How long before it sells? Hard to say

Providence Journal December 21, 2008

How long does it take to sell a house in today’s chaotic real estate market? Although potential sellers can get plenty of advice — most of it centered on setting a realistic price at the beginning of the process — there is no definite answer.

According to statistics collected by the Rhode Island Association of Realtors for the third quarter of this year, the median “days on market” numbers for all three categories of residential properties were up from the same period last year, including single-family and multifamily properties (88 this year, 72 last year), and condominiums (124 this year, 102 last year.)

Most agents agree that, at best, the statistic is a ballpark figure; overpriced houses will linger on the market much longer than average, and properties priced right will sell most quickly.

But even the president of the Realtors’ association acknowledges that the statistics have very little real-world usefulness given the way properties are listed and relisted when contracts expire, prices drop or sellers change real estate agents.

“It’s not a true statistic,” said president Paul Leys.

The “days on market” statistics may have had had a bit more meaning when market conditions were better. When the market was booming, many properties would be under contract well before a 60-day or 90-day listing contract would expire. But today, it is not uncommon for houses to sit on the market for many months, or even for more than a year.

Frustrated sellers are more likely to change agents and/or engage in multiple price cuts, actions that could result in their property appearing in the Statewide Multiple Listing Service as a “new listing.”

In the MLS, the “days on market” clock is reset when properties are relisted after a previous contract has expired, according to Donna McGinn, administrator of the Statewide Multiple Listing Service.

For example, if a house had been listed by Realtor A for 90 days, then listed with Realtor B for another 90 days, and the seller then signed a new listing contract with Realtor B for another 90 days and the house sold 15 days later, the statistics could show that the house sold in 15 days.

As a practical matter, however, real estate brokers and salespeople, and others who have access to the MLS database, can find the listing history of individual properties, including how long it has been for sale and how many times the price has been cut, Leys said.

Buyers who want to know this information can ask any agent for it. (Brokers and salespeople could risk losing their state real estate licenses if they misrepresent facts to buyers, even when they are representing sellers.)

“Buyers should know how long a property has been on the market,” Leys said. “It’s the reality.”

“If you want to track a property, an agent can provide that tracking for you,” said broker Ron Phipps, owner of Phipps Realty of Warwick. But he added that “as an agent, I want the timeline to be reflective of my listing agreement.”

Although the current system has its flaws, Phipps said, the days on market can provide information on how long a property takes to sell at a certain price point. For instance, if a property priced at $500,000 sat on the market for five months, but was relisted at $425,000 and sold within one month, the statistic reflects the marketing time based on the “real market price,” he said. “At 500, they weren’t really on the market in a realistic way.”

Phipps said the high number of distressed properties in today’s marketplace is affecting the average time on market. In the case of a short sale, in which the lending bank has to approve a sales price that is below the outstanding mortgage, many extra weeks of delays are common, he said.

“I’ve got a couple of properties that are upside down,” Phipps said, referring to a case when the mortgage is higher than the current market value. Problems and delays are occurring “not [due to] a lack of offers, but an unwillingness of lenders to work with us,” he said. It can take a lender 30 to 45 days to respond to an offer on a short sale, Phipps said, and that would count as extra “days on market.”

Leys and McGinn said the association has been thinking about altering the way relistings are handled. McGinn said the Statewide MLS may get a computer program that would automatically add plat and lot numbers to properties, and this would give each listed property an “individual identifier.”

Theoretically, if someone takes a property off the market for the winter, after it’s been on the market for 200 days, the “days on market” clock could stop when it was taken off the market and restart at 201 when it went back on the market in the spring.

But for Phipps, and for many agents working to sell real estate, the attraction of relisting long-marketed properties as “new listings” is the hope that this action will bring fresh attention from the market, even if the “new listing” moniker isn’t exactly accurate.

“My job as a listing agent is to sell the property,” Phipps said. “…At the end of the day, price really matters. If it’s well priced, it’s going to do well….The average time on market, frankly, is a distraction.”

Real Estate Bytes December 2008

It is December 11 and already after 6 pm. It is cold, rainy and dark. Like many Realtors across the country, I am at my desk putting in a long day to pull some transactions together, keep others together and identify some new business. (Sometimes I feel like a real estate transaction janitor). For almost 30 years, real estate has been my job and my passion. The cyclical economics of real estate remind me of the weather in New England. We have seasons: seasons of planting, harvesting, tending and hibernating. We have seasons of wet springs, warm summers, bountiful autumns, and raw winters. We know this in our bones. Furthermore, this economic winter is chilling us to the bone, but we will as we have get through this.

It has been a challenging year for everyone, with few exceptions. Whether you are a homeowner, a renter, a Realtor, it is a rare person who says this year has been easy. However, there are some rainbows out there if we look up. Interest rates are great. Think about it: You can obtain a 30 year fixed rate, conventional mortgage for less than 5.5%. The average price of a single family home has come down to under 218k, making housing more affordable for more families. Condominium sales were down this year, but average price went up a few thousand dollars. Additionally, the number of pending sales is up and inventory is down. There are some great deals out there and some investors are scooping them up. In short, these are encouraging signs in the middle of the real estate storm.

One important element is becoming apparent. There are fewer full time Realtors working now, but their value is becoming more obvious. Whether pricing, negotiating, staging, positioning, marketing, closing etc, professional experience will make a real difference. This is true with both the buying side and the selling side. Even in so called normal, traditional transactions it has become an exercise of immense patience, and persistence to complete the sale. Selecting a home is easy. Obtaining the financing and getting it closed is very challenging. Sellers are beginning to understand this new real estate reality, too: The interview questions have changed lately when making listing presentation. Pricing is still important, but many sellers are asking more questions: What do you do to stage? What is your marketing plan, specifically? The question of what is your experience has changed to how many houses have you sold this year? It is also strange as a couple of homeowners have asked if this is my full time job. Both buyers and sellers are asking about professional designations and what they suggest.

Finally, in a market with so many foreclosures and short sales, we are reverting back to a caveat emptor, buyer beware. These homes do not have completed seller’s disclosures. Often there is no water, heat or electric. They are very difficult to inspect and research. If those facts were not enough, add the fact that this category of property takes so much longer to negotiate and acquire. While there may be great opportunities, there are great challenges.

It is New England, so we will bundle up and get through the winter.

NAR Installs 2009 Officers

ORLANDO, Fla., Nov 10, 2008 /PRNewswire via COMTEX/ -- Charles McMillan, a Realtor(R) from Irving, Texas, was installed today as 2009 president of the National Association of Realtors(R) at the association's Board of Directors meeting during the REALTORS(R) Conference & Expo here. More than 20,000 Realtors(R) and guests from the United States and abroad attended the annual meeting this year.
(Logo: Logo: http://www.newscom.com/cgi-bin/prnh/20080923/NARLOGO)
In 2008, McMillan was NAR president-elect, and he was NAR first vice president in 2007. He also served twice as NAR Region X vice president, which comprises Texas and Louisiana. A Realtor(R) for more than 20 years, he is a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth. McMillan was president of the Texas Association of Realtors in 1998, and named Texas "Realtor(R) of the Year" in 2000. He was president of the Greater Fort Worth Association of Realtors(R) in 1991, and was selected as GFWAR's "Realtor(R) of the Year" in 1986.

Vicki Cox Golder, a Realtor(R) from Tucson, Ariz., is 2009 president-elect. A Realtor(R) for 35 years, Cox Golder owns Vicki L. Cox & Associates in Tucson, specializing in commercial, farm and land brokerage, as well as building and development. In 2005, she was NAR's Region XI vice president, representing Arizona, Colorado, Nevada, New Mexico, Utah and Wyoming. Cox Golder was president of the Arizona Association of Realtors(R) in 1994, and served as president of the Tucson Association of Realtors(R) in 1991. She was named "Realtor(R) of the Year" by her local peers in 1989.

Realtor(R) Ron Phipps from Warwick, R.I., is 2009 first vice president. A Realtor(R) for more than 30 years, Phipps is broker/president of Phipps Realty in Warwick, specializing in residential brokerage. In 2003, he was NAR's Region I vice president; the region comprises Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont. Phipps was president of the Rhode Island Association of Realtors(R) in 2000. He was also president of the statewide Multi-Listing Service (MLS) in 1993. He was named Rhode Island's "Realtor(R) of the Year" in 1995.

