I seem to recall a Twighlight Zone episode where a bigot wakes up one morning and is transformed into the ethnicity that he has been persecuting. That was the first thing I thought of when I read that the law firm of Steven J Baum is closing and laying off 89 employees. The closure comes as a result of the firm losing its major accounts in the wake of the New York Times running an article on a recent Halloween party at the firm where employees dressed in costumes mocking borrowers in foreclosure. 

I read that article on my tablet while at a home inspection last week. It was incredibly vulgar- at the party, Baum employees dressed as debtors, people in squalor, and even set up a mock subdivision called “Baum Estates” which were all homes that were repossessed. There was a a significant show of derision for people who sought to prevent their own foreclosure, and even a mock set up to ridicule someone who made a critical Youtube video of the firm. 

The Times article caused Baum to lose their big accounts with Fannie Mae and Freddie Mac, and they then filed to dissolve the firm. 

How incredibly ironic. Loss of a job and loss of income is the surest way to default on your mortgage, and you can bet that some of those 89 people -70 of whom are apparently attorneys- are going to get a fat envelope from their own bank down the road informing them that they are in default and face foreclosure. I have seen that fat envelope, and the people who had them, my clients, were scared. And when they reached out to the firm issuing the letter to try and work things out, they were faced with people who couldn’t care less.

We see it all the time in short sale negotiations, mid management grunts who worship the holy trinity of coffee, lunch and 5pm. They lose faxes, act nasty, and in general make the borrowers feel like garbage for having gotten sick, losing their job, or losing their business. And the worst, by far, in the whole industry are the law firms that were at the root of the robo signing scandal in their zeal to separate people from their homes. 

I am not for people living for free or shirking their debts. But I am for due process and compassion. And before we start celebrating that the witch is dead, believe me, most of these people will regroup elsewhere and keep doing what they do best under another roof. But a few of them will learn a tough lesson: turnabout is fair play, and when you know the person on the other end of the line is the same troglodyte as you were 6 months ago, you’ll have to swallow hard. 

Be careful who you mock. 

Quick preface: 

In 1997, the brokerage flavor of the month was pre-recorded property hotlines with voice mail. Instead of dealing with a salesperson to get information on  a property, consumers could call a recorded hotline and get the details on the listing pressure-free. They had the choice of hanging up or leaving a message. I had such a system, but on one listing there was a glitch with the voicemail. The seller, an imbalanced guy with an anger management issue, had a friend act as a mole, call the hotline and he got no call back. When I was asked to meet with the client a few days later, in about 45 seconds he went from calm to a screaming maniac who assaulted me in his kitchen. 

I have never been much of a fan of spies in real estate since then. 

Earlier today, on the Active Rain Network, there was a featured blog post suggesting that licensees act as secret shoppers so they could examine the sales and follow up skills of the agents in open houses. Invoking some reality show where CEOs pretend they are janitors or waiters, the author also suggested that a broker like myself could get insight into how my team handles themselves by pretending to be a buyer, perhaps via email, perhaps by proxy. 

There are huge ethical and pragmatic issues with such a practice. Let’s set aside for a moment the pragmatic, which is the incredible waste of time it would be for a colleague to chase me around thinking they might make a sale with me. We all know the frustration of having a neighbor walk into an open house and pretend to be an interested prospect. And let’s set aside the instant loss of respect my 26 agents would would experience if they know I were spying on them. 

It’s um, wrong. It is wrong (wrong as in against the Code of Ethics) to impersonate a consumer and not disclose my status as a Realtor, and I am pretty sure it is not real kosher with the nice people at the Department of State in Albany to do so either. There are plenty of things I might do to decode the secret sauce of a competitor. I suppose I could have lunch with an ex agent from the firm. Or I could contact a former client who is looking for new representation. But whatever I do, I would do it as Phil Faranda, licensed broker. 

