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.

Buying • February 9, 2024

Waiving Home Inspection vs “Inspection for Informational Purposes Only”

by J. Philip Faranda

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

Never
Waive
Inspection

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

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

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

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

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

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

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

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

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

Commentary • For Agents • February 6, 2024

For Agents: Open House Parking Etiquette

by J. Philip Faranda

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

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

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

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

Commentary • Home Improvement • February 2, 2024

Yes, Virginia, You Can Paint That Wood Paneling

by J. Philip Faranda

Formica.
Popcorn Ceilings.
Wood Paneling.

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

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

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

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

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

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

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

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

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

The Pre Approval Shell Game

by J. Philip Faranda

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

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

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

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

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

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

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

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

Commentary • January 19, 2024

Sewer vs Septic: The Full Poop

by J. Philip Faranda

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

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

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

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

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

Commentary • January 9, 2024

Sellers: Always Plow Your Driveway After it Snows

by J. Philip Faranda

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

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

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

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

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

Commentary • Market • December 21, 2023

How Can We Solve the Real Estate Inventory Shortage?

by J. Philip Faranda

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

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

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

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

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

That’s a lot to tackle.

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

Allow me to wave my scepter.

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

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

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

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

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

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

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

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

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

Market • December 20, 2023

Why is Inventory so Low?

by J. Philip Faranda

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

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

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

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

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

I’ll opine on that in my next post.

Commentary • Market • December 19, 2023

How Slow is the Market in December and the Holidays?

by J. Philip Faranda

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

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

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

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

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

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

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

Market • November 10, 2023

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

by J. Philip Faranda

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

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

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

Commentary • Market • Pimpage • August 1, 2023

What can you buy in Mahopac for $305,000?

by J. Philip Faranda

Prices are up, but lower cost homes are still possible if you don’t need lots of bedrooms, like the home we just closed at 27 Jackson Road, just a few hundred yards from Kirk Lake.

“Great opportunity to own a unique charmer with Lake Rights seasonal views of Kirk Lake in a secluded, wooded setting. The first floor has a lovely hearth in the open living room with vaulted ceiling a bright and airy wall of windows looking out at the lake. French doors lead to a spacious deck with a view. Eat in kitchen, first floor bedroom and a full bath complete the main floor. Upstairs is a loft with lots of natural light, an even better view, and can be used as a second quarter, home office, or rec area. Off-street parking for 2 cars. No through traffic street. Investment potential or owner occupant as a condo alternative.”

Market • Uncategorized • July 13, 2023

What $449,000 Buys in Peekskill

by J. Philip Faranda

$449,000 will buy you a condominium with Hudson Views like the one I just closed on. The MLS description for the property are as follows:

“Amazing Hudson River views, just yards from the metro north train station, and minutes from all that downtown Peekskill and the wonderful waterfront offer! Modern kitchen with roomy granite countertops. Open floor plan and back door opens to the rear deck- great setting for a quiet experience overlooking the majestic Hudson! Master suite has even more breathtaking Hudson views. Shuttle to the train. Complex amenities include clubhouse, health club, heated pools and lounge. Spacious bedrooms and plenty of closet space, and a second floor laundry to make the living even more easy!”

This one is sold, but we have more. Contact me at 914-450-8883 for information on finding one like it!

Company News • May 16, 2023

Happy News on Joining Forces with Howard Hanna Rand Realty!

by J. Philip Faranda

Company News • Pimpage • May 4, 2022

Some Shameless Self Promotion

by J. Philip Faranda

Most weeks in our training we publish a “sexy stat” about the company. It might be an obscure, cool thing like how our sign appeared in the movie Wakefield with Bryan Cranston carrying it, or some milestone.

This past April was a nice accomplishment.

On April 15th, we broke our record for properties put under contract for the month. You read that right; we passed the old record mid-month. When the dust settled, we more than doubled our best April ever, and had our very best month ever in the history of the brand with just an eyelash under $21 million put under contract. This says something. I often tell the agents that what you do today is your love letter to Future You in 60 days or so. Clearly, our team did some hard work over the past 90 days to make this happen, and May has kept up the momentum.

Spring is the busy cycle of the market and the wind was at our back to a degree, but we also rose to the task and made close to 50 clients happy. The market is robust but that doesn’t mean that every agent has it easy. Quite the contrary.

So, I tip my cap to my team on their hard work, their commitment, professionalism, and their grit. The best is yet to come.