James L. Helsel Jr., a Realtor(R) from Lemoyne, Pa., remains as NAR treasurer in 2009. A Realtor(R) for 34 years, Helsel is a partner with RSR Realtors(R), a full-service real estate company in Harrisburg, Pa. He served as NAR 2002 Region II vice president, which comprises New Jersey, New York and Pennsylvania. In 1994, Helsel was president of the Pennsylvania Association of Realtors(R). In 2001, his state peers named him "Realtor(R) of the Year."
Gary Thomas, a Realtor(R) from Orange County, Calif., is 2009 vice president and liaison to government affairs. A Realtor(R) for more than 30 years, Thomas is president of RE/MAX Real Estate Services in Orange County, specializing in residential brokerage. In 2001, he served as president of the California Association of Realtors(R), and was also awarded the "Realtor(R) of the Year" by his state peers. Thomas was president of the Saddleback Association of Realtors(R) in 1987, now known as the Orange County Association of Realtors(R).
Steve Brown, a Realtor(R) from Dayton, Ohio, is 2009 vice president and liaison to committees. A Realtor(R) for more than 30 years, Brown is broker-owner of Irongate Inc. In 2005, he was Region VI vice president, which comprises Ohio and Michigan. In 2002, Brown was president of the Ohio Association of Realtors(R). At the local level, Brown was president of the Dayton Area Board of Realtors(R) in 1995, and was selected Broker-Owner of the Year by the board in 1998.
NAR's 2009 regional vice presidents are:
Bonnie Guevin, Manchester, N.H., Region I (Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont); Joseph Canfora, East Islip, N.Y., Region II (New Jersey, New York and Pennsylvania); Dale Ross, Potomac, Md., Region III (Delaware, District of Columbia, Maryland, Virginia and West Virginia); Jane Cox, Lancaster, Ky., Region IV (Kentucky, North Carolina, South Carolina and Tennessee); Russell Grooms, Jacksonville, Fla., Region V (Alabama, Florida, Georgia and Mississippi);
Cathy Sherman Bittrick, Grand Rapids, Mich., Region VI (Michigan and Ohio); Stan Sieron, Belleville, Ill., Region VII (Illinois, Indiana and Wisconsin); Scott Louser, Minot, N.D., Region VIII (Iowa, Minnesota, Nebraska, North Dakota and South Dakota); Doug Smith, Little Rock, Ark., Region IX (Arkansas, Kansas, Missouri and Oklahoma);
Connie Kyle, Baton Rouge, La., Region X (Louisiana and Texas); Keith Kelley, Las Vegas, Nev., Region XI (Arizona, Colorado, Nevada, New Mexico, Utah and Wyoming); Jim Johnston, Pocatello, Idaho, Region XII (Alaska, Idaho, Montana, Oregon and Washington); and Toby Snitkin Bradley, Santa Barbara, Calif., Region XIII (California, Guam and Hawaii).
The National Association of Realtors(R), "The Voice for Real Estate," is America's largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.
Information about NAR is available at www.realtor.org. This and other news releases are posted in the Web site's "News Media" section in the NAR Media Center.
REALTOR(R) is a registered collective membership mark which may be used only by real estate professionals who are members of the NATIONAL ASSOCIATION OF REALTORS(R) and subscribe to its strict Code of Ethics. Not all real estate agents are REALTORS(R). All REALTORS(R) are members of NAR.
SOURCE National Association of Realtors

Translating the Real Estate Numbers: What do they mean October 2008

The National Association of Realtors just released the housing numbers for September. Believe it or not, there is actually some good news. Seasonally adjusted, national sales of homes improved and were sold at an annual rate of 5.18 million. This is above the 4.9 rate that we had seen this summer. This rate is up 5.5%, which is great news. The reason that we are finding ‘a floor’ on the volume of sales is that we are finally moving from attractive prices to compelling prices. The average price moved from $210,500 in September of 2007 to $191,600 September of 2008. This is a drop of 9.0%
One of the main reasons for this significant drop is the mix of houses being sold. A significant portion of homes being sold are ‘REO’s” (Real Estate Owned, by banks, typically foreclosed) and short sale. If 1 in 4 or 5 houses fit in the distressed category, price will come down. Obviously this is what has happened in Rhode Island. But the result of lower prices has been an increase in the pending index of homes in the Ocean State. In 2008, the number of house pending increased by 9% over September of 2007. This is also encouraging news.
One other really important fact in the report is that over 80% of the purchases in September were owner occupied. This is a much higher than normal percentage.
This means that the people buying are purchasing for shelter and will in fact occupy the home. This is a strong stabilizing trend. It also suggests that these buyers will be re creating neighborhoods and taking better care of their properties.
What is also absolutely apparent is that the numbers range broadly across the country and here in Rhode Island. We tend to look at the national numbers and assume they apply directly to our city/town and or neighborhood. This is not the case. As all real estate is local, you need to look at the data for your immediate area to really know what is going on. A Realtor can provide the data and the analysis. Get the advice. The real estate rule which has been: location, location, location is now “all real estate is local.”


To Recap:

What do the number mean?

There is a floor for the number of houses sold just over 5 million nationally.
Prices are still correcting.
Inventory is dropping which will help stabilize the price.
1 in 4/5 Houses in Rhode Island is a foreclosure or a short sale.
Most buyers are in the market to buy a home to occupy for them selves.
Buyer Purpose for buying: shelter.
We really are in a global economy.
Yet all Real Estate is LOCAL.

Home sales, prices decline in Northeast cities

Existing home sales in the Northeast tumbled nearly 19 percent in August from last year, while the median sales price in the region fell 3.8 percent to $271,000, the National Association of Realtors said Wednesday.

Compared with the country as a whole, home sales were a bit weaker in the Northeast, but prices held up better. Nationally, sales -- without adjusting for seasonal factors -- were down 15 percent in August from a year ago, while the median price slid 9.5 percent to $203,100.

The Associated Press-Re/Max Monthly Housing Report, also released Wednesday, showed August sales dropped by more than 20 percent in seven of the nine Northeast metro areas tracked. The report analyzed home sales recorded by all real estate agents in those areas, regardless of company affiliation.

But barring a national economic meltdown, the Northeast is likely to emerge from its housing slump before other regions in the country, said Nicolas Retsinas, director of Harvard University's Joint Center for Housing Studies.

The reasons are twofold: The region didn't experience the ambitious overbuilding plaguing the Southwest, California and Florida and the Northeast also isn't suffering from a severe economic downturn like the Midwest.

"I can see the Northeast working through its excess of inventory and trolling around the bottom for a while," Retsinas said. "I can't even think about when that will begin to happen in those other areas of the country."

Retsinas pointed out, though, that job losses on Wall Street could eventually hurt home sales and prices surrounding New York city. In August, sales fell nearly 26 percent, the AP-Re/Max report showed, while the median price slipped less than 5 percent to $460,000. The numbers include Suffolk, Nassau and Westchester counties, but not New York city.

For the second month in a row, Pittsburgh recorded the worst sales decline at 32 percent from August 2007. But the city's median price posted the smallest drop in the region at less than a half-percent to $131,400. Even better for the market, the supply of unsold homes shrunk by a quarter last month.

"I think the economic conditions are leading some people, the traditional move-up buyer, feeling that maybe this is not the right time to put my house on the market," said Tony Mete, president of the Realtors Association of Metropolitan Pittsburgh.

He expects sales to continue to lag in September but more inventory to drop off. Mete hopes the possible $700 billion bailout of the U.S. financial system that Congress is debating this week would free up more mortgage money for buyers.

Only the most creditworthy buyers are qualifying for home loans as lenders have raised the bar for borrowers to qualify for a mortgage.

Those stricter credit standards have cut out about a quarter of potential homebuyers in Philadelphia, said Harry Caparo, chairman of Coldwell Banker Preferred in Philadelphia.

"The general condition of the mortgage market and uncertainty of the buyer are the issues today," he said.

Philadelphia also recorded a median price dip below 1 percent in August. Home values fell to $235,000 during the month, while sales activity declined 28 percent. The supply of homes on the market shot up by almost 22 percent.

Caparo expects September sales to be down another 20 to 25 percent after a "substantial drop" in pending sales in the last few months.

MaryAnn Sgobba, president of the Passaic County Board of Realtor, also laments that buyers don't think they can get a mortgage, so they're discouraged from even looking.

The number of sales fell almost 20 percent in the greater Passaic, N.J., area, including sales from the nine surrounding counties. But prices dipped just under 6 percent to $399,900 last month, a welcome adjustment compared to other cities, Sgobba said.

"We're not unhappy with August's stats," she said.

But the supply of unsold homes is ballooning in the Passaic area. Inventory jumped 26 percent in August from a year ago, which could put more downward pressure on prices if sales don't keep up.

More people are contacting Sgobba about current listings, a good sign she said, which could lead to more sales in September. She also hopes the housing rescue plan passed in May, which includes a credit of up to $7,500 for first-time homebuyers, will boost sales.

Foreclosures are the largest obstacle for Providence, R.I., where nearly one of five sales are distressed properties, said Ron Phipps of Phipps Realty in Warwick, R.I.The discounted properties are weighing on values too. The median price plunged by nearly 15 percent last month to $230,000, the largest drop in the Northeast, the AP-Re/Max report showed. Sales there also fell 22 percent in August.

"We've gone back to 2004 pricing which was pre-housing boom," Phipps said. "I'm looking very much to bottom in prices this fall or winter."

The median home price in Augusta, Maine, posted the second largest decline last month. Values there lost nearly 13 percent to $141,500 as the volume of sales slowed by almost 30 percent. Inventory was nearly unchanged.

