Every One thinks they are an Expert

I was reading an article written for Houselogic.com about pricing “Your Home”. Actually, the information could be used to price the home you want to sell or the home you want to buy. 

After reading the article I came away disagreeing with some of what the expert had to say.

I agree that pricing a home based on data, not emotion, can mean a swift sale. That’s a no brainer and has to do with that ‘endowment theory’ mindset I have talked about before.  However, I do not agree that “home pricing is more of a science than an art”. Home pricing is an art; it is an educated ‘guesstimate’. Any appraiser will testify to that, and the reason why is because no two homes are the same and no two properties are the same – there are too many variables for a scientific conclusion to result.  The author claims “crunching the numbers is always the better route to an accurate home price”.  Well, it beats throwing darts at a board, and appraisers do crunch numbers to a certain extent but it is their professional experience that guides their final analysis and ‘appraisal’ of a property.

From this preface the author goes into various topic headlines.  The first one is “The Pitfalls of Overpricing”.  Let me tell you, overpricing can be the kiss of death and for some reason seller agents do it all the time here on Martha’s Vineyard.  I suppose the rationale that has proven true is “you never know”, or as I like to say, paraphrasing what allegedly PT Barnum once said, “There is a sucker born every minute”.  That is becoming less and less true due to both the advent of the Exclusive Buyer Agent giving buyers their own advocate and due to more and more information (?) becoming available on the Web.  Nevertheless, overpricing is part and parcel of the real estate marketing game and, as I said, it can be the kiss of death.  Besides the fact that it will take much MUCH longer to sell a home, the author rightfully points out “Continually lowering the price could turn off potential buyers who might start wondering just what is wrong with your home.”

Under the next topic, The Pricing Trap, the author points out that it is wrong to think that ‘renovations’ will “result in a dollar-for-dollar increase in the selling price – or more.”  There are dozens of articles out there listing the best bang for the buck upgrades and improvements, and those that are not so good but should be looked at as enhancing the owner’s quality of life while they own the house.  This is more a cautionary for would be home sellers and don’t forget that some improvements you make may just be improvements the buyer would want to make according to their taste.  Also, those fruit trees in the front yard that you think are so special – take them with you because a buyer is not going to pay extra for them.

Now here is an interesting adage: “Don’t buy the nicest home on the block”. That is most certainly true in America but on Martha’s Vineyard it actually works in reverse.  Martha’s Vineyard is old and so are most of the homes here, with many of those old homes in varying stages of disrepair and decay.  The life of a modern home today is about 40 years which would apply to those built in the late sixties, early seventies and certainly most of the crap that was thrown up during the 80’s.  Sure, we have some wonderful old antiques that are hundreds of years old, but to renovate them can cost as much or more than if you were to tear them down and build a modern replica. Yes, we have the talent to do that here on Martha’s Vineyard.  Anyway, the point I am making is that if you buy or build the biggest house in the neighborhood eventually it will inspire and encourage others to follow suit. That’s how the Vineyard will go through a renaissance once we have a strong economy again, although there are a number of projects like that going on right now.

I totally agree with the author when she points out that Zillow’s Zestimate’s are a factor in the incorrect pricing of homes for sale, or even for buyers to rely on when looking for and making offers on homes.  “The estimate is often wildly inaccurate.”  Yup, you bet it is.  Stay away from Zillow … ask a professional real estate licensee and make sure that licensee is a REALTOR®.  Ask me, I’m a REALTOR® and a True Exclusive Buyer Agent – I Represent People, Not Property. 

The rest of the article is irrelevant for the purpose of my writing but if you want to read the whole article for yourself go to Not Sure How to Price Your Home?

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.

What’s Your Hurry?

When you buy a new automobile you know better than to expect any sort of equity in that automobile. Heck, as soon as you drive it off the lot you’ve lost about $5,000.00.  Automobiles are a depreciating asset. But when you buy real estate you expect to have equity in it or at least you expect for that purchase to appreciate in a reasonable amount of time so you can build equity in it.  Up until now real estate investors did not have to wait very long before they saw their properties increase in value. That is one reason why the average investor bought and sold every five to seven years.  They could build equity and trade up. This is a new economy and a new real estate market.  It could be twice that long before you see reasonable appreciation in your real estate investment.  Of course there are exceptions like areas on the west coast of Florida and Arizona around Phoenix. That is where the fire sales were taking place.  Appreciation will be more rapid in these areas because the fires are going out due to inventories being significantly reduced. Do you really want your dream “second” home to be in one of these areas?

