The National Association of Realtors has been working diligently through national ads for several years to educate consumers that all real estate is local. They don’t think what is happening in one area of the country is happening everywhere. I absolutely agree but it is like second hand smoke, everyone is affected to one degree or another.
With the ever deepening economic crisis crawling into every aspect of our lives and the reality that this is a global crisis of unprecedented proportion, I would rephrase the slogan and say all real estate is the same, but different.
I was reading an article about the effects of what is now an epidemic real estate crisis in the UK, effecting one of the wealthiest resort areas in the world. Fortunes have been lost and high rollers living in $7,000,000 homes are now living in apartments above retail shops. Playgrounds around the world are all affected by the hubris that brought the market down, from Hollywood to Dubai and Monte Carlo.
I am going to paraphrase part of a commentary that expresses a sentiment that rang a bell for me with regard to Martha’s Vineyard. However, it was written about a seaside luxury resort area in the UK. I will leave out the location specific parts so you can fill in the blanks.
“I’M not surprised the credit crunch has hit (blank). … Why should it be immune?”
“(Blank) is a very, very beautiful place. If prices coming down makes it more accessible to ordinary people, that is a good thing.”
“Locals were becoming very concerned about the way the place was changing.”
“(Blank) is a quintessentially English place and should remain so.”
“Prices … were way too high. The fact they are coming down is good.”
“It makes (blank) more affordable and attracts the right kind of person for the area.”
“Hopefully more local people will be able to afford to move there and it will remain as beautiful as it is.”
All those who feel this way about Martha’s Vineyard raise your hands.
Wednesday, January 28, 2009
Saturday, January 17, 2009
Martha's Vineyard Real Estate --Then and Now
I was thinking about how this recession compares to the last one. The unemployment rate in Massachusetts was 9% in the early 90’s, and today it is about 6%. We also had about three times as many properties on the market here on the Vineyard.
If you are sitting on the fence, knowing in your heart that this is your chance of a lifetime to own property here but reluctant to get into the game because you think the market will go down more, you may be right. But you may regret it. If this is really your dream, do yourself a favor. Calculate exactly what your savings would be if you bought that perfect property you’ve been watching now, versus perhaps waiting until the market drops another point and you have to settle for something else. We all know the old saying, 'don't let life pass you by'.
If you are sitting on the fence, knowing in your heart that this is your chance of a lifetime to own property here but reluctant to get into the game because you think the market will go down more, you may be right. But you may regret it. If this is really your dream, do yourself a favor. Calculate exactly what your savings would be if you bought that perfect property you’ve been watching now, versus perhaps waiting until the market drops another point and you have to settle for something else. We all know the old saying, 'don't let life pass you by'.
Monday, January 05, 2009
Dear Islander, I Envy You
2008 was a very tough year. I think we all felt, or should have felt the pain by now. My business is real estate. Much of the focus nationally as well as locally has been on what has happened to the real estate market. Most of the talk is negative as are immediate future predictions. Negative thinking is easy.
In my latest SplitRock Real Estate e-Newsletter, I directed my readers to an article that appeared in the MV Times, “The Reality of the Martha’s Vineyard Real Estate Market”. My clients and readers know that I have been giving them the same information for quite some time now, but it is nice to hear it from another real estate professional and to look at it in terms of bar graphs. More importantly, it is important to be reminded that this is merely a cycle we must go through, as we have done many times before. As the author said, real estate markets go through regular cycles of (3)5 years down and (7)10 years up. Even the stock market goes through cycles, and theirs are usually 20 to 25 years. I’ll admit we are in a real pickle right now because it is not just the United States that is suffering; this is a global meltdown and the ripple effect is affecting everyone which will result in a prolonged overall recovery. What I found most interesting about the MV Times article was one of the reader comments. Here are some excerpts of that reader’s rather harsh perspective:
“As tragic as this downturn is for the local economy, and as much as it may usher in a different era ahead, I feel a bit glad and relieved about it all.
“I have come to believe that economic progress is actually opposite of quality of life.
“I am someone who first feel in love with the Vineyard in the 1960's. It has not improved since then. In fact, as we get richer by material standards. It actually gets poorer. Material progress has simply been ruining the place. We just adjust to the incremental changes and are, therfore, less likely to notice.
“It is barely distinguishable from the places we came here to escape.
“The growth has diminished the Vineyard's most precious jewels....what we get for free. We have simply over-exploited it.
“Economic ruination would be the Island's salvation, in non-material terms. Now, there's an alien concept, indeed.
“Ruin is rebirth.
“It's of little matter to me, though. I have already moved off-island to another place that reminds me of the love I had for the Vineyard so long ago. I come back to visit now and again, and am, frankly, quite happy to leave.”
I remember when I first came to the Vineyard in the ‘60’s with my parents; they no longer enjoyed summering in ‘the Hamptons’. Martha’s Vineyard was a very quiet place and not too many people knew about it. The ‘Natives’ were typical New Englanders, and not very forthcoming or welcoming, but once they accepted you they were the best. I think one of the circumstances hindering population growth on the Vineyard was transportation, and that factor more than anything isolated the Vineyard from America, but that is irrelevant at this point.
I find it curious that the MV Times reader moved away from the Vineyard, but yet he still follows Island news. His acrid comment above reminded me of a developer who ran through the Vineyard in the ‘80’s like a swarm of locust, and then abruptly left for greener pastures. He was asked by a news reporter in his new location why he left. He said, ‘The Vineyard is like an old lady who has lost her charm’. Sure the Vineyard has become more crowded and sure we have once again seen carpetbaggers come and go. But the Vineyard has really not changed that much --- honest! I know people who have lived all over the world and in crowded urban areas who swear this is where their soul is at home, and this is where they will come to recharge themselves, bond with family and loved ones, and where they will live out their days when they retire --- or before.
The Martha’s Vineyard Gazette published a wonderful commentary in their print paper, but unfortunately they did not put it on-line. The article was written by the late CBS correspondent, Don Hollenbeck, who sadly committed suicide in 1954, possibly caused by the effects of Malaria. It is not clear when he wrote his article, but it was most likely at least 50 years ago. I think the article demonstrates the colorful fabric that those who really know and understand the Vineyard realize is still very much in tact. The title of the Gazette commentary was taken from the last line of Hollenbeck’s article, ‘there are no Islands anymore’, and that line was actually the title of a poem by Edna St. Vincent Millay, written in 1940. Keeping in mind the time line of these writings, I want to preface Hollenbeck’s reflection with a couple of paragraphs extracted from Millay’s work:
Dear Islander, I envy you:
I'm very fond of islands, too;
And few the pleasures I have known
Which equalled being left alone.
Yet matters from without intrude
At times upon my solitude:
A forest fire, a dog run mad,
A neighbour stripped of all he had
By swindlers, or the shrieking plea
For help, of stabbed Democracy.
We live upon a shrinking sphere—
Like it or not, our home is here;
Brave heart, uncompromising brain
Could make it seem like home again.
(There are no islands any more.
The tide that mounts our drowsy shore
Is boats and men,—there is no place
For waves in such a crowded space.)
I hope you enjoy the warm spots in Hollenbeck’s article as much as I did. Please rest assured, what was great about this Island 50 years ago still exists, you just have to slow down and look a little harder.
There are No Islands Anymore, Only a Certain State of Mind
Editor's Note: Don Hollenbeck was a CBS correspondent and journalist who produced a radio show in the late 1940s during the Edward R. Murrow era, titled CBS Views the Press. He was also a summer visitor to the Vineyard and was interviewed in the Gazette in 1949. Mr. Hollenbeck, who committed suicide in 1954, is the subject of a recently published biography authored by Loren Ghiglione (CBS's Don Hollenbeck, Columbia University Press). A distinguished journalist in his own right and professor at Northwestern University's Medill School of Journalism, Mr. Ghiglione is also a longtime Vineyard visitor. In researching his book, Mr. Ghiglione came across this undated piece about the Vineyard which was written by Mr. Hollenbeck. It is published here with permission.
By Don Hollenbeck, date unknown
"This is out of the world, but this is America: This is our country. Picture an Island of triangular shape, a hundred miles in area, lying seven miles off the southeast coast of Massachusetts; an Island which is all things to men. This Martha’s Vineyard described as a place of old towns, new cottages, high cliffs, white sails, green fairway, salt water, wildfowl, and the steady pull of an ocean breeze.
"This is a land of contrasts: from the brazen honky-tonks of the town known as Oak Bluffs, with its jukeboxes, its gaudy post cards, its bus drivers hawking for business and its revival season, to the well-bred quiet of Edgartown, with a social air twice as rarefied-as that of Newport, to the view from Indian Hill, 260 feet high.
"There one stands and views the prospect: to south and east stretches a level plain of dwarf forest top without a sign of civilization. To the west, there are rocky outcrops and tree-filled ravines, and to the north, the cerulean blue of Vineyard Sound. Of this world and yet out of it might apply of all places to Martha's Vineyard; it meets perfectly the need so often felt for a retreat; for a quiet time of contemplation, when, as in this springtime, one may leave the noise of the jukeboxes at Oak Bluffs, and listen only to the sound of the frogs the Islanders know as pinkletinks.
"This is the land Leif Ericson may have visited in the eleventh century - on a tiny island eight miles off-shore - and island called Noman's Land, you may view a boulder, and on if, if your imagination is cooperative, you may see dimly scratched the numbers 1004.That date is accepted by some devout Islanders as good enough evidence that this is the land Leif Ericson found and named Vinland; indeed, the wild grapes grow in profusion on the Island, which in area only may be compared to Manhattan island, 150 miles away, and which is, in a different sense, all things to all men . . ..But the contemplative man finds on Martha's Vineyard other things to think about than he does on Manhattan island, now that spring is coming.
"A pink and white mayflower is blooming h the office of Miss Mary Nunes, the Oak Bluffs tax collector; a weather-wise Islander has reported the arrival of the first red-winged blackbird. Islanders know that the red-winged blackbird has advance and inside information about the weather; spring cannot be very far behind.
"We live with the sea here on Martha's Vineyard; the sea is our fortunes and our fate: what the sea gives us is our livelihood. We See signs of spring on the sea, too, in a fishing boat. Now the wind breezes from the south'ard; the sea which can be cold and hostile through the winter seems more friendly now - it is blue under the warmer sun instead of icy-gray: and in" the beach pools, there are flocks of ducks and coots squawking.
"The sparrows, too, seem to have inside information on the springtimes, and are busy picking up straws for their nests. It is impossible for a man to get too downcast when the sun shines on the blue water around Martha's Vineyard at this time of year when the wind has veered to the south'ard: light airs they are indeed, fragrant with the promise of the season.
"Soon it will be the time when a man can go out and get enough sassafras bark to brew a pungent cup of tea: this is the decoction which in New England seems to clear away the miasma of winter, and which gives one the proper feeling of springtime.
"There seems to be a sort of greenish mist around the bare branches of the trees now; at any time, the lilac hedges will burst into aromatic color, complementing perfectly the silvery, weather-worn look of the shingles and the wood in the sea-salt laden air of this Island so close to, and yet so far from, the rest of the world.
"Soon the chestnut tree over the smithy in Edgartown will be showing signs of transfiguration, and Orin Norton, the blacksmith, can open doors of his forge, and beat up the sparks to the admiration of the children - they would never think Longfellow's poem over-sentimental or shopworn: the village blacksmith is a real person to the children of Edgartown. Now, in the fire-lit gloom of the forge, Orin Norton talks to you about the six-hundred pound anchor which he has just completed. He says, "it's such a darned good one that I figure I ought to charge a little less for it than usual." "Now why in the world why?" you ask in real astonishment at this paradox. "Well," Orin says,"it's like this. I think the man who ordered it will be perfectly satisfied. In that case, he won't be coming around here finding fault, and taking up my valuable time, so I’ll be the gainer if I knock 'something off."