"We're still in an adjustment period so we'll be down through 2008," said Bill Sprague, a partner at Sprague and Curtis Real Estate in Augusta. But he expects sales to perk up next year

J.W. ELPHINSTONE

The Associated Press September 24, 2008, 3:02PM ET

www.phippsrealty.com

Realtors soldier on in down market

For real estate agents coping with Rhode Island’s struggling housing market, last week’s meltdown on Wall Street was hardly welcome news. Nothing that threatens to undermine buyer confidence or the availability of credit is ever good news for the real estate business.

But as the fall real estate market gets under way, most brokers and salespeople, already used to new market realities, are continuing to soldier on, according Rob Scaralia, president of the Rhode Island Association of Realtors.

“We’re still working our way through it,” Scaralia said of the market downturn.

Turmoil on Wall Street has the potential to hurt consumer confidence, he said, “by creating some uncertainty” for buyers.

But the inventory of residential properties for sale in Rhode Island was down across the board this month compared with September last year, according to the association. There are 6,693 single-family houses for sale, compared with 6,874 last year; 1,536 multifamilies for sale, compared with 1,864 last year, and 1,762 condos for sale, compared with 1,793 last year.

“The candid answer is we’re not sure yet if it will have any impact on us,” Ron Phipps, of Phipps Realty, of Warwick, said of the financial crisis on Wall Street. Phipps is a former president of the Realtors’ association.

In his own office, “we had a major closing [last Monday], and two more closings scheduled at end of September,” Phipps said. “I think people are doing what we need to do.”

Phipps said the challenges at this point are all the foreclosed properties that have flooded the market and the credit crunch.

“When one in every four or five transactions is REO [real-estate owned, or foreclosed properties], that makes it particularly difficult,” Phipps said.

Bargain-savvy buyers can’t help comparing prices of market properties with the distressed ones. And the sale of distressed properties — including foreclosures and short sales — “take forever to resolve,” Phipps said.

Lenders often take weeks or even months to respond to an offer to buy a foreclosed or short-sale property, Phipps said.

These delays have become legendary in recent months as lenders’ loss-management divisions have been overwhelmed with the sheer numbers of foreclosures and requests for short sales.

Tightened credit is an issue, Phipps added. “The demand is fairly strong,” he said. “…The problem is access to the money … We need to create true liquidity.”

“I think that the days of all of those funky no-doc loans, and the crazy loans that were out there, and the risky loans, we’re not going to see them for a while to come,” said Stephen Tetzner, an owner of HomeStar Mortgage Inc., of Providence, and one of the directors of the Rhode Island Mortgage Bankers Association. Tetzner said the government takeover of Fannie Mae and Freddie Mac earlier this month “did wonders for mortgage rates,” delivering the lowest rates since April or May of this year.

“There is a credit crunch,” Tetzner admitted. But people with good credit, who can document their income, “can get financed,” he said. Low down-payment programs are still available through FHA, and Rhode Island Housing is still able to help qualified first-time buyers with 100-percent financing, he said.

Tetzner added that condominium financing is more difficult in this market because “mortgage insurance companies are scared about the values” in the condo market. Many condo financing programs now require a bigger down payment, he said. And he said that condo conversion projects with less than four units “are not insurable” under HUD guidelines.

But the Fed’s decision last week to hold off on a further cut in interest rates “is not necessarily a bad thing,” Tetzner said. “Just because the Fed lowers rates doesn’t mean mortgage rates will go down.” Fear of inflation can drive up mortgage rates even after the Fed cuts rates, he said.

This market, as difficult as it is, “is not as challenging as it was in the early 1980s after the credit union crisis,” Phipps said.

Phipps said he strives to be honest when buyers ask him to “guarantee that the price won’t drop” by admitting that it is a possibility.

He said he tells buyers that although property may lose some value in the short term, “in the interim you’re going to be in the house you want.”

But for people who plan to stay in a house only for a year? “Maybe you ought to rent,” Phipps said.
Christine Dunn, Providence Journal September 21,2008

www.phippsrealty.com

Ron Phipps Testifies at Congress

WASHINGTON, D.C. - September 18, 2008 - (RealEstateRama) — Homeowners who are struggling to make their mortgage payments must have more options available to them to avoid foreclosure, particularly in the area of short sales, according to National Association of Realtors®‘ testimony before the House Financial Services Committee today.

“When people lose homes to foreclosure, our communities, the housing market and our economy all suffer,” said Ron Phipps, 2009 NAR first vice president nominee. “Expanding the use of short sales would benefit consumers, lenders and the surrounding community.”

A short sale is a transaction in which the seller’s mortgage lender agrees to accept a payoff of less than the balance due on the loan. The lender often receives a higher amount of the remaining loan balance than it would from the sale of the property after a foreclosure. This helps support home values in the surrounding community. Short sales also help homeowners maintain some level of credit.

“Short sales can be used to avoid foreclosures, and can be less costly than a foreclosure to the lending institution,” Phipps said. “Unfortunately, many Realtors® are increasingly encountering roadblocks that prevent troubled homeowners from taking advantage of short sales. We hear that lenders are often taking a very long time to decide whether to accept a short sale, often resulting in the loss of the home buyer and the sale, and negatively impacting the neighborhood and the community,” said Phipps.

Realtors® cite many reasons for the difficulty in completing a short sale. These include burdensome paperwork, appraisals that do not consider the sellers’ duress or number of foreclosures in the community, over-burdened loss mitigation departments, and the complications created by second mortgages.

NAR has created a working group to examine the problems and difficulties surrounding short sales and to educate its members on how to best work with their clients through this process. NAR is also reaching out to its partners in the housing and mortgage industry to encourage adoption of principles and practices to streamline the short sale process. “We are asking all lenders and their servicers to deliver a clear answer, in writing, within a reasonable timeframe,” Phipps said.

“Our nation faces significant challenges in dealing with the economic turmoil fostered by the housing market,” said Phipps. “To combat this, we must assist those families threatened with the loss of their home by using all of the tools that we have at our disposal. Short sales offer families who cannot avoid losing their home a way to repay a portion of their debt obligation while maintaining a level of dignity during the process and somewhat salvaging their credit, enabling them to perhaps someday own a home again. NAR and its members stand ready to work with Congress and other industry partners to improve and implement all foreclosure mitigation efforts.”

Reel estate: Broker lures buyers with free fish

Realtor Caroline Caira has often brought gifts - usually department store gift cards or restaurant certificates - for new homeowners. But her latest promotion takes the bait.

“I just brought haddock to a closing,” said Caira, who works out of the RE/MAX First Realty office in Watertown. “People like seafood.”

Caira’s fiance, Domenic Vincenzino, owns the Newton fish store Steamers, where she gets her fish. And her new deal offers anyone who buys or sells their house with her free fish for a year.

isn’t so much a reaction to the economy as a partnership to support local business, she said. Vincenzino talks up her real-estate business to customers and features her business cards at the counter advertising the fish promotion. Meanwhile, she talks tilapia to anyone who will listen.

“There’s no real gimmick,” she said, noting that the amount of free fish depends on the amount the house sells for. “If it’s a $500,000 house, we’ll give you $500 worth of fish.”

Caira, who has also served lobster rolls at broker open houses, is one of a select few who go beyond traditional promotions that typically feature free calendars. Another local broker, Naomi Zygiel-Almozlino from Coldwell Banker in Newton, recently sent out a food and wine pairing list to potential clients. Serve sharp cheese with a pinot noir or cabernet sauvignon, it suggests. But mild cheeses go better with sauvignon blanc.

No one may enjoy incentive marketing more than Ron Phipps of Phipps Realty. The Warwick, R.I.-based agent said he’s done plenty of unusual, even funny promotions during his 20-year career.

“Some things work. Some things don’t. It will cause them to smile, but it won’t make or break a sale,” he said.

Thoughtful gifts have included a Douglas fir to a family relocating from the West Coast and bougainvillea for a buyer from Atlanta. He tempted buyers of a waterfront property with a sailboat and offered a professional closet-planning service to a home ripe for a build-out. While jewelry and fur coats are not uncommon gifts in the South, Phipps said they would never work in New England.

Instead, he has plied open-house guests with the latest Harry Potter [website] title and pints of Ben & Jerry’s ice cream.

Phipps is careful not to offer anything that might draw attention to a weakness of a house and admitted that some perks turned out to be problems.

“Once I gave a gift certificate to go fishing,” he recalled. “The seas were rough and everyone got sick.”

These days, Phipps has scaled back, saying that buyers don’t want extras in a tight economy. They just want a well-priced house.

“It’s better to price the house where it’s going to be in 90 days, and sell it now,” he said. “We’ve reduced incentives and recommend all those resources go into the selling.”But in Newton, Caira enjoys the friendly conversation that her free-fish-for-a-year deal has prompted. Customers joke, “I’ll eat you out of business.”

“Well,” she said. “Restrictions do apply.”
By Jill Radsken

- jradsken@bostonherald.com

Home sales, prices mostly fall in Northeast

Homes sales tumbled in most big Northeastern cities last month - with only Passaic, N.J., showing a healthy jump in activity - while sales of distressed properties dragged down median prices in the entire region, according to two reports released Monday.

Sales of existing homes in the Northeast declined nearly 12 percent in July from a year ago, the National Association of Realtors said. The median price in the Northeast was $278,700, down almost 5 percent from July 2007.

