SuburbanDigs

If At First You Don't Succeed, Try, Try Again?

It's a war zone out there in local Essex County, NJ real estate, as it is almost everywhere else. Since 2008, some sellers have tried and tried again to move -- and they're still living in the same house. Rather than positioning these houses where they could really even sell, they top off pricing in a no-man's land, then endure months, even years of visits from cautious, unresponsive buyers who just aren't feelin' it, receive oodles of analytics about their market and their neighborhood sales, see all the dire headlines, all the while protesting that their agents just aren't working hard enough to make it happen. Despite relentless public feedback about what their houses DON'T have, where it AREN'T located, and what THE AREN'T priced at, our intrepid band of oblivious sellers maintain that the whole world is wrong.

Meanwhile, plenty of other homes sell, and what does that do? It reaffirms the contrarian's view that his or her house is better and deserves more -- and that next season or next year, this month's inflated price will be vindicated by that one buyer who better understands just how great the house really is.

We Realtors have been through this more times than we'll admit to counting. Just recently, I received one such seller protestation that quietly pushed me over the edge into stark, raving Realtor madness: "My objective," he announced, "continues to be to sell my home at a price consistent with my perceived value of the home and at a price that will allow me to recover the investment I have made in my home over the last several years. It is my hope that this will happen soon."

That, after six months on the market, a series of glacially arrived at price reductions totalling $80,000; about 10 showings; and another half-dozen showings rejected because the owner wouldn't accomodate less than 24 hours notice. In that time period, during which we exchanged some 75 detailed email discussions, the immediate market swelled to near 400 listings, more than 50 of them similarly priced. Meanwhile, prices of local solds that provide appraisers with tools to analyze a home's value, dropped faster than we could keep up.

Without a seller's unconditional need to sell a house today at a price consistent with the market as it is today, failure is the outcome. The seller who says he's withdrawing the listing to try again next spring or next fall at the same price, hasn't a clue about value, does not get it and doesn't feel the need to get it because - and we hear this every day - "I don't really need to sell."

If it could talk, really talk, the beleaguered real estate market itself would rise up and say it loud and clear: Then don't! Our market glut isn't exclusively from short sales and foreclosures; it's also caused by the try, try again crowd to whom every indignity associated with selling with today's real estate conditions is a badge of honor. Go figure.

Gauging The Bottom

For the last 18 months or so, gauging he bottom of the market has been a buyer's primary goal. It has been a how-low-can-I-go scenario. When I'm working for a seller who has drawn a line in the sand, below which there is no deal, I encourage the buyer's agent to be reasonable when bringing in an offer. Last week, I conveyed just that to a agent who said her clients were thrilled to find just the right house. They'd fallen in love after two mishaps -- houses that didn't pass inspection for whatever reason -- and they just couldn't wait to make this happen.

Then the offer came in -- $60,000 under asking. Now, the sellers bought it for $50,000 more than they were selling of for, so we'd done the numbers and felt sure the house wasn't overpriced. Well, maybe not THAT over priced! We negotiated. The sellers dropped another $20,000. The buyers...oh, they hardly budged at all and then, quick as a wink, disappeared. I guess they didn't love the house SO much.

And now, some other people are interested in it. We'll see what they come up with. I reviewed all the competition today in the MLS. Okay, this isn't the biggest house in the price range, but it's by far the prettiest, the most elegant, and the most updated. Time will tell.

What we're seeing this first month of a new year is promise -- for homes that are priced right. Amazing but true: Buyers are making offers. And they're not all insanely low. In Montclair and Glen Ridge, NJ. adjacent towns with enormous desirability due their access to NYC, homes are selling over-asking again. When they're "worth" it!

Which brings me to the how-low-can-I-go scenario in 2010. A client of mine made an offer last week on a very pretty, updated, centrally located home here. She came in $20,000 under asking for her Best and Final offer; the other two bidders came in at least $20,000 over asking. One of my team's listings in Maplewood last week, cute as a button, sold in just days. Just under a 10 percent adjustment in 2 years for this home, to be sure, but hardly a Humpty Dumpty real estate moment.

Sure, there are many homes out there without happy endings and there will continue to be. Once a home enters short sale status, whatever real value it has will have been compromised. Only bargain status will give it marketplace power, no matter the home's inherent value.

But for properties left untainted by misfortune, the outlook is better. The most desirable properties are being shown and embraced. A colleague of mine put a cute 100-year old home on the market yesterday. There have already been 12 showings. This one last sold in 2008, with multiple offers. Now priced $10,000 under that old sale price, it may well reflect that part of the market that retains value. It's not a bargain, never has been, and it seems, never will be. But it's a wonderful place to live, great schools, great commute, and it's going to be home sweet home, on a fair and square basis, to someone who just loves it and embraces it, price and all.