The fact that you can learn something by breaking the rules is not justification for the practice. There are no nannycams in real estate, unless you are a client watching your own property. But lying about my status as a broker? Impersonating a buyer when I am not one? Am I supposed to sign a nom de plume in an open house registry? Have a buddy waste one of my agent’s time pretending to be a buyer to observe their technique? No way. If I wanted to see how my agents work, I’d simply go out into the field with them, like I do now. 

Just as that old hotline was the thing back in 1997, the new thing in real estate is transparency. Just tell the truth. Just be real. You won’t give away the store, you’ll be so incredibly refreshing that you’ll have more people wanting to be your client than ever before. Don’t use an alias. Don’t even have the pretense of being someone whom you are not. Disclose your identity and your license status. It is the right thing to do, and the public is starved for agents that do the right thing. 

There is nothing we like more than an enthusiastic, gung -ho buyer in this market. 

There is nothing we like less than a stressed out buyer who makes life hell for all involved. 

So, when that gung-ho buyer locks their rate in for 30 days and we haven’t even signed contracts yet, it doesn’t take a clairvoyant to know there will be trouble down the road. And yet, every so often this occurs. We get an accepted offer on one of our listings, inspections are done,  the lawyers are talking contract (remember, here in New York we do it backwards- no inspection contingency and a minimum of a week or more before signed contracts), and then we get that phone call or email from the other side that we have to hurry- the buyer locked in their rate last Friday. 

Even in a cash deal, a 30 day closing in Westchester County is a rarity. 45 days is zippy, and 60 days about normal. Why that is so is another post entirely. The point is you don’t lock your rate in before we have a deal contractually. The buyer goes in stressed out already as it is, and in a state where a hiccup can cause a 2 week delay, adding that deadline unnecessarily throws gas on the flame. Knowing that we won’t close for 2 weeks and hearing that the buyer’s rate lock expires in 72 hours isn not fun. Just trust me on this. 

You have to have a plan. You lock your rate in once you have a deal and there is light at the end of the tunnel. You have to have a plan and an understanding of what to do when after what and why. For example, once contracts are signed and the appraisal is done, the file should be sent to underwriting. Many buyer attorneys wait until the approval is issued to order title, which is too late in my view, but whenever you run title is probably when you should be ready to lock your rate in. That way, if there is a title-related delay, you know whether or not to hold off or proceed. The idea that this will cause you to lose an plum rate based on shifts in the market is a fallacy- a super awesome rate is less advantageous if you have to pay through the nose in cash for an extension, which is essentially paying discount points. 

Understand the process, confer with your agent and loan officer, and plan accordingly. And if your loan officer allows you to lock in without really knowing where you are in the process, you might be working with the wrong person. This is a collaboration, and lone wolves don’t help.  

In plain language, the old adage “lack of planning on your part does not constitute an emergency on my part.” Rate locks are serious business, and once done are irreversible.

Measure twice, cut once. 

Any REALTOR association will have the inevitable news on our web page on the passing of a current or former member with some frequency. It is never a happy thing to read, and today’s announcement was particularly significant for me- not because we were very close (we weren’t), but because I knew firsthand what a good man we had in George Groves. 

And with the sad announcement of his untimely passing I will share my own personal George Groves story. 

In late 2007, I was the listing broker for a particularly difficult sale. After about 7 months on the market, at long last we had a buyer with an approval. The closing date was all set and everything looked good. I remember getting the phone call on a Wednesday, with the closing scheduled for that Friday. 

“Phil, this is George Groves. I need you to take your lock box off the house. The bank foreclosed on the property, and I was assigned the listing today.”

“Wow,” I said, “what a bummer. We were scheduled to close the day after tomorrow.”

“Really?”

“Really.”

There was a pause, and then I heard him sigh. 

After a brief discussion of our status and the journey we thought we were about to conclude, George then proceeded to do something I have never seen any agent do before or after. 

