CNNMoney has published a piece entitled It Doesn’t Pay to Remodel Your Home. Overall, I couldn’t agree more, and I have banged this drum for a while. Am I against home remodeling? Of course not. I am against the expectation that you’ll cash out handsomely in the current economy. One of the toughest jobs I have had the past few years is convincing home sellers that their improvements did not raise the value of their home, and that their value often declined.

For example, if the going rate for a raised ranch in a given market area is $450,000 and someone bought their home in 2003 for $425,000 and put $75,000 in improvements, they simply won’t get $500,000. Why? Because the buying public is skimming the cream off the top, and the homes that sold for $450,000 are by and large well matched to their place. Many improvements don’t raise value as much as they shorten market time. Equally priced homes will see the nicer one sell first. The article has a useful chart on the dollar for dollar return on improvements, and the top upgrade, cement fiber siding, only paid back 80 cents on the dollar.

In the example sited, the return on the improvements was only 33 cents on the dollar. The reason? The property the home rests on lost value for most of their ownership. Improvements seldom to never outrun property value declines. In the rock/paper/scissors of real estate, land value trumps everything. This is especially the case in fully developed New York, where land is scarce and land values are so relatively high. If the land goes down 20%, there is no improvement upon that land that can reverse the tide. As a result, many sellers who poured a ton of money into their home are understandably depressed.  

Should people shun improvements? Not necessarily, no. If you have a 1962 kitchen, upgrade if you want. Just don’t expect to cash out as a result, and don’t splurge on every upsell thinking it will pay you back. It won’t for a long time, probably when styles have changed. The same goes for new roofs, furnaces, and other mechanical improvements, because buyers already expect roofs that don’t leak and furnaces that heat for their consumer dollar.

The idea is more in expectations. As I blogged recently about master bedrooms becoming absurdly opulant, improve your home for your quality of life, hopefully with an eye toward resale. But don’t expect the prospective buyers to appreciate your personalized amenities with their checkbook. In the current economy, dollar for dollar return on investment is negative until values get bullish again.   

Making an offer in New York is different from most parts of the country because purchase and sale contracts are not prepared by agents, but by attorneys after agreement and inspections. Therefore, offers vary from nice clean memos with clear terms on company letterhead to a phone call. Memos are great. Emails are OK. Phone calls are hated. Our typical seller client will not render a decision until all terms have been put in writing and a pre approval is furnished. There is no sense in disclosing an accepted offer and possibly scaring a good buyer away if the current “buyer” ends up not being able to buy a week or month down the road. 

For a purchase, therefore, a pre approval is a must to accompany an offer. For a rental, a completed application and summary page of a credit report is also absolutely necessary. When an agent representing a buyer or tenant can’t grasp these rather basic requirements, I’ll reach out to their broker or manager. It isn’t a big deal, or a tattle tale kind of thing. I would want to know if I needed to guide one of my agents, frankly, rather than have them flail in the wind. I am, after all, liable for everything they do. And I do get a piece of the commission they’ll bring in. I owe them some value and guidance. 

So, most of the time I get a big thank you from my colleague broker or manager, and things get handled. Recently, I called a colleague broker and he seemed less than interested to know the details. I don’t know if he was in the middle of something or just not into it, but he asked me to email what I wanted and he’d take care of it. The agent called me later, not angry, but disappointed that I spoke with the broker. I was assured I could have gone to him and explained things. 

Well, that’s just the thing. It is not my job to take the time to explain to another broker’s agent how to do their work. As a matter of fact, I doubt my clients would really appreciate my time going there either. My job is not to teach or train my competition, and if the broker is presumably taking a 30-50% chunk of the fee, he ought to be bringing some value to the table. If that move is perceived as getting them in trouble with their broker, they might want to change brokers. If an agent isn’t clear on how to do things, I blame their broker before I blame the agent. It is the broker’s responsibility to have their agents in the field operating competently. Brokers who can’t live with that fact will have a best friend called “attrition.” 

I read the events in the local paper and my jaw keeps dropping. 

Two 13 year old boys in Chappaqua had their bake sale stand shut down for not having a permit. The police officers who had to stop the little venture were very polite, but the parents were incensed, and eventually the local paper filed a Freedom of Information Law (FOIL) request to find the complainant and it was actually a town councilman. 