"This is the-spirit you find repeated again and again on Martha's Vineyard where the tempo of the world seems to have slowed down in the winds that veers from the mainland to the sea and back again. You find it in the case of Carl Reid, who runs the general store in the town of Menemsha -this is the fishing town where the air is almost always full of the aroma of lobster bait, drying in the sun. You may ask Mr. Reid for fish hooks, only to be told that he isn't carrying them this season. "People bothered me too much about 'em -had to fuss too much," Mr. Reid says. It would please him if there were only one brand of everything, from cigarettes to molasses, and the people couldn't pester him, fretting about labels, and so on.. . .When you come to Martha's Vineyard, you must note expect the usual standards to apply, to repeat, it is of this world, and yet out of it. It has its own standards of conduct and department, and off-Islanders, as the permanent population calls the summer vacationers, sometimes have difficulty in understanding this.
"The steady population of Martha's Vineyard is about six hundred; in the summer, it is nearly seven times that figure. You may go there year after year, and become friendly to a point with the regular inhabitants, but if you are an off-Islander, you are never quite accepted . . . Oscar Flanders, who drives a truck, may call you by your first name, but it may be two years or more before you feel sufficiently at ease to call him by his first name, and then you are self-conscious about it: there is a delicate point of etiquette involved here which you must understand instinctively and emotionally, rather than logically . . . . Not long ago, a general of our Army was spending a holiday on the Vineyard, relaxing thoroughly in civilian clothes. He was well known to the steady population; he had been a summer person for several seasons.
"Almost anywhere in the world, a general of an Army, even in mufti, seems to get special consideration; he is usually exempt from small trials and tribulations which beset the rest of us. Our age-old awe of, and respect for, the soldier, force us into a deference which may be difficult to rationalize, but which nevertheless exists.
"One day the general, perhaps preoccupied with a matter of logistics concerning the purchase of a pack of cigarettes, drove his automobile through a stop light in Edgartown – a flagrant violation of a traffic ordinance. Almost anywhere else, the traffic officer recognizing him would probably have let him off with a courteous and deferential reminder, but not on Martha's Vineyard.
"The general got a ticket, and as the policeman said, he considered the general entitled to special consideration only when he - the general - was on duty. And he wasn't on duty on Martha's Vineyard . . . .
"But there have been soldiers on duty on Martha's Vineyard in recent years, and their presence simply emphasized the far-away-and-long-ago quality of the Island. Although these soldiers were only seven miles over the Sound from the Commonwealth of Massachusetts, they were considered to be on duty outside the continental limits of the United States; they drew correspondingly bigger pay, and they were entitled to wear the Atlantic ribbon . . . .
"But nowhere could one find more vividly exemplified the spirit of Martha's Vineyard than in another reference to the Flanders family - the truck driver whom you hesitate to call by his first name. The Flanders have a son, and some years ago, before the world was set afire, young Flanders as a public school student, was assigned the task of writing an essay on Mussolini. At that time, the late dictator was arousing a certain amount of admiration for making the trains in Italy run on time. But young Flanders saw him in a rather different light: his essay began with these words: "Mussolini is an off-Islander . . . ."
"But there have been changes in the world, and again, the case of young Flanders shows what they have done to Martha's Vineyard. Mussolini became something other than an efficient administrator and train operator; others of his sort came to power, and young Flanders growing up, found himself a member of the United States Army Air Force in the Pacific.
"He was off-Island at last, and he gave a good account of himself: he won the Distinguished Flying Cross. And as he moved from island to island in the Pacific - islands like and yet unlike his own home, he must have come to the realization that many others of his generation have come to in the past few years: there are no islands anymore, not even Martha's Vineyard. "
Well, that's it. Now I ask you, what's your state of mind?
In my latest SplitRock Real Estate e-Newsletter, I directed my readers to an article that appeared in the MV Times, “The Reality of the Martha’s Vineyard Real Estate Market”. My clients and readers know that I have been giving them the same information for quite some time now, but it is nice to hear it from another real estate professional and to look at it in terms of bar graphs. More importantly, it is important to be reminded that this is merely a cycle we must go through, as we have done many times before. As the author said, real estate markets go through regular cycles of (3)5 years down and (7)10 years up. Even the stock market goes through cycles, and theirs are usually 20 to 25 years. I’ll admit we are in a real pickle right now because it is not just the United States that is suffering; this is a global meltdown and the ripple effect is affecting everyone which will result in a prolonged overall recovery. What I found most interesting about the MV Times article was one of the reader comments. Here are some excerpts of that reader’s rather harsh perspective:
“As tragic as this downturn is for the local economy, and as much as it may usher in a different era ahead, I feel a bit glad and relieved about it all.
“I have come to believe that economic progress is actually opposite of quality of life.
“I am someone who first feel in love with the Vineyard in the 1960's. It has not improved since then. In fact, as we get richer by material standards. It actually gets poorer. Material progress has simply been ruining the place. We just adjust to the incremental changes and are, therfore, less likely to notice.
“It is barely distinguishable from the places we came here to escape.
“The growth has diminished the Vineyard's most precious jewels....what we get for free. We have simply over-exploited it.
“Economic ruination would be the Island's salvation, in non-material terms. Now, there's an alien concept, indeed.
“Ruin is rebirth.
“It's of little matter to me, though. I have already moved off-island to another place that reminds me of the love I had for the Vineyard so long ago. I come back to visit now and again, and am, frankly, quite happy to leave.”
I remember when I first came to the Vineyard in the ‘60’s with my parents; they no longer enjoyed summering in ‘the Hamptons’. Martha’s Vineyard was a very quiet place and not too many people knew about it. The ‘Natives’ were typical New Englanders, and not very forthcoming or welcoming, but once they accepted you they were the best. I think one of the circumstances hindering population growth on the Vineyard was transportation, and that factor more than anything isolated the Vineyard from America, but that is irrelevant at this point.
I find it curious that the MV Times reader moved away from the Vineyard, but yet he still follows Island news. His acrid comment above reminded me of a developer who ran through the Vineyard in the ‘80’s like a swarm of locust, and then abruptly left for greener pastures. He was asked by a news reporter in his new location why he left. He said, ‘The Vineyard is like an old lady who has lost her charm’. Sure the Vineyard has become more crowded and sure we have once again seen carpetbaggers come and go. But the Vineyard has really not changed that much --- honest! I know people who have lived all over the world and in crowded urban areas who swear this is where their soul is at home, and this is where they will come to recharge themselves, bond with family and loved ones, and where they will live out their days when they retire --- or before.
The Martha’s Vineyard Gazette published a wonderful commentary in their print paper, but unfortunately they did not put it on-line. The article was written by the late CBS correspondent, Don Hollenbeck, who sadly committed suicide in 1954, possibly caused by the effects of Malaria. It is not clear when he wrote his article, but it was most likely at least 50 years ago. I think the article demonstrates the colorful fabric that those who really know and understand the Vineyard realize is still very much in tact. The title of the Gazette commentary was taken from the last line of Hollenbeck’s article, ‘there are no Islands anymore’, and that line was actually the title of a poem by Edna St. Vincent Millay, written in 1940. Keeping in mind the time line of these writings, I want to preface Hollenbeck’s reflection with a couple of paragraphs extracted from Millay’s work:
Dear Islander, I envy you:
I'm very fond of islands, too;
And few the pleasures I have known
Which equalled being left alone.
Yet matters from without intrude
At times upon my solitude:
A forest fire, a dog run mad,
A neighbour stripped of all he had
By swindlers, or the shrieking plea
For help, of stabbed Democracy.
We live upon a shrinking sphere—
Like it or not, our home is here;
Brave heart, uncompromising brain
Could make it seem like home again.
(There are no islands any more.
The tide that mounts our drowsy shore
Is boats and men,—there is no place
For waves in such a crowded space.)
I hope you enjoy the warm spots in Hollenbeck’s article as much as I did. Please rest assured, what was great about this Island 50 years ago still exists, you just have to slow down and look a little harder.
There are No Islands Anymore, Only a Certain State of Mind
Editor's Note: Don Hollenbeck was a CBS correspondent and journalist who produced a radio show in the late 1940s during the Edward R. Murrow era, titled CBS Views the Press. He was also a summer visitor to the Vineyard and was interviewed in the Gazette in 1949. Mr. Hollenbeck, who committed suicide in 1954, is the subject of a recently published biography authored by Loren Ghiglione (CBS's Don Hollenbeck, Columbia University Press). A distinguished journalist in his own right and professor at Northwestern University's Medill School of Journalism, Mr. Ghiglione is also a longtime Vineyard visitor. In researching his book, Mr. Ghiglione came across this undated piece about the Vineyard which was written by Mr. Hollenbeck. It is published here with permission.
By Don Hollenbeck, date unknown
"This is out of the world, but this is America: This is our country. Picture an Island of triangular shape, a hundred miles in area, lying seven miles off the southeast coast of Massachusetts; an Island which is all things to men. This Martha’s Vineyard described as a place of old towns, new cottages, high cliffs, white sails, green fairway, salt water, wildfowl, and the steady pull of an ocean breeze.
"This is a land of contrasts: from the brazen honky-tonks of the town known as Oak Bluffs, with its jukeboxes, its gaudy post cards, its bus drivers hawking for business and its revival season, to the well-bred quiet of Edgartown, with a social air twice as rarefied-as that of Newport, to the view from Indian Hill, 260 feet high.
"There one stands and views the prospect: to south and east stretches a level plain of dwarf forest top without a sign of civilization. To the west, there are rocky outcrops and tree-filled ravines, and to the north, the cerulean blue of Vineyard Sound. Of this world and yet out of it might apply of all places to Martha's Vineyard; it meets perfectly the need so often felt for a retreat; for a quiet time of contemplation, when, as in this springtime, one may leave the noise of the jukeboxes at Oak Bluffs, and listen only to the sound of the frogs the Islanders know as pinkletinks.
"This is the land Leif Ericson may have visited in the eleventh century - on a tiny island eight miles off-shore - and island called Noman's Land, you may view a boulder, and on if, if your imagination is cooperative, you may see dimly scratched the numbers 1004.That date is accepted by some devout Islanders as good enough evidence that this is the land Leif Ericson found and named Vinland; indeed, the wild grapes grow in profusion on the Island, which in area only may be compared to Manhattan island, 150 miles away, and which is, in a different sense, all things to all men . . ..But the contemplative man finds on Martha's Vineyard other things to think about than he does on Manhattan island, now that spring is coming.
"A pink and white mayflower is blooming h the office of Miss Mary Nunes, the Oak Bluffs tax collector; a weather-wise Islander has reported the arrival of the first red-winged blackbird. Islanders know that the red-winged blackbird has advance and inside information about the weather; spring cannot be very far behind.
"We live with the sea here on Martha's Vineyard; the sea is our fortunes and our fate: what the sea gives us is our livelihood. We See signs of spring on the sea, too, in a fishing boat. Now the wind breezes from the south'ard; the sea which can be cold and hostile through the winter seems more friendly now - it is blue under the warmer sun instead of icy-gray: and in" the beach pools, there are flocks of ducks and coots squawking.
"The sparrows, too, seem to have inside information on the springtimes, and are busy picking up straws for their nests. It is impossible for a man to get too downcast when the sun shines on the blue water around Martha's Vineyard at this time of year when the wind has veered to the south'ard: light airs they are indeed, fragrant with the promise of the season.
"Soon it will be the time when a man can go out and get enough sassafras bark to brew a pungent cup of tea: this is the decoction which in New England seems to clear away the miasma of winter, and which gives one the proper feeling of springtime.
"There seems to be a sort of greenish mist around the bare branches of the trees now; at any time, the lilac hedges will burst into aromatic color, complementing perfectly the silvery, weather-worn look of the shingles and the wood in the sea-salt laden air of this Island so close to, and yet so far from, the rest of the world.
"Soon the chestnut tree over the smithy in Edgartown will be showing signs of transfiguration, and Orin Norton, the blacksmith, can open doors of his forge, and beat up the sparks to the admiration of the children - they would never think Longfellow's poem over-sentimental or shopworn: the village blacksmith is a real person to the children of Edgartown. Now, in the fire-lit gloom of the forge, Orin Norton talks to you about the six-hundred pound anchor which he has just completed. He says, "it's such a darned good one that I figure I ought to charge a little less for it than usual." "Now why in the world why?" you ask in real astonishment at this paradox. "Well," Orin says,"it's like this. I think the man who ordered it will be perfectly satisfied. In that case, he won't be coming around here finding fault, and taking up my valuable time, so I’ll be the gainer if I knock 'something off."
