The Timing is The Thing

Happy New Year my friends!

The time has come to put 2009 behind us once and for all, and what a year it's been! Financial tumult and market buckling have continued to haunt many of us and has persisted to dampen consumer confidence. Thankfully the housing stimulus package did well to, well, stimulate housing. Due to its success, it has been not only extended but expanded (see entry below for details). As the economy seems to be stabilizing a bit, with some industries being more or less out of the woods, others bracing for a late hit, now can be a phenomenal time to buy or sell a home in specific price points.

If you're buying your first home, or maybe a second or third move up, you have a great opportunity for savings. Understanding in what form those savings are going to come, though, will make you a more prepared and realistic consumer. Because the market has not hit these sub-$300k properties the way the high dollar values have dropped, and because the stimulus package has brought so much activity to the area, you are simply not going to have much luck with well-below-market offers. We have experienced clients who want to offer 10-20% below asking on homes that are already accurately priced and need few repairs. While the scuttlebutt may lead you to think in a buyers market, anything goes, this simply isn't going to be true.

Consider taking a look at the public records. When did the subject property get purchased by the current owners? How much did they pay, and how long ago? As you will probably observe if they purchased after 2002, their asking price is probably not much more than what they paid. In some cases it will be less. This will significantly impact the negotiating leverage you will have. Remember also that from their "profit" they also must pay their Realtor and yours, as well as transfer tax and possibly repairs (based on a home inspection contingency). The truth is, if you really believe in low-balling because the asking price is out of line, by all means, proceed with swagger. However if you're low-balling only because you've heard from friends or family that you should be able to get whatever you want "in this market" you may want to soften your stance.

How can you get a great deal if you don't get a deeply discounted price?

Location. Consider how accessible the areas are where you may actually WANT to live. In recent years --during the "go-go times" of real estate-- a first time buyer in a sub $200k price range was forced to look in rural areas or poorly ranked school districts. Because of the price adjustments and short sales available, this is no longer true. This is a huge bonus and absolutely cannot be overlooked. I have a client who is purchasing a condo in Unionville-Chadds Ford school district for $125k. Not a typo. That's an amazing investment, and was a full price offer. Sometimes it pays to look at the big picture.

Interest Rate. My generation is somewhat spoiled with interest rates. We weren't old enough to be securing credit lines when things were sky high back in the 80s and early 90s. But money is still very cheap, especially for housing. Even if your credit is less than perfect, if it's good enough to get approved, you're still going to get a relatively good rate. Fill out a pre-approval here to get some ideas of what you're working with: http://larryflick.tridentmortgage.com/apply.cfm Larry and his team will provide prompt feedback and guidance for you first-timers especially if you mention I referred you.

Tax Credit. Maybe it takes hitting hard times for someone to realize that the government does not actually hand out money like it's going out of style. That all the things we hear about public assistance being easy to come by is complete bologna, especially for honest people who don't exploit the system. This housing package is probably one of the only times you and I are going to squeeze a dime out of the government, and I think it would be foolish not to seize that. If they're projecting an end of social security and the US being knocked out of first place as financial super power, this could realistically be the last chance for us to milk the cow. Reach out and start squeezing baby, get that money!

Activity. As a seller this is the single most important aspect of today's market. People are looking, people are buying, people are going to open houses. And if there's one thing I learned from my time in new home sales, it's that activity begets activity. You've never seen people more anxious to put a deposit down on a new home than when there are other families in the model home at the same time. It may be oversimplifying, but this argument is true: No one wants to look like an idiot. We conform so that we have a sense of security that our decisions aren't dumb, because other people are making the same decisions. This is the biggest key to consumer confidence, and will be, in the stable Greater Philadelphia area, the key to re-building the real estate market.

People see their friends looking at new homes, going through the open house listings in the classifieds and they get excited. "Honey, if Jess and Chris can do it, we can do it." The excitement spreads throughout their social network and just like that, Lisa, Sam, Brian and Tim....they're all thinking they can do it, too. This is why you need to get your home listed NOW. You want to catch that building sense of enthusiasm and urgency before some other unforeseen financial hailstorm hits the media and scares everybody right back into their apartments. To understand more about the ebb and flow of consumerism and what drives people to buy, read The Tipping Point by Malcolm Gladwell. The Division President of my former employer recommended it years ago, and I strongly urge all of my associates to check it out. As someone who intrinsically "gets" trends and patterns, it was all second nature to me, but the thoughts were well-constructed and helped me identify certain trending signals I would have once missed.