Commentary • Industry News • April 28, 2022

On the Latest New York Standard Operating Procedure Law

by J. Philip Faranda

First, some background: In late 2019, Long Island Newsday published the shocking results of an investigation where reporters of different ethnicities and races went undercover as prospective homebuyers and the different ways they were treated by the real estate agents they engaged. Long Island Divided made national news and reverberated across the industry as professionals were faced with hours of footage showing how white prospects were treated differently than their counterparts of color. It was awful to watch. White home buyers were treated far more favorably. Among the hurdles placed before black and Hispanic buyers were requirements for being pre-approved before seeing homes, being asked to sign a representation contract before seeing properties, and being asked to produce ID.

These things are not bad in and of themselves; a pre approval and exclusive right to represent are considered “best practices” before home shopping. The problem was that white home buyers seldom had these hoops to jump through. There was plenty of cringeworthy, disparate, and biased treatment that seemed awfully coincidentally tied to the race of the buyers, and the data reported on how white home buyers were treated compared to other races was damning. Worse, some of the companies reacted very poorly to the report.

In response, the state government passed a new law mandating an additional fair housing disclosure to be signed by all prospects at first substantive contact so the consumer would know their rights, and for the disclosure to be posted prominently in all real estate offices. No one was under the illusion that a piece of paper would change peoples’ hearts, but it did appear to make a difference in informing consumers of their rights.

But that wasn’t the end of it. This year, Albany passed another law requiring brokerages to publicly disclose a uniform standard operating procedure as on whether or not the brokerage would require a pre approval, exclusive representation contract, and showing identification before serving the consumer. On the face of it to the layperson that might seem reasonable. However, real estate agents are independent contractors with different business models. Asking for a pre approval up front is baked into the practices of many of our agents. Others are willing to meet up without a pre approval or proof of funds up front, and so long as the agent themselves are consistent, no bias could be explicated. It made sense (and is still the way it is in the other 49 states), that so long as an agent who would, for example, tell a $1000 rental prospect that rentals weren’t their specialty, that they wouldn’t suddenly be open to rentals with a $10,000 budget consumer. The law doesn’t see dollar amount in that example, it just saw bias that would unfairly affect folks with lower economic means, more likely to be minorities.

The new law, however, expands the bias to the entire brokerage without any consideration for details like agent safety, business models, or other circumstances. This made brokerages face difficult choices. If a company chose to not require pre approvals, for example, then it would be an infraction for an individual agent to practice a business model to require them. The converse would be the issue for brokerages that might require ID, financials, or an exclusive contract. The conundrum for brokerages with more than a handful of agents is the big tents so many companies have with the business practices of their independent contractors. Now, to the state’s credit, they aren’t making a judgement about requiring or not requiring these things in and of themselves; they want consistency. But making the consistency brokerage wide rather than for individual practices could be construed as overreach.

Some agents, for example require a pre approval ahead of time to verify the identity of the consumer for safety purposes. This is understandable. Other agents might not be concerned about safety so much. And circumstances can change. We meet strangers alone in empty houses for a living many times. Other times we meet people in crowded setting like a high trafficked apartment complex. This has nothing to do with the ethnicity or race of the consumer.

To complicate matters, these rules go out the window when a homes seller requires ID or a pre approval. Those preferences must be obliged regardless of company policy.

I predicted that larger firms would not require any of the three up front as a condition of service and smaller firms might be more likely. Since the operating procedures have to be on the company websites, I was able to confirm that I was correct.

I’ll also predict that more homeowners will be coached to require pre approvals so the brokerage community could be off the hook to a degree. Time will tell on that. The law may change after feedback from the industry to legislators, but it is also an incredibly sensitive thing to debate- no one wants to be the brand that might have appearance of being against any fair housing initiative.

This brand has chosen to not make ID, exclusive contracts, or pre approvals a requirement, as the graphic above says. We have a number of agents who have historically required them as a condition of service, and we are training our agents to be consistent in being sensitive to the different consumer preferences and refer a prospective client to a colleague in the firm when in the past they might have felt they weren’t a professional match. This will surely evolve, but I’ll agree with Albany about one thing: if we have to make a choice between the unbiased experience of the consumer and the convenience of the professional, the consumer must get the nod.