"This is the-spirit you find repeated again and again on Martha's Vineyard where the tempo of the world seems to have slowed down in the winds that veers from the mainland to the sea and back again. You find it in the case of Carl Reid, who runs the general store in the town of Menemsha -this is the fishing town where the air is almost always full of the aroma of lobster bait, drying in the sun. You may ask Mr. Reid for fish hooks, only to be told that he isn't carrying them this season. "People bothered me too much about 'em -had to fuss too much," Mr. Reid says. It would please him if there were only one brand of everything, from cigarettes to molasses, and the people couldn't pester him, fretting about labels, and so on.. . .When you come to Martha's Vineyard, you must note expect the usual standards to apply, to repeat, it is of this world, and yet out of it. It has its own standards of conduct and department, and off-Islanders, as the permanent population calls the summer vacationers, sometimes have difficulty in understanding this.
"The steady population of Martha's Vineyard is about six hundred; in the summer, it is nearly seven times that figure. You may go there year after year, and become friendly to a point with the regular inhabitants, but if you are an off-Islander, you are never quite accepted . . . Oscar Flanders, who drives a truck, may call you by your first name, but it may be two years or more before you feel sufficiently at ease to call him by his first name, and then you are self-conscious about it: there is a delicate point of etiquette involved here which you must understand instinctively and emotionally, rather than logically . . . . Not long ago, a general of our Army was spending a holiday on the Vineyard, relaxing thoroughly in civilian clothes. He was well known to the steady population; he had been a summer person for several seasons.
"Almost anywhere in the world, a general of an Army, even in mufti, seems to get special consideration; he is usually exempt from small trials and tribulations which beset the rest of us. Our age-old awe of, and respect for, the soldier, force us into a deference which may be difficult to rationalize, but which nevertheless exists.
"One day the general, perhaps preoccupied with a matter of logistics concerning the purchase of a pack of cigarettes, drove his automobile through a stop light in Edgartown – a flagrant violation of a traffic ordinance. Almost anywhere else, the traffic officer recognizing him would probably have let him off with a courteous and deferential reminder, but not on Martha's Vineyard.
"The general got a ticket, and as the policeman said, he considered the general entitled to special consideration only when he - the general - was on duty. And he wasn't on duty on Martha's Vineyard . . . .
"But there have been soldiers on duty on Martha's Vineyard in recent years, and their presence simply emphasized the far-away-and-long-ago quality of the Island. Although these soldiers were only seven miles over the Sound from the Commonwealth of Massachusetts, they were considered to be on duty outside the continental limits of the United States; they drew correspondingly bigger pay, and they were entitled to wear the Atlantic ribbon . . . .
"But nowhere could one find more vividly exemplified the spirit of Martha's Vineyard than in another reference to the Flanders family - the truck driver whom you hesitate to call by his first name. The Flanders have a son, and some years ago, before the world was set afire, young Flanders as a public school student, was assigned the task of writing an essay on Mussolini. At that time, the late dictator was arousing a certain amount of admiration for making the trains in Italy run on time. But young Flanders saw him in a rather different light: his essay began with these words: "Mussolini is an off-Islander . . . ."
"But there have been changes in the world, and again, the case of young Flanders shows what they have done to Martha's Vineyard. Mussolini became something other than an efficient administrator and train operator; others of his sort came to power, and young Flanders growing up, found himself a member of the United States Army Air Force in the Pacific.
"He was off-Island at last, and he gave a good account of himself: he won the Distinguished Flying Cross. And as he moved from island to island in the Pacific - islands like and yet unlike his own home, he must have come to the realization that many others of his generation have come to in the past few years: there are no islands anymore, not even Martha's Vineyard. "
Well, that's it. Now I ask you, what's your state of mind?
Friday, November 21, 2008
REO’s: A Cautionary on Bank Own Property Purchases
Properties that have been repossessed through foreclosure by a lender are called REO’s. REO stands for Real Estate Owned. If they are bank owned, why not call them BO’s? I suppose it is obvious why not, although many of them stink. When buying REO properties there are some key differences to understand, as opposed to a traditional real estate purchase. First and foremost, you as a buyer have little or no ability to negotiate the price or terms with the seller. REO properties are sold “AS IS” and the seller is a financial institution with no emotional attachment to the property for sale. Unlike a traditional homeowner, they do not have any personal interest in who is moving into “their home”. There is a good chance that no one from the bank has seen the property, or been inside the house. The same holds true for the listing broker if that listing broker is not local. The lender is only concerned with receiving the highest Offer and best terms possible to suit themselves. Most of the negotiation process is completed via internet e-mail. The only information the bank will receive is the terms of the Offer. They only care about how much you will pay for the property, and how you will pay for the property.
Be sure you speak with your lender before submitting an offer on an REO property. In most cases, a pre-approval letter, not a pre-qualification letter, is required simultaneously with the Offer to Purchase. The bank wants to be certain they are considering an Offer from a buyer that has the credit and financial wherewithal to see the deal through. In many cases the seller even wants to see a bank statement showing you have enough cash in your account to consummate the transaction. Isn’t that an invasion of privacy?
Since you can’t rely on personal interaction with the seller, the cleaner the Offer the better it will look. Because REO properties are sold in “As-Is” condition, you want to look for a loan program that applies to this type of property. The condition of the property may not qualify you for certain types of traditional loans. If the property is in poor condition, and most REO’s are in poor condition, you might want to investigate a construction loan. Many lenders are now offering programs geared specifically for distressed properties. This way, the repairs can be completed after the buyer takes possession of the property. If your Offer is accepted, you are entitled to have your own property Structural Inspection, but you will only have a few days to complete the inspection. Quite often, only a dry inspection will be possible. By that I mean the power and water will not be turned on. Some REO clearing houses will advance funds and take responsibility for ‘trashing out’ the property and generally cleaning it up, because it helps them market the property. However, that is being done less and less today because listing companies are finding it very difficult to get reimbursed for their expenses. It’s getting ugly, and it may get worse before it gets better.
What about the closing date? Yes, that is also handled differently from the way a traditional purchase is closed. In a traditional sale, it is possible for the seller to be flexible about a closing date. Some contracts use the term “on or about” a certain date. Sellers in a traditional sale tend to be more willing to adjust plus or minus to make the sale work, as long as the Closing takes place within a reasonable number of days from the original date agreed upon. However, REO contracts use the term “on or before” a certain date, and the bank will tell you what the closing date will be. The bank will expect the Closing to take place no later than their stipulated closing date, and if there is a delay on the buyer’s side causing the buyer to be in default, the bank will either terminate the contract, with the buyer forfeiting their down payment, or the buyer will be penalized a specified dollar amount per day for an extension. Most often that amount is $100.00 per day. However, because of the enormous inventory of bank owned properties today, in my experience sales often do not close on time and the bank is responsible for the delay. A 30-day closing can end up being a 120-day closing, and that could mean the buyer will lose their loan rate lock. Nevertheless, I cannot stress strongly enough that the bank sets the timelines and they could care less about what you want.
Because REO transactions are different from traditional purchases, any buyer interested in an REO property needs a knowledgeable support team consisting of a competent and vigilant real estate buyer agent who knows how to look out for their buyer client’s best interest and can interface fluidly with a good attorney. Yes, the next member of the team needs to be a GOOD ATTORNEY, one who will take the necessary care to investigate the property title. What you do not need is a wishy-washy, don’t ask, don’t tell real estate agent and attorney, who just wants to get it done, collect a fee and move on.
REO properties appear to be very attractive opportunities on the surface, and you can save money purchasing an REO property. However, you can also end up spending considerably more money than you would on a traditional purchase property, not to mention all the stress and anxiety that has become typical with this type of transaction. Many times the offering price is set low in order to attract buyer attention with the hope that multiple buyers bidding on the same property will drive up the final price. Buyers are encouraged to submit their highest and best offer without the opportunity to know what the highest price is that they are bidding against. Since these properties are being sold “AS IS”, and since the onus is usually on the buyer to correct any structural deficiencies in the property, repairs can drive the final price above the realm of what would be considered a good deal. With short sales, foreclosures, and REO’s there are no guarantees, and in Massachusetts, it’s Caveat Emptor. That is why you need to hire an Exclusive Buyer Agent who deals with buyers’ needs day in and day out. On Martha’s Vineyard you want SplitRock Real Estate, an exclusive buyer agency specializing in careful buyer representation.
Be sure you speak with your lender before submitting an offer on an REO property. In most cases, a pre-approval letter, not a pre-qualification letter, is required simultaneously with the Offer to Purchase. The bank wants to be certain they are considering an Offer from a buyer that has the credit and financial wherewithal to see the deal through. In many cases the seller even wants to see a bank statement showing you have enough cash in your account to consummate the transaction. Isn’t that an invasion of privacy?
Since you can’t rely on personal interaction with the seller, the cleaner the Offer the better it will look. Because REO properties are sold in “As-Is” condition, you want to look for a loan program that applies to this type of property. The condition of the property may not qualify you for certain types of traditional loans. If the property is in poor condition, and most REO’s are in poor condition, you might want to investigate a construction loan. Many lenders are now offering programs geared specifically for distressed properties. This way, the repairs can be completed after the buyer takes possession of the property. If your Offer is accepted, you are entitled to have your own property Structural Inspection, but you will only have a few days to complete the inspection. Quite often, only a dry inspection will be possible. By that I mean the power and water will not be turned on. Some REO clearing houses will advance funds and take responsibility for ‘trashing out’ the property and generally cleaning it up, because it helps them market the property. However, that is being done less and less today because listing companies are finding it very difficult to get reimbursed for their expenses. It’s getting ugly, and it may get worse before it gets better.
What about the closing date? Yes, that is also handled differently from the way a traditional purchase is closed. In a traditional sale, it is possible for the seller to be flexible about a closing date. Some contracts use the term “on or about” a certain date. Sellers in a traditional sale tend to be more willing to adjust plus or minus to make the sale work, as long as the Closing takes place within a reasonable number of days from the original date agreed upon. However, REO contracts use the term “on or before” a certain date, and the bank will tell you what the closing date will be. The bank will expect the Closing to take place no later than their stipulated closing date, and if there is a delay on the buyer’s side causing the buyer to be in default, the bank will either terminate the contract, with the buyer forfeiting their down payment, or the buyer will be penalized a specified dollar amount per day for an extension. Most often that amount is $100.00 per day. However, because of the enormous inventory of bank owned properties today, in my experience sales often do not close on time and the bank is responsible for the delay. A 30-day closing can end up being a 120-day closing, and that could mean the buyer will lose their loan rate lock. Nevertheless, I cannot stress strongly enough that the bank sets the timelines and they could care less about what you want.
Because REO transactions are different from traditional purchases, any buyer interested in an REO property needs a knowledgeable support team consisting of a competent and vigilant real estate buyer agent who knows how to look out for their buyer client’s best interest and can interface fluidly with a good attorney. Yes, the next member of the team needs to be a GOOD ATTORNEY, one who will take the necessary care to investigate the property title. What you do not need is a wishy-washy, don’t ask, don’t tell real estate agent and attorney, who just wants to get it done, collect a fee and move on.
REO properties appear to be very attractive opportunities on the surface, and you can save money purchasing an REO property. However, you can also end up spending considerably more money than you would on a traditional purchase property, not to mention all the stress and anxiety that has become typical with this type of transaction. Many times the offering price is set low in order to attract buyer attention with the hope that multiple buyers bidding on the same property will drive up the final price. Buyers are encouraged to submit their highest and best offer without the opportunity to know what the highest price is that they are bidding against. Since these properties are being sold “AS IS”, and since the onus is usually on the buyer to correct any structural deficiencies in the property, repairs can drive the final price above the realm of what would be considered a good deal. With short sales, foreclosures, and REO’s there are no guarantees, and in Massachusetts, it’s Caveat Emptor. That is why you need to hire an Exclusive Buyer Agent who deals with buyers’ needs day in and day out. On Martha’s Vineyard you want SplitRock Real Estate, an exclusive buyer agency specializing in careful buyer representation.
