MARK IT UP TO MARK IT DOWN

Those of us who live in Massachusetts should know who Eliot Tatleman is; he is the spokesperson for Jordan’s Furniture, an innovative home furnishings store that was purchased by Berkshire Hathaway some years ago.  The furniture business is extremely competitive with companies like Bob’s, Bernie & Phyl’s and Cardi’s all vying for favor through the medium of television.  Tatleman has recently been hawking his bed mattresses saying that the competition marks their products up so they can mark them down, which he implies is not a savings for the consumer. Jordan’s price is the ‘best price’.  I had to ask myself, “Didn’t we in the real estate business invent that marketing practice?”

I am forever frustrated and dumb founded by the fact that the practice of over pricing continues without any realization for what the downside is to the Seller and to the overall selling process.  Many of my colleagues dismiss it by saying “there is an ass for every seat”.  I wonder what they mean by ‘ass’, but then again what was the expression we attribute to PT Barnum about suckers? Here are 5 reasons why over pricing is not a good idea for Sellers, and in turn may mean a lost opportunity for Buyers.

1. Fewer Offers or No Offers – An overpriced home discourages prospective Buyers from making Offers, if the difference between the asking price and today’s market value is substantial. Many Buyers won’t waste their time on a property they believe is overpriced, and may even think they would be engaging in a hostile negotiation that would insult the Seller and never go anywhere.

2. Lost Inquiries means Lost Showings – Buyers shop within price ranges and over-pricing a property may put the property out of line or out of range with its competition.  In a perfect world Buyer Agents should concentrate showings based on the stated price-range preferences of the buyers; however, knowing that properties are overpriced a buyer agent will offer properties that are above the buyer’s stated price range. Without an explanation the buyer may infer that their agent is trying to upsell them. This is why, when I present properties that I am familiar with – which is most properties on Martha’s Vineyard, and have analyzed, I tell my Buyer Clients not to pay too much attention to the ‘asking price’. If we make an Offer it will be a carefully considered Offer, presented with the proper respect and intent. If the Seller is insulted, that is their problem. Also, many Buyer Agents, if they don’t have a good sense of values in their market may not look at some properties that could ultimately fit into the price range their Buyer is able to afford.

3. A Low Appraisal versus the Sale Price – When a Buyer requires financing in order to purchase a home, the lender will require an appraisal for that property.  If the Buyer has agreed to pay more than market value, and they may not realize that they have, the property may not appraise, which would mean that the Buyer will have to put more money into the down payment or the sale will be in jeopardy of not going to Close.

4. Over Pricing May Help Sell the Competition – This is an old truism in real estate.  When a Seller Agent takes an overpriced property, and there is competition in the area, the overpriced property will help sell the competition.  The problem is not always created by the Seller Agent’s opinion of value as many Sellers, reflecting the endowment effect, will insist their property is better than the competition and will control the (over) pricing.  Sellers need to listen to their Seller Agents, they are the professionals!

5. Overpricing Can Mean the Seller Loses in the End – “Chasing the Market” can be the kiss of death for a Seller in terms of final proceeds.  Overpricing inevitably ends up in having to reduce the price to keep up with the market and once that price slide begins, unless it is a bold cut in price, the market will tend to sit back and see how low the price will go.  When Sellers price their property correctly so it is clearly the most attractive property within its price range, they end up with less expense in carrying costs, wear and tear, and usually more money in their pocket.  Life is short and time is money, so the best price is the right price, not the over price.

What You See Is Not Always What You Get

When I started my Exclusive Buyer Agency, I felt that Buyers were not getting the whole truth when they were shopping for a home, so I made it my mission to give them the truth.
  
As part of that commitment, and because the majority of Martha’s Vineyard buyers are not local, I felt they needed an accurate picture of the properties they were interested in. At that time the photographs that accompanied property listings were, in a word, abysmal.  It was commonly believed, and it still is among some old timers, that more and better photographs were counterproductive to the seller agent’s goal which was to sell real estate.  It just gave potential buyers a reason to reject a property before actually seeing it.