What a deal!

Upgrades, Anyone?

During the old high market, I never ceased to be in awe of buyers who closed on their new homes and then began ripping out and replacing just about everything to create the perfect environment for their lifestyle - sometimes at very great expense. They were largely undaunted by worries that the sum of these improvements might take a while to enhance the home's value in the marketplace.

Through time, not all home improvements have made sense -- we all see that now. The best upgrades had utilitarian as well as design value, the worst fulfilled that short-term desire for an icing-on-the-cake lifestyle. Like custom cabinets vs. semi-custom; whole house A/C vs. window units; finished basements vs. not-so-finished -- but still cute, still liveable.

Custom cabs make no sense if the rest of the house isn't up to custom standards -- if you're still walking on old, curled linoleum or staring up at florescent lights from 1965; A/C is a luxury in a house with an old roof and peeling shingles, for buyers will discount the aberrant upgrade and focus on the have-not part of the home in this, our new, frugal buying environment. Finished basements for more family space-- hey, who wouldn't want that? But what's so bad if it hasn't got wall-to-wall carpeting or the pipes are visible? What about just replacing that horrible commode and putting in a new one for $100? Forget the high-end tumbled marble down there.

And so here we are at the end of a brutal 2009 real estate market, faced with the official yearly cost vs. value report on home improvements -- and it's a lesson to us all. According to Realtor.com today, "the majority of the 10 remodeling projects with the best return on investment nationally are a testament to pragmatism. Six of the 10 projects, using a variety of materials, involve home maintenance that costs less than $14,000."

There will still be those who jump head first into home ownership with the dream of perfection -- and, if they have the money, who can stop them? -- but my fervent New Year's hope is that my buyers will find ways to enjoy what they have and to work toward perfection with caution and humility. For, as some have found the hard way, new kitchens and baths do not necessarily happiness -- or profit -- make.
 

Managing Expectations

That's my favorite phrase these days ... managing expectations -- for my clients, buyers and sellers alike, as well as for myself.

As a Realtor who has been in the profession almost a decade and a half, it's hard not to remember the good old days, when the only expectations we had to manage were about how high a house would sell, or how many houses a buyer would have to lose before figuring out he or she had to bid way, way over asking.

Now, expectations are in miniature: How low a buyer can safely go in with an offer; how low a seller has to go to rid himself of the property. Lots of lows, lots of misery all around. And, when the parties have finally agreed on something, comes the hard part: getting a mortgage.

The other day, a very good mortgage professional we work with sent a "managing expectations" note to one of my clients who is due to close on a home any day. The process has been relentless -- documents required up the wazoo, signatures and double signatures, more proof here, much, much more proof there. Once, it was fine to for me to witness clients' signatures on a contract with my own on just one line. Now, for every signature, another line for me to sign.

I'll refrain from asking for what real purpose such diligence exists. The other day, just days from closing, one buyer was told to her loan-to-value ratio was suddenly off-balance. The bank demanded she pay off her car loan and she did. Days past, the closing date came and went. Underwriting just stood still, with only one further comment -- that there had been no point in paying down that car loan. We finally took the client to a private banker who funded the purchase in just days.

So, I was rather touched to see the following end-run email from our mortgage friend, which in a few words telegraphed that the next few days would no doubt be harrowing: "Thanks for sending the documentation and working with my associates," he wrote to my prosective buyer. "They will have the documents reviewed by the underwriter and our operations manager to have the loan cleared to closing but please be prepared to give additional documentation all the way to the closing.  That is the nature of the mortgage industry now with the large amount of documentation required by FHA, Fannie Mae and Freddie Mac.  I tell clients, and especially FHA borrowers, that we will be finished supplying the underwriter with documents when you walk out of the closing. I apologize but that is the state of our industry as we dig out of this foreclosure crisis. Please let me know if you have any questions as we are with you every step of the way."

Post-apocalyptic real estate at its best.
 

Commiseration Time

In downtown Miami, there are so many unfinished and empty high rise buildings. As soon as people I met there this week hear I’m in real estate, that’s what they mention. It’s commiseration time. We’re all in this together, whether we live in tall, communal buildings or short, single-family ones. Now, on my way home, a captive of delayed flights, I can’t escape today’s murky headline – "Improving Home Sales Belie Market Reality." The gist of the piece is that more than half of all sales are now "distressed"; only 31 percent are "unforced or optional" – meaning not tied to the far-reaching mortgage mess.