Wednesday, October 08, 2008
WHAT’S “WRONG” WITH THE MARTHA’S VINEYARD REAL ESTATE MARKET
Starting with the premise that commerce is activated by supply and demand, I want to look at what is wrong with the Martha’s Vineyard real estate market today. What I discovered was that, in fact, there is nothing wrong with the Martha’s Vineyard real estate market; it is just that this market is confusing to many people and even more confusing today given the dire conditions in the financial market and a disparity in seller motivation factors. But first let me establish a few facts as guidelines:
<> This is not a place people have to be, they want to be here. Martha’s Vineyard is a destination and for the most part, a second home market.
<> This Island is only 20.5 miles long, 87.48 square miles in total land area --- they are not making any more of Martha’s Vineyard.
<> With home prices averaging almost 100% higher than the national average, ranging from $300,000 for a shabby ‘fixer-upper’ to $25,000,000 and above not everyone can afford to swallow that pill.
<> The cost of living is about 60% above the mean, so once again living here is surely not for everyone, but that does not diminish its popularity.
<> There are between 775 and 850 properties on the market, depending upon the method of tabulation used, which is about four times as many properties as there were at the height of the market.
<> The current inventory is about one-quarter of what we had to deal with after the market broke in 1988, and the population density has increased significantly since 1990.
The total inventory at the time of this writing totals 777 properties. I want to break down that number, which includes all classifications of properties so you have a better perspective:
<> Up to $200,000 = 7 properties (Note: This includes a share in a fishing camp, an aircraft hanger, time shares and an office condo.)
<> $201,000 - $400,000 = 86 properties
<> $401,000 - $600,000 = 162 properties
<> $601,000 - $800,000 = 140 properties
<> $801,000 - $1,000,000 = 85 properties
<> $1,100,000 - $2,000,000 = 157 properties
<> $2,100,000 - $3,000,000 = 51 properties
<> $3,100,000 - $5,000,000 = 54 properties
<> $5,100,000 – $30,000,000 = 35 properties
Only 18% of the inventory is above $2,000,000. That means the so-called lower end of the market is where the fat is. However, within that segment lies a misleading inflationary factor --- sellers who do not have to sell.
For a few years now we have been reading about how the real estate market has tanked in some areas of the country, falling into what many view as a fathomless abyss. The media has us believing this was the general condition everywhere. In an attempt to educate consumers, the National Association of Realtors® launched an educational campaign proclaiming ‘all real estate is local’. This is true, all real estate is local and in many parts of the country the market has been pretty much stable or a recovery is under way. But the message came too late, the die was cast, and for most of the country sales activity started to stall. Sellers started to panic and buyers delighted that the tide was turning in their favor. No longer would the buyers be at the mercy of a seller’s market. Even on Martha’s Vineyard buyers believed they finally had a chance to get a foothold on their dream Island.
Overall, however, property values still remain solid on Martha’s Vineyard. Yes, I am serious. If you are interested in real estate on Martha’s Vineyard, you should be paying attention to this local market and not be influenced by broad brush studies that are based on limited national metropolitan samplings. I don’t deny there are pockets across the country where prices have fallen 40% or more. These areas are not the norm. On Martha’s Vineyard, overall, the price drop has only gone down about 14% since 2006. For anyone who invested in Martha’s Vineyard real estate 5, 10, or 20 years ago, the good news is their investment has increased handsomely in value over that time period, even with the occasional bumps in the economic highway.
Exclusive Buyer Agents, such as SplitRock Real Estate, work very hard to educate consumers and create Power Buyers. I have a number of buyer/clients who have been working with me for 6 months, a year, even three years or more. They have a sincere desire to be here if they can only find the right property at the right price (Isn’t that typical of what motivates buying decisions?). Much to their chagrin they are discovering that prices on the Vineyard make no sense. Comparables are difficult to come up with, and ultimately the buying decision has to be an emotional decision. For those who are thinking long term and understand the fundamentals of real estate investment, the fact that prices overall have not gone down much should be a reassuring factor that lends more confidence to a buying decision. For others, if they cannot afford to make the investment now they will regrettably join the ranks of the would-have, should-have, could-have buyers.
So what is wrong with the Martha’s Vineyard real estate market? Buyers who enter the Martha’s Vineyard real estate market, regardless of whether it is an up or a down market are confused and scared. They do not want to make a mistake or appear foolish. There are many sellers who are sincerely motivated and will actively compete, engage and negotiate with buyers to sell their properties in this market. I am not including what we call distress sales, i.e. short sales, foreclosures and bank owned properties (aka REO’s). The problem lies with the ‘ego seller’ who lists their property for sale, but really does not care if they sell now or two years from now. They are not willing to listen to the market (IE their seller agents), and insist on holding a hard line because they think their properties are special, and their posture is "I don't have to sell". I call this the ‘goose that laid the golden egg’ mentality. Sellers who are not competitive are like buyers who are not qualified; they are wasting everyone’s time and money. If you are a serious seller, please don’t be offended by an offer you receive. Be willing to graciously engage with a meaningful counter offer. Properly educating buyers is a difficult, time-consuming process. When they get to a point where they are comfortable making a reasonable offer, if they are coldly rejected by a seller, it sets the whole process back considerably. If you recall the moral of Aesop’s fable, he who wants too much loses everything. In this case it is the entire Vineyard real estate market that is losing.
As average buyers watch the market week after week, the inventory continues to grow. Some buyers hold out, sitting on the sidelines, as they keep hoping those overpriced properties will come down in price. They resist making a buying decision waiting for sellers to cave in. The result is a slow market with minimal inventory absorption. When the inventory was limited, the demand was greater and the market moved briskly. If this market is going to get back in stride, it is my opinion that sellers, who don’t need to sell, should remove their properties from the current inventory. If sellers don’t like where the market is today and they are not willing to be competitive and engage in negotiations, they should wait and relist their properties when happy days are here again. And surely, this too shall pass and happy days will return.
Thursday, August 14, 2008
Is the Martha’s Vineyard Housing Market really that Bad? I Don’t Think So
Looking at the overall picture of the housing crisis, perspective and understanding has been lost as a result of what is essentially a localized crisis in 4 states: California, Nevada, Florida, and Arizona. According to statistics from City-Data.com, 54 of the 101 cities with the largest population increase from 2000 - 2006 are located inside California, Nevada, Florida, and Arizona - the four states most affected by sharply decreasing home values. These four states saw the largest population influx between 2000 and 2006 triggering the need for more housing supply and with that demand, prices started to go up at 15% or more annually.
Anyone who has been in the real estate investment business knows that what goes up must come down. Many mortgage lenders bolstered by the above average appreciation rate year after year irresponsibly let their guard down, lowering lending standards and granting all sorts of exotic loans they should have known could not be repaid. Opportunity and greed propelled builders, real estate licensees, lenders and investors to push the envelope until the bubble burst. Today there are 15 states struggling to correct themselves; that is 30% of the country with 37% of the population and approximately 4 million problem mortgages. That breaks down to 7 percent of all mortgages owned in the U.S. Sure, you hear numbers reported by RealtyTrac, a foreclosure reporting service, stating one in every 464 U.S. households were served with a foreclosure filing in July --- 272,171 households, but the deepest concentration of those foreclosures are in California, Nevada, Florida, and Arizona. In Cape Coral-Fort Meyers, Florida alone, one in every 64 households received a foreclosure notice in July. On Martha’s Vineyard, RealtyTrac is reporting only 34 properties in Pre-foreclosure, Foreclosure or REO status. There are approximately 14,000 households on Martha’s Vineyard. The current inventory of properties for sale is less than 800 properties. Does anyone remember the early nineties? This is nothing compared to back then, but business is so much more difficult today because everyone is afraid of doing the wrong thing. Most of the public continues to believe the media, and the media continues to fuel the fear factor because, “misery sells newspapers”.
Not having a clear picture of the market has resulted in a lack of movement stalling the market, except for those buyers who ignore the media negativity and know how to read the numbers. I believe we are about to see a significant paradigm shift being expressed in two ways. Frustrated sellers are finally taking a hard look at their pricing realizing that their past strategy has not worked and has done them more harm than good. They are listening to their seller agents and cutting prices to the bone, well below assessed value in many cases. Sellers who have refused to price their properties realistically for today’s market and were never really sincere about selling, are taking their properties off the market. They think the market is about to turn around and prices will start to inch back up within the next 4 to 9 months. They can wait. I think this will paint a clear uncluttered picture for consumers who have been anxiously waiting with pent-up desire to get into this market but have been unsure and confused. They will finally realize now is the time to buy. They want to buy!
This fall, mortgage rates are forecasted to go up as much as a quarter percentage point according to Jim Vogel, an analyst at FTN Financial Capital Markets. This prediction is a result of Fannie Mae reporting a second-quarter loss of $2.3 billion and their prediction of more heavy losses resulting from the home-mortgage defaults and price declines centered primarily in California
(-28%), Florida (-17%), Nevada and Arizona. Fannie Mae has already said they will stop buying alt-A loans by the end of 2008. Fannie Mae and Freddie Mac are going to be limited in their ability to buy and guarantee home loans, and they will increase fees to borrowers seeking LTVs of 75-80 percent. Increases in the cost of borrowing will reduce the pool of homebuyers with the expected result that buyers with strong liquidity and solid credit will be in the catbird seat. As of today, mortgage rates are still very attractive. Martha’s Vineyard local Island banks understand our market and are excellent at helping qualified buyers to create a loan package that suits their needs. Now is the best time to buy, waiting will only create memories of what could have been your dream come true.
Anyone who has been in the real estate investment business knows that what goes up must come down. Many mortgage lenders bolstered by the above average appreciation rate year after year irresponsibly let their guard down, lowering lending standards and granting all sorts of exotic loans they should have known could not be repaid. Opportunity and greed propelled builders, real estate licensees, lenders and investors to push the envelope until the bubble burst. Today there are 15 states struggling to correct themselves; that is 30% of the country with 37% of the population and approximately 4 million problem mortgages. That breaks down to 7 percent of all mortgages owned in the U.S. Sure, you hear numbers reported by RealtyTrac, a foreclosure reporting service, stating one in every 464 U.S. households were served with a foreclosure filing in July --- 272,171 households, but the deepest concentration of those foreclosures are in California, Nevada, Florida, and Arizona. In Cape Coral-Fort Meyers, Florida alone, one in every 64 households received a foreclosure notice in July. On Martha’s Vineyard, RealtyTrac is reporting only 34 properties in Pre-foreclosure, Foreclosure or REO status. There are approximately 14,000 households on Martha’s Vineyard. The current inventory of properties for sale is less than 800 properties. Does anyone remember the early nineties? This is nothing compared to back then, but business is so much more difficult today because everyone is afraid of doing the wrong thing. Most of the public continues to believe the media, and the media continues to fuel the fear factor because, “misery sells newspapers”.
Not having a clear picture of the market has resulted in a lack of movement stalling the market, except for those buyers who ignore the media negativity and know how to read the numbers. I believe we are about to see a significant paradigm shift being expressed in two ways. Frustrated sellers are finally taking a hard look at their pricing realizing that their past strategy has not worked and has done them more harm than good. They are listening to their seller agents and cutting prices to the bone, well below assessed value in many cases. Sellers who have refused to price their properties realistically for today’s market and were never really sincere about selling, are taking their properties off the market. They think the market is about to turn around and prices will start to inch back up within the next 4 to 9 months. They can wait. I think this will paint a clear uncluttered picture for consumers who have been anxiously waiting with pent-up desire to get into this market but have been unsure and confused. They will finally realize now is the time to buy. They want to buy!