That reflected the national trend: sales dropped more than 13 percent year-over-year, while the median price decreased 7.1 percent to $212,000.

But the Associated Press-Re/Max Monthly Housing Report, also released Monday, showed July sales dropped by at least 20 percent in five of the nine Northeast cities tracked. The report analyzed home sales recorded by all real estate agents in those cities, regardless of company affiliation.

In the one bright spot, Passaic, sales jumped 38 percent over July last year. But the rapid sales pace could be stymied by glut of properties coming onto the market. The supply of unsold homes grew 32 percent to 10.6 months, and the median price slid 6 percent to $400,000.

In contrast, Pittsburgh posted the worst sales decline at 31 percent from July 2007. But prices offered a sliver of hope, dipping less than 1 percent to $132,000, the smallest drop in the region.

In Boston, the supply of homes for sale declined markedly, signaling a possible turnaround in the offing. Judy Moore, a local agent with Re/Max Landmark, said the condo market already is showing signs of life.

Overall, Boston home sales fell 12 percent in July and the median price decreased 8 percent to $355,000, according to the AP-Re/Max report. While Moore expects August sales and prices to decline year-over-year, she thinks the drop in both will be less severe than July's.

"It's been fits and starts, but there's always some activity going on," Moore said.

Philadelphia real estate agent Ellen Renish of Continental Realty said the sales pace has improved over the last several months there, though in July were still 20 percent below July last year.

"We're seeing sold signs instead of for-sale signs," Renish said. "We've even seen several properties in the past month that have had multiple offers." She's optimistic about August sales.

But inventory remains high here, up about 6 percent from last year, or a 10 month supply, including homes in or close to foreclosure.

Foreclosures are also leaving their mark in Providence, R.I. Nearly one of five sales in the area were distressed sales, said Ron Phipps of Phipps Realty in Warwick, R.I. The discounted properties are weighing down the market, where the median price fell by 13 percent last month to $234,900, the AP-Re/Max report showed. Sales there also slipped 9 percent in July.

"A lot of sellers are nostalgic for what was, so they're disengaging from the market," Phipps said. The supply of unsold homes shrank nearly 3 percent in July as a result.
Don Plourde, a real estate agent in Waterville, Maine, doesn't expect sales in the state capital of Augusta to turn around until at least next spring. Home sales fell almost 21 percent in July while the median home price lost 10 percent to $149,000.

Buyers are worrying about fuel oil, Plourde said, and out-of-state buyers are sparse this year, hurting sales of higher end homes.

"Maybe they're going to Florida for all the good buys down there," Plourde said with a chuckle.

Foreclosures and short sales - where the bank accepts less than the value of the mortgage - also are adding to inventory. Maine foreclosure filings more than doubled in July from the previous year.

Brenda Perry, 49, bought a one-story ranch home in a short sale at the end of July in a suburb of Augusta. Perry, a development officer at a nonprofit, wanted to move closer to her job. She declined to say how much she paid for it, but said she bought it for less than the $119,900 asking price.

"(Foreclosures) are coming onto the market faster than you could keep up with them," Perry said. "It's an excellent time to buy. There are plenty of houses on the market, plenty to choose from."

Helicopter Buyers

You may recall all of the articles and stories several years ago about helicopter parents. These are parents that ‘hover’ over their children to organize, direct, supervise, encourage, engage, protect, and insulate their children’s lives. The concept is not complementary and child development experts argue that this behavior is very bad for the children. Children need to engage their own world. They need to develop problem solving skills, coping techniques, and a sense of self worth, of purpose. Helicopter parents may not live through their children, but they clearly interfere with the kids’ development.

In the real estate market of 2008, we have seen the advent of a new type of buyer: the helicopter buyer. He, she, or they are not like helicopter parents. The description is much more elementary. Helicopter buyers, are in the lingo of the industry, “ready, willing and able buyers.” who have identified the ‘right property’ for themselves, but do not buy. They hover around the property. They set up showings. They visit the house repeatedly. They come to open houses, over and over. They watch every marketing element of the property. They are not just professional students of the market; they are professional students of the property.

Each visit produces a new list of questions and queries. With the internet, most property information is easily available. Helicopter buyers want to know the ‘why of the data.’
Tax records, real estate transfer records, DEM environmental records, Google earth, etc are all libraries. It is in fact smart and appropriate to engage this research approach as part of due diligence for purchasing a property. Realtors encourage buyers to become knowledgeable and to do their own independent investigations. It is a major and important purchase that requires focus and action.

The challenge of this market is the lack of a final destination, a landing. A significant number of purchasers do exhaustive ‘due diligence.’ But never make an offer, or rather a formal one. They will ask what will the seller take, but not make the offer. The reasons for this are numerous, varied, and individual. Some buyers are simply trying to wait the seller out, expecting that they will become desperate and ‘give the house away.’ Some buyers are trying to time the market at the absolute bottom. Some buyers are waiting for rates to come down. Some buyers are waiting for ‘signs.’ Many buyers are waiting for their current residence to sell. Many buyers are looking for signs of encouragement. Most buyers are discouraged by the news about the market. Ironically, this is after they ‘know’ they have found and researched the right home for them.

The advent of the helicopter buyer is particularly frustrating for sellers. To have multiple interested parties visiting their home and no offer is most challenging. “There must be something wrong.’ Can’t you get any offer? Recently, we had a buyer view a house four times with private appointments and come back to four open houses. They have yet to make an offer on anything including this original house. They are well fueled ‘helicopter buyers.’ Oh and in case you are wondering, there are a lot of great choices, at great prices, in this market. If you find the right property, make the offer. You might be pleasantly surprised. At some point, you will need to land. Do it now, when the choices and values are great.

GPS for the Real Estate Market. Summer 2008

You have heard the most important rule of real estate: Location, Location, Location. You probably have heard the new variations of the same concept: All real estate is local or each market is unique. All of these rules are common sense rules. Many things are portable, real estate, obviously is not. It is not just, what it is, it is where it is.

So real estate is understood and analyzed in terms of where it is. But to be really understood, real estate must be analyzed, also, in terms of WHEN it is. GPS is used as a navigational tool. When looking at real estate we need to add a feature to our electronic map, the ‘when feature.’ The when is now summer 2008?

In the largest sense, Rhode Island real estate has changed significantly. The number of sales has dropped significantly since 2006. The first half of 2008 showed another drop of 19% unit sales of single family homes since 2007. Average price of single family homes have also adjusted downward from approximately $280,000 to $250,000. This is a change of 6.9%. Condominiums have seen a similar trend: Sales unit volume dropped from 944, first half of 2007, to 647, first half of 2008. Condo prices have remained fairly constant changing from $215,500 to $215,000. Multi family sales are up significantly, while average price is down significantly.

These are the numbers, but the real challenge is what do they mean. First, we are still in a correcting mode. The number of active listing has gone down this year versus last year.
This bodes well for a stabilization of price. The number of pending sales has gone up for each of the last three months, communicating that nostalgic sellers with high priced houses are withdrawing their listings, and the prices of the remaining properties are low enough to generate sales. However, there is a fact in the price changes that is most telling: A large portion of the real estate market is bank owned. Almost one is five single family homes sold in the first half of 2008 was owned by a bank. Among multi family properties, more than half of the sales were bank owned. This is why prices have shown a significant downward adjustment. Some sellers, want us to ignore, these distressed properties when determining value. Unfortunately, when such a large portion of the market is banked owned, you cannot ignore the information. Moreover, these properties, although wrapped challenge, are priced so low they are compelling to many buyers.

Secondly, the Housing recovery act is in the process of becoming law. It is the single most important housing bill in at least a generation. It has many elements, over 600 pages long. Its primary features include 1. Shoring up Fannie Mae and Freddy Mac, the largest ‘buyers’ of mortgages; 2. Providing relief from foreclosure of many Americans; and 3. Stimulating housing sales. The last item is being done with several tools; the most effective is a tax credit of $7500 for first time home buyers. This should really help us in Rhode Island. The definition of a first time home buyer is someone who has not owned a house in the past three years. This bill will go a long way to shorten the real estate downturn.

Third, the demographics are strong locally. Very simply, we have enough ‘families’ to fill the housing we currently have available, in the broadest of terms. We do have an oversupply of expensive, urban condominiums, but when you look at the total number of families and the total number of residential units, there are enough families to fill them.
The issue is one of value and affordability. Many people cannot afford to purchase right now. Some very savvy investors are buying multi family properties a priced well below value. It is a smart move, as prices are low, demand for rentals high, and the properties will not only carry themselves, but can generate positive cash flow. We have returned to great fundamentals.

Fourth, the signs of stabilization are visible. In the industry we have been looking for the light at the end of the tunnel. (8000 people had licenses as of April 30, 2008. On May 1st after the renewals, that number dropped to 6000 people. A lower number of sales, at lower prices, translate to less brokerage fees for sales people. It has been, and continues to be very difficult for people in real estate.) The visible light is the number of pending sales and the passage of the housing bills. Both of these are good signs. It is a perception in the real estate community that we are on either side of the bottom. Also the number of bank owned properties are enabling a lot of sales. The investors are buying and buying well.