As I set out on my mission, I bought a really good professional camera, flash w/ auxiliary battery pack, and an 11mm wide angle lens, which is my go to lens today.  I started taking what I call “Scratch-n-Sniff” photographs of all properties I previewed.  I move very fast and don't have time for staging, lighting, etc.  All in all, I do a good job of accurately representing the property and explaining the layout.  I experimented with video and I have used Facetime, but I find the way I take my photographs gives my buyer clients a very accurate representation of a property.

Very soon after beginning this process colleagues would want to know what equipment I was using and my technique.  I was happy to share.  What followed was a HUGE improvement in the quality of property listing photographs. I wish I owned stock in Nikon.

And then a competition evolved among the larger offices. Who could take the glitziest photographs? Photoshop and Lightroom became common tools to embellish the photographs to the point that they became distorted and cartoon-like.

Businesses were born and now there are a number of professional real estate photography companies on Martha’s Vineyard offering still, video and drone photography.

I continued doing what I do, staying true to my original mission, keeping it simple stupid (KISS), and doing my best to tell the truth.  Over the last 12 years I have amassed a library of tens of thousands of images all cataloged and easily accessible.

I was reading an article about real estate photography in one of the professional real estate publications I receive and here are some excerpts I want by Buyer readers to think about. A survey by VHT Studios, a professional real estate photography company found that “professional online photographs increased a buyer’s perceived value of a listing by 11.5 percent when compared to listings with descriptions only. Adding an online video tour of the property increased perceived value by 6 percent.”  The article goes on to say that the ‘perceived value’ leads to more interest and multiple offers creating bidding wars which result in higher closing prices.I think another result of overly embellished photographs is buyers who get very upset when they make the effort to see the property and realize the property is not as nice as the photographs they saw.  Actually, one could argue that this is a breach of the REALTOR® Code of Ethics, not to mention state and federal laws protecting consumers from false or misleading advertising.

One of my favorite slogans is “Get What You Want, Not What You Get”. Buyers seek me out and engage me as their Exclusive Buyer Agent because they know I will tell them the truth – the good, the bad and the ugly.  Ask anyone who has worked with SplitRock Real Estate and they will tell you --- the truth.

Houses Have EARS!

Who cares?  You should.  One of the very first things I was told when I started in real estate was, ‘houses have ears’.  That was over a quarter century ago.  At the time I simply dismissed it to a psychological neurosis – paranoia.  However, as I gained experience, in the back of my own neurotic psyche I became acutely aware of that possibility.

On my first outing with a Client, along with the obvious -- always be respectful to the seller agent showing us the property, my basic training lecture about how to behave during a showing would emphasize, keep your comments to yourself until we are back in my car.  My car is the ‘safe zone’ where my Client can tell me exactly what they think about the property (etc.) they just previewed.

Today, more than ever, remote surveillance has become common fare. If you are a fan of the TV series, ‘Person of Interest’, you know what I am talking about.

I just read a really good article in REALTOR® Magazine that brings this subject to today’s real estate market climate.  The article referred to a YouTube video produced by a Washington REALTOR® Legal Hotline and featuring their attorney, Annie Fitzsimmons.  The message is still the same for Massachusetts and the take away for buyers is ‘what you say could be used against you in negotiations’.

Home Inspections are not the Gospel

As you know, Massachusetts is a Buyer Beware state and many areas like Martha’s Vineyard do not require an owner to complete a ‘Seller’s Description of Property’ check list. Matter-of-fact, attorneys will suggest to their seller clients not to fill out the form due to possible liability, even though there are three choices provided for an answer: Yes, No and Unkn.

So what can you do to help you avoid buying a money pit?  The first thing you do is hire the best most through home inspector you can find. Usually, that will be the one the seller agents are not keen on. 

 

Next, you can ask your insurance company for a Comprehensive Loss Underwriting Exchange report, which is known as a CLUE report.  The CLUE report contains a 7 year history of any claims made on the home you are thinking about buying.  