Commentary • Industry News • Market • April 11, 2022

Just Because the Market is “Hot” Doesn’t Mean Real Estate Agents Have it Easy

by J. Philip Faranda

I don’t think I’ve seen the following thought written anywhere lately, but I’ll say it:

The average real estate agent has never worked harder than they have in this market.

That seems contrary to the public perception that rising prices and a “hot” market is when agents have it easy, but extreme conditions aren’t conducive to a leisurely business model.

For example, when an agent sells their new listing the first weekend that it’s active for more than asking, it not only doesn’t mean things are easier for them, it can have a deleterious effect on their bottom line.

Listing agent challenges include:

More difficulty procuring the listings. Competition is higher for the listing, and many homeowners need a plan on where they’ll go once they sell because that’s the biggest challenge. You have to have a detailed plan in beyond the sale, which is unheard of in any market I’ve ever seen before this one. Before this market the plan was “find a place to buy/move to.”
Bidding wars aren’t fun, and can get messy. The passions around housing are high enough, but try explaining to a colleague why their cash offer $50,000 over asking is in 3rd position. And there is no margin for error, as the devil is often in the details on offers, and missing a key term can cost. If you meet an agent with bags under their eyes, they were likely parsing the details of 6-10 offers with a nervous client to help them make a decision.
Appraisals can be a nightmare. When prices spike dramatically, the 6 month lookback at comparable sales is at lower cost transactions. Buyers can offer cash protection, but it’s not automatic and an appraisal $25,000 under contract price can spark some serious buyer remorse that reverberates to all parties.
Greed. Sellers view the current market as a once in a lifetime chance to ring the bell, but it can blur their common sense and cause them to have unrealistic expectations even if everything goes right. For example, suppose a listing goes active for $800,000 and sells for asking price within the first week. Great, right? But if the seller had a fantasy that they’d get $860,000 in a bidding war based on what they see on the news, they need to be talked off a ledge.
Lack of professionalism. There are 1.5 million members of NAR right now, up 50% from the housing crash. That means hundreds of thousands of rookie agents who have no substantive experience. When the market gets hot, old failures take their licenses out of mothballs, and newbies jump in with deplorably sparse training. Doing business with a poorly trained agent on the other side of a deal is brutal.
Loss of income. This is counterintuitive, but all too real. Less inventory spread over a dramatic increase in agents is bad enough, but the big aggregators are getting in on the commission via onerous referral fees. We used to pay for advertising on Zillow, Trulia, and Realtor.com. Now those companies take referral fees of 35% on a typical transaction, meaning that if you sell a $450,000 property your commission is more reflective of a $300,000 closing. So higher prices not only don’t mean more commission, they mean lower earnings spread over fewer transactions.

Other issues are more inside baseball, but the model of the industry has always been predicated on the longstanding idea that carrying a listing for any period of time will develop new prospective client relationships with inquiries on the listing. When the listing is gone the first weekend, that can’t happen. I understand this means little to the consumer, but it’s a factor that can’t be denied.

On the buying side, agents representing prospective purchasers are in trench warfare. Buyer agents in our firm have fewer properties to show their clients, and many of our successful buyers have not hit paydirt until their 4th or 7th attempt to buy. That’s madness. Worse, buyers are selling their souls to get accepted offers by waiving inspections, offering cash to make up for appraisal deficiencies, and in some cases even waiving mortgage contingencies. Surrendering your own security and exposing yourself to that kind of liability is not only stressful and risky, it can be destructive if everything doesn’t go perfectly.

In any industry, volatility is not a welcome thing. Stability, even if it’s considered boring, is a far better market condition. Give me boring any day. Leave the volatility for the Oscars.

Stay tuned for my next post on why this is brutal for consumers as well!

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

Waiving Home Inspection vs “Inspection for Informational Purposes Only”

For Agents: Open House Parking Etiquette

Yes, Virginia, You Can Paint That Wood Paneling

The Pre Approval Shell Game

Sewer vs Septic: The Full Poop

Sellers: Always Plow Your Driveway After it Snows

How Can We Solve the Real Estate Inventory Shortage?

Why is Inventory so Low?

How Slow is the Market in December and the Holidays?

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

What can you buy in Mahopac for $305,000?

What $449,000 Buys in Peekskill

Happy News on Joining Forces with Howard Hanna Rand Realty!

Some Shameless Self Promotion

On the Latest New York Standard Operating Procedure Law

Just Because the Market is “Hot” Doesn’t Mean Real Estate Agents Have it Easy

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