So where are we? Our time sensitive GPS suggests we are still in correcting mode. After the majority of bank owned properties are sold, price stability will be visible. Condo are doing the best is holding their value at the moment. We expect that trend to spill over to single family soon. So if you have been on the side lines, trying to time the market for the bottom, it is a really great time to look. We will not know where the bottom was until AFTER we have left it. It is only visible in the mirror. Check out the current options. There are some great buys out there now. One important recommendation: Get expert advise. Regardless of whether you are buying or selling, this market is difficult to analyze. Contact a Realtor, who ‘knows’ your market area, so you have some who can help you un-knot the dynamics of this market.

Businesses Feel Pinch

With the credit crunch on Wall Street entering its second year, a widening array of businesses are finding it tough to get credit. And with mortgage giants Fannie Mae and Freddie Mac roiling credit markets, individuals could soon find it harder to get a loan as well.

One company feeling the strain is Chrysler Financial, the financing arm of the Big Three auto maker that was carved out of the former DaimlerChrysler AG last year. The Chrysler LLC unit has $30 billion of short-term debt due to mature in early August. And bankers, led by J.P. Morgan Chase & Co., are pushing hard to get that debt renewed.


While a deal is likely to get done, people involved in the transaction say the terms could be onerous for Chrysler Financial, pushing up borrowing costs for consumers and auto dealers that depend on it for loans. (Please see related article.)

Banks also are pulling back on the amount of rainy-day money they have been giving out to corporate clients in the form of loans called revolving-credit facilities. Retailers such as Sears Holdings Corp. and Talbots Inc. have struggled to renew revolving-credit facilities with their bankers in recent months. Other companies, including Wal-Mart Stores Inc., AT&T Inc. and American International Group Inc., have had to agree to tougher terms on such credit.

Overall, the value of credit held by banks in the second quarter shrank 1.5% from the first quarter, according to Federal Reserve data. That was the largest three-month contraction since 1948.

These tight credit conditions are particularly worrisome because the Federal Reserve has responded aggressively since the credit crunch emerged last July. The central bank has cut interest rates seven times by a total of 3.25 percentage points.

Despite those moves, "it's hard to make the case that financial conditions are especially stimulative right now," says UBS economist James O'Sullivan.

Credit-market woes have hammered the housing market and financial companies, but until recently they didn't appear to be hurting the rest of the economy so much. The latest data suggest that might be changing.

Credit is the lifeblood of economic activity. If it continues to be hard to get, despite the Fed's efforts to keep it flowing, that could spell trouble for an economy teetering on the edge of recession.

Investors had started to believe the Fed might be forced to raise interest rates later this year to fight inflation. But with credit tight, that looks less likely now.

The Fed's overnight target rate, at just 2%, is well below the rate of inflation. But that easy-money stance isn't translating into lower borrowing costs for companies and households. Many borrowers haven't seen a drop in the rates they get charged, despite the Fed rate cuts, which began last fall. Chrysler Financial, for instance, is likely to pay more to roll over its $30 billion debt than it did a year ago.

The bear market in stocks also means that companies can't easily tap the equity market for cash.

Much of the decline in outstanding credit has been due to banks sharply reducing the amount of bonds and other debt securities held on their books, but the slowdown is apparent across all forms of lending. The heavy losses banks have taken on mortgage-related securities are forcing them raise cash levels, leading to tighter lending. Because they can't know what other problems might be lurking on their balance sheets, they are being especially cautious.

Payroll-services company Paychex Inc. has been seeing fewer new businesses starting up, which it attributes to the tighter credit climate. On a recent call with investors, Chief Financial Officer John Morphy said that Paychex itself felt the effects of banks' reluctance to lend when it went to open a line of credit.

"We're working with our No. 1 provider lead bank for the last 20 years. You can't believe what we've had to go through to get this," Mr. Morphy said. "And we're in great shape. They want dividend restrictions; they want all kinds of stuff. Now, in the end, we're going to get what we want, but it was a battle."

Fruit-and-vegetable processor Del Monte Foods Co. bought back $50 million of its stock in the second half of last year at an average price of $9.31 a share. At $7.76 a share, the stock is cheaper now, but rather than buy back more of it, the company says it is shoring up its cash holdings instead in order to reassure bond investors of its credit-worthiness.

"The credit market today is very uncertain, to say the least, and the last thing we want to do is in any way affect our credit rating," Del Monte Chief Financial Officer Dave Meyers told investors earlier this month. If Del Monte's credit rating was dropped a single notch, he suggested, the company's borrowing costs could rise by millions.

In a survey of chief financial officers at 468 U.S. companies last month, John Graham, a finance professor at Duke University's Fuqua School of Business, found that companies with low credit ratings, in particular, were seeing significantly higher credit costs and were having a hard time obtaining or renewing bank credit lines. Many companies said they were cutting back or delaying new investment plans, paring hiring plans and initiating cost-cutting programs as a result of tough credit conditions.

"When credit gets tight, money becomes more precious than ever," says Mr. Graham. "If you have it, you're not going to spend it, and if you can't get it, it affects your operations."

That applies to individuals, too. Ron Phipps, who runs Phipps Realty in Warwick, R.I., says banks are making even the most credit-worthy borrowers jump through hoops, asking for reams of documentation before granting a mortgage.

"The approach now is so hyper-risk-sensitive and labor intensive, it's very emotionally taxing," he says. "Somewhere along the way common sense has been replaced by the check-off menu."
David Stevens, who runs the mortgage operation at Long & Foster Real Estate in Fairfax, Va., worked at Freddie Mac from 1999 to 2005. He says that during his time there, the mortgage lender was never as stringent about the quality of mortgages it would accept as it is now.

With banks and other lenders cutting back, Fannie and Freddie have been "the only game in town as far as credit creation is concerned," said Goldman Sachs economist Jan Hatzius. If the mortgage giants, in an effort to raise their cash holdings, curtailed activity in the same way they did in earlier this decade in response too accounting problems, credit conditions could get oppressively tight, Mr. Hatzius says.

By JUSTIN LAHART
July 21, 2008; Page A3

Draft a Winning Team to Sell Your House

Sometimes in order to sell a house you have to act like you’re trying to win the Super Bowl: you have to have the right team.

To get the most for your biggest investment, you’ll want to draw buyers away from the new development down the street and that cute little fixer-upper around the corner. And that means you may need some special expertise.

“When the market is exuberant, you may be fortunate enough to do a good job selling your house without a team,” says Ron Phipps, a broker with Phipps Realty and Relocation Services n Warwick, Rhode Island. “In a normal market or a buyer’s market, a team isn’t a luxury—it’s a necessity.”

Unless you’re selling the house yourself, start by selecting an agent. The agent will essentially be your selling team’s quarterback and he or she can advise you on the pros you need, offer referrals and give you an estimate of just how much money you need to spend versus how much you’ll get back at the closing table.

The smart move? Audition at least three agents, from three different firms, says Phipps.

What you want to know is what they think your house is worth and how they plan to market it, he says.Hold off sharing personal information and financial details. You need to first understand how each agent would price the house (and why) and exactly what each would do to market it effectively.

Here are some other critical issues to consider before you hire an agent:

How creative is the agent with marketing?
Does the agent understand Internet marketing? (Eighty-five percent of buyers start there, says Phipps.)
How sharp are the person’s negotiating skills?
How will the agent position the property for maximum exposure?
How much has the agent sold this year? What is his or her performance record?
What price range does the agent normally represent?
How do the agent’s list prices compare to actual sales prices?
What you want is a successful agent who understands your neighborhood and has a good track record with homes of similar value to yours. You want an agent with whom you can build a relationship of trust, says Phipps, so go with your gut.

Your agent’s assessment and marketing plan will likely determine the other members of your team:

A home inspector: Get a prelisting inspection. The home inspector will give you a heads-up if there are any problems that need to be addressed. With this information in hand, you can decide whether to fix the problem or discount your home accordingly. Having a home inspection is a good preemptive move that can keep negotiations from falling apart after a serious offer. The price for an inspection generally runs between $300 and $500, although it could cost more if you have a large home.

You can get a referral from friends, neighbors or your agent, or use the professional who inspected your home before you bought it. Look for an inspector who is a member of the American Society of Home Inspectors (ASHI.org), a national organization that provides ongoing education and a code of ethics. (The site also includes a rundown of requirements for inspectors in each state and contact information for the state bodies that oversee inspectors.)

If your state licenses home inspectors, be sure to go online to the agency that regulates them to make sure the one you choose has a valid license to do business. Phipps adds that you should avoid inspectors who are also contractors.

A cleaning crew: This is a must if you’re a smoker or you have animals. And it’s not a bad idea if you have a busy family life, either.

Phipps says that one of his recent clients had a beautiful home that was also very messy. But the residents were so accustomed to it that they didn’t notice it anymore. So he hired a team of cleaning pros (for about $250), held an open house—and got an offer that day.

Want to take it a step further? You can hire a professional organizer to come in and declutter your home or a designer or stager to make it look more appealing to buyers. (A good real estate agent should be able to recommend pros in your area.)