This fall, mortgage rates are forecasted to go up as much as a quarter percentage point according to Jim Vogel, an analyst at FTN Financial Capital Markets. This prediction is a result of Fannie Mae reporting a second-quarter loss of $2.3 billion and their prediction of more heavy losses resulting from the home-mortgage defaults and price declines centered primarily in California
(-28%), Florida (-17%), Nevada and Arizona. Fannie Mae has already said they will stop buying alt-A loans by the end of 2008. Fannie Mae and Freddie Mac are going to be limited in their ability to buy and guarantee home loans, and they will increase fees to borrowers seeking LTVs of 75-80 percent. Increases in the cost of borrowing will reduce the pool of homebuyers with the expected result that buyers with strong liquidity and solid credit will be in the catbird seat. As of today, mortgage rates are still very attractive. Martha’s Vineyard local Island banks understand our market and are excellent at helping qualified buyers to create a loan package that suits their needs. Now is the best time to buy, waiting will only create memories of what could have been your dream come true.
Thursday, April 17, 2008
Short Sales Are Not A Slam Dunk
Back at the end of January I wrote a brief e-Newsletter editorial about the ‘Short Sale’ phenomena, how it works and how the Urban Housing Corp. in Roxbury, MA was working to help suffering homeowners to work out their situations before losing everything. I also talked about how difficult and frustrating it could be when the mortgagor owed significantly more money than the current market value, I mean hundreds of thousands of dollars in some cases. I ended by saying “The good news is that Martha’s Vineyard is not one of these distress markets flooded with upside-down investors. Most attorneys here know very little about how the short sale process works, and personally I want no part of it.” Well, here we are at nearing the end of April and I still want no part of short sale negotiations, not that I will not engage if a buyer client insists, but now we have an increasing number of home owners here who are facing foreclosure and are offering their properties as short sales.
At the end of 2007 and the beginning of 2008, lenders were more willing to accept significant short sale losses and move on, but I believe that is not the case any longer --- especially here on Martha’s Vineyard. I believe we are walking in the valley of this down market and the turnaround is clearly in sight. That means lenders are going to be stubborn and if they cannot sell closer to their investment, they will take back the properties and wait it out. Here is an article that appeared in the Wall Street Journal today that further addresses Why Lenders Are Leery Of Short Sales.
At the end of 2007 and the beginning of 2008, lenders were more willing to accept significant short sale losses and move on, but I believe that is not the case any longer --- especially here on Martha’s Vineyard. I believe we are walking in the valley of this down market and the turnaround is clearly in sight. That means lenders are going to be stubborn and if they cannot sell closer to their investment, they will take back the properties and wait it out. Here is an article that appeared in the Wall Street Journal today that further addresses Why Lenders Are Leery Of Short Sales.
Monday, March 17, 2008
A Cautionary To Homeowners - Reverse Mortgages
This article appeared in today's Wall Street Journal. I have always believed that Reverse Mortgages can be a trap unless they are structured properly and are carefully thought through by the homeowner.
By Donna Kardos
The Wall Street Journal Online
"The Financial Industry Regulatory Authority urged homeowners over the age of 60 to carefully weigh their options before tapping into their home equity through reverse mortgages to obtain additional income for their retirement years.
"The group, formed by a merger of the NASD and some regulatory functions of New York Stock Exchange parent NYSE Group Inc., warned that a reverse mortgage -- an interest-bearing loan secured by the equity in a home -- can jeopardize their financial futures.
"With a reverse mortgage, a bank makes payments to a homeowner instead of the homeowner making payments to a bank. The loan is repaid, with interest, when the borrower sells the house, moves out or dies. Reverse mortgages have high fees -- typically about 7% of the home's value -- and they make it difficult for homeowners to leave the property to their heirs.
"The warning notes that, in some cases, those who sell the mortgages may profit from the their sale, giving them twice the incentive to talk someone into a loan they may not need.
"Finra Chief Executive Mary L. Schapiro said home equity "is often a homeowner's most valuable asset and most precious source of retirement security." Accordingly, the agency reminded homeowners that reverse mortgages should generally be a last resort.
"Reverse mortgages were originally designed as a tool for aging, low-income homeowners to keep their homes, Finra said. But they have been used more often by retiring Americans as a way to finance a more-extravagant retirement lifestyle than they could otherwise afford.
"Still, as foreclosure rates continue to rise amid the subprime-mortgage crisis, some homeowners who have built up equity in their home may consider reverse mortgages their best option against losing it."
Related Article Reverse Mortgages: A Way Out Of a Bind for Older Homeowners
By Donna Kardos
The Wall Street Journal Online
"The Financial Industry Regulatory Authority urged homeowners over the age of 60 to carefully weigh their options before tapping into their home equity through reverse mortgages to obtain additional income for their retirement years.
"The group, formed by a merger of the NASD and some regulatory functions of New York Stock Exchange parent NYSE Group Inc., warned that a reverse mortgage -- an interest-bearing loan secured by the equity in a home -- can jeopardize their financial futures.
"With a reverse mortgage, a bank makes payments to a homeowner instead of the homeowner making payments to a bank. The loan is repaid, with interest, when the borrower sells the house, moves out or dies. Reverse mortgages have high fees -- typically about 7% of the home's value -- and they make it difficult for homeowners to leave the property to their heirs.
"The warning notes that, in some cases, those who sell the mortgages may profit from the their sale, giving them twice the incentive to talk someone into a loan they may not need.
"Finra Chief Executive Mary L. Schapiro said home equity "is often a homeowner's most valuable asset and most precious source of retirement security." Accordingly, the agency reminded homeowners that reverse mortgages should generally be a last resort.
"Reverse mortgages were originally designed as a tool for aging, low-income homeowners to keep their homes, Finra said. But they have been used more often by retiring Americans as a way to finance a more-extravagant retirement lifestyle than they could otherwise afford.
"Still, as foreclosure rates continue to rise amid the subprime-mortgage crisis, some homeowners who have built up equity in their home may consider reverse mortgages their best option against losing it."
Related Article Reverse Mortgages: A Way Out Of a Bind for Older Homeowners
Monday, March 10, 2008
The Private Homecare Services Program of the Vineyard Nursing Association
Extra help for Vineyard Visitors is just a phone call away!
Families vacationing on Martha's Vineyard that travel with elders, infants, or those with a disability come to the Island facing unique challenges. The Private Homecare Services Program of the Vineyard Nursing Association is here to specifically assist with these special circumstances.
Whether your loved one requires nursing attention or companion services, we are here to help.
Some of the services they provide are:
· light housekeeping and meal preparation
· assistance with getting ready for the day or getting ready for sleep
· help with daily injections and lab work
· companionship for those that are not safe or don’t feel safe alone
· babysitting or respite care
Assistance is available from 2 hours to 24 hours a day.
For more information or to arrange for services please call: 508-693-6184.
Families vacationing on Martha's Vineyard that travel with elders, infants, or those with a disability come to the Island facing unique challenges. The Private Homecare Services Program of the Vineyard Nursing Association is here to specifically assist with these special circumstances.
Whether your loved one requires nursing attention or companion services, we are here to help.
Some of the services they provide are:
· light housekeeping and meal preparation
· assistance with getting ready for the day or getting ready for sleep
· help with daily injections and lab work
· companionship for those that are not safe or don’t feel safe alone
· babysitting or respite care
Assistance is available from 2 hours to 24 hours a day.
For more information or to arrange for services please call: 508-693-6184.
Saturday, March 08, 2008
1031 Exchanges and Vacation Homes actual text for IRS Rev. Proc. 2008-16
IRS Rev. Proc. 2008-16 on Safe Harbor for Like-Kind Exchange of Dwelling Unit
IRC Section 1031 IRC - Section 280A Document Date: February 15, 2008
This revenue procedure is scheduled to be published in Internal Revenue Bulletin 2008-10, dated March 10, 2008.
Part III
Administrative, Procedural, and Miscellaneous
26 CFR 601.105: Examination of returns and claims for refund, credit, or abatement; determination of correct tax liability.
(Also Part 1, §§280A , 1031).
Rev. Proc. 2008-16
SECTION 1. PURPOSE
This revenue procedure provides a safe harbor under which the Internal Revenue Service (the "Service") will not challenge whether a dwelling unit qualifies as property held for productive use in a trade or business or for investment for purposes of § 1031 of the Internal Revenue Code.
SECTION 2. BACKGROUND
.01 Section 1031(a) provides that no gain or loss is recognized on the exchange of property held for productive use in a trade or business or for investment (relinquished property) if the property is exchanged solely for property of like kind that is to be held either for productive use in a trade or business or for investment (replacement property). Under § 1.1031(a)-(1)(a)(1) of the Income Tax Regulations, property held for productive use in a trade or business may be exchanged for property held for investment, and property held for investment may be exchanged for property held for productive use in a trade or business.
.02 Rev. Rul. 59-229, 1959-2 C.B. 180, concludes that gain or loss from an exchange of personal residences may not be deferred under § 1031 because the residences are not property held for productive use in a trade or business or for investment.
.03 Section 2.05 of Rev. Proc. 2005-14, 2005-1 C.B. 528, states that § 1031 does not apply to property that is used solely as a personal residence.
.04 In Moore v. Commissioner, T.C. Memo. 2007-134, the taxpayers exchanged one lakeside vacation home for another. Neither home was ever rented. Both were used by the taxpayers only for personal purposes. The taxpayers claimed that the exchange of the homes was a like-kind exchange under § 1031 because the properties were expected to appreciate in value and thus were held for investment. The Tax Court held, however, that the properties were held for personal use and that the "mere hope or expectation that property may be sold at a gain cannot establish an investment intent if the taxpayer uses the property as a residence."
.05 In Starker v. United States, 602 F.2d 1341, 1350 (9th Cir. 1979), the Ninth Circuit held that a personal residence of a taxpayer was not eligible for exchange under § 1031, explaining that "[it] has long been the rule that use of property solely as a personal residence is antithetical to its being held for investment."
.06 The Service recognizes that many taxpayers hold dwelling units primarily for the production of current rental income, but also use the properties occasionally for personal purposes. In the interest of sound tax administration, this revenue procedure provides taxpayers with a safe harbor under which a dwelling unit will qualify as property held for productive use in a trade or business or for investment under § 1031 even though a taxpayer occasionally uses the dwelling unit for personal purposes.
SECTION 3. SCOPE
.01 In general. This revenue procedure applies to a dwelling unit, as defined in section 3.02 of this revenue procedure, that meets the qualifying use standards in section 4.02 of this revenue procedure.
.02 Dwelling unit. For purposes of this revenue procedure, a dwelling unit is real property improved with a house, apartment, condominium, or similar improvement that provides basic living accommodations including sleeping space, bathroom and cooking facilities.
SECTION 4. APPLICATION
.01 In general. The Service will not challenge whether a dwelling unit as defined in section 3.02 of this revenue procedure qualifies under § 1031 as property held for productive use in a trade or business or for investment if the qualifying use standards in section 4.02 of this revenue procedure are met for the dwelling unit.
.02 Qualifying use standards.
(1) Relinquished property. A dwelling unit that a taxpayer intends to be relinquished property in a §1031 exchange qualifies as property held for productive use in a trade or business or for investment if:
(a) The dwelling unit is owned by the taxpayer for at least 24 months immediately before the exchange (the "qualifying use period"); and
(b) Within the qualifying use period, in each of the two 12-month periods immediately preceding the exchange,
(i) The taxpayer rents the dwelling unit to another person or persons at a fair rental for 14 days or more, and
(ii) The period of the taxpayer's personal use of the dwelling unit does not exceed the greater of 14 days or 10 percent of the number of days during the 12-month period that the dwelling unit is rented at a fair rental.
For this purpose, the first 12-month period immediately preceding the exchange ends on the day before the exchange takes place (and begins 12 months prior to that day) and the second 12-month period ends on the day before the first 12-month period begins (and begins 12 months prior to that day).
