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.