If you have specific questions about listing your home or buying in this market, I'm happy to answer them. Whether you're ready to make a move now or you're just feeling curious, I never consider client education a waste of my time! sarah.alderman@prufoxroach

NEW!!!! Tax Credit Details!!!

Homebuyer Tax Credit Update!

On November 6, 2009, President Obama signed a bill to extend the tax credit for first-time homebuyers (FTHBs) through June 30, 2010. The bill also opens up opportunities for others who are not buying a home for the first time.

TAX CREDIT OVERVIEW
Who Gets What?

First-Time Homebuyers (FTHBs): First-time homebuyers (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10% of the purchase price of the home, with a maximum available credit of $8,000 Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

Current Owners: The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

What are the New Deadlines?
In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

What are the Income Caps?
The amount of income someone can earn and qualify for the full amount of the credit has been increased. Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible
Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

What is the Maximum Purchase Price?
Qualifying buyers may purchase a property with a maximum sale price of $800,000.

What is a Tax Credit?
A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual’s primary residence.

How Much are First-Time Homebuyers (FTHB) Eligible to Receive?
An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.

Who is Eligible fort FTHB Tax Credit?
Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible. This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.As mentioned above, the tax credit has been expanded so that existing homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years are now eligible for a tax credit of up to $6,500.

How Much are Current Home Owners Eligible to Receive?
The tax credit program includes a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Can Homebuyers Claim the Tax Credit in Advance of Purchasing a Property?
No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.

Can a Taxpayer Claim a Credit if the Property is Purchased from a Seller with Seller Financing and the Seller Retains Title to the Property?
Yes. In situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Some examples of this would include a land contract or a contract for deed. According to the IRS, factors that would demonstrate the ownership of the property would include:
1. Right of possession,
2. Right to obtain legal title upon full payment of the purchase price,
3. Right to construct improvements,
4. Obligation to pay property taxes,
5. Risk of loss,
6. Responsibility to insure the property, and
7. Duty to maintain the property.

Are There Other Restrictions to Taking the FTHB Credit?
Yes. According to the IRS, if any of the following describe a homebuyer’s situation, a credit would not be due:

They buy the home from a close relative. This includes a spouse, parent, grandparent, child or grandchild. (Please see the question below for details regarding purchases from “step-relatives.”)
They do not use the home as your principal residence.
They sell their home before the end of the year.
They are a nonresident alien.
They are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. (This does not apply for a home purchased in 2009.)
Their home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)
They owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2008, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2005, through July 1, 2008.

Can Homebuyers Purchase a Home from a Step-Relative and Still be Eligible for the Credit?
Yes. As long as the person they buy the home from is not a direct blood relative, the purchase would be allowed.

If a Parent (Who Will Not Live In The Property) Cosigns for a Mortgage, Will Their Child Still be Eligible for the Credit?
Yes, provided that the child meets the other requirements for the tax credit.

Get in touch with me today if you have any questions!!

Thanks Matt, that reminds me: The SSP Factor

SSP. Shameless. Self. Promotion. Hands down the most uncomfortable aspect of real estate for me. For someone as extroverted and seemingly confident as I am, who enjoys public speaking and marketing, you'd think I could self-promote without breaking a sweat. But that's definitely not the case.

As my Facebook friends can attest, I am regularly posting links to my real estate blog, pictures of my listings, status updates mentioning my team. And I feel SOO gross doing it. Seriously I prefer more of a subtle ninja marketing technique. But ninja marketing doesn't work in real estate, and I have kiddos to feed and roots to touch-up. Ain't no time to be a ninja.

When you are an agent, whether it's with Prudential, Keller Williams, Century 21, etc, no one is going to promote YOU -- the individual agent-- except YOU. And you will quickly understand why I spam the shit out of you on the interwebs at every opportunity. Who do you think is gonna send you leads? Your broker of record? Other agents? Santa?