A contractor or building professional: Depending on the home, you might also need a contractor to fix major or minor problems. Ask for referrals from your agent or from friends who’ve had recent work done. When you talk to the contractor, make sure he or she is licensed, bonded and insured. Get several references—and call all of them. (Basically, you want to verify that the work was first-rate and completed on time and on budget, and there weren’t any problems.)

“No team can make it to the Super Bowl without collaborating brilliantly,” says Phipps. “Effective home sales are very similar. If you want a great outcome, not an okay outcome, engage the support of a team.”


Discover EDGE contributor Dana Dratch is a freelance writer from Atlanta, GA.

5 Tips for Selling a House in a Slow Market As Posted on US News and World Report

It's no secret that the days of houses selling like Beanie Babies are over. After real estate appreciated at jaw-dropping rates during the first half of the decade, home prices and sales tallies have dropped precipitously in recent months—tilting market dynamics to favor buyers over sellers. That doesn't mean your house won't sell, just that the playing field has changed. So here are five tips to help you get a timely sale at a fair price in today's reshuffled housing market.

1. Make those repairs. While in years past it may have been enough just to cut the grass and retouch the paint, anyone looking to sell in today's market will have to take care of those more onerous repair projects as well. "The buyer that might have bought a fixer-upper five years ago now has an opportunity to purchase a short sale or a foreclosure," says Ronald Phipps, president of Phipps Realty in Warwick, R.I. "So if you have a property that needs a lot of work, you are competing against real estate-owned [properties] that are compelling rather than interesting." So fix the leaky roof, call the plumber, and rebuild the staircase. "The modest repairs should be done," Phipps says. "Frankly, repairs period should be done."

2. Price to the market. Unfortunate though it may be for sellers, demand for real estate has softened significantly. That means, in many cases, sellers will have to bring down their asking price below what the house might have fetched just a couple of years back. "The best advice that real estate practitioners can give [home sellers] is, 'If you aren't prepared to sell at fair market value, then you probably ought to wait,' " Phipps says. "The properties that are selling are selling at or slightly less than fair market—it is very, very rare to have a premium house."
By setting an asking price above market value, homeowners risk driving potential buyers away. "People think, 'Well, I'll run it up the flag pole at [an above-market] price, and people will come along and make a [lower] offer. That is not really happening in this market," says Elizabeth Blakeslee of Coldwell Banker Residential Brokerage in Washington, D.C. "If people perceive your property is being overpriced, they will just move on to the next." Lowering the price may be difficult, but if you want to sell your home in today's market, grit your teeth and do it. "There is a buyer for every property if the pricing is right," says Lenn Harley, a broker at Homefinders.com.

3. Know your agent's stats: Finding an agent with experience selling homes in your market will help ensure correct pricing. When deciding on a real estate agent, find out how long it usually takes him or her to sell a house. It's best to choose an agent whose properties sell in an average of three or four months, a time frame that indicates the agent understands how to price the market, Harley says. "An agent whose average is six months is too long," Harley says. "Talk to an agent that has experience selling in your market."

4. Be flexible. Ensuring that your house is ready to show at all times will make it easier for prospective buyers to see it. So make your bed each morning and clean up the dishes before heading off to work, just in case someone may want to come by at the last minute. In addition, homeowners should be willing to disappear on Saturday and Sunday afternoons if potential buyers are free to see the property. "Access is very important," says Shari Kruse of Prudential Northwest Realty in Seattle. "Things like limiting the hours of showing or requiring an appointment because you have a pet are reasons for real estate agents to bypass your house when they go to show."

5. Bite your tongue: If a potential buyer comes in with an offer you consider too low, resist the urge to turn up your nose, Blakeslee says. After all, it takes a considerable amount of paperwork to make a formal offer, so even a low bid signals interest. "You need to respond—even though you are indignant and insulted," Blakeslee says. "Do a serious counteroffer. You have nothing to lose by countering, everything to lose by rejecting it out of hand."

8 ways to sweeten the deal on your home as Posted on MSN.com

Offering freebies with your house is almost a requirement in today's market. But forget the Final Four tickets. Buyers want you to help reduce the initial hit to their wallet should they buy your house.

By Karen Aho
Your house has been on the market for months. The for-sale sign, spattered with mud, has tilted over in surrender. As you go to straighten it, you trip over the morning newspaper, and, presumably, your answer: Inside is a story about a home that sold quickly after owners tossed in Hannah Montana concert tickets.

So, do you race inside to see what snazzy perks you can get hold of? A friend with ballgame tickets? A relative with a time share? Your old Harley? Is the age-old marketing ploy -- the incentive – a home seller's sure-fire solution in this dismal buyer's market? The answer is yes … and no.

Incentives help. Some say they're even necessary these days. But not all incentives boost the prospects for a sale, and the options for which ones actually do have shrunk. The free balloon ride? That's probably out. Six months of heating oil and half the closing costs? Those are in.

To understand what works and why, first consider what's happening in the housing market now.

1. There are more homes for sale than there are people buying. Home sales declined 23.4% from January 2007 to January 2008, according to the National Association of Realtors. Sales slowed most in the Western region, with a decline of 28.5%.

The slide has continued month-over-month this year, even as prices continue to fall, and The National Association of Home Builders reports a 10-month supply of new homes on the market, compared with a 4.5 month supply in 2005. Turn on any news show and the pundits are summing it up: Home buyers remain wary.

2. Sellers are turning to incentives. In February, 55% of builders surveyed by the NAHB said they were adding optional items at no charge, compared with 37% in 2002. And 43% said in February that they were paying all or some of the buyers' closing costs.

Jessie Beaudoin, a mortgage broker with American Financial Network, says that he can't track incentives precisely but that in California he sees 60% to 70% of sellers now paying some of the buyer's costs. "The lenders and the real-estate community are encouraging this," he says. "Nobody right now expects to pay full price for any property."

Most bank foreclosure homes and corporate relocation houses are also offering financial incentives, says Ron Phipps, a Rhode Island broker.
3. Buyers need to put cash down. Lenders have reined in those fully financed loans that helped trigger the mortgage collapse. Banks now demand not only better evidence that buyers can make the monthly payments but also that they have a financial stake in the property from the outset through bigger down payments.

In 1989, the median down payment was 20%, says the NAR, and mortgage brokers have reported that institutions are inching back toward such heftier requirements.

Even buyers who qualify for a low 3% down payment with an FHA loan still need to come up with closing costs, which add another 3% to 6% of the home's price.

4. Many home buyers are first-time buyers. Without home equity to tap into, first-time buyers often have difficulty securing a large amount of cash. "First-time buyers can handle the monthly payments; it's coming up with the down payment and closing costs that's hard," says Walter Molony of the NAR.

First-time buyers comprise nearly 40% of the market, he says. Of those, 22% receive a gift from a friend or relative to cover some or all of those costs, and 7% use a personal loan.

Forget the gimmicks

Add these four factors, say the experts, and you get a strong case for offering prospective buyers financial incentives. But forget about the Final Four tickets. Instead, help soften the financial blow associated with a new home.

"That's the time when (buyers) have the least amount of money in their pockets," says Stephen Melman, director of the NAHB's economic services. "They're buying. They're going to closing. They might have moving costs. They're going to have to buy furniture. Anything that helps their cash flow is going to be great."

It's more true now than in recent years, say brokers.

Phipps, a broker with Phipps Realty in Rhode Island, has been offering creative incentives for years. Goods or services associated with the house – a trip to wine country to stock the new cellar, for instance – have always piqued interest. But today's buyers are savvy, he says. They're analyzing price data and aren't distracted "by things that seem like gimmicks."

"Awhile ago (the incentives) were fun, but the nature of the real estate market is more serious now," Phipps says. "Buyers react to those incentives or encouragements that impact their bottom line."
Here are some ways to offer financial incentives:

Pay closing costs

Closing costs include title, application and attorneys fees, and points paid toward the loan's interest rate. They typically range from 3% to 5% of a home's cost. The median price of a home sold in the United States in January was $201,100, according to the NAR. That means typical closing costs start at $6,000.

On a conforming loan, sellers can pay up to that 3%, and up to 6% if the buyer is using FHA financing, says Beaudoin. He says it is the most popular incentive today.

"There's definitely a trend for sellers to pay all or most of the closing costs for the buyers," he says. "It has a much bigger impact than dropping the price."Why? Because the home price will be spread out over the life of the loan. Closing costs are due now.

"It's much easier to pay $30 dollars a month than it is to save $6,000," he says. (If you save $30 a month it would take 16.6 years, excluding interest, to amass $6,000.)
Home builders rate closing-cost assistance as more effective than adding optional items or reducing the sales price, says the NAHB.

Buy down the mortgage interest rate

Instead of knocking down the price, a seller can give money to the lender to go toward the buyer's interest payments for a certain amount of time, usually one to three years.

Here is a rough example from one of Phipps' clients:

Rather than taking $5,000 off the price, the seller gave it to the buyer's bank, where the buyer had a $200,000 loan. The bank used the $5,000 to buy 2 percentage points of the interest payments for the first 12 months and 1 percentage point the second 12 months.