In many of these "unforced and optional" deals, you wouldn’t know they were the conventional ones, because they have become so terribly contorted. Buyers motivated enough to go on with their lives, to buy a house or condo so they can make the life they planned before all this terrible stuff took over,  now approach their experience with fear and loathing -- of the financial process which is much more convoluted than before; and of the sellers wading knee deep in the depressive market with their most valuable possession, their house.

This week, a number of my summer deals closed (or didn’t …maybe next week!) All had in common a demoralizing stand-off that began with a price tug-of-war the likes of which we haven’t seen in more than a decade – and ended in disbelief that the process could have gotten so ugly. These days, the usual miseries of the home inspection period are likely to fester right up to the end, and sometimes after. Angry sellers, even those lucky enough to make a significant profit, argue over a hundred dollars to fix something. Buyers unsatisfied by repair estimates, haul in in new ones with higher numbers. Not convinced by paperwork showing this or that has been fixed, they drop in to check for themselves.If a homeowner's fixed something himself, it's not good enough; call in an expert.

In retaliation, sellers retreat and dig in. Refrigerators and window treatments promised to buyers are suddenly withdrawn, mid-deal. Forget hiring the cleaning team before closing. Let the place shimmer with dust. Let the lawn go. It's all-out war.

I try to remember my own first-time homeowner experience, in the mid-eighties. My husband and I couldn’t have been dumber about the process. I remember a lot of nail-biting and tears as we toughed it out. We got a really cute, old house that needed everything -- and we were hardly daunted. The kitchen closets didn’t even have doors! We expected nothing from the sellers except to turn over the keys at closing. Perfection wasn’t a word that could be applied to our little place, but we worked together, over years, to bring it back. Our next house, the scenario was much the same. When we pointed out that the roof was flapping and the furnace rusted out, they shrugged. We bought it, anyway, because we loved it.

So, I just clench my teeth and smile when today’s buyers, who are getting some astoundingly good deals, don’t think it’s enough. Be happy, I think. This house experience will do you good. Make it your challenge. Don't move in with all this bad- deal karma.

When the static clears, maybe they will hear me.

"Bought & Sold" Lite

With Season One (2007) "Bought & Sold" episodes running non-stop on HGTV for almost 2 years, I occasionally get recognized. Often, I'm presenting my marketing plan for a listing and, when I mention I was on the show and clients make the connection, eyes flicker appreciatively, broad smiles ensue and everybody's happy. It's a nice piece to present and I'm grateful for it. And, so, participating in Season Two, a shoot that lasted about 3 months, was a good thing, despite the inconveniences that a long-term commitment like this engender. The last pick-up for one of my stories was completed a week ago. Tonight, the show "debuts" with a dozen new episodes. Later this week HGTV will toast us in a Manhattan bar. Very sweet.

But I sort of feel like I just completed one of those hapless network shows that goes straight to summer -- no promotion, no nothing. It's a blizzard out there today, but I would have been happy for HGTV to have had us picked up in a limo for appearances on Today or Regis to yap about the second season and the real estate market (isn't everybody?) We're a fun group, we "Bought & Sold" 'stars'. Instead, I'm in my mismatched PJ's, blogging.

Season Two: Starts tonight at 10:30. So far, no HGTV website presence, no TV book highlights, no cast promotion. We're just reality show functionaries, I know that, but People over there in TVLand: WHEN ARE MY EPISODES GOING TO BE ON SO I CAN TELL MY MOM?

The Times They Are A Changin'

Three of our clients lost their jobs yesterday. Two were making offers that coincided with their layoffs and, in the absurdity of it, they didn’t know whether to laugh or cry. The third was about to resume an earlier home search but for an unexpected pink slip. Earlier this year, two of our deals collapsed at different times over job insecurity, but nothing brought home the fragility of the market, not to mention the very fabric of American life, like this most recent series of events unfolding within minutes of each other.

I’m a wee-hours-of-the-morning newspaper reader. In a few years, if things continue to deteriorate in that industry, I’ll be bringing my laptop to the kitchen table, I guess, to insure my current-events fix. These days, the take away from my sunrise fact-gathering and watching "Anderson Cooper 360" before bed is pure, unadulterated gloom.

Armed with statistics and examples of our societal failures, I must venture out into my little real estate-centric world in an extra-empathic mode. With pad in hand, sitting at other people’s kitchen tables, I find myself asking excruciating financial questions, doing the numbers and trying to come up with solutions without resorting to extreme ones like short sales, auctions, foreclosures or outright bankruptcy.