The first obstacle you've gotta tackle is that your friends and family will not think of you as an agent when you first start. They will think of you as their child, a teacher/waiter/IT support tech/scientist....whatever you were before you got into real estate. You might laugh but I'll offer two true stories as proof. My mom's co-worker told her she wanted to sell her house, and asked if she knew a good realtor. She was half-joking...she remembered I was a realtor and was just sorta waiting for my mom to say "Why yes, my daughter is an agent". Instead my mom forgot that her only child, who talks about real estate ad nauseam, was not working for a builder anymore and said no. Her co-worker, perplexed and unsure if maybe she'd misremembered, went home and googled, and found another agent. My mom recounted this story to me still not realizing her mistake. I kept counting to 3, willing my arm to stay glued to my side so as to not, well, bitch-slap my mother. That brain fart just cost me a potential $6,000 commission. Ouch. THEN my step-grandfather decided to sell his house. He had always insisted realtors were "crooks" and he would never ever use one. So imagine my surprise as I drove past his house and saw a Re/Max sign in his front yard. I honestly almost barfed on my steering wheel. My face got hot, I broke out in a cold sweat and I started to cry. I mean really?? My own family didn't even use me to list their home? How humiliating!!! He said he "forgot". He forgot that I had my own real estate team, and I guess forgot that I had been selling houses for four years, and I guess forgot I had two babies to feed all on my own. Hmm. I had to chalk it up to his age, brush it off, and move on undeterred. But it is still awkward whenever I see him.

You can laugh, but all of these things will happen to you when you first get started. You are your own marketing department, PR rep, advertising campaign, etc. What did I have to blame these two mishaps on? I had to blame them on myself for letting my own family forget what it is I do for a living. Go ahead and be embarrassed to self-promote, go ahead and be shy, laid back and all zen about letting it 'come to you'. Perhaps you'll make enough to keep you in the business. Perhaps you won't. But you're definitely not going to have abundance until you get over it and spread the word.

Easy Money? That's news to me.

A lot of people I have met over the years have told me about their plans to enter into the real estate profession after hearing what I do for a living. "It's such easy money" they tell me. I try not to choke, or worse laugh in their face, when I hear this. It's actually sort of adorable. I'm going to turn my pockets inside out for your benefit, so if you are considering getting into the business, wrap your brain around these numbers.

Immediately after getting my license (classes $600 + licensing fee $83 + exam $56) I was hired as a licensed assistant for Re/Max Classic in St. David's. I liked the office because I would be working for someone I knew and it was in an area with high property values. The downside was that I lived about an hour from the office and with no hourly pay, gas money was not instantly reimbursed and Blue Rt traffic was killing me. So I chose to go in another direction, but of course there was lag time in figuring out what direction exactly... so back to bartending for awhile.

After a grueling FOUR interviews, I was hired by a luxury home builder as a Sales Associate. This felt like the brass ring of real estate jobs: a base salary + commission + benefits? Amazing! Prior to signing on I received an offer letter for my base salary (about $30k-ish) and was told that my commission would be "about $10k", but didn't see it in writing. So I had no idea what this meant...did it mean I'd make $10k per house?!?!? Because I would be selling $800k-$1M homes, that didn't seem impossible, but maybe unlikely. Or did they mean $10k total? Just a small difference. I was confused but so excited for the opportunity that I accepted the job. It turned out that they meant about $10k total. (I was promoted to a Sales Manager fairly quickly, about a year and a half later, and the money got a lot better.) Still, very exciting stuff and I would go on to stay there for a few great years, until the twins were about 10 months old.

I started to feel really restricted by having to sit in a model home day in and day out, whether there were any prospects coming in our not. I began to resent that had I sold one of our homes on the other side, as a Realtor, I would be making about $20k/house versus $2k/house....base salary or not. And so as it happens, the grass on the other side started looking pretty green and off I went. Back to being a free agent.

I started at a company I'll call XYZ Realty, just to be fair. I transferred my license ($25) after taking some continuing education ($150), bought business cards ($50 + photographer fee $75) and a for sale sign ($50). I knew I'd be working from home but this particular company required even at-home agents to pay a monthly fee ($55). We also paid for any photocopies we made. I joined Trend MLS so I could publish my listings and search for them (this isn't exactly optional, it's our lifeline...a $226-up-front- $126/year-lifeline).

For the listing I had with XYZ, I had to pay for my own For Sale sign, my own color copies for the brochures I made for prospects ($86 for 20 copies of the brochure), food for the broker's open house ($30), food for the public open house ($30). For my buyer, my biggest expense was gas. They were looking in Delaware County, about an hour from my house, so the back and forth wasn't as nominal as it might've been if I was working in my area. In the end, my listing was priced too high and didn't sell --but did cost me a couple hundred bucks. My buyer successfully purchased a home in Aston. Out of my $3800 commission I had to pay E & O insurance ($400). So from January-March I grossed $3800 and my net was about $2000 give or take. Yikes. Ultimately, the culture of XYZ as well as the monthly fees/operating expenses were not for me. Next!