Obviously, many problems in the home are not reported to insurance companies, but this is one more step beyond having a home inspection and those additional inspections that may be triggered by the home inspection, like asbestos, radon, mold, pest infestation, and lead. 

A cautionary from Bill Loden who is the President of the American Society of Home Inspectors is to be careful when buying a home that is or has been ‘flipped’. "Experienced flippers looking to maximize profits at the expense of the buyer will learn how to hide problems from the inspector rather than correct the problems."

Loden goes on to sight examples like, "an air conditioner that has coolant leaks can be charged just before the inspection and may work fine for a couple of weeks." 

Something else a buyer can do, and I always recommend to my clients, is to talk to the neighbors.  They would be the ones to know if there was a flood or a fire in the house. They may know just as much as the owner does and they are more than happy to spill the beans.

Finally, and most importantly is to hire an Exclusive Buyer Agent, one that has a track record for putting their client’s interests before their own.  Don’t take the Agent’s word for how wonderful they are, read their testimonials and ask to speak directly to some of their past and/or present clients.  This is your life, your money and your happiness.  You deserve the best so go out and get it.

How Good Is A Home Inspection

I was reading a legal article in one of my trade publications recently discussing ‘Caveat Emptor’ which means Buyer Beware.  Massachusetts is a caveat emptor state.  So what does that mean to you the consumer? By definition it means "The seller of a product cannot be held responsible for its quality unless it is guaranteed in a warranty."

If you have read through the “Why You Need a Home Inspection” part on my website you know how bullish I am about home inspections as a result of a mishap I had in my personal home buying experience.  I always say that I would rather lose a sale because the house did not pass muster than have a client move into an unsound home and have a bad experience. 

However, even with the best home inspector, the one the seller agents call ‘the deal breaker’ the inspector cannot see or find every single chink in the structure’s armor.  He may discover evidence of a problem but how large or small that problem may be should then be determined by an expert in the specific area of the problem.  It will be up to you, the home buyer, to act upon the evidence in a timely manner and request further exploration in order to gather more information.

Discovering a serious problem later on may leave you no recourse with the seller.  The case study that I read started with evidence of ‘rot’ found during a home inspection. The inspector, who also happened to be an engineer, stated in his report that the rot did not pose a structural problem, so the buyer went ahead and bought the home without doing any further investigation or raising the issue with the seller. 

If I were there for that diagnosis I would have been thinking that the engineer said it did not pose a structural problem -- at the present time, or from what he could see.  Have you ever had rust rot on your automobile? What does it do -- it progresses and spreads.  I would have raised a red flag and suggested further investigation or at least the notion that there was possibly more there than meets the eye.

The reason why the seller should have been questioned about their knowledge of the problem is because:
1) We do not use “Seller’s Description of Property” forms so the seller has no opportunity or reason to provide specific information as to their knowledge of the condition of the property.
2) Only if a hidden structural defect that would affect the value or the desirability of the property is disclosed by the seller to the seller’s agent is that seller’s agent morally required to reveal that fact to a buyer. That is a governing rule for REALTORS®.
 Continuing on with what ended up being a law suit, the new owners of the house where the rot was discovered started noticing “a damp smell, the presence of potato bugs, and the ceiling tiles separating.”  The new owner had “the home re-inspected and this time the inspector found serious mold, rot and pest damage. The extent of the damage hadn’t been easily discovered the first time they had the house inspected, because new siding, trim and insulation had been installed”.

Here is where the story reaches its tipping point.  “With the new inspection report in hand, the couple determined with the help of a contractor that it would cost more to repair the property than to rebuild”.  Any of us would be fighting mad to get this kind of news. Right?  Of course, the logical next step would be to go to Court and that is exactly what these folks did.  “They sued charging the sellers with fraudulent concealment and negligent misrepresentation”.

Although the court found in their favor on the first go around, they lost an appeal because even though the court found in their favor based upon “egregious nondisclosure and concealment” by the sellers, the case was dismissed based upon Caveat Emptor.  In this case the buyer was made aware of a problem but did not follow up in a timely manner. 