This reduced the buyer's monthly mortgage payments from about $1,400 to $1,100 the first year and to $1,300 the second year. Given that the buyer had been paying $1,200 in rent previously, it eased the transition into the higher mortgage payments.

"We are using the buy downs for the first-time homeowners more than anything," Phipps says.Pay toward the down payment

Lenders won't allow sellers to fund a down payment directly, but they do allow you to help via special down-payment assistance programs as long as those entities do not have a direct interest in the sale of the property. These include government programs, or nonprofit groups such as the Nehemiah Corporation of America, the Housing Action Resource Trust and Partners in Charity. (The U.S. Department of Housing and Urban Development maintains a list of down payment programs whose nonprofit status has been revoked.)

Nehemiah, the largest of the charitable groups, has provided down-payment assistance to more than 250,000 home buyers nationally in the past decade. This is how it works: Nehemiah contributes up to 6% of a home's price for a qualified buyer's down payment. The seller later reimburses Nehemiah to replenish its account for other buyers. The buyer can get help from Nehemiah only if the seller agrees to repay the program, so the seller wins, the buyer wins and Nehemiah gains funds to help future home buyers.

For FHA loans, which require only a 3% down payment, a seller could essentially offer 100% financing by working with a program such as Nehemiah, Beaudoin says.

Buy a warranty

This is a great incentive, say real-estate agents. It typically costs the seller just $400 to $500 and gives the buyer peace of mind that any mechanical or electrical repairs will be covered, minus a small deductible, in the first year. Sellers can add riders for other items, such as wells, spas or washer-dryers.

"Particularly for first-time home buyers, it really is a way for them to control or limit any unforeseen repairs," Phipps says.

Ask your real-estate agent what companies they like to work with. Also, the home warranties don't go into effect until after the sale, so you can prepare. A list of home-warranty companies by state is available here.

Prepay some first-year expenses

Buyers who might have exhausted their savings and entered into steep monthly payments may feel great relief knowing other costs have been prepaid for six months or a year. These could include:

Homeowners association dues
Taxes
Utility payments
Lawn maintenance costs
Housekeeping payments.
Offer owner financing

In this scenario, the seller essentially offers to act as a bank and can set the terms of payment. This is clearly for those sellers who don't need the cash immediately. It is risky, agents say. "The other incentives are one-time fees; this is a long-term relationship," Phipps says.
Sellers should not only check the buyer's credit risk, but also make sure the buyer is financially invested in the house from the outset, through a decent down payment.

"You want to make sure you have good professional advice from your Realtor and your lawyer as to what that means, and what the recourse is if the mortgage isn't paid," Phipps says. "And a pre-approval letter for financing doesn't necessarily mean that you don't want to do due diligence."

Reward your broker

If you're in a hurry, you can always offer perks to your sales broker. This can include a higher commission or a gift. Human nature being what it is, this may work get the agent to move more buyers through the house. (Read more about people who chose to pay their agents extra.)

Nonfinancial incentives

There's no cap to what you can offer. Just make sure you are upfront and disclose transactions to your lender. Incentives can work as a psychological draw, say experts. But keep them fun and related to the house, Phipps says. For instance, he knows a seller seeking a Smart Car, which is hard to find, to offer with a solar house.
Advertise that the incentive will be offered for a limited time, and if it doesn't work, try something else. Steer clear of politically incorrect items that might offend prospective buyers, such as fur coats or energy-hogging cars.

Be wary of paying for inspections or repairs

It's possible to pay for these if need be, but it's not necessarily a good idea.

A home inspector should represent the buyer. If a buyer pays for the inspection, there's less chance someone could cry foul later. You don't want to be accused of being in cahoots with the inspector simply because you signed the check for his work, Phipps says.

Also, if the seller offers to pay for repairs as a condition of sale, the buyer's lender could require that the work be completed prior to funding, potentially stalling the sale.

"It creates a hiccup in the transaction," Beaudoin says. "Instead, what lenders will suggest is that the seller apply that money toward the closing costs. You can proceed and no work needs to be completed before the close."

Stay aboveboard

No matter what kind of incentive you ultimately offer, keep in mind that you'll need to be upfront about the details with all interested parties.

"Any kind of credit that the seller agrees to is ultimately subject to approval, or is limited, by the buyer's lender," says Kenneth Russo, a real-estate lawyer with LaPlante Sowa Goldman, in Rhode Island. Both parties must disclose any transactions made as part of the process.

Real-estate transactions are governed under the federal Real Estate Settlement Procedures Act. Violators can be subject to charges of felony fraud, says Russo.

Also, check with the state's business regulatory office to ensure that incentives are legal in your area. Spell out their value clearly, and have a lawyer review the agreement.

With those caveats in mind, offer incentives. They can send a strong message to buyers that you are willing to negotiate, says Gary Painter, an associate professor at the University of Southern California and research director of the Lusk Center for Real Estate.

"In some cases, buyers prefer incentives over lower prices," Painter says. Just calculate the exact value, "and make it clear."

Seven Suburban Real Estate Myths and Legends

At a time in human history when information and misinformation are often impossible to differentiate, it is important to admit that we make a lot of inaccurate assumptions. Every field has it myths. From the beginning of time, we are taught to have a critical mind and to challenge assumptions. That is our charge today: Obviously we need to start somewhere: So what are suburban legends or myths? According to Wikipedia,
An urban legend or an urban myth is a form of modern folklore consisting of stories thought to be factual by those circulating them. The term is often used to mean something akin to an "apocryphal story". Like all folklore, urban legends are not necessarily false, but they are often distorted, exaggerated, or sensationalized over time. A suburban myth or legend is just in a different locale, a suburb, like East Greenwich.  Remember these are not necessarily false, but they are exaggerations. Here are some good ones for suburban Rhode Island Real Estate:

1. New Yorkers or Bostonians will pay more than fair market value for MY house. When preparing to list a house, the best agents will evaluate ‘comparable sales’ as part of an analysis to help the seller determine the list price. Elements include, number of active, competing listings; pending sales; sold sales; mortgage interest rates, governmental regulations, absorption rates, (how many months will it take to sell of the existing inventory based on the current rate of sales.) etc. Often when a seller is disappointed with ‘fair market’ value, he or she insists the property be listed well above reasonable to sell to the one ‘uniformed, price unaware, New Yorkers. Now one might argue that there just might be basis for making that assumption; it is true that many are Yankee fans and some are Giants fans, but that nostalgic exuberance does not carry over to home prices, even when they are coming from ‘uber-wealthy’ Manhattan. In short, Boston and New York home buyers will not over pay for Rhode Island real estate, even your home.
2. If I wait long enough, I will get my price when the market catches up. This may have been true for a while in the early and mid parts of this decade. When the market is correcting, the gentler word for home prices dropping; you will need to wait a very long time. It may in fact be a very, very long time until we pass the water mark of real estate values two and a half years ago. Additionally, if your house is on the market for the four or five years, it is even more unlikely that you will sell if for more than fair value. The longer on the market, the less likely you will sell it at a premium price. Simply said price matters. A well price property will sell. One that is overprices is unlikely to find a new owner. This market is very impatient with sellers who are nostalgic with price, say 2005.
3. Buyers will look beyond repairs, decorating, or ‘deferred maintenance.’ It is amazing how many people say foolish things about buyers: The leaking roof does not matter; it is only a little leak. The toilet does not work, but the buyer will never notice. If you bake cookies or an apple pie, the buyer will never smell the septic system that is backing up. Truth be told, most buyers in 2008 have neither the patience nor the money to make a sellers repairs. There are plenty of houses on the market that are in great condition that will sell first.
4. Everybody will love my dog. There are over 75 million dogs in the United State in 45 million households. We are a nation of dog lovers. Well not necessarily. One of the most common complaints and objections of potential homebuyers is the evidence of animals, most often dogs. If you are not a dog owner, or rather a dog lover, having Bruno sticks his nose in the buyer’s butt or groin is not a good closing technique. Most buyers will not enjoy your dog. They either have their own or do not like them. It is not personal, it just is. I know Bruno does not bite, but the buyers’ fear is not perception. It is real. Yes I too have been bitten by a Newfoundland.
5. The agent who is not selected to list the house will sell it for the competing agent who obtains the listing.. Real Estate is intensely competitive. Many agents work on a contingent fee. If they sell the house they get paid. If they do not, they will not earn a fee. Sometimes when a seller says that they have selected another agent, they close by saying but you can always earn a fee by selling it for the competing agent. The operative word is ‘competing.” The non-selected agent is committed to selling his/her own listing, by contracted fiduciary. Only after they have tried unsuccessfully to close a potential buyer on one of their listings, will they move onto others, but not necessarily your, particularly if it is not priced right. There is a major oversupply. Multiple Listing is a great broker to broker network for cooperation and compensation, but it amplifies and highlights competition. Sold signs are one of the best ways to get future listings. The non-selected agent will want to sell his or her listing first so the sold sign is one on of his/her signs.
6. Which brings me to one of the biggest myths: a great real estate agent can ‘make a buyer’ purchase something they do not want. Great agents are masters at pricing, positioning, pursuing, and persuading potential purchasers. It is rare that a great agent can keep a transaction together through closing, if the buyer does not genuinely want the property. A great agent works tirelessly to identify and introduce a home to potential purchasers. For this to work effectively the buyer must be ready, willing and able. (ABLE has been the biggest challenge lately).
7. Houses sell themselves. This may have been true for a couple of months at the peak of the market, and maybe not. This market requires aggressive marketing, strategic pricing, web-centric marketing, and high energy commitment. If you look at what is selling right now, it is the result of a convergence of marketing talent, careful pricing, and unrelenting Realtor effort. While on one hand experience has major value in this market, it is also true that quick response is important. The National Association of Realtors completed a study that many elements are important for effective marketing, but among the most critical is response time. Often the person who makes the sale is not necessarily the agent with the most experience, best web presence, best logo, most awards, best looking, etc., rather it is the first responder. That needs to be repeated: The first responder most often makes the sale. It is important to have a responsive agent, who is available not merely to market the home, but to available to answer questions and to show the property. Even with digital presentation, the human touch of a Realtor is a very valuable element is selling a home.