The councilman, Michael Wolfensohn, said he called the cops because he essentially didn’t feel he could handle the situation himself. The press the case has now attracted has yielded the local politician some rather unwelcome attention, and he has admitted that he could have done things better in hindsight. The story has gotten legs, and he has gotten angry and threatening calls and emails. Sad. 

“In hindsight, maybe I should have done that <approach them himself-JPF>, but I wasn’t sure if I was allowed to do that,” he said. “The police are trained to deal with these sorts of issues.”

For me, the moral of the story is that engaging in commerce in this modern age, especially in New York, is not easy. There is always someone around the corner ready to take you down, invoking some arcane minutiae of the law or perceived shortcoming. In the case of these two young men, an innocent effort was scuttled and I hope they do not lose heart. 

I think the councilman has regrets too, but frankly, if he were in my town I’d vote him out. I don’t have faith in the judgment of a person who feels the police are the best way to handle two 13-year olds selling cookies and brownies. We don’t need the blind leading the blind around here. 

If it is this hard to sell brownies in this environment, imagine the challenges facing those selling homes. 

What Can You Buy in Hartsdale for $150,000? 

$150,000 will get you a very cute 1 bedroom co op apartment in a pre war building like one we just closed on last week.  with hardwood floors, a huge living room, a dining room, and a kitchen with a…wait for it…dishwasher. It is a junior 4 penthouse on the top floor of the building with a terrace and lovely view of the wooded grounds. There is a free van to the nearby Hartsdale Metro North train station on the Harlem Line, storage, and plenty of closets.

The complex is walking distance to Central Park Avenue,  downtown Hartsdale, and plenty of food and shopping. 

Not bad for $150,000 in southern Westchester County! 

After two similar discussions the past week, it would be wise to address how a short sale should be priced. After all, if the offer submitted to the lender is subject to approval and therefore not a certainty, all the more that the asking price is also a hypothesis.

It is. But, as educated guesses go, a good short sale broker’s list price is pretty educated. It takes into account comparable sales, competing listings, and, sometimes, the gut sense of a seasoned professional. You have to skate a nuanced line in some cases between what will get the phone to ring and what the lender will sign off on.

I have blogged before on the stress that a short sale can put on a home seller. They are typically in default, getting collection calls and letters from the bank, facing the steps up to a foreclosure, and often overwhelmed with distress. When one is under stress, it is natural to instinctively move to eliminate the source of the stress, so often sellers want to lower the price to get moving, and dramatically so. The problem is that if you lower the price to be the lowest asking price the neighborhood has seen in 5 years, you can foster too much skepticism from the lender and  the offers you get might not be enough for the bank accept.

For example, if comparable sales put your homes estimated value at $400,000, it is irresponsible to whack the price to $320,000 just to get an offer and be done with it. You have to balance between what the buying public will respond to and what the lender will accept. And few homes sell in 10 or 20 days. It takes some time. Not all short sales tale a long time to find a buyer,  but some can, and too many reductions too soon can sabotage your efforts.

The best (and really only) approach is to price the home aggressively based on comparable sales, and then review and reduce every 30 days unless market activity indicates something faster. But it is market activity, and not nerves or stress, that should source the price strategy.

I was out with buyers recently and we toured a home that was owned by architects who had done a complete renovation. Essentially, they took an 80’s era ranch and gutted the entire inside, improving it to 2000’s standards. The kitchen was ultra modern, there was now a den, and the master suite was to absolutely die for: a good sized bedroom, a sleek, modern master bath, and a walk in closet that had a built in cabinet system and room to dress. 

This was, for a medium sized ranch, the nicest master suite I had ever seen, and from a quality point of view, it was done right. I would eat Thanksgiving dinner in that closet. I would carve a turkey on that master bath. And I would sleep it off in that tub. I’m sure you get the picture. No corners were cut. 

Well, some corners were cut elsewhere. The enlargement to the master suite somehow made the 3rd bedroom into a small den with no closet, changing the home from a 3 bedroom to a 2 bedroom home. They did create a 3rd bedroom from an attic loft, but it was not the same- especially if a small child had to sleep there. My clients loved the house, but not for anything near asking price. And 7 months into being for sale, it sits  unsold.  The moral of the story: over-improving one area of a home at the expense of others can nullify the perceived gain. 3 bedroom homes get more money. Had the improvements not been at the expense of that 3rd bedroom on the main level, it would have been far prudent a move. 