Actually, I am happy about this new real estate market because I think the purpose of a home is for family, not instant monetary gratification.  My opinion is directed specifically as it relates to this precious Island where lives are renewed and families are made whole and lifetime memories are made.  If you want to be here, the good news is you have time because as you can see prices are still adjusting and as is usually the case the market will cool down in about a month as we approach the end of the year. This is not a location of necessity for real estate investors; this is destination primarily for second homes. This is a unique location and the destination should be Joy and Happiness as well as a much simpler way of life.  There is an expression: Do what you love and the money will follow. On Martha’s Vineyard, buy what you love and the Joy will be in a collective family journey and a respite from your so-called normal life.  Why settle; haven’t you done enough of that in your life already?

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%.

Whatever Will Be Will Be Que Sera Sera

Back at the beginning of December I was asked by a local news reporter a series of questions about our real estate market. I thought I would review those questions and my answers now that we are gathering speed heading further into 2012.

Question: What do you see ahead for 2012?
Answer: I really don’t know anymore what is ahead of us but my guess would be more of the same. I think it would be foolish for anyone to prognosticate with any certainty on what the future will be. One survey I read suggested that most Americans think prices will go down 1.1% over the next year, but we just don’t know. In what has become a global economic meltdown we are constantly tinkering with possible solutions, but the uncertainty is vast and the landscape seems to change daily.

Question: Have there been any changes locally or nationally that might affect the 2012 market?
Answer: We hear about and read about changes every day as there is always something new that affects people’s thinking and confidence. There is a lack of confidence and an overall mood of uncertainty. The general consensus is that mortgage rates will remain low over the next 12 months. Financial institutions are being very stringent with their lending requirements. Corporations are playing it very close to the vest which means they are not hiring. It’s like listening to a broken record --- jobs, jobs, jobs. Until people go back to work and people start spending on a regular basis we will see little change. Island residents are affected by the poor job market and many of them are being forced to leave because they cannot find work. That means they are either putting their homes on the market, or they are unable to pay their mortgages and in some cases simply walking away. Nationally, a second wave of foreclosures is on the move and we will most likely see more foreclosures on the Island in 2012.

Question: Where are the best buys to be found on the Island? (geographically, in price segment, etc.)
Answer: Where are the best buys to be found on the Island? That is a good question. The short answer is so-called best buys can be found across the Island and in all towns. Personally, I don’t use the term best buys; I call them good opportunities. Oak Bluffs has seen a drastic decline in property values over the last few years. Tisbury, Edgartown and Chilmark have remained somewhat consistent. West Tisbury prices are softening and I think Aquinnah prices are too. Midrange higher end properties ($1.5mm - $2.5mm) have not been selling and prices have remained steadfast. However, I think we may be approaching a paradigm shift. For the last few years prices at the mid and low end (below $600K) have taken a brutal beating and that is where the majority of sales have been, although there has been a trickle of high-end and uber high-end sales, for the most part the high-end price range has languished. This year I am seeing some stunning price reductions with prices plummeting from where they were 5 and 6 years ago. I think the real opportunities are coming in 2012 with water front and water view properties priced very attractively. I also see a good opportunity to negotiate on properties in the $600K to $800K range.

Question: What's your best advice to sellers in 2012?
Answer: My best advice to sellers is to listen to the seller agent/broker they are choosing to hire, and don’t be attracted to one agent/broker just because they give you the highest price recommendation. Look at the comps and don’t chase the market – price your property sharply. Insipid little price reductions can only hurt a seller’s chances of attracting buyers. Sellers need to clean up their properties. I am not saying sellers have to rent fancy furniture (i.e.: Staging), just make it look presentable. Sellers should have a prelisting Structural Home Inspection to eliminate some of the mystery and concern for the buyer. Then they should either fix or repair what they can or be prepared to negotiate or credit the buyer on what they do not fix. It is unwise to try to hide anything. Some sellers have the attitude, ‘I don’t have to sell’. If that is the case, don’t list the property for sale. Sellers should not clutter the market with unrealistically priced properties; it only confuses the market and confuses real estate agents. Sellers will end up losing more than they gain. For all the sales that have occurred in 2011, the inventory seems to continuously replenish itself with more properties for sale. As long as we have a large inventory we will not have a balanced market.

Question: What's your best advice to buyers in 2012?
Answer: My best advice to buyers in 2012 is the same advice I have been giving my clients for the last few years. 1) If you are thinking of buying as a short term investment, this is not your market. 2) Plan on at least 7 and maybe 10 years before you will have any significant equity in your property. Buyers may also experience a slight negative equity in the short term if prices go down. One analysis I read suggests the home price appreciation rate may not exceed a 2-percent-a-year between now and 2015. That is not a very inspiring number. 3) Buy a property because you love it and it will bring joy to your life and your family. Life is short. 4) If you find a property you like but you think the price is too high, offer what it is worth to you. Nothing ventured, nothing gained.