(2) Replacement property. A dwelling unit that a taxpayer intends to be replacement property in a §1031 exchange qualifies as property held for productive use in a trade or business or for investment if:
(a) The dwelling unit is owned by the taxpayer for at least 24 months immediately after the exchange (the "qualifying use period"); and
(b) Within the qualifying use period, in each of the two 12-month periods immediately after the exchange,
(i) The taxpayer rents the dwelling unit to another person or persons at a fair rental for 14 days or more, and
(ii) The period of the taxpayer's personal use of the dwelling unit does not exceed the greater of 14 days or 10 percent of the number of days during the 12-month period that the dwelling unit is rented at a fair rental.
For this purpose, the first 12-month period immediately after the exchange begins on the day after the exchange takes place and the second 12-month period begins on the day after the first 12-month period ends.
.03 Personal use. For purposes of this revenue procedure, personal use of a dwelling unit occurs on any day on which a taxpayer is deemed to have used the dwelling unit for personal purposes under § 280A(d)(2) (taking into account § 280A(d)(3) but not § 280A(d)(4)).
.04 Fair rental. For purposes of this revenue procedure, whether a dwelling unit is rented at a fair rental is determined based on all of the facts and circumstances that exist when the rental agreement is entered into. All rights and obligations of the parties to the rental agreement are taken into account.
.05 Special rule for replacement property. If a taxpayer files a federal income tax return and reports a transaction as an exchange under § 1031, based on the expectation that a dwelling unit will meet the qualifying use standards in section 4.02(2) of this revenue procedure for replacement property, and subsequently determines that the dwelling unit does not meet the qualifying use standards, the taxpayer, if necessary, should file an amended return and not report the transaction as an exchange under § 1031.
.06 Limited application of safe harbor. The safe harbor provided in this revenue procedure applies only to the determination of whether a dwelling unit qualifies as property held for productive use in a trade or business or for investment under § 1031. A taxpayer utilizing the safe harbor in this revenue procedure also must satisfy all other requirements for a like-kind exchange under § 1031 and the regulations thereunder.
SECTION 5 . EFFECTIVE DATE
This revenue procedure is effective for exchanges of dwelling units occurring on or after March 10, 2008. No inference is intended with respect to the federal income tax treatment of exchanges of dwelling units occurring prior to the effective date of this revenue procedure.
SECTION 6 . DRAFTING INFORMATION
The principal author of this revenue procedure is J. Peter Baumgarten of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this revenue procedure contact Mr. Baumgarten at (202) 622-4920 (not a toll free call).
IRC Section 1031 IRC - Section 280A Document Date: February 15, 2008
This revenue procedure is scheduled to be published in Internal Revenue Bulletin 2008-10, dated March 10, 2008.
Part III
Administrative, Procedural, and Miscellaneous
26 CFR 601.105: Examination of returns and claims for refund, credit, or abatement; determination of correct tax liability.
(Also Part 1, §§280A , 1031).
Rev. Proc. 2008-16
SECTION 1. PURPOSE
This revenue procedure provides a safe harbor under which the Internal Revenue Service (the "Service") will not challenge whether a dwelling unit qualifies as property held for productive use in a trade or business or for investment for purposes of § 1031 of the Internal Revenue Code.
SECTION 2. BACKGROUND
.01 Section 1031(a) provides that no gain or loss is recognized on the exchange of property held for productive use in a trade or business or for investment (relinquished property) if the property is exchanged solely for property of like kind that is to be held either for productive use in a trade or business or for investment (replacement property). Under § 1.1031(a)-(1)(a)(1) of the Income Tax Regulations, property held for productive use in a trade or business may be exchanged for property held for investment, and property held for investment may be exchanged for property held for productive use in a trade or business.
.02 Rev. Rul. 59-229, 1959-2 C.B. 180, concludes that gain or loss from an exchange of personal residences may not be deferred under § 1031 because the residences are not property held for productive use in a trade or business or for investment.
.03 Section 2.05 of Rev. Proc. 2005-14, 2005-1 C.B. 528, states that § 1031 does not apply to property that is used solely as a personal residence.
.04 In Moore v. Commissioner, T.C. Memo. 2007-134, the taxpayers exchanged one lakeside vacation home for another. Neither home was ever rented. Both were used by the taxpayers only for personal purposes. The taxpayers claimed that the exchange of the homes was a like-kind exchange under § 1031 because the properties were expected to appreciate in value and thus were held for investment. The Tax Court held, however, that the properties were held for personal use and that the "mere hope or expectation that property may be sold at a gain cannot establish an investment intent if the taxpayer uses the property as a residence."
.05 In Starker v. United States, 602 F.2d 1341, 1350 (9th Cir. 1979), the Ninth Circuit held that a personal residence of a taxpayer was not eligible for exchange under § 1031, explaining that "[it] has long been the rule that use of property solely as a personal residence is antithetical to its being held for investment."
.06 The Service recognizes that many taxpayers hold dwelling units primarily for the production of current rental income, but also use the properties occasionally for personal purposes. In the interest of sound tax administration, this revenue procedure provides taxpayers with a safe harbor under which a dwelling unit will qualify as property held for productive use in a trade or business or for investment under § 1031 even though a taxpayer occasionally uses the dwelling unit for personal purposes.
SECTION 3. SCOPE
.01 In general. This revenue procedure applies to a dwelling unit, as defined in section 3.02 of this revenue procedure, that meets the qualifying use standards in section 4.02 of this revenue procedure.
.02 Dwelling unit. For purposes of this revenue procedure, a dwelling unit is real property improved with a house, apartment, condominium, or similar improvement that provides basic living accommodations including sleeping space, bathroom and cooking facilities.
SECTION 4. APPLICATION
.01 In general. The Service will not challenge whether a dwelling unit as defined in section 3.02 of this revenue procedure qualifies under § 1031 as property held for productive use in a trade or business or for investment if the qualifying use standards in section 4.02 of this revenue procedure are met for the dwelling unit.
.02 Qualifying use standards.
(1) Relinquished property. A dwelling unit that a taxpayer intends to be relinquished property in a §1031 exchange qualifies as property held for productive use in a trade or business or for investment if:
(a) The dwelling unit is owned by the taxpayer for at least 24 months immediately before the exchange (the "qualifying use period"); and
(b) Within the qualifying use period, in each of the two 12-month periods immediately preceding the exchange,
(i) The taxpayer rents the dwelling unit to another person or persons at a fair rental for 14 days or more, and
(ii) The period of the taxpayer's personal use of the dwelling unit does not exceed the greater of 14 days or 10 percent of the number of days during the 12-month period that the dwelling unit is rented at a fair rental.
For this purpose, the first 12-month period immediately preceding the exchange ends on the day before the exchange takes place (and begins 12 months prior to that day) and the second 12-month period ends on the day before the first 12-month period begins (and begins 12 months prior to that day).
(2) Replacement property. A dwelling unit that a taxpayer intends to be replacement property in a §1031 exchange qualifies as property held for productive use in a trade or business or for investment if:
(a) The dwelling unit is owned by the taxpayer for at least 24 months immediately after the exchange (the "qualifying use period"); and
(b) Within the qualifying use period, in each of the two 12-month periods immediately after the exchange,
(i) The taxpayer rents the dwelling unit to another person or persons at a fair rental for 14 days or more, and
(ii) The period of the taxpayer's personal use of the dwelling unit does not exceed the greater of 14 days or 10 percent of the number of days during the 12-month period that the dwelling unit is rented at a fair rental.
For this purpose, the first 12-month period immediately after the exchange begins on the day after the exchange takes place and the second 12-month period begins on the day after the first 12-month period ends.
.03 Personal use. For purposes of this revenue procedure, personal use of a dwelling unit occurs on any day on which a taxpayer is deemed to have used the dwelling unit for personal purposes under § 280A(d)(2) (taking into account § 280A(d)(3) but not § 280A(d)(4)).
.04 Fair rental. For purposes of this revenue procedure, whether a dwelling unit is rented at a fair rental is determined based on all of the facts and circumstances that exist when the rental agreement is entered into. All rights and obligations of the parties to the rental agreement are taken into account.
.05 Special rule for replacement property. If a taxpayer files a federal income tax return and reports a transaction as an exchange under § 1031, based on the expectation that a dwelling unit will meet the qualifying use standards in section 4.02(2) of this revenue procedure for replacement property, and subsequently determines that the dwelling unit does not meet the qualifying use standards, the taxpayer, if necessary, should file an amended return and not report the transaction as an exchange under § 1031.
.06 Limited application of safe harbor. The safe harbor provided in this revenue procedure applies only to the determination of whether a dwelling unit qualifies as property held for productive use in a trade or business or for investment under § 1031. A taxpayer utilizing the safe harbor in this revenue procedure also must satisfy all other requirements for a like-kind exchange under § 1031 and the regulations thereunder.
SECTION 5 . EFFECTIVE DATE
This revenue procedure is effective for exchanges of dwelling units occurring on or after March 10, 2008. No inference is intended with respect to the federal income tax treatment of exchanges of dwelling units occurring prior to the effective date of this revenue procedure.
SECTION 6 . DRAFTING INFORMATION
The principal author of this revenue procedure is J. Peter Baumgarten of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this revenue procedure contact Mr. Baumgarten at (202) 622-4920 (not a toll free call).
Sunday, February 03, 2008
Martha’s Vineyard Real Estate – Should You Be In The Market Now?
There are too many people who should not be in the real estate market right now, both buyers and sellers. They’re not serious, they are time wasters, and to me real estate is not a game.
If I were a seller’s agent, and I am not, and a home owner came to me asking me to list his property at a certain price that was out of line with my market research, and saying “let’s just try it for a while at this price”, I would say no thank you. Perhaps that seller is unable to sell his property at fair market value because he owes too much, and is upside down --- loan vs. current market. Perhaps that seller does not have to sell, but is just testing the waters or derives some pleasure at seeing his property advertised at a big number. It is sellers like this and the resulting skewed values and distorted inventory that create the negative public opinion and add to buyer’s misperceived impression of the market.
If a buyer came to me, and they do, saying they want to “steal a property”, I say no thank you. Pricing property is analogous to water seeking its own level. If you price a property too high, it will languish on the market until the price comes in line with the market. Across the country, 36% of all properties sold for list price or higher. Only 12% of all properties nationally sold for 90% or less than asking price. What this means is buyers continue to wait until properties are priced correctly. If you recognize that a property is priced correctly, you need to bid accordingly because properties that are priced correctly will normally sell quickly to a savvy buyer, and there may be more than one savvy buyer making a run on a property at the same time. Buyers must realize right now prices are good, interest rates are excellent and anyone with cash or excellent credit has power if they use it wisely in their negotiation. I’ve seen this too many times. Buyers who are eager and ready to get into the market, but continue to sit on the sidelines waiting for the ‘go signal’ from on high that prices have bottomed out are destined to join the ‘would have … should have’ club. You know who I am talking about, those people who painfully recount that they could have bought that property for ….
In the investment game, if you think you are at the bottom, or at the top, it is too late --- you are already on the other side. Right now is a great time to approach the market because the fruit on the tree is abundant and ripe. I don’t blame anyone for having doubts and fears; after all, the news these days is mostly negative and full of fear. I love what Louis Rukeyser once said about investing, no matter what you do, it is going to be wrong so do something, because the worst thing is to do nothing.
We need to remember real estate is cyclical and this too shall pass. Historically, the down-markets normally last two to three years and the up-markets last from seven to ten years. I believe we are walking in the valley right now, but we just don’t know it. It is going to be a long slow trek through the valley and we may not reach the mountain until the end of 2008, or the beginning of 2009, but we are on the march. One thing is for sure, real estate values overall continue to go up. Real estate is the one sure investment that always appreciates over time.
If I were a seller’s agent, and I am not, and a home owner came to me asking me to list his property at a certain price that was out of line with my market research, and saying “let’s just try it for a while at this price”, I would say no thank you. Perhaps that seller is unable to sell his property at fair market value because he owes too much, and is upside down --- loan vs. current market. Perhaps that seller does not have to sell, but is just testing the waters or derives some pleasure at seeing his property advertised at a big number. It is sellers like this and the resulting skewed values and distorted inventory that create the negative public opinion and add to buyer’s misperceived impression of the market.
