drive to the building department.

This was a mistake that was caught early, but I’ve attended closings where the buyer has been surprised by higher taxes than they expected, homeowner association fees they weren’t aware of, and in some cases, no certificate of occupancy for improvements made the the house they they were now on the hook to legalize. In all of these cases, their buyer agent was paid a commission. I know that in many municipalities in Westchester and Putnam Counties that the building departments don’t have records online, and in some cases an agent has to file a FOIL (freedom of information law) request, but that’s the job. You can’t cut corners.

In my feistier moments, I have explained to my own team that they can’t expect to be paid just for opening the door, filing a few papers, and holding the client’s hand for a few weeks. They have to treat the due diligence as if they were buying for themselves.

Any consumer who considering hiring a buyer agent or working with one now should ask the agent what they do for advocacy, and that should include the crucial component of due diligence.

“Trust but verify.”
-Suzanne Massie

Home Improvement • Selling • February 11, 2024

When DIY Comes Back to Bite You

by J. Philip Faranda

Sellers have an extreme advantage in the current market due to the lack of competition. But even that has limits.

One a recent walkthrough of a home, a buyer client and I noticed a few things that a smart seller should consider. The home appeared to have been off market just under 3 weeks after an accepted offer was disclosed, then returned to active status. It appeared that a deal had fallen through. That will always make one curious.

This was clearly being sold by someone who was into do it yourself projects on the property. There was ductwork for central air that was not utilized. There were split units on many walls, part of an extensive system that was hard to piece together for us. A separate flue had been added to the heating system that was unused. There were drainage grates on one side of the house with electrical wires going down into the drain itself. The basement workshop appeared to be an active one, with pipes, hoses, and registers and systems that appeared to be connected to the split units. Outside, electric cables were run alongside the house, partially enclosed with downspouts.

I could go on, but you get the picture.

My failure to recognize a particular setup (or, in this case, half a dozen setups) doesn’t mean it is not kosher, not properly done, or not up to code. But in putting the pieces together, evidence of an offer going south after inspection, dormant duct systems, other systems that were hard to follow, and a very aggressive price for the type of home, it seemed at the very least that whatever this homeowner saved over the years in the upkeep and stewardship of the home was more than lost, to the tune of tens of thousands of dollars, in market value.

Saving money in the short run has always been a catch-22 in real estate in the long run. People who hide income to save on taxes learn that they can’t qualify for a mortgage on a house they could otherwise afford. Home improvements completed without permits to keep assessed value down end up having to legalize those improvements at great expense, sell for below potential market value, or both. And do it yourself afficionados sometimes realize that they should have hired a professional.

I don’t know the full picture on this particular listing, nor does it look like I ever will, but the point remains that doing it yourself is very good for some facets of life smaller in scope than housing. But for the largest asset that most people will ever own, DIY should be approached with significant caution.

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Solving the Catch-22 on New Development: Build 55 and Over Housing

What Buyers Must Know About Buying a Foreclosure in Westchester County

What Home Sellers Really Need to Know About the Commission Lawsuits

New York’s New Property Condition Disclosure Statement

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What’s Up With All Those “We Will Pay You Cash for Your House” Signs on Street Corners?

What $705,000 Will Buy You in Ossining

It’s February in New York, so Let’s Talk Swimming Pools

Price Changes Are No Longer Guesswork

How Online Reviews Have Impacted Real Estate Agents

Living Indoors is Not a Fad

Sale Contingency vs Closing Contingency

Buy Before You Sell Program is Now in New York

My Visit to the Sunshine Children’s Home

Buyer Agents and Due Diligence

When DIY Comes Back to Bite You

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