He began to explain to me how I should have my client’s attorney contact George’s asset manager at the bank and get the loan reinstated so we could close with the buyer in our sale. 

Over the course of the next 2 weeks, he methodically coached us in the maneuverings of a strategy that would cost him his own commission, and ensure that I would get mine. We were successful, and the house did close, albeit with his lockbox on the door and re-keyed doors, because George had to fulfill his own duties as he helped me save my deal. 

I estimate that this cost him somewhere between $7,000-$14,000. It also got him my undying respect forever. I ran into George plenty of times thereafter, and he was always cordial and authentic. What’s more, while I never forgot what he did, I think George actually did. It was no big thing to him. It was what he did. 

One thing George did recall, however, was funny. I ran into him at an event in Scarsdale some years later where he was on the panel, and he asked for his lockbox back! I reminded him that I returned it.

George was a giant- a former board president and broker owner who remained active in the field to the very end, he was a top selling agent and the picture of class and character. He was also lauded as the person who introduced open houses way back when in the prehistoric time when they were actually an innovation. I am sure my colleagues will all have good memories and stories of the fine man George was, and now you know mine. I am a better man for having known George Groves, and hope I can be more like him. 

Like anyone else, I love it when I get a cash offer on one of my listings. That is rare, but it is also nice when we get an offer that has terms including a healthy 20-30% or larger down payment. That doesn’t happen all the time either. What is keeping the lights on in Westchester real estate is the FHA mortgage, which was unheard of 5 years ago, but is now more common than any other program for starter and medium homes. 

The minimum down payment on an FHA loan is 3.5%. For the math-challenged, that means the buyer will be financing 96.5% of their purchase. In a county where FHA loans were once as rare as hens’ teeth, this causes some consternation among some attorneys who have grown accustomed to picking the low hanging fruit for decades. I always shake my head when we have a perfectly good offer torpedoed by the seller’s attorney simply because they have never closed an FHA loan. Here are some of the stupid things these lawyers say:

• How can these people qualify for a loan if they are only putting 3.5% down? 
• I can’t let us get tied up under contract with buyers with no money. 
• I won’t send contracts to anyone putting less than 20% down. It is irresponsible to get in bed with such a risky loan. 

If one were to do a heat map of population density for Westchester, Putnam and the Hudson Valley, they would discover an amazing fact about Philipstown- of all the river communities from Westchester to Poughkeepsie, Philipstown -including Cold Spring and Garrison- is the least populated and perhaps most pastoral river town for 60 miles. 

That’s a good thing. That’s a great thing. That means you can live on the Hudson line, commuting distance from New York City, close to the river, but not be in a crowded place. 

Philipstown has two school districts, and this market report for the 3rd quarter of 2011 will center on Haldane schools. Garrison will be forthcoming. Haldane includes the Cold Spring post office, which is mostly the village of Cold Spring, neighboring Nelsonville, and the town of Philipstown. 

For the 3rd quarter of 2011, Cold Spring and the surrounding area had 9 single family homes closed at a median price of $459,000. 

Two homes are under contract at a median lst price of $239,900. 

57 homes are available with a median asking price of $549,000. 

Buyers have incredible choices. There is village living in Cold Spring, or an outstanding, more pastoral lifestyle in Philipstown with Cold Spring close by. But more than just that, the high inventory makes this a unique opportunity for buyers seeking quality of life at enticingly affordable levels. I seldom speak in superlatives. But the facts are hard to argue. Buyers are in a great position, and the options before them in Philipstown are awesome. 

One good example is this home in Philipstown. It is a 4 bedroom ranch on a private 8 acres with its own pond- stunning! It is only $499,000. Click on the photo for more details, or for a walk through video, scroll down. 

Not far away is the village of Cold Spring and all it offers. To see this and more home in Philipstown, register for a free Listingbook account and search the MLS database of homes effortlessly. 