If a buyer came to me, and they do, saying they want to “steal a property”, I say no thank you. Pricing property is analogous to water seeking its own level. If you price a property too high, it will languish on the market until the price comes in line with the market. Across the country, 36% of all properties sold for list price or higher. Only 12% of all properties nationally sold for 90% or less than asking price. What this means is buyers continue to wait until properties are priced correctly. If you recognize that a property is priced correctly, you need to bid accordingly because properties that are priced correctly will normally sell quickly to a savvy buyer, and there may be more than one savvy buyer making a run on a property at the same time. Buyers must realize right now prices are good, interest rates are excellent and anyone with cash or excellent credit has power if they use it wisely in their negotiation. I’ve seen this too many times. Buyers who are eager and ready to get into the market, but continue to sit on the sidelines waiting for the ‘go signal’ from on high that prices have bottomed out are destined to join the ‘would have … should have’ club. You know who I am talking about, those people who painfully recount that they could have bought that property for ….
In the investment game, if you think you are at the bottom, or at the top, it is too late --- you are already on the other side. Right now is a great time to approach the market because the fruit on the tree is abundant and ripe. I don’t blame anyone for having doubts and fears; after all, the news these days is mostly negative and full of fear. I love what Louis Rukeyser once said about investing, no matter what you do, it is going to be wrong so do something, because the worst thing is to do nothing.
We need to remember real estate is cyclical and this too shall pass. Historically, the down-markets normally last two to three years and the up-markets last from seven to ten years. I believe we are walking in the valley right now, but we just don’t know it. It is going to be a long slow trek through the valley and we may not reach the mountain until the end of 2008, or the beginning of 2009, but we are on the march. One thing is for sure, real estate values overall continue to go up. Real estate is the one sure investment that always appreciates over time.
Thursday, January 10, 2008
New Regulations Impose the Nation's Toughest Restrictions on the Mortgage Industry
In an effort to encourage mortgage lenders in Massachusetts to continue doing business here, on January 2, 2008 the Attorney General’s office imposed restrictions that require increased income documentation and a “reasonable belief” that a borrower can afford the loan they are applying for.
Follow this link to learn more > New Mortgage Rules in Massachusetts
Follow this link to learn more > New Mortgage Rules in Massachusetts
Wednesday, January 09, 2008
Narragansett Bay Insurance undercuts Fair Plan
In the past few years virtually all residents of Cape Cod and the Islands have been caught in the mass exodus of insurance companies from the region. Policies have been abruptly cancelled with the only option being the government Fair Plan insurance with its higher rates and deductibles. Now a company in Rhode Island is attempting to offer insurance plans that will be more affordable than Fair Plan insurance.
Follow this link to read more > Narragansett Bay Insurance
Follow this link to read more > Narragansett Bay Insurance
Saturday, December 01, 2007
Catastrophe Fund Backed To Insure Coastal Homes While Deductibles Skyrocket
As a homeowner on Martha's Vineyard Island, living on the water, I can tell you I have felt the bite of insurance companies backing away from so-called high risk locations. Before I was forced into the Massachusetts Fair Plan, a representative from my home owners insurance provider came to my house and subsequently I received a terse letter saying if I did not remove and cut back all the trees that were close to me house, the insurance provider, Vesta would cancel my insurance. I was bewildered and called my local insurance agent. I was surprised when my agent told me to ignore it because --- Vesta was going to cancel me anyway. They filed for protection with the US Bankrupcy Court, and became another casualty of the disastrous hurricane season in 2005.
According to an editorial in the Boston Globe reported by Bruce Mohl, "A special legislative commission called for the creation of a state-run catastrophic event fund to help reduce the cost of home insurance in Massachusetts. Few details were provided in the report, but the fund would be set up to sell reinsurance to companies at below-market rates. Industry officials participating on the commission dissented from the majority view, saying the fund would drive up insurer costs. Consumer groups also dissented, saying they wanted caps on the increases being sought by the Massachusetts Fair Plan, the home insurer of last resort. Insurers have been canceling policies or raising premiums along the coast on fears of a major hurricane. The Fair Plan provides coverage for about 40 percent of homes on the Cape and islands."
In the meantime, as of December 15, 2007 many residents of Martha's Vineyard insured under the Massachusetts Fair Plan will have the highest windstorm and hail deductibles in the country, up from a minimum of two to five percent. The increase will affect homes valued up to $500,000.
Follow this link to read > Bills Grow Larger For Home Insurance
According to an editorial in the Boston Globe reported by Bruce Mohl, "A special legislative commission called for the creation of a state-run catastrophic event fund to help reduce the cost of home insurance in Massachusetts. Few details were provided in the report, but the fund would be set up to sell reinsurance to companies at below-market rates. Industry officials participating on the commission dissented from the majority view, saying the fund would drive up insurer costs. Consumer groups also dissented, saying they wanted caps on the increases being sought by the Massachusetts Fair Plan, the home insurer of last resort. Insurers have been canceling policies or raising premiums along the coast on fears of a major hurricane. The Fair Plan provides coverage for about 40 percent of homes on the Cape and islands."
In the meantime, as of December 15, 2007 many residents of Martha's Vineyard insured under the Massachusetts Fair Plan will have the highest windstorm and hail deductibles in the country, up from a minimum of two to five percent. The increase will affect homes valued up to $500,000.
Follow this link to read > Bills Grow Larger For Home Insurance
Relief in Sight for Some Massachusetts Home Owners
You've all read countless articles and tales of woe and devestation caused by the subprime mortgage market debacle. The predatory behavior of many mortgage companies coupled by the lack of understanding of borrowers who either did not fully understand what they were getting into or were sold a bill of goods by the lenders has wiped out many homeowners.
In Massachusetts alone there are 24,650 adjustable rate mortgages due to reset at the beginning of 2008. However, there appears to be good news on the horizon for some > Subprime mortgage rates could be frozen for some .
In addition, an Associated Press release just reported that Governor Deval Patrick has signed a measure seeking to slow the state's recent spike in home foreclosures. According to the Governor, the new law gives Massachusetts one of the nation's most consumer-friendly mortgage lending statutes. The legislation requires mortgage companies to file a 90-day notice of intent to foreclose with the homeowner and the state. Borrowers would be required to receive consumer counseling before obtaining certain high-cost mortgages. Grants totaling $2 million would establish 10 education centers statewide and promote first-time home buyer and foreclosure counseling. (AP)
In Massachusetts alone there are 24,650 adjustable rate mortgages due to reset at the beginning of 2008. However, there appears to be good news on the horizon for some > Subprime mortgage rates could be frozen for some .
In addition, an Associated Press release just reported that Governor Deval Patrick has signed a measure seeking to slow the state's recent spike in home foreclosures. According to the Governor, the new law gives Massachusetts one of the nation's most consumer-friendly mortgage lending statutes. The legislation requires mortgage companies to file a 90-day notice of intent to foreclose with the homeowner and the state. Borrowers would be required to receive consumer counseling before obtaining certain high-cost mortgages. Grants totaling $2 million would establish 10 education centers statewide and promote first-time home buyer and foreclosure counseling. (AP)
Thursday, November 29, 2007
What is it going to take to get the Martha’s Vineyard real estate market rolling again?
There is one thing for sure, wishful thinking is not working. Neither is the constant stream of anemic price reductions week after week. How about those incentives and broker bonuses? You know what I'm talking about; the three-year old Range Rover in the driveway, the 24' sailboat, a 60" LCD TV, seller paid closing costs, seller paid Land Bank fee, first payment in six months, a vacation in the Bahamas or $50,000 to the agent that brings the buyer. None of that is working, and any additional compensation offered to an agent that brings the buyer should be considered a conflict of interest and bribery.
So what is working, and how is it working? Home "Staging" is working to some degree, but once buyers wise up to the fact that this kind of eye candy emotional sizzle is costing them thousands of dollars more in the price for the home, they will stop falling for it and start backing away from homes that look just too pretty. They will wonder what lies beneath the dining room table that is set for a 5-course formal dinner party seating twelve.
In an article written for Bloomberg News, John F. Wasik says, "Buyers just want price," he quotes one real-estate attorney/broker/consultant based in Stuart, Fla., as saying. "Buyers have become more educated and they can easily cut through the fluffy incentives". Hmmm. I don't think we're there yet. Everyone loves romance and people shopping for a home on Martha's Vineyard want to fall in love. This market is like going to Las Vegas for the first time and getting lost in one of the Casinos. Know the feeling?
What is the first question buyers ask? "How long has the house been on the market?" This has almost become a joke among real estate professionals, but buyers ask the question because it is commonly assumed that the longer a property has been on the market the weaker the seller's resolve to hold firm on price. You see, overpriced listings that languish on the market reduce the seller's negotiating ability as time diminishes their power. Once a listing has gone unsold, even if they take it off the market for a while or remove it and relist it with another agency, the information is in the public domain. There are definitely exceptions; EG: the seller doesn't have to sell, or the seller just likes to see their property advertized at some inflated price.
I think it is obvious that if a seller is serious --- I am NOT talking about desperate; homes priced to sell will sell. That means being ahead of the market instead of chasing the market. A good deal starts to get noticed if it is at least 10% below its competition. But when you see a good deal, do you think you are the only one who sees that good deal? Heck no, and usually you end up competing with other consumers who want what you want. What that can do is create a bidding war, and that is exactly what the seller wants --- or should want. A bidding war is probably the best and truest way to establish market value. I hate bidding wars, and right now I don't have to worry about it because sellers on Martha's Vineyard are following the same bloodletting technique; they all price high and week after week pull a few thousand dollars out of their last price. My clients feel like they are standing around the markdown sale table at Macy's waiting for the 70% off sign to go up.
There is a lot of misleading statistical information out there right now. Many agents talk about price-to-price ratio. In the recent 2007 NAR Report on Buyers and Sellers it states that "sellers sold their homes for 97% of list price." Does this mean 97% of the original listing price or 97% of the current listing price? The property could have been on the market for a year and transitioned through a half-dozen price reductions before it finally sold.
To sellers my advice is to listen to your listing broker when they give you an 'honest' price recommendation. In this market, if you interview several brokers, hire the broker who gives you the lowest price recommendation because they are probably the one telling you the truth. Many times a broker will agree to a listing contract with a seller because they are thinking, "If I don't take it, my competitor will and I will lose it." They know full well the property will never sell at the listing price. They are banking on the seller eventually coming to their senses and seeing the light. The conversation goes like this. "Mr. Seller, it has been three weeks since we listed your property and we have had no interest, so it is time to reduce the price." By then it is too late and that conversation will most certainly be had again --- and again.
To my buyer clients I always say if you like a property, pay little attention to the asking price and don't be afraid to make a "Bold Offer". By this I mean make an intelligent well thought-out and thoroughly researched offer. I make it perfectly clear on my website > ATTENTION SELLERS: A Low Offer Today, May be a High Offer in 60 Days .
So what is working, and how is it working? Home "Staging" is working to some degree, but once buyers wise up to the fact that this kind of eye candy emotional sizzle is costing them thousands of dollars more in the price for the home, they will stop falling for it and start backing away from homes that look just too pretty. They will wonder what lies beneath the dining room table that is set for a 5-course formal dinner party seating twelve.
In an article written for Bloomberg News, John F. Wasik says, "Buyers just want price," he quotes one real-estate attorney/broker/consultant based in Stuart, Fla., as saying. "Buyers have become more educated and they can easily cut through the fluffy incentives". Hmmm. I don't think we're there yet. Everyone loves romance and people shopping for a home on Martha's Vineyard want to fall in love. This market is like going to Las Vegas for the first time and getting lost in one of the Casinos. Know the feeling?
What is the first question buyers ask? "How long has the house been on the market?" This has almost become a joke among real estate professionals, but buyers ask the question because it is commonly assumed that the longer a property has been on the market the weaker the seller's resolve to hold firm on price. You see, overpriced listings that languish on the market reduce the seller's negotiating ability as time diminishes their power. Once a listing has gone unsold, even if they take it off the market for a while or remove it and relist it with another agency, the information is in the public domain. There are definitely exceptions; EG: the seller doesn't have to sell, or the seller just likes to see their property advertized at some inflated price.