This week, I advised a client whose affordable, centrally located condo is sitting like a lump, to just forget about selling and investigate refinancing to consolidate her two untenable mortgages. I negotiated payment at closing for home repairs for another client who doesn’t have the cash to fix what he needs to fix before then.  I hunkered down with lovely people who sunk almost $1M into new construction, only to find their current home isn’t saleable for anything like what would pay off the loans they’ve taken to finance the dream house. To the owner of a totally pristine, well-located property I suggested a $50,000 price reduction -- which was followed by virtually no showings.

The Wall Street Journal quoted one builder as saying that in October, ‘home buyers went on strike.’ The hope was, after the election uncertainty passed, buyer enthusiasm would increase again. Not so. They’re definitely still hunkering down for a long term disassociation from all things h-o-u-s-e. CEO Robert Toll of Toll Brothers Inc. said yesterday that the ‘scale and the urgency’ of the problem needed further government action. In unison, US Treasury Secretary Henry Paulson reflected that his highly-touted, original bank bailout hadn’t resulted in a real loosening of mortgage funds after all and that his program was being adjusted to help banks really help the little guy. Who knows how long it will be before the mechanics really kick in, not to mention whether he's on the right track this time?

For many, like another of my clients, whatever happens will be too little, too late. He’s a sweet guy who's already borrowed deeply from credit cards to keep his mortgage current but finally fell behind. So when he finally heard from his bank this week, six months after first reaching out, that his recently-adjusted mortgage would be frozen at the previous rate, there was no solace. He is deeply in hock; he cannot keep the house.

Meanwhile, the worsening state of affairs at America’s car companies threatens to intensify the angst we’re all feeling because isn’t this our first truly American industry, the one that largely transformed this nation into a many-layered manufacturing and communications culture in the first place and gave us the mobility to go wherever we needed to be to fulfill our respective dreams? But if we can't keep our houses, we certainly can't buy new cars. A daisy chain reveals itself.

My business realm is no where near Detroit geographically, but advertising, marketing and investment sectors that serve Detroit are neighbors, friends and clients on both sides of the Hudson River. Tom Friedman, the New York Times columnist, had the keenest idea yesterday in his thoughtful consideration of the ailing auto biz. "Somebody ought to call Steve Jobs…and ask him if he’d like to do national service and run a car company for a year." We need to think big, don't we!

Indeed, everything and everybody's connected! "All roads, into and out of this crisis, run through the housing market," the New York Times avowed in its Nov 11th lead editorial, "It's About the Mortgages." "Mr. Paulson should be pressing for a streamlined plan that includes permanent modifications to troubled loans. That is the only way to keep Americans in their homes, save the banks and the economy."

Amen.

Alice Doesn't Live Here Anymore

A client of mine likes a quirky Tudor in town, although not near enough to buy it. Overlooking Manhattan on a clear day, pressed snugly against an outcropping on First Mountain, it calls out to a unique buyer who isn’t interested in level land, uniformly big rooms or spectacular cook's kitchen with six-burner Viking, SubZero fridge and an amazing silent dishwasher. Charm, though, it has, in spades. But it isn’t worth what it was…just 2 years ago, when all its quirks seemed so much more valuable.

This home is currently a short sale, meaning the value of the property has fallen beneath the owner’s mortgage amount and the lender has agreed to negotiate a possible lower sale price than what is owed. In 2006, the owners paid just over $800,000 and originally priced it a few months ago at $900,000, in an attempt to at least break even; that didn't work . After all, why would this house suddenly be worth 10% MORE in a falling market? Now the house has been reduced to about what the owners paid for it. If, minus expenses (back taxes, commissions, bank-added legal fees, etc.,) a budget-minded buyer were to offer $750,000 right now for the home, the lender would mull over the options for weeks and perhaps months, finally order an appraisal to judge the current value (another 4-8 weeks), and finally either accept the offer and mandate an immediate closing date or reject it.

Although the house is still "owned" by the holder(s) of the deed and that’s who signs the offer, lender approval really drives the deal. My potential Tudor buyer is, in his head, where so many buyers are today: He’s convinced the house will fall further in value to a point where it’s just a steal. If I had a crystal ball, I would just look up the date of that event today and put it in my calendar to call him.

 

Any deal he might make with the lender, at least the way business is conducted right now, could take my lifetime AND yours. The process is that protracted! If the house just sits there without an accepted offer, eventually, in 6-9 months, it will go to auction, where it probably won't sell -- most auctioned homes don't -- and then return as a so-called REO property (real estate owned), meaning the lender now fully owns it. You might think it would then be really priced to sell, think again. Even on REO properties, most lenders demanding as close to market value as possible, hanging on (and on) to prices that reality tells us just won’t fly.  They also prefer cash offers, and how many people have that kind of money now?