Question: Is the demand for existing homes, condos, or buildable land similar?
Answer: I don’t think the demand for existing homes, condos, or buildable land is similar. The main attraction with condos is that the prices are lower than residential homes in most cases, and that attracts those buyers who thought they could never afford to live here. But most often when a buyer finds out the condo rules, regs and what the fees are, their interest quickly turns away from condos. Land is still very attractive but even with about 1/3 of the Island still not developed, nice pieces of land at reasonable prices are rare. I also think many buyers are dubious about the building process as a long distance absentee owner. We have many excellent contractors on the Island who are eager to work. However, pre-existing homes are still the most desirable. There are many very nice spec homes available right now, but they are mostly at the mid-higher end of the market and they are not selling. I find the problem with so many existing homes, especially those in the million dollar and below price range, is that many of them have not been properly maintained and they need a lot of work. We should no longer consider our market to be the goose that laid the golden egg and anything will sell just because this is Martha’s Vineyard. Buyers today want value and they are smarter and better informed than ever before.

It’s been almost two months and I don’t think the landscape has changed much. Que Sera Sera.

Why Not Wait?

I was going to title this writing, And the Beat Goes On, because it is going on – and on and on. With over 800 properties on the market now, depending upon who’s counting, there seems to be no end in sight.

There are not that many foreclosures for sale and most of them are overpriced junk, but the number of properties for sale in the $1.2mm to $3.7mm range is staggering. Short Sales may be on the rise and some banks are realizing it is better to be reasonable, cooperate with the mortgagor, cut their losses and not go through the costly foreclosure process. However, Short Sales still present some risk to a potential buyer.

There are some great buys out there right now in water front properties; you can even buy a Lagoon front property for $950,000 that is attractive and in good condition. But there are still too many properties that are unrealistically priced for this market and the level of competition between similar properties. I think part of the reason for overpricing is because July and August are the months of hope for sellers when the wealthier vacationers are here and emotional purchases are at their highest level. Of course there is always the ‘we don’t have to sell’ test the waters mentality that wastes everyone’s time, foolishly spends the listing broker’s ad money and confuses the market in general not to mention the real estate agents out there who do need to sell to stay in business.

Although I do not see a significant continuation in the downward spiral of prices I can see that the game plan for many sellers is to price their properties very high to start and then reduce the price giving the appearance that they are radically discounting their properties. That strategy is working when selling to the uninformed buyers. On the other hand, those properties that have been priced sharply and ahead of the market are getting an immediate response and in most cases multiple offers are being presented on those properties and they are selling quickly. You will also notice a trend for the acceptable differential between asking and selling price to be about 6%.

I think this is a great time to buy if you find your ‘dream home’, but if you have not then I say why not wait? Every week I hope and expect that the number of new properties coming on the market will slow down or abate, but they just keep coming. This week there are very view price reductions but still 28 new properties are being introduced and added to the inventory. It's been like this for many weeks now as the inventory continues to grow. This is just in time for the beginning of the two biggest months for tourists and big spenders – or so everyone hopes.

Once Labor Day has come and gone, or actually after the 3rd week of August I think sellers who have not made a deal are going to start worrying. It happens every year. Those who ‘don’t have to sell’ will probably take their properties off the market – again, around Thanksgiving and try again in 2012.

There are 568 single family homes available right now and that does not include the 36 properties that are either being negotiated or under contract to close. Perhaps I have answered my own question and maybe I should have titled this commentary, Why Wait?

Benefits of Purchasing a Vacation Home Rental

I'll admit that this is a silly lightweight video but it still emphasizes the value of owning a vacation 'income' property that could be partially or totally carrying itself and one day transition into your retirement home.

Is your dream to live on Martha's Vineyard, and were you hoping to get here sooner rather than later? If the economy has rearranged your plans extending your timetable, but has not sapped all of your financial resources, maybe now is the time to put those resources into real estate on Martha's Vineyard. Market prices have not been better in decades and interest rates while still historically low are beginning to inch up.

A recent survey by the Pew Research Center reveals that even five years after the real estate bubble burst, it has not shaken the confidence of the American public in the investment value of home ownership.

Uninvited Visitors in Your Martha’s Vineyard Home, A Sign of Our Times

Home break-ins and burglaries are happening more often and it seems as if not a week goes by that there isn’t news of another burglary or home invasion. Because there are so many people out of work and facing increasing financial hardship I guess their desperation is leading them to extremes. Martha’s Vineyard is not immune to these violations in one form or another. There are many Martha’s Vineyard vacation homes empty for a good part of the year and located in remote isolated areas, which makes this Island a perfect hunting ground for thieves. Recently I learned of about three break-ins in the area near where I live in just the last month. Burglars can be very clever and calculating so it is a fact of life today that we all need to be more vigilant and “THINK’.