However, these are not the only people who over improve the master suite. Last week I walked through a 4000 square foot colonial of recent vintage with a master suite that needed it’s own zip code. But the other bedrooms were crappy 10′ x 12′ boxes! What good is that? Can you sleep in the den or sunken family room? With home sizes trending down, oversizing master bedrooms is not a winning move. 

The sellers in the first house are now listing it as a rental because they can’t sell it as the price point they now have, and the holidays are coming. And the reason is simple: while the home is out of this world fabulous, people in that market area want a real 3rd bedroom. Even if one or two people were to live there, they still have to think of resale, and a 3rd bedroom does more for resale than a fabulous closet or bathroom can. 

What is it with people and these crazy master suites anyway? What do builders and home improvement contractors think we do in there anyway? Does anyone ever really use those huge jet tubs more than a few times a year? Is the master suite Madison Square Garden? Most people I know in one of these monstrosities are working too hard to pay the mortgage to enjoy what they are paying for. 

Don’t buy into the master bedroom hype! 

This article in on foreclosure fraud today’s Journal News features two things, one that is incredibly disheartening and another that gives me some hope. 

Disheartening: The incredible incongruities and obvious sham filings just to shunt repossessions through are chillingly obvious. For example, one of the bank officials signing on behalf of Washington Mutual is dated after Wamu was dissolved. 

Encouraging: Lawyers (I can’t believe I am writing “encouraging” and “Lawyers” in the same sentence) are starting to counter punch the fraud on behalf of aggrieved borrowers. Locally, in Westchester, the article points to an attorney by the name of Linda Tirelli of White Plains as an advocate who is uncovering the sham procedures and bringing them to the courts’ attention. Ms Tirelli was also mentioned in Businessweek online last month on the very same subject. 

The point here, as I have written many a time, is that this is not about invoking a technicality to get out of paying a debt. It is about due process. Many of these people are simply trying to sell their home, do a short sale, or modify their loan. They should be given ample time to do so and benefit from the laws of due process fought for by every veteran in this nation and revered by every conscientious person in the citizenry. 

Anyone who has lost a home before they could sell (short sale or not) or modify, with any short cut or fraudulent procedure involved by the lender, is a victim of fraud. They are entitled to due process. 

In 5 years you’ll see late night commercials for lawyers who will offer to sue for people who lost their homes in the robo signing scandal. It will become an industry. Forensic studies of trillions of pages of paperwork with be a growth sector for jobs. Buy stock in paper shredders*. For now, those who are fighting unfairly executed foreclosures deserve all the support they can get. 

I do not give investment advice and no statement should be construed as advisement on investing in securities.

How dumb are the politicians we are  ostensibly sending to Washington to clean up the economy? Well, try this dumb: There is now talk of ending the mortgage interest deduction in order to rein in the deficit. It goes without saying that such a move would throw millions in the USA’s middle class into a tailspin (like we need that now) and throw millions more out of reach from even buying who would otherwise qualify.

It is even more insidious than that. Just the talk of such a move freezes many people who might otherwise act, further harming the economy. When otherwise ready willing and able people hear that a benefit of owning might disappear, they grab their wallets and don’t move forward. This is the cure making the sickness worse: the economy is in the doldrums, so let’s cripple the housing market even more because some bean counter who doesn’t understand human beings sees money in eliminating a deduction.  

This isn’t some rogue congressman trying to get into the paper for his 15 minutes of fame. It is a Presidential commission. You can’t make this up.

Yet again, the government is falling on its spear.  

Open Sunday, November 14, 2-4pm: 8 Harwood Ave, White Plains, NY 10603

There are people that have a perception of my car that is in fact quite different from how it really is. It is a nice automobile if I say so myself. I drive a 2008 BMW 528XI that I bought in the summer of 2007. I was 40, and given the amount of time I spend driving, Ann and I both agreed that I should upgrade my wheels. Up until that point I had a 1996 Saab that gave its last somewhere in Orange County on Route 17. Tom Ricapito saved my rear end that day, which is another blog post. Those that know me teased me about buying a BMW, but I worked for 18 years and it got the wifely endorsement. 