I think it is obvious that if a seller is serious --- I am NOT talking about desperate; homes priced to sell will sell. That means being ahead of the market instead of chasing the market. A good deal starts to get noticed if it is at least 10% below its competition. But when you see a good deal, do you think you are the only one who sees that good deal? Heck no, and usually you end up competing with other consumers who want what you want. What that can do is create a bidding war, and that is exactly what the seller wants --- or should want. A bidding war is probably the best and truest way to establish market value. I hate bidding wars, and right now I don't have to worry about it because sellers on Martha's Vineyard are following the same bloodletting technique; they all price high and week after week pull a few thousand dollars out of their last price. My clients feel like they are standing around the markdown sale table at Macy's waiting for the 70% off sign to go up.
There is a lot of misleading statistical information out there right now. Many agents talk about price-to-price ratio. In the recent 2007 NAR Report on Buyers and Sellers it states that "sellers sold their homes for 97% of list price." Does this mean 97% of the original listing price or 97% of the current listing price? The property could have been on the market for a year and transitioned through a half-dozen price reductions before it finally sold.
To sellers my advice is to listen to your listing broker when they give you an 'honest' price recommendation. In this market, if you interview several brokers, hire the broker who gives you the lowest price recommendation because they are probably the one telling you the truth. Many times a broker will agree to a listing contract with a seller because they are thinking, "If I don't take it, my competitor will and I will lose it." They know full well the property will never sell at the listing price. They are banking on the seller eventually coming to their senses and seeing the light. The conversation goes like this. "Mr. Seller, it has been three weeks since we listed your property and we have had no interest, so it is time to reduce the price." By then it is too late and that conversation will most certainly be had again --- and again.
To my buyer clients I always say if you like a property, pay little attention to the asking price and don't be afraid to make a "Bold Offer". By this I mean make an intelligent well thought-out and thoroughly researched offer. I make it perfectly clear on my website > ATTENTION SELLERS: A Low Offer Today, May be a High Offer in 60 Days .
Wednesday, October 31, 2007
Federal Funds Rate Down Again
Today the Federal Reserve once again in less than two months lowered its target rate for the federal funds rate by a modest 25-basis-points to 4.5 percent and the discount rate to 5 percent.
In a statement announcing the Fed’s decision today, members of the Federal Reserve's Open Market Committee said that "after this action, the upside risks to inflation roughly balance the downside risks to growth."
Some analysts concerned that the housing downturn will lead to a recession were hoping for another 50-basis-point reduction in the federal funds rate, but the Fed has to weigh consequences such as further weakening of the dollar and inflation.
However, on Martha’s Vineyard, the mortgage market has little effect on our high-end market, because most real estate transactions are all cash.
In a statement announcing the Fed’s decision today, members of the Federal Reserve's Open Market Committee said that "after this action, the upside risks to inflation roughly balance the downside risks to growth."
Some analysts concerned that the housing downturn will lead to a recession were hoping for another 50-basis-point reduction in the federal funds rate, but the Fed has to weigh consequences such as further weakening of the dollar and inflation.
However, on Martha’s Vineyard, the mortgage market has little effect on our high-end market, because most real estate transactions are all cash.
Friday, September 21, 2007
What Consumers Want On A Real Estate Website
What information do most consumers want to know about when visiting a real estate website?
According to a survey released by the exclusive Buyer agency firm Accent Realty Group, here are the topics most searched by consumers:
1) 85.7% wanted the ability to search all homes in the area.
2) 42.9% said they wanted to know about local schools.
3) 57.1% said they wanted to know about local crime rates.
4) 28.6% said they wanted to know about tax rates.
The survey also went on to add the fact that consumers were still unfamiliar and confused about the terms “Dual Agency” and “Facilitator”.
I spent a lot of time personally creating my website and I go into great detail to educate consumers about the different types of Agency, but I still find about 50% of the potential buyers I speak with are confused or just plain suspicious. I don’t blame them because the real estate community is still playing a shell game and trying to be all things to all people. I say it can’t be done.
On my website I use the analogy of two sports teams sharing the same locker room, and the same coach. What kind of game do you think they are going to be playing? In an NAR sanctioned publication titled Agency – Choices, Challenges & Opportunities (Agent’s Guide), the definition of an EXCLUSIVE Buyer Agency reads as follows: “The practice of representing only buyers and never sellers in a transaction. The company never lists a sellers’ property and thus never has a seller as a client. Agents never accept subagency that is offered to a seller’s agent.” (Note: In Massachusetts, practically all agencies no longer offer compensation to subagents because of inherent liability.)
As if it is not hard enough for the public to understand terms like “Dual Agency”, “Designated Agency”, “Transaction Agency” or “Facilitator”, “Single Agency”, and “Buyer Agency -- with consent to Dual Agency”, many brokers are still misusing the term EXCLUSIVE in order to capture a buyer. They offer EXCLUSIVE Buyer Agency with consent to Dual Agency”. That is like saying, I’ll be married to you, but if I see someone I want to fool around with, I’ll do it. I don’t know about you, but my wife would have none of that and I am perfectly happy being her EXCLUSIVE husband. Call me what ever you like, but I prefer to keep my life simple stupid, and be respectful of consumer intelligence. I will never share the locker room with another team.
In conclusion, allow me to direct you to a wonderful article I just read and please call me if you still don’t “get it”. I create power buyers!
Follow this link to read > What Buyers Do Wrong
According to a survey released by the exclusive Buyer agency firm Accent Realty Group, here are the topics most searched by consumers:
1) 85.7% wanted the ability to search all homes in the area.
2) 42.9% said they wanted to know about local schools.
3) 57.1% said they wanted to know about local crime rates.
4) 28.6% said they wanted to know about tax rates.
The survey also went on to add the fact that consumers were still unfamiliar and confused about the terms “Dual Agency” and “Facilitator”.
I spent a lot of time personally creating my website and I go into great detail to educate consumers about the different types of Agency, but I still find about 50% of the potential buyers I speak with are confused or just plain suspicious. I don’t blame them because the real estate community is still playing a shell game and trying to be all things to all people. I say it can’t be done.
On my website I use the analogy of two sports teams sharing the same locker room, and the same coach. What kind of game do you think they are going to be playing? In an NAR sanctioned publication titled Agency – Choices, Challenges & Opportunities (Agent’s Guide), the definition of an EXCLUSIVE Buyer Agency reads as follows: “The practice of representing only buyers and never sellers in a transaction. The company never lists a sellers’ property and thus never has a seller as a client. Agents never accept subagency that is offered to a seller’s agent.” (Note: In Massachusetts, practically all agencies no longer offer compensation to subagents because of inherent liability.)
As if it is not hard enough for the public to understand terms like “Dual Agency”, “Designated Agency”, “Transaction Agency” or “Facilitator”, “Single Agency”, and “Buyer Agency -- with consent to Dual Agency”, many brokers are still misusing the term EXCLUSIVE in order to capture a buyer. They offer EXCLUSIVE Buyer Agency with consent to Dual Agency”. That is like saying, I’ll be married to you, but if I see someone I want to fool around with, I’ll do it. I don’t know about you, but my wife would have none of that and I am perfectly happy being her EXCLUSIVE husband. Call me what ever you like, but I prefer to keep my life simple stupid, and be respectful of consumer intelligence. I will never share the locker room with another team.
In conclusion, allow me to direct you to a wonderful article I just read and please call me if you still don’t “get it”. I create power buyers!
Follow this link to read > What Buyers Do Wrong
Wednesday, September 19, 2007
Can You Smell the Brownies in the Oven?
Anyone who has ever been shopping for a home has had at least one of these experiences. It’s early June and you walk into a home to be greeted by a crackling fire in the fireplace. Even before you have walked over the front door threshold, the smell of Vanilla extract is overpowering. You go to inspect the basement and six different Airwick scents chase you back up the stairs. How about the dining room table with eight place settings for a formal dinner -- and all the plates and wine glasses are dusty? Don’t for get the framed needlepoint in the family room that says ‘Home Sweet Home’.
Staging has become very popular lately. Seller agents implore their sellers to remove all the personal knickknacks and clutter, and if necessary rent new furniture, putting dad’s tattered Lazy Boy into storage along with that treadmill no one has used in years.
Even more so today, people are going to extremes ‘staging’ their homes, and you know why? It works! Sellers who stage their homes usually sell them for more money. That is why I say, buyer beware – and be aware.
The National Association of Exclusive Buyer Agents (NAEBA) published an article sometime ago warning buyers of staging pitfalls. What I find interesting is the national Press picked up on it and there are still articles being written referencing NAEBA.
Follow this link to read > Don't be fooled by for-sale homes that are 'staged'
Staging has become very popular lately. Seller agents implore their sellers to remove all the personal knickknacks and clutter, and if necessary rent new furniture, putting dad’s tattered Lazy Boy into storage along with that treadmill no one has used in years.
Even more so today, people are going to extremes ‘staging’ their homes, and you know why? It works! Sellers who stage their homes usually sell them for more money. That is why I say, buyer beware – and be aware.
The National Association of Exclusive Buyer Agents (NAEBA) published an article sometime ago warning buyers of staging pitfalls. What I find interesting is the national Press picked up on it and there are still articles being written referencing NAEBA.
Follow this link to read > Don't be fooled by for-sale homes that are 'staged'
Monday, September 17, 2007
GREENSPAN SPEAK(S)
If you watched the most recent interviews with Alan Greenspan you may or may not be pleased with what you heard. As for the housing bubble, Greenspan says it is a global problem and we still have some distance to travel before the market levels off. He said, “We, unlike the rest of the world, are showing some modest price declines.” When asked if a recession was on the horizon, his answer was, “The evidence so far, is not yet. The economy at this stage, despite this fiscal problem, despite the financial problem, is still holding up.”
In hopes of slowing the downturn in the housing market and lessening the credit crunch the Fed is expected to lower federal funds rates to at least 5.0 percent; it is now at 5.25%. However, Greenspan still sees a great deal of pain ahead for those who overextended during the boom. “I think we're going to have to go through this adjustment, as indeed all the other countries are in the process of going through it. There are going to be a lot of people who will have very tragic stories," said Greenspan.
It appears Greenspan is less optimistic about the economy than he was while writing his memoir, The Age of Turbulence, and estimates the probability of a recession at just above one-third. One of the problems, according to an interview published in the WSJ is the “very large” inventory of newly built and unsold homes resulting in increased pressure on builders to sell them quickly.
Martha's Vineyard for the most part is a high-end resort and second-home market where many expensive properties are sold without need for mortgage financing. However, in order to stave off inflation in the future, Greenspan said the Fed would most likely have to raise interest rates to double-digit levels for the first time since the 80’s, but that increase period would be short lived. If you are contemplating a real estate investment on Martha’s Vineyard and need financing, I think that prediction alone is a good reason to get into the market while the rates are low.
In hopes of slowing the downturn in the housing market and lessening the credit crunch the Fed is expected to lower federal funds rates to at least 5.0 percent; it is now at 5.25%. However, Greenspan still sees a great deal of pain ahead for those who overextended during the boom. “I think we're going to have to go through this adjustment, as indeed all the other countries are in the process of going through it. There are going to be a lot of people who will have very tragic stories," said Greenspan.
It appears Greenspan is less optimistic about the economy than he was while writing his memoir, The Age of Turbulence, and estimates the probability of a recession at just above one-third. One of the problems, according to an interview published in the WSJ is the “very large” inventory of newly built and unsold homes resulting in increased pressure on builders to sell them quickly.
Martha's Vineyard for the most part is a high-end resort and second-home market where many expensive properties are sold without need for mortgage financing. However, in order to stave off inflation in the future, Greenspan said the Fed would most likely have to raise interest rates to double-digit levels for the first time since the 80’s, but that increase period would be short lived. If you are contemplating a real estate investment on Martha’s Vineyard and need financing, I think that prediction alone is a good reason to get into the market while the rates are low.
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