Here is a list of tricks of the trade that a burglar won’t tell you about:

1. He was the same person who cleaned your carpets, painted your shutters, cut your lawn, delivered your new refrigerator or repaired your TV service. Did you check references or his identification? Did you make a copy of his credentials or take his picture with your iPhone?

2. He was one of the landscape crew cleaning up your yard and he asked to use the bathroom. While he was there, he unlatched the back window to make his return a little easier.

3. Manicured opulent landscaping or fresh cut flowers around the house signal that you have good taste and money. You probably have a lot of nice expensive things in your home. All those big toys in the backyard and that huge outdoor play set says your children probably have expensive gaming equipment and electronic toys in their rooms.

4. Newspapers are piling up on the driveway or the mailbox is bulging with mail. That’s a clear indicator that no one is home. Make sure you tell your postmaster to stop delivery of your mail, even if you are only going to be away a short time. Your burglar might even leave a pizza flyer in your front door to see how long it takes you to remove it.

5. If it snows while you're out of town, get your caretaker or a good neighbor to create car tracks around the property and footprints up to the front door of the house.

6. If your entrance doorway has translucent or clear glass sidelights, don't let your alarm company install the control pad where your burglar can see if it's been set.

7. A good security company alarms the window over the sink. And the windows on the second floor, which often access the master bedroom which is where your burglar will first look for expensive jewelry. It's not a bad idea to put motion detectors up there too. More homeowners today are installing Security Camera Systems and they are not that expensive. Q-See http://www.q-see.com/ makes a popular inexpensive system that is currently available at stores like Costco. Even if you don’t have an alarm system, if you can get a large security display sign from a local alarm system dealer, it will deter many would-be burglars.

8. Your burglar is not deterred by bad weather and like the mailman; neither rain, sleet nor snow will keep him from his task – robbing your home. So make sure you always lock your doors and windows.

9. Your burglar will always knock first and if you answer the door, he may ask you for directions to somewhere else or say he is looking for odd jobs. Don’t let him into the house and don’t hire him.

10. Once in your house, your burglar will check places like all your dresser drawers, the top of your closet, your night table or the medicine cabinet, so don’t hide your valuables in a sock roll or in one of those Aquanet Hair Spray Can Hidden Safes.

11. Your burglar will rarely enter into or rifle through your kids' rooms except to steal their gaming equipment.

12. If you have a safe for your valuables your burglar will not have time to break into it, BUT if it's not bolted down, if he can move it, he will take it with him and break it open later on.

13. Staggered lighting on timers in several rooms or a TV or loud radio can be a better deterrent than the best alarm system. If you're reluctant to leave your TV on while you're out of town, you can buy a $35 device that works on a timer and simulates the flickering glow of a real television. (Find it at http://faketv.com/ )

Here is a list I found of secrets confessed during interviews with convicted burglars in various parts of the country.
In the burglars' own words:

1. Sometimes, I carry a clipboard. Sometimes, I dress like a lawn guy and carry a rake. I do my best to never, ever look like a crook.

2. The two things I hate most: loud dogs and nosy neighbors.

3. I'll break a window to get in, even if it makes a little noise. If a neighbor hears one loud sound, they'll stop what they're doing and wait to hear it again. If they don't hear it again, they'll just go back to what they were doing. It's human nature.

4. I'm not complaining, but why would anyone pay all that money for a fancy alarm system and leave their house without turning it on?

5. I love looking in the windows. I'm looking for signs that no one is home, and for flat screen TVs or gaming systems I'd like. I'll drive or walk through the neighborhood at night to pick my targets.

6. Avoid announcing vacation plans on Facebook. It's easier than you think to look up a home address.

7. To a home owner, leaving a window open just a crack during the day is a way to let in little fresh air. To me, it's an invitation to come in.

8. If there is no answer when I knock, I try the door. Occasionally, I hit the jackpot and walk right in.

Finally, here is one more neat security tip I had never thought about, and it is so obvious. Many security systems have panic buttons that are located in a primary bedroom at the bedside or in rooms most frequented by the home’s inhabitants like the kitchen or even in the garage. These security systems also may have a warning light beacon mounted in a conspicuous location on the house and/or a high decibel klaxon. A setup like this is a good idea even without a whole house security system. But did you know you may already have a security system setup similar to this? It’s your automobile.

If your car has an alarm system with a remote key fob, keep that remote by your bedside or on your person and in an emergency you can press the alarm panic button and if your car is within range your alarm system will be triggered, the lights will flash and your alarm will sound an alert. If you have a neighborhood watch group, make sure your neighbors or anyone close by that you trust is aware that your car alarm sounding may be a signal and a call for help. Times have changed and sadly we all must become more vigilant and aware. We no longer live in Mayberry, but Martha’s Vineyard is still a gentle and safe place to live. It’s just a fact of life that we all have to be more mindful and ‘THINK’.