Over the years, however, as I work in the real estate industry, I think my clients, who often reach me while I am driving, feel that my car has features that it does not have. It has German engineering, all-wheel drive and fuel injection (I think) but not some of the other things that the people calling me seem to think are available. I’ll illustrate:

That is my car on the top of the graphic. The one below is the car some people must think I drive. 

The car some clients think I have is quite a vehicle. Here are some of its features, not found on the car in my driveway right now: 

The Satellite dish has a direct link to the company files, enabling me to immediately access specific data while driving with digital specificity and lightning speed. It tells me on a dashboard readout (think “Nightrider”) when emails arrived, what they said, when faxes arrived, what they said, and other data germane to active and pending files. 

The Flux Capacitor enables the car to run without gas or oil. Clients sometimes get annoyed when I forget this solar-powered feature which makes the car impervious to needing oil changes or petroleum-based refueling. The Flux Capacitor makes me more available to serve clients’ needs. 

The Orb of Prescience on my dashboard has most of the power of my satellite dish, except that the data it culls is specifically from the future. It enables me to answer questions like “Do you think we’ll sell?” and “How do you think they’ll react to our counter offer?” with 100% accuracy, all while driving. 

The USB ports are where the fossil fuel tank cap used to be. They enable me to fire up my laptop, update my lockbox, print things, read and forward email, and operate other types of technology while I drive. They are on the exterior of the automobile so they do not detract from the plush luxury of the interior, reserved exclusively for clients riding with me. 

The Rear Spoiler and Aerodynamic design of the car enable me to “fold space” and time, so as to never be late, overcoming all the vagaries of the real estate industry. Client’s time is precious, and must never be undermined by an appraiser, contractor or fellow licensee who is not as punctual as I. Therefore, when I am running late, I simply engage the Hyper Drive under the hood, getting me where I need to go safely (thank you rear spoiler!) and, more importantly, on time. 

The “TerrainDevourer (r)” brand tires get me anywhere in inclement weather. The snow and ice of New York winters are no match for “TerrainDevourer” brand tires. I can go anywhere, anytime with these babies. They are also certified flotational devices for the models sold in Minnesota. 

This car is not manufactured by Bavarian Motor Works, it is from Alpha Centuri Motor Works. There is a difference (TM). 

I have blogged before about Facebook business pages and how they differ from your personal profile. Now, new applications are coming into prominence that can make your Facebook business page even more robust and appealing, such as the Roost application now used by almost 20,000 agents already.

What the application does is add a “Home Search” tab to your page, and once clicked on, it opens an option rich, thematically colored custom page right within Facebook giving search options and other links.

It is sharp. It is emphatically an application for your business page, not your personal page. Here is a screenshot of my Roost tab:

The full page has more features than the screen shot shows, and the search tab goes directly to my IDX solution. This is a concrete, tangible way of converting Facebook fans to buyer client prospects. It is the call to action you are looking for, and it isn’t a tacky, spammy come-on. It is  professional, attractive looking, and personally branded.  

Facebook’s terms of service specifically prohibit using your personal page for business, so a business page is essential. Moreover, many of us want to keep our personal Facebook presence separate from our business efforts. This is a powerful means of doing just that. It is getting competitive out there, and I like the presentation that the Roost tool gives me on Facebook. 

Set up (one-time) $150.

Monthly cost: $24.88

This is for the customized broker version I have. 

This was not a paid endorsement. 

Follr.com is a social business card you can get that is like an online directory of everywhere you can be found, from AIM to Zillow and everything in between: Facebook, LinkedIn, Google profile, Foursquare,Wordpress, you name it. It is developed by Active Rainer Stephen Fells and is the true one-stop shop for those of us who either suffer from button overload or like a cleaner footer. 

My Handle is Follr.me/jphilip

The platform is a comprehensive stop on the information highway for your entire social media directory, your contact information, web page, and even a brief bio. While I have a 100% complete rating on the professional side, I am sure there are more sites I could add to my profile. But the big ones are all there. 

The company also offers a fantastic single property website system, Agency Logic Powersites, which helped me get a property under contract recently. I will expound on that in a future post. 

This was not a paid endorsement, by the way, and although Mr. Fells and I are chums my only compensation is satisfaction with the product. 