I believe the most important part of a home purchase is doing your homework and that includes a thorough home inspection with solid answers for any questionable problems uncovered, speaking with town officials about the current and future neighborhood plans and even going so far as to interview the neighbors who would be more than happy to spill their guts with everything they know about your home owner, the neighbors next door or the overall community. It’s up to you to get out, walk the streets and knock on doors. Caveat Emptor.

Is This Really The Time To Be Thinking About Your Fireplace?

Yes it is, and this is also a good time to have your chimney cleaned, but that is not what I want to talk about.

With the price of cord wood averaging $300.00 along with the mess associated with operating and maintaining a wood burning fireplace, people who still love the ambience of a fireplace maybe thinking about converting to a Propane fueled fireplace.

Did you know you have three options to choose from? Let me first explain that we do not have ‘natural gas’ on Martha’s Vineyard; we use Propane which does not burn as hot and does not create the same type of ‘big flame’ that natural gas does. To retrofit a gas fireplace to Propane is a simple matter.

The three types of Propane fireplaces are the vented Propane fireplace kit, the vent-free Propane fireplace, and the Propane fireplace insert.

The vented kit is the Propane log type we see so often that you can purchase for around $1000. If you don’t want to control the flame remotely you can safe a couple hundred dollars. The Propane log fire has a very realistic open fire look. The only disadvantage is that the damper in the chimney has to be removed because it is a state code requirement to guard against someone lighting a fire and forgetting to open the vent, which in turn could pump lethal carbon monoxide into the living area of your home. Another disadvantage is heat loss. Without the damper only about 15-20 percent of the heat is returned into the living space. This is about the same as with a wood burning fireplace, but the way to solve the problem is to install tightly fitting glass doors. Adding the doors could add as much as $1500 or more to the price of the installation.

The vent-free fireplace can be installed for under $1000. Vent free means there is no exhaust going up the chimney and therefore the chimney damper does not have to be removed. All the heat remains inside the living space. Health problems have been associated with these fireplaces among people suffering from respiratory ailments like asthma and allergies. Vent free fireplaces should not be operated for more than a few hours at one time which means they are not good sources of heat.

The logs in a vent free fireplace are more economical using less gas than those of a vented fireplace but the flame produced by vented logs looks more realistic.

Finally, we come to the Propane fireplace insert. I have a Vermont Casting wood burning fireplace insert and like the wood burning inserts, the gas insert is costly with an average price today or around $3000. As with the wood burning fireplace inserts, the look of the façade of your fireplace is retained. Inserts are meant to be airtight so you won’t be able to have an open fire. The exhaust fumes are vented outside the house which means the air inside the house remains healthy and you can run the insert indefinitely as there is Propane to fuel it.

Regardless of which option you choose don’t try to install it yourself, call a professional like the people at Vineyard Hearth Patio and Spa in Vineyard Haven. Here is a link to their website: http://www.vineyardhearthpatioandspa.com/

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%.

Would You Buy a Used Car Without Inspecting It and Taking It To Your Mechanic?

Maybe a better question is, would you buy a half a million dollar home on Martha’s Vineyard without taking a good hard look at it yourself, and then having a professional home and structural inspector thoroughly examine it? If the answer to both of my questions is No, then by all means read no further.

There are two kinds of house shoppers: One just likes to shop, looking at how a house is decorated and how the owners are living; they are just nosey and have nothing better to do with their time. On Martha’s Vineyard we call them rainy day house hunters – a real estate agent’s worst nightmare. The second kind of house shopper is dead serious about the task; they recognize they are contemplating making the most expensive investment that they may ever make and this is not a game. They will forego the beach on a sunny day because to them this is not a lark, a rainy day distraction.

Serious buyers are the only people I will work with and I can quickly separate the wheat from the chaff. Serious buyers need education and that is what I provide. Serious buyers are not afraid to pull up a corner of the carpeting, draw back a shower curtain, open closet and cabinet doors, climb up into attics or scrutinize basements, cellars and crawl spaces. Serious buyers are all about business and they have a nose for mold, water damage, leaks, faulty appliances and any sign of deferred maintenance. Serious buyers will ask a seller agent, if present at the showing, all kinds of probing questions even though they may think those questions approach being provocative or inappropriate. They do not have time to waste, and neither do I.