 

Impatience is a curse, both for buyer and agent in circumstances such as these. The lender remains a faceless negotiator throughout the process, available by phone if you have the right code words, hard to decipher, imposible to get information from -- generally impenetrable. If there are two outstanding loans on the property, it’s much worse to deal with dueling banks.

 

One short-sale nightmare I was sucked into in 2006 remains with me today, five buyers down, eight auction stays and how many more depressing outcomes to follow; only God knows. Another, with a now-lapsed listing after six months and two rejected offers, one for the actual amount of the most recent appraisal but the bank hesitated, even then, and the buyer fled in fear and disgust -- and now, the beleaguered owner has disappeared.

 

Yes, Alice is gone. She’s really gone, somewhere out there with at least a million other (and predicted to double) Americans who have lost their homes or will very soon, beyond our frantic calls and emails and, finally, our concern over her health and welfare.

 

At the end of the day or year that these unfortunate properties like Alice's do change hands, what do these red-blooded American banks do? Reduce payment to the loyal intensive-care nurse-agents who have been tending our near-comatose patients for months and months, hoping to do our bit to make things right. Dare I complain? Our remuneration is pretty much zero, already, if you figure in time and expense spent calling and pleading with lenders, outlays for lawn maintenance, plumbers, roofers, you name it, which is what so many honest REALTORS® now do for houses like this that nobody lives in anymore. A strange situation, indeed. With winter coming, it will get worse.

God Bless The Writer

Tonight was the MEWS party, a huge bash of Montclair (NJ) editors and writers. In this town of 39,000, there are probably more than 1000 of them with Montclair addresses. Working for the New York Times, New York Daily News, New York Post, women's magazines, publications in New Jersey, blogs, on-line publications, not to mention the gobs of book editors and agents, these are the movers and shakers who in other communities would be considered quaint outsiders but here are the heart and soul of a place.

A few hundred or more of them came together at the Diva Lounge in downtown Montclair for open bar and food, to network and network some more. The air was thick with "what I'm writing now and what I just gave to my agent" talk. One friendly, very famous, best-selling novelist was there, yapping away...another regional best-selling author, too, along with the editor of the local weekly paper, PR writers, first novelists waiting for acceptances or rejections, daily journalists by the dozens -- all enjoying an evening with like-minded people. Everyone wore name tags and their names all seemed more than familiar to me. I still read 3 newspapers a day and my share of mags...In byline city, this is how we creative types get our kicks!

As I used to be a writer in the formal sense -- I wrote books and had bylines in magazines and newspapers up the wazoo and still write a real estate newsletter on NJDreamHouses.com and this blog -- I made my way there with all the confidence that I would still be considered one of the group. It seemed to work. As far as I know, I'm the only former newspaper journalist and author who is a Realtor in Montclair, NJ, although there are, I'm told, one of two others dotting the landscape of South Orange, Maplewood and other local towns (and my colleague, Tamima Friedman, freelanced as a writer in before the real estate urge hit.)

It's a good segue, writing for a living to selling real estate. You need drive, curiousity, the love of research; you need self-promotion, you need obsessiveness. I had all of that stockpiled already and I just reapplied it to another area. Now, often people ask me when I'm going to write a book on real estate. I say, I think not. The point is, if you are in real estate, you are in it to sell it. Lots of it. That is what I am doing. Books? Love them. Love authors, too. I'm even married to one. But, for now, I'll stick to newsletters, blogs, and The Deal.

Super Bowl Weekend

Like Christmas, New Year's Day, July 4 and Labor Day, Super Bowl Sunday and the Saturday preceding it, are real estate duds. The phone is eerily quiet; appointments drop off; website hits decline. Weekends like this are terrific if you're buying, because the competition diminishes, but nobody who IS buying cares about that as they plan their best SB party ever. For sellers, it's a respite from the clumping in and out of prospective buyers with slush and salt on their shoes. By Sunday afternoon, most sellers don't want to show anyway. As guests arrive, the odd buyer here and there will weave in and out of party clusters, munchers, and big-screen, pre-game reports. That's no fun!

As for me, this weekend's a mini-vacation of sorts. Time, finally, for the gym, catching up on paperwork, reflecting on business. A bit of praying, too, that the good signs we've seen the past few weeks -- competing offers, doubling of the buyer pool from last fall, when everything seemed so glum -- are true signs of of pent up energy that will infuse the spring market.

And a Happy Super Bowl to all!