Price and Terms. 

Price. Terms. 

I will bet you a 6-pack of Old Milwaukee that if you ask first-time buyers what the term “terms” is that a bunch of them would screw it up, maybe because their buyer agent is a glorified door unlocker who is a payment behind on his car. But that’s another post. 

Right now, thousands of buyers across our great land are poisoning their prospective home purchase over an appliance, a repair to an electrical panel, or less than 1% of the price of the home. Because, after all, it is a buyer’s market.  What is a buyer’s market? Well, to a carrier pigeon buyer agent who won’t properly advise their client out of fear of losing them, it is whatever the buyer wants. And typically, the uninitiated buyer will subjugate the seller to their will to get a great deal. And why shouldn’t they? Sellers were making buyers waive inspections, come up with extra cash with under appraised homes and equally insane things 5 short years ago. Point conceded. And if buying a home is a tit-for-tat event for you, read no further. But if you want to buy intelligently, read on. 

We got off track in the earlier part of this decade by calling homes great investments. Everyone bought that. Later in the decade, homes became bad investments, and almost nobody bought. So I don’t begrudge anyone for taking a wait and see attitude. Yet homes are like insurance. They can behave like investments, but they serve a greater utility– while you hope to never actually use life insurance, you do use your home as a place to live. It isn’t a cold asset. You derive utility from it. Live within your means and you are OK, as many prior generations will attest.  

Any honest perusal of my blog will attest to the fact that I have never had a mantra of “Now is the time to buy!” I am rethinking that. 

About a year ago, some guy was featured on Active Rain advising people not to buy a short sale because they were going to miss some narrow window of opportunity for historically low rates. Those rates were higher than they are today. With current rates so low they are starting to resemble Mariano Rivera’s earned run average, too many people are missing the train because they want a window seat. They have to dominate the seller or no deal. And that’s a shame. Right now, the monthly payment on a 15 year mortgage is just a tad higher than the payment on a 30-year mortgage 3 short years ago. If you throw an extra payment or two in annually, you could pay your house off in 10 years. 

I have witnessed buyers lose fantastic deals on homes that have everything they wanted over a $5000 difference on a $600,000 home. The seller had the temerity to attempt to negotiate. Bad seller. No sweat off my back; I have a home and if my company were going to go under it would have a long time ago. There is no one buyer I need. But these people need a home. They can’t justify the move until they have subjugated the seller to their absolute will, and if the seller won’t submit, they are banished. The buyer keeps hunting. Here’s why that’s crazy: the town crier won’t announce when the market bottoms out. Nor will he let us know when rates will rise again. 

A 3/8 percent rise in rate over the period of the loan will dwarf that $5000 buyers still want from the seller after rounds of offers and counter offers. The riding mower or the chandelier won’t pay that extra money, but many of today’s buyers aren’t thinking of that- they feel a societal-driven compulsion to chew sellers down ever more. I don’t blame them for being this way. I blame their agents for not educating them about local conditions. I blame the NAR for running bland commercials that sound like 1970’s era Amway commercials that build trademark recognition and little else. It is only a good deal if the seller actually agrees. If you are making offers on your 3rd or 4th house, wake up- if your agent won’t say it, I will. Sellers have never been this motivated. They just dislike being your gimp. Smart business people don’t have their trading partner humiliated. Magnanimity is not weakness. 

I would advise buyers to get on the train. With the terms available now, you are in the best position any of us have ever seen. Be happy you have a job and a down payment, don’t kvetch about not riding in the conductor’s car, and rejoice that you are one of the fortunate few when you arrive.  

In a county where the median sales prices of a single family home hovers around $700,000, affordable home ownership often seems far away. Dutchess or Orange County, perhaps. However, unless you absolutely must have a yard, a cooperative apartment could be you ticket to home ownership without sacrificing proximity to Manhattan. Westchester county has over 1600 co ops available as I type this, and the median list price is under $170,000. 

Yonkers has the bulk of the available listings with over 500, but there are also healthy numbers available in such diverse locales as

• New Rochelle
• Port Chester
• Eastchester
• Hartsdale
• Ossining
• Mount Kisco
• Mount Vernon
• Bronxville
• Tarrytown
• White Plains 
• Harrison
• Mamaroneck 
• Scarsdale
• Pelham
• Rye

And plenty more. The co-op form of ownership differs from a single family home or a condominium, and board approval is almost always a contingency, as well as required financial considerations such as a minimum down payment. Explaining it all is far more than one blog post, so stay tuned, or shoot me an email to get more details to see if making a co op your next home is the right move for you. 