Are you thinking to yourself, I’m serious but once we agree on a purchase price I have every intension of getting a ‘home inspection’, so why do I need to be so inquisitive and investigative? Why can’t I just enjoy looking at the furniture, art work, petting the dog and admiring the gardens? Because, when you pay attention to the details you will be able to save yourself infinite time and aggravation. If you carefully walk around the inside and outside of a house you will be better able to determine if the condition of that property meets with your expectations for the condition of a property you would buy. Here is a list of just a few of things YOU are capable of observing while you are previewing a property on Martha’s Vineyard that is on your list for possible purchase.

• Wooden siding that is rotten at the edges.

• Wooden window and door trim and sills with evidence of rot and peeling paint.

• Exterior shingles both on roofs and on siding that are split or lifting up (that’s called cupping).

• Cable-vent covers that look like they have been chewed on by werewolves.

• Double glazed window glass that is fogged. Make note of who the window manufacturer is. Note: Anderson windows also have the manufacture date stamped on them.

• Gutters overflowing with leaves and grass and sometimes with small bushes growing in them.

• Mud tubes running up the sides of foundations or wood siding touching the ground, less than 6” - 8” from the earth surface.

• Oil stains under old style single wall oil tanks in the basement or evidence of rust on the belly of the tank.

• Hot water heating boilers that look like they have been hit by a train and have rust around all the fittings.

• Electrical panel boxes with covers removed and a rat’s nest of wires poking out.

• Cracked foundation blocks or wide (3/16”+) settling cracks in basement floors.

• Wooden or composition flooring that looks like it has been rough sanded.

• Ceramic floor tile that is cracked.

• Brown spots where grass won’t grow around septic system covers.

• Appliances that have scaling rust and look like they should have been taken to the dump years ago.

• Water stains and turquoise blue (copper) stains around plumbing pipe couplings for domestic and heating system plumbing.

• Black flecks of mold on the walls and ceiling in bathrooms with no exhaust fans, whether they have windows or not.

• Speaking of exhaust fans, if there is an exhaust fan in the bathroom look to see if there is an exterior exhaust hood for that fan nearby. If there is none all that moisture may be venting into the attic. The same thing applies to clothes dryers where the foundation is a crawl space and the laundry equipment is on the main level.

• On Martha’s Vineyard, if the foundation is a crawl space check to see if the foundation vents are open or closed. The foundation should be sealed and have a vapor barrier or concrete skin over the entire floor.

• Nasty black mold stains around bathroom ceramic bathtub tile grout.

• Water stains around toilet bases.

• Metal entrance way storm doors that are rusting along the bottom.

• Metal basement bulkhead covers that are rusted and open to the elements and rodents.

• Finished areas above garages or in basements where you do not see proper egress windows or doors – cook stoves are a trigger for questions about approved zoning.

By paying attention to the types of things I listed above you will be able to make a more intelligent decision on what you are willing to pay for that property. I am not saying that this means you don’t need to have a professional home inspection but this puts you further ahead of the game. Also, it is important to note that here on Martha’s Vineyard more than in most other areas ‘deferred maintenance’ is common place and that makes a home inspection even that much more important.

Once you and your exclusive buyer agent have negotiated an agreeable purchase price and there is an acceptable home inspection contingency in that agreement, you can go ahead and hire a home inspector. Make sure you tell him what your observations were when you previewed the property and what your concerns are now. If the home inspector discovers a deficiency that you determine will significantly affect your enjoyment of that property you then have the right to terminate the agreement with the seller and all monies deposited for the seller will be returned to you. Keep in mind that your home inspection is not meant to be an opportunity to renegotiate the purchase agreement; it is for your edification alone.

So as you can see, buying an older home is very much like buying a used car, first you walk around it, look under the hood, kick the tires and then you have your mechanic look at.