I decided on Prudential Fox & Roach, where I am now, after a lot of research on Coldwell Banker, Long and Foster, and Weichert. To be fair, I will say some of my friends in the business have not liked PFR; they've felt it was too corporate and structured. For me, coming from a publicly traded builder, this was music to my ears! For every marketing piece I could need to create there are templates to help, beautiful pieces already made and free for my use, and photocopies are free, too. I have a desk at the office as does my teammate Greg and we do not pay monthly fees. We don't pay for signs. I was able to negotiate some other perks since I have been in the business and have a large Sphere of Influence. Greg is new to real estate, so he has had more out of pocket expenses: business cards, announcements, and a very in-depth training program ($200). I should mention XYZ offered free training, however none of the sessions I attended offered me anything of value. I can see though that a brand new agent probably would benefit, but it was fairly basic stuff. The PFR training is much more in-depth and technical than focused on sales. And in my opinion you can either "sell" or you can't. It's more of a natural gift, not something that can be taught.

As an agent for PFR you are expected to join the National, PA, and Suburban West Realtor Associations. This certifies you to be a certified REALTOR. A REALTOR is a Real Estate Salesperson who has received additional ethics training. To become a REALTOR isn't cheap: $150 application fee + $373 up front, $373/year.

I've been at Prudential since June. I started working with a buyer pretty immediately and their settlement did not occur until September 15th. So from March 28th (buyer at XYZ settles) to Sept 15th (buyer at PFR settles) I made $0, but I spent quite a bit. From my first commission check, I gave my teammate a cut, paid for a new E & O policy ($400...again) and was left with about $1700.

Because I am extremely well-connected and Greg is no wallflower himself, my team will be headed into November with 2 new listings, a possible sale of our Reading listing, 2 investors, a renter and a potential buyer. All of these leads were generated by our friends and my past clients. But for a typical new agent, you will also need to spend some dollars and time prospecting. Flyers, floor time, internet based lead generation, mailing lists, direct mailings...and all of those things cost money.

So. Is there money in real estate? ABSOLUTELY. Lots of it. Is it easy? Not even a little. If you're passionate about people and investments, dislike static environments and predictability, and have about $15k-30k at your disposal I fully encourage you to go for it. And although I have my own opinions about most of the companies out there I will never, ever try to recruit and will offer as unbiased an opinion as possible.

Keep the faith, if you're already in it right now. As my buddy Dave Hopkins says, good things happen to good people who work hard. Simple advice really, but it's gotten me through some very lean times and on my way to the f-a-t.

Grab that cash with both hands and make a stash.

A word on finances as a homeowner

DON'T take out a home equity loan unless you plan on staying in your home for 5-10 years with no chance of relocation
DON'T use a home equity loan for anything that won't increase the value of your home (furniture, wedding, car, vacation)
DON'T gloss over the financing terms of your mortgage simply because you're excited to own a home; that home will quickly own YOU.
DON'T forget how many items you will need to make the house a home...avoid being 'house poor'

DO act now if you want to be eligible for the $8000 first time home buyers tax credit
DO remember why homeownership is made out to be such a big deal-- because it IS. If you have one month's pay in savings and credit card debt equal to or in excess of that amount, you're not ready to buy. Just because you CAN get a mortgage doesn't mean you SHOULD.

Investing in homeownership is just that: making an investment. As such it takes preparation, research, dedication, and resources to make it work. If you have specific questions about your finances with regards to purchasing a home, please let me help! All inquiries are confidential and I always have time to help a friend. sarah.alderman@prufoxroach.com

Turnin' Down the House

Buyers, this little nugget of wisdom is for you as well as your agent. Did you know that for every property you see, your agent will be expected to provide feedback to the listing agent in the areas of price, appearance, and your interest level? Although your agent uses your reaction to the home as the basis for their feedback they often input their own opinion as well. This feedback is invaluable for the sellers of the home. It can affect their willingness to reduce price, to make repairs, or simply rearrange some furniture. But let us remember the Golden Rule when giving feedback: Do unto others as you would have them do unto you. A.K.A. put down the Hater-ade before providing your feedback.

First, it can be very frustrating when your realtor says: "Price- Good, Home Showed- Excellent, Client Interested?- No"...and that's it. What is it you didn't like about the home? Was it the size, location, feng shui, building materials? Was it just a matter of taste?