This past August, Teresa Boardman published a piece on Inman News on how the real estate blog was dead. Her point was more intricate than the tag line. In my view, she was decrying how all the noisy bad content was crowding out the small proportion of quality content. It got a fair bit of attention on Active Rain and other platforms, and made for good discussion with the fall season of conferences coming up. 

This past week, Inman republished another piece on something dying, namely map-based home searches. This wasn’t Teresa Boardman, respected real estate blogger noticing all the bad content out there, it was from the looks of things  a software guy with a better thing to sell writing the piece. He wasn’t the only one other than Teresa to use the metaphor. But I hope he’s the last. 

Enough already with the obituaries. The literary device of declaring something in real estate dead should be declared dead. 

There are a number of reasons. 

• The too cool for school technique of predicting the end of something before it ends is tiresome. 
• They’re just wrong. In the example sited, map-based searching will not go away anytime soon, especially as technology improves. I have buyers looking at back yards on Google Earth. 
• Too often, the self appointed coroners have their own agendas. 

This Market Report is for the Yorktown school district and all data is taken from the Empire Access (formerly Westchester-Putnam Multiple) Listing Service. It compares the sales of single family homes from October of 2010 to October of 2009. Prices of Active and pending listings are list price only, as contract prices are not disclosed until closing. 

Previous postings on Yorktown can be found here. 

To check out the 119 available properties Yorktown has to offer, register yourself for a free Listingbook account. 

This market report is for single family homes in the Croton-Harmon school district. All data is from the Empire Access (formerly Westchester-Putnam) MLS. Contract and asking prices are list prices, as contractual prices are not disclosed until closing. 

Croton had 5 closings in October at a median price of $400,000, considerably lower than the $679,000 median of a year ago. I wouldn’t read too much into this, as the month just had lower prices homes close this time around. Last month the median price of homes under contract was $420,000, so a lower median sales price this month is no surprise. Expect a far higher median price in November. The median asking price of the 12 homes under contract is a very robust $679,000. 60 homes are available for sale.  

To find your dream home in Croton, get yourself a free Listingbook account. 

Previous posts on Croton on Hudson

I got the following email today: 

we are withdrawing our offer of purchase on XX Rd.  The reason is the mold problem.  He is hearing that the mold goes right through to the studs and even the beams and he doesn’t want to subject his family to that.
 
I thought this was a good buy and I told him so but…

These people insisted that my client turn on all the utilities and de-winterize the house. They didn’t need all that done to know that there is mold. 

This isn’t an isolated example. Thanks to the media and basic groupthink of the current market, buyers are expecting not just great deals, but unbelievable ones. The problem is, in our area, most foreclosures are not recent builds or recent renovations. REO and short sale homes in New York are often the poster children for deferred maintenance and, upon occasion, vandalism. Yet 2/3 of the buyers I speak with mention foreclosures. Nine out of 10 people that see a few foreclosures have visceral, negative reactions to the condition. In cases where you have an ambitious soul who is handy and doesn’t mind a fixer upper, a chunk of them get the “in-law veto” where parents, friends or relatives put the kabosh on the transaction. 

It is our job to educate the public and manage expectations. In the case I first brought up, I got the distinct sense that the agent is hanging onto the people for dear life to make her commission. And that is not the posture to competently advise clients on the biggest transaction of their lives. 

In Westchester and surrounding areas, people stop maintaining their home long before they default on their home loans. By the time the home hits the market, you have old decks, old paint, old baths, and needed repairs put off with unpleasant consequences. Buyers need to understand this. In those rare cases where you do have a foreclosure in great condition, you’ll get wide interest based on scarcity, and the deal of a lifetime goes instead to the highest and best offer in a bidding war. 

You may have a cousin who just paid 50 cents on the dollar for the Taj Mahal in Las Vegas or Wichita. But this is New York, and it isn’t Kansas. I would advise any perspective buyer to stop getting educated by hearsay and national media and instead hang their hat on the the local expertise of their qualified buyer representative.