The October real estate closing statistics in the Ossining School district indicate a drop from October of the prior year. 

In October 2011, 7 single family homes sold at a median sale price of $410,000. 

In the same period last year, 11 single family homes sold at a median sale price of $535,000. 

Obviously, this is a precipitous drop in both volume and median price. However, there is an explanation: The number of homes under contract ballooned from 19 last month to a whopping 37 this month. Buyers are indeed signing contracts; they just aren’t closing yet.

This could be due to delays on the lender side, which is something I am seeing more frequently in this environment. The pending transactions could also be short sales, which take much longer to close than typical deals (we often say that short sales should be renamed “long sales”). There could also be title issues delaying closings, which would again indicate caution on th part of the lender, the buyers, or both. In years past, buyers might turn a blind eye to a finished basement or a deck without permits. That is no longer the case.  

The median price of the 37 pending deals is $449,000, which is a healthy number. 

121 homes remain on the market as active and available at a similar median list price of $399,000. While buyers still have quite a few choices, that is a rather low number for Ossining, which typically has 150 homes in inventory, but it also indicates a lull in the sales cycle. Some people are taking their homes off the market until after the holiday season. 

Prior posts on Ossining.

Find a home in Ossining with the Listingbook Home Search!

All information is for single family homes and is sourced by the Empire Access MLS, a wholly owned subsidiary of the Westchester Putnam Association of Realtors. 

In the current economic climate where deals die so often that we sometimes have to “sell” a listing twice or three times just to get to the closing table, more due diligence and evaluation of buyer qualifications is a serious mandate. Twice in the past month I have seen instances where a pre approval was not worth the paper it was printed on, and that punctuates the need to evaluate buyers with more scrutiny. They don’t always like that; but they need to understand the times we live in. 

The Dubious Down Payment. We are in the midst of a White Plains short sale that was approved in early August and now on its 3rd extension because the buyer’s down payment source was the refinance of his current residence. This was not disclosed until we needed the first extension. If the pre approval does not take into account liquid available funds and is predicated on an undisclosed other loan, it is worthless. That will never happen to me again. I will always ask the lender to disclose the source of down payment funds. 

The Out of State Mom and Pop Shop. If I call Mortgage Shack to verify some things on the preapproval and I get voicemail all day Monday and a return call from the loan officer that night with the distinct impression that this is a part time operation out of his basement, my seller may not have much confidence in your qualifications- even if you may in fact be a great borrower. Get a more credible source to vouch for you. It doesn’t have to a be Big Box Bank of Beelzebub. A local community bank, direct lender or credit union work fine. 

The Unresponsive Loan Officer. On a rehabilitation project in Mount Vernon, a buyer for my listing is facing losing their deposit because their lender approved them for the wrong loan. They needed a specific type of rehabilitation mortgage, known as a 203k, and were instead underwritten for a different type of 203k. Their inept, unresponsive and arrogant loan officer was a red flag not long afterward. Not only does this buyer face loss, my seller client has to undergo either a costly wait or a costly return to the open market. Never again. If a loan officer won’t respond with specifics to me as a colleague on a collaborative transaction, it will disqualify the buyer. 

The Un-thorough Loan Officer. Easy one. This was also an eager bidder on a listing of ours in southern Westchester County. I asked the loan officer one question: Did you run your conventional loan applicant through your conventional loan underwriting software, known in our area as Desktop Underwriter, or DU in fancy circles. The answer was no, which translates that he has a prospect making offers who is not truly vetted as well as they could be. DU is the industry standard. It is not the extra mile, It is the minimum before a buyer should be making offers. 

The Ill-Conceived Plan. We are given an offer with a pre approval. The offer is conditioned on the sale of the buyer’s current property, in which a buyer has been found. It isn’t under contract. It isn’t even listed. A relative is going to refinance their place to buy the prospective buyer’s place, who will then buy our place. But only in one spouse’s name. But they have a preapproval based on this awkward row of dominoes, none of which is disclosed on the preapproval. And this is the guy tho didn’t run them through Desktop Underwriter (above). Pass. 

