BUYER BEWARE is one thing, but in this case – OWNER BEWARE too.

An Epiphany
I had an epiphany today and my guess is that very few real estate professionals, or for that matter anyone else knows about this.  Unless you are directly involved in what I will call the electrical power supply business, the details of how you get the electricity to maintain your home or who maintains the service rarely crosses your mind.  You spend less time thinking about that than you do the water you drink or the air you breathe. But it is very important.  I am going to talk about who owns your electrical power supply equipment – the lines, transformers and poles.

My Frame of Reference
I have lived in a so-called exclusive West Tisbury community populated by more than 45 families for over 40 years.  There has always been a ROW utility easement across the property and through the woods for the utility company to supply electricity to the abutting properties.  In my experience it has been the utility company that has always maintained proper clearance by trimming the trees along the ROW.  The utility company has always maintained the power lines, transformers and poles along the private roads network within the community.  It makes perfect sense to me that if I pay for the ‘service’, part of that service should be maintaining continuity and consistent service.  Right!

It ain’t necessarily so
I learned today, this is not the necessarily the norm on Martha’s Vineyard and only a few communities have service networks providing electricity to homes that are owned and serviced by the utility company, presently known as NStar.  In most cases NStar supplies and maintains an electrical service system to a point and beyond that, the system is the responsibility of the property owners along their private roads.

So, what is the big deal? 
It’s not a big deal until the trees along the service path are overgrown and threatening the service continuity, or until the infrastructure of that service has been fully depreciated and compromised.  What I mean by ‘fully depreciated is, when the electrical wires are old, brittle and leaking, transformers are failing due to corrosion and wooden utility poles are rotten and no longer able to carry their load.  The big deal is the cost of replacing all those components that provide the infrastructure keeping your lights on.  Actually, it’s not a big deal, it will be a huge deal and will cost you dearly – unless you choose to live ‘off the grid’ and even then you may be in for a fight with your neighbors.

Take down those utility poles Mister NStar
We can all agree that above ground utility poles and wires are ugly, and my vote would be to bury all utilities.  Spring Point in Chilmark is replacing their entire service and from what I have been told they are going underground all the way.  I love Spring Point.  Did I mention that they are one of the other rare Island community cases where NStar owns the service system and has to maintain it?  It is estimated that the service replacement is going to cost well over a million dollars.

What should you do? 
For one, if you are a Buyer considering a purchase in a ‘community’ with private roads, find out who owns the utility system.  My guess is that you will not find that information in the Association Rules and Regulations. If it is privately owned and there is a home owner association, do they have a reserve to set aside to earmark funds to maintain the electrical system (tree trimming and equipment replacement)?   If you are already an owner in a private community, find out what provisions have been made to support the maintenance of the electrical system. 

Brinksmanship can cost you dearly
Do not wait for a failure or a threat from NStar that they will turn off the electrical supply service to the community until certain maintenance issues have been corrected – like trimming trees around utility lines.  This all can happen during a storm and I am sure you can imagine the difficulty factor when trying to get personal emergency help during a storm.  You are just one more name on a list of hundreds.  This is just another good reason to own a back-up generator.

Sue me, Sue you Blues
I have been told on a regular basis there are any number of litigative actions arising out of disputes between home owners as to who owns what and what the fair share of each property owner should be when a utility problem occurs. The court costs alone can exceed any amount that would be paid for being responsible and setting up preventive measure rules and funds ahead of time.

Wouldn’t it be nice?
I think it would really be a considerate ‘public service’ disclosure for NStar to notify those customers affected that maintenance and safety of their service system is the responsibility of the home owners in their community. For all I know they may be doing that but if not wouldn’t it be nice. I hate surprises – don’t you?

Home Sales On Martha's Vineyard Are Picking Up

2011 proved to be a year of reduced sales on Martha’s Vineyard with home sales totaling 319, down 9.1% from 2010 and the average price dropped to under a million, and at $939,000 was down 10.9% from the prior year. The median home price settled at $555,000 which was down 9.8% from 2010. 

 At the beginning of this 2012 I predicted sales would be ‘flat’ and pretty much a repeat of 2011.  However, if home sales numbers at the end of February are any indication I will have to agree with NAR’s chief economist that Spring Looks Bright .

 As we rolled out of February into March, home unit sales were already up by 40.8% and the average sales price was down by 11.5%.  The median sale price was up by 7.7%.

This Negotiation Is Not About You And Me

Helping my Buyer Clients to find the right property, and then researching and discovering the hidden secrets relative to that property are certainly important elements of what I do as an Exclusive Buyer Agent. What happens after my Buyer Client has identified the property they want to buy and are ready to make an Offer is what really matters. This is when the negotiation begins.

After we have found ‘the property’ that turns their light green, I discuss with my Clients how to proceed. First we look at all the comparable properties, such that they are. We dissect the subject property as best we can so as to get some idea of its possible market value. That does not mean looking at the Assessed Value and using that as our benchmark. Matter-of-fact, there is really nothing we can use to get a spot-on number. The Assessed Value and even an Appraised Value are merely guess-estimates used for specific purposes and guided by subjective opinions and data. Probably Comparable Sales, if there are any, are what will establish the closest value number, but no two properties are identical.