Second, and exponentially more frustrating, is the feedback that seems to scream "the person who completed this feedback form is having the worst day ever". The buyer is not interested, because of a large element-- let's say they wanted a bigger yard. Then it would seem a bit unnecessary to go on and on about all of the perceived shortcomings of the home. "Paint colors are tacky, strange layout, floors should be refinished, unusual landscaping." Now see...them there fightin words. Don't forget what a tremendous amount of emotion the sellers have tied into their home. This is the place they scrounged every dime they could find to buy, and spent years pouring bits of themselves into. They picked that paint color together...as a matter of fact that is the first thing they ever bought for their home as a married couple. They've raised their children there and taught them about gardening. So what if the result looks a bit 'unusual'? You're just going to tear it up to build a deck anyway! When you and your buyers agent are walking through the home alone, certainly be as candid as you like. But when providing feedback, be as gracious as possible while still giving an honest explanation of your level of interest. There's no need to gloss over huge defects, but if it's clearly a matter of taste, just let it go.

The other thing you want to steer away from is letting your agent giving the seller's agent a diluted impression of your intent to purchase. Until you are pretty sure you're going to write an offer, be sure your agent isn't giving the green light to the sellers. This will ultimately get everyone's hopes up for nothing.

I had an agent schedule an appointment for one of my listings late one evening. In her appointment remarks, which went to my sellers as well as myself, she said "Buyers are anxious to purchase this home!!". Naturally we were all jumping up and down and basically staring at the fax machine all day waiting for the offer to come in. After two unreturned calls, hours later, I was able to reach the buyer's agent at home. "They didn't like it. It was really much too small. And they thought it the lights were strange. And the yard was......"(by now she's sounding like Charlie Brown's teacher, drowned out by the sound of my high hopes deflating). I was dumbstruck. How anyone could be so insistent that this was their clients' dream home only to be blowing smoke. In the words of Full House's own Stephanie Tanner, how rude!

So remember and please remind your agents that the feedback you give them in private should be filtered and passed on appropriately. That rejection stings enough and there is no need to add extra barbs. And that somebody actually really loves that "funky layout", and someone else will, too.

It only takes one!

Open up!

Today is one of those quintessential September days here in the Delaware Valley when you can smell the excitement of Fall in the autumn air. People everywhere are gearing up for the first day of E-A-G-L-E-S madness, flanked by a Phillies double header. Non-sports fans may be switching out their summer and fall wardrobes, doing home improvement projects to prepare for the winter months, or enjoying the sunshine by spending the day outside. As an agent hosting an Open House today, I'm hoping at least ONE person is also shopping for a home, making the most of the crunch time between now and the deadline to qualify for the First Time Buyers Tax Credit. And I'm hoping I have reached that person with my internet ads, signage, and let us not forget, balloons.

So....do Open Houses sell houses? The resounding answer is "they can't hurt". Convincing, huh? So you may ask "Are they worth it?". This is how the magic happens:

1. Nosey Neighbors

The first question every neighbor has when they see that For Sale sign pop up in your yard is "how much are you asking?". They instantly start comparing their property to yours, trying to imagine what features you've got that they don't and vice versa. So the moment they know they have opportunity to be unabashedly nosey-- a la the public open house-- they are in like Flynn. How's that going to help you sell? They're going to tell their friends about it. Their friends that may have always loved your neighborhood but never had a chance to buy. They're going to tell their co-workers, their fellow parishioners, their relatives. That's our hope, at least.

2. Destiny drives by...........

The signs, the balloons, maybe some flags thrown in there. All part of the sticky web we Realtors weave to draw the unsuspecting prospect to your home. More than any other media, signs are the biggest draw when selling a house, whether it be new construction or resale. If you put a balloon on it, they will come. You never know who could be driving around aimlessly and be sucked in by your jewel-box of a home and it's amazing curb appeal.

3. Real Estate agents doing their homework

If I'm listing a home for sale, I like to take the week before to preview the other homes for sale in the area. There's no better way to do this than to attend an open house. The seller isn't inconvenienced by my appointment with the hopes that the showing will result in a sale, and the listing agent is available to answer all of my questions face to face. And guess what will happen if I like it? My big, Realtor mouth will gab about it to all my other connected real estate friends, and pretty soon that buzz is going to generate at least one showing for you. And one showing is all it takes to make a sale.

Coming from a new construction background, I entertained people traipsing through my model home every weekend, usually just for shits & giggles and often for the free cookies. I know that very often having an open house is something I'm doing primarily to give my sellers peace of mind. After all, if the price isn't right and the location isn't right, even weekly open houses aren't going to help. But the possibility of finding a buyer with a little bit of meeting & greeting, and of course those balloons-- well that is priceless.