In this economy, we are seeing more and more creative ways to get around the new reality of strict underwriting from the lenders. Parents have lost money in the market and can’t gift down payments to their children. Compensating factors no longer count. Debt ratios are more strict. Buyer agents are just glad to have a warm body to drive around. Separating the prospects from the suspects is crucial. And in Westchester, where property costs are higher than average and deals take longer to close, you can lose 3 months or more, and tens of thousands of dollars if you make a mistake choosing your buyer. 

The takeaway for the buyers in Westchester and the surrounding areas is this: A listing agent doing their job is going to go through your qualifications with a fine tooth comb to avoid a catastrophe. A pre approval can’t just be based on a credit report and verbal assurances. We now have to verify down payment funds, employment, credit, know that you have been underwritten to truly assure our sellers that it is OK to tie the house under contract with you. To the lay person this may seem thorough; it is moreso than years past, but it is absolutely necessary to ensure a trip to the closing table with a minimum of drama. 

In Westchester and the surrounding counties of New York, quite a bit can happen between the acceptance of an offer and contracts being signed. Once an offer is accepted, the buyers still have to do their home inspection and settle those matters before memos go out and contracts are drawn. Even then, there is still the back and forth between attorneys on verbiage and pet riders before signatures and deposit. It can take weeks. And in those weeks, another offer can come in and change the game. 

But if a higher offer comes in, is the seller obligated to take it? Should a seller switch horses to an unknown quantity when they have already been through inspections with buyer number 1? And isn’t there a risk in switching, because if the new deal dies and the old deal is alienated, isn’t that a great way to go from 2 offers to zero? These are things we face frequently in Westchester that seldom happen elsewhere. 

First, the seller does NOT have to switch to a higher offer when an accepted offer is on the table. They often do, and it can screw things up if it doesn’t work out, but there are many reasons why a seller might choose to stay with their first accepted offer, even if a higher offer comes in. The key is not simply price. It is also terms. 

• The higher offer might be caught up in the competition. 11th hour high bids often get remorse once they leapfrog over other offers and stall or back out. People want what they can’t have. When they get it, they sometimes lose their inspiration and flake out. We have observed that people who don’t ante up by the deadline are a reversion risk after it passes. 
• The higher offer might be monopoly money. Simply put, they might not qualify for the higher number. I have seen bids that were not accepted in favor of another come in a week later and assure us that they could in fact qualify for full price or close to it. Some do. But some don’t. It was wishful thinking, borne of competition and wanting to “win.” 
• The higher offer might still be selling something. This is especially a concern when the buyer is selling a co op, which is common in New York. Co ops can take 3 months to close, and there are instances where the buyer gets their mortgage but is turned down by the board, killing the deal after a long wait. But deals on other properties also die. I often hear buyer agents, when they present an offer, make it clear that their client “has nothing to sell.” That is wise to emphasize.
• The high offer might take longer to close. The end of the year is coming, and some people want to close before the end of December. Time is money. A buyer with a higher offer might not want to close that soon- their lease might not be up until March. They are planning a wedding. It can be anything. Long waits tempt fate. 

What matters to sellers, sometimes more than mere price, is certainty. More money might not be worth it if it is riskier, or if it adds to the stress of the transaction because of a longer wait. Certainty has value. This is why some believe that a cash offer might be more attractive than a bid with a mortgage contingency. Time is indeed money, and sometimes there is a premium for cash. Certainty has value. Even if offers come in simultaneously, the higher offer may not be the right one. 

Price does not occur in a vacuum. There are other factors, such as timeframe, terms, certainty and plenty of other variables that might make a lower offer the better choice for some sellers. Sellers and their agents would be well advised to evaluate context and the Big Picture before making a judgment based on raw numbers alone.