After we are done thoroughly reviewing the market data and discussing the various ways to approach negotiating an Offer, my final advice to my Client is to think about it and knowing what they know now, ‘offer what it is worth to them’. Don’t misunderstand, I am not talking about making a 'lowball offer'. What exactly is a lowball offer? I was reading an interesting interview the other day with Jeffrey Stanton who is a Negotiation trainer. For clarification sake, I will use the Martha’s Vineyard real estate market as my reference going forward. In a ‘balanced market’ the average margin price difference between the asking price and the selling price is usually around 3-5 percent. In today’s ‘buyer’s market’ the average selling price is usually 6-12 percent below the asking price. However, there are incidences where a property may sell for between 13-20 percent below the asking price, or even less. Usually properties are passed by when Buyers think they won’t stand a chance if they offer what they believe the property is worth when that number happens to be way below the asking price. Just to confuse matters even more, in any market the exceptional properties (i.e. those that stand out above the rest for one reason or another) will sell above the asking price, and where multiple buyers are engaged those properties will sell well above the asking price. I always tell my Clients if they are hesitant to make an Offer, “If you really want it what’s the worst that can happen? The Seller can say no”.

There have been occasions when I have presented a thoughtful and respectful Offer that was considerably lower than the asking price. Even before the Seller Agent presented the Offer to the Seller they would tell me that ‘they’ were personally insulted by the Offer. Oh really! This is not about You and Me! This is about my Buyer and your Seller. But of course if that is the tone the Seller Agent is going to accompany my Buyer’s Offer with there will probably not be much of a chance of success for anyone. But that is okay because I can deal with that. Stanton suggests in cases like this that the Buyer’s Agent request to present the offer to the Seller in person. That does not happen on Martha’s Vineyard mostly because the Sellers rarely live on the Island year round and are usually not here during negotiations. This is why I am always ready to present my case to the seller agent supporting my offer with the facts – as my Client and I see them.

The other mistake that Seller Agents and their Sellers make is that they do not respond when they perceive an Offer as being too low. The biggest hurtle to jump is from looking at a property to making an Offer on a property. By not responding to an Offer, that means there can be no conversation. It should not matter what the Offer is; beginning the conversation is all important. Stanton said, “A lot of times, a lowball may be all the buyers can afford.” He went on to say. "It could be an investor or a buyer looking to steal the property, or a buyer who really likes your property and is just taking a shot at it, never knowing if you're going to say, Yes or No. Just don't take it as them disrespecting you." Sellers should not be offended by a low Offer and they should realize that when they make a Counter Offer, no matter how small that Counter Offer may be, it is saying, I am willing to engage …. (Note: By law, real estate agents are required to present all offers to a seller.)

Once the conversation has begun between the Buyer and the Seller that is when the true motivations of both parties will start to appear. It is really important for both the Buyer Agent and the Seller Agent to manage expectations on both sides and control emotions --- including controlling their own emotions. And remember, this negotiation is not about you and me.

What is all this talk about Assessed Value and Appraised Value? What is the difference and what is Fair Market Value?

Today more and more, we are hearing many seller agents say their listed properties are priced "well below Assessed Value". What does that say about the listing price? Does that mean the listed price is a 'good deal' price? Is that the Fair Market Value? Absolutely not, and quite frankly the assessed (tax) value has little relevance when it comes to the actual market value of a property which can be below, at, or above the listing price.

The Assessed Value of a property is arrived at by a cursory unscientific look at properties in an area. Most of the time the Assessor does not actually visit the property, and if they do, 99% of the time they never set foot through the front door to inspect the interior (i.e. floor materials, appliances, fixtures, level of trim and finish, etc.). A home owner does not have to allow an Assessor inside to inspect their home. The Assessor gathers and tabulates as much information as possible about a property and then they use that for their valuation. Opinions on value are always based upon the subjective interpretation of the information available to the Assessor at the time of the assessment. Assessment information is usually 12-18 months behind the market which is one more reason the information cannot be used as a true barometer for current market value.

The Home Appraisal is much more thorough, detailed and timely. When preparing a Full Narrative Appraisal for a property the Appraiser will inspect the property inside and out and compare the subject property to as many comparable sales as possible. Since no two properties are the same, they will make specific adjustments for as many items as necessary. If too many adjustments have to be made then the comp is not a good one and it is removed from the equation. After the adjustments are made and values are established for each comparable, the numbers are averaged and a market value is established for the subject property. It sounds complicated and it is, but it is not scientific. Appraisal analysis is considered an art form and the opinions of the Appraiser are understood as being subjective, even though this is the most accurate method to establish market value we have today. Today Appraisers must be licensed and undergo continual and extensive training.

You will notice I did not say ‘Fair Market Value’. In appraisal analysis the correct term used today is ‘Market Value’. Okay, so what is Market Value? Market value is the price at which a buyer is ready and willing to buy and a seller is ready and willing to sell in an open market arm’s-length transaction between strangers. Both parties have reasonable knowledge of the property and are not under any compulsion to do business. This now rules out any form of distress sale as a way to establish market value.

Here on Martha’s Vineyard market value is heavily biased and distorted by emotion which creates ‘intrinsic value’. I have always said that if you as a buyer try to value a property according to the numbers, you will end up very frustrated because many sellers as well as buyers place an intrinsic value on properties based on their own preferences and circumstances. Quality of life creates an intrinsic value as does hearing the roar of the ocean or watching the sunsets from the comfort of your deck chair. I would have to say in general ‘Market Value’ on Martha’s Vineyard is intrinsic even though it is not the same for everyone. I believe making a purchase on Martha’s Vineyard is ultimately an emotional decision. My goal is to get you as close as possible to a fair deal price as possible and to make sure you know as many details about the property as possible. My responsibility is to protect you from as many unpleasant surprises as possible, but I cannot make the final decision as to whether the purchase you are making is a good deal. If you are making a fully informed decision that makes you feel good and is good for your family then you can say you are making a good deal.