We will share other myths and legends with you, but this gives you some good examples. If you want to share more with me, please share them here on my blog: www.phippsrealty.blogspot.com

Foreclosures, Short Sales, Walk A ways, and Opportunities.

It would be almost impossible to be out of the reach of media in 2008, although it might actually be healthier. But via television, video, web, texting, tweetering, pda, cell, phone and what my grandmother used to call gossip, information and misinformation surrounds us like air. Sometimes the information is difficult to understand due to its volume and its inconsistency. The sub prime mortgage mess is a great example of this problem. What is true and what is real?

Approximately 46,000,000 people have mortgages in the United States. Incidentally, more than one third of Americans own their homes outright, that is without any mortgage. Sub prime mortgages typically are adjustable rate mortgages. Many people took out this type of mortgage to ‘get into’ a home without documenting any income. Most of the mortgages had a low ‘teaser’ initial rate and payment. Many of these loans will adjust after 2 years. The adjustment would increase the interest rate and the payment. A good number of these mortgage holders cannot afford the new payment. In each quarter of 2008, 450,000 mortgages are likely to ‘reset’ to a new rate and payment. Many buyers can not afford the pre-reset payments. Therefore, it is a major problem. The Federal Reserve and the Government are trying to help minimize the impact of ‘non performing’ mortgages by helping the borrowers, lenders, and investors. The economic stimulus package addresses some of the problem. Increases in conventional mortgage ceilings, from 417k to 475, and the increase in FHA mortgage ceilings from 316k to 475K will help. Even with all of these efforts, there are a significant number of foreclosures, short sales, and ‘walk a ways.’ Walk a ways are when the homeowner simply moves out and leaves. Short sales are a protracted process of selling the house for less than the mortgage value.

There are some great opportunities with foreclosures and short sales. The March 24th National Association of Realtors monthly numbers showed an increase in sales and a price reduction due in part to the impact of ‘REOs,’ Real Estate Owned, by the lender.
The real challenge in the market is that the lenders are not equipped to handle to volume of REOs. Any real estate broker dealing with REOs will tell you it is very difficult. It is not usual to wait 2 or 3 months for a response to an offer. It is obviously very difficult to keep a buyer interested. The result of that delay is a further deterioration of the value of the property and sometimes a deterioration of the condition of the property. Some foreclosed properties have suffered water damage, vandalism, etc. Foreclosed properties also hurt the value of the neighborhood. We must recognize that the lenders do not want instructions on how to run their businesses, but this is a perfect storm of hurricane proportions. The lenders would ‘recover’ more of the value of the property if they sold the properties more quickly. The non producing mortgage becomes recovered cash when the house is sold. This would be true even if the lender sold the property at a low price.
It should not take 3 months to get an answer after a house is in short sale mode or has been foreclosed.

As a potential buyer, there are great opportunities with short sales and foreclosures if you are patient and persistent. You must be prudent and you need to know what you are purchasing. Many of the properties have issues that nothing short of a comprehensive inspection would uncover. Some have been trashed. Sometimes the lenders are generous. Last summer there was supposed to be a sale on a property in the 470’s. The lender was owed almost 500k so they refused to close. That same house came on the market last week at 329k. At last count there were over 20 offers. Someone is going to do very well. Often short sale and foreclosed properties are sold between 10 and 20% below market value. It is important to have representation and inspection to ‘protect’ your position. But there are buyers out there and there are opportunities as well. If you have been trying to time the bottom, the clocks of some of the short sales and of foreclosures have struck midnight. It is a time of great opportunity.

New Rhode Island Conventional and FHA Mortgage Limits

Real Estate News: Major Changes in Real Estate Financing;

The last few weeks have seen major changes in the mortgage market. The crisis in the sub-prime market has produced a major contraction in mortgage money. As with most things in life, every action tends to cause a predictable reaction. Pendulums swing both directions. The balance to the sub prime mess is difficulty for credit worthy people to obtain mortgages. It is true that mortgage money is in fact available for qualified homeowners.

The first part of March saw some major changes. One of the challenges has been
the rate difference between conventional rates and jumbo rates, mortgages above 417k.
The jumbo rates had grown to almost a full point, one percent above conventional rates. For example, if you were borrowing 415k your rate might be 5.5% in a 30 year mortgage. If however, you needed to borrow 430k, the fixed rate would be closer to 6.5%. The difference in mortgage rates, historically would have between .25% and .33% higher, not 1.0%. This impacts the month cost of a mortgage.
Conventional Mortgage limits are regulated by the GSEs, Freddie Mac and Fanny Mae.
As part of the economic stimulus package that Congress just approved, there was a provision to increase the GSE mortgage ceilings. Fortunately, all of Rhode Island was increased from $417,000 to $475,000. This means you can borrow up to 475k at the lower rates. This will help to stabilize prices. It will have significant impact in East Greenwich where the average sales price is just over 500K.

What was even more encouraging was the change in the FHA limits. FHA has historically been the source of funding for people with limited cash and who would not fit conforming underwriting criteria. FHA was super ceded by sub prime financing. Sub prime is essentially gone now. FHA will be the alternative. The limits for mortgage have been increased from 316k to 475k for single family, $608,100 for two families, $735,050 for three families, and $913,450. for a four family. The higher limits do come with a change in the amount down. Prior to 5 March 2008 you could finance a property with 3% down, now you will need 5% down. You may need more or may need to re negotiate the purchase price if the appraisal does not come in at the agreed upon price. Appraisals are critical now. The FHA program will have most value beyond East Greenwich. FHA is also a great tool for people who need to get out of sub prime mortgages and need a ‘flexible’ alternative.

If you are looking to finance a new purchase or re finance a house get some professional advice from someone who know the new financing choices. It is much better now than it was a week ago, but get expert advice, it will make a huge difference.

Realtors are really encouraged by these changes. It will help move us back into a normal market. A normal market can be either a buyers market or a sellers market. But is a normal market, credit worthy buyers can obtain fairly priced mortgage money. It is a good time to buy a house and obtain a mortgage. Just get professional advice: Call a Realtor!

TMI: To Much Information

Rhode Island State Law requires that all real estate licensees take 18 hours of continuing education every two years. The current renewal period ends April 30, 2008. Anyone who does not have the continuing education hours will not be able to continue working in real estate. While the approved courses are required of all licensees, Realtors are required to take additional courses including Ethics. The best agents take more courses to be at the top of their game. The challenging market demands continuing training.
Some of the course help to teach the average Realtor, typically a 50 something female, how to work with x and y generation sellers and buyers. In one of the courses offered recently it was suggested that one of the things we should do is join one of the ‘social utilities:’ facebook or myspace. As a baby boomer, we tend to pride ourselves in our use of programs like: www.pandora.com. www.goodreads.com , and www.linkedin.com
Each of these communities engages a specific community. Furthermore, the amount of information exchanged tends to be professional in nature and is by choice and by situation limited. That is not the case with facebook. After joining several days ago, I have 12 friends. Several of them are my friends, but a good number are friends of my adult children. It is very kind of them to share their ‘faces’ with me, but there is by any definition a degree of awkwardness. The nature of social utilities is to be forth coming, but it makes me a bit uncomfortable to know all of the personal details about my friends much less my children. It is also very apparent that this is a great tool for background checks for employment. Yes, it is also true that you can place a privacy setting to limit the viewers of your face to just that your face and your name.
Maybe it is my age that is the problem, not the vehicle. How old is too old to be on facebook? Is the entry of baby boomers some form of generational voyeurism or is it some sort of generational envy? Truth be told, I am too much of a newbie to make any real conclusions, but the questions require response. What is really amazing is the breath of information on the site. Not merely friends, but pictures of friends of friends. Relationship status, orientation, religion, travel experience, steams of consciousness, video, thoughts, statements, gifts, pokes, et al. If you can dream, it can be experienced, at least vicariously through www.facebook.com.
One obviously conclusion, facebook has simply too much information. Not yet sure, how accurate all of it is, but one absolute truth is there is simply too much information TMI. If you are on facebook and find there are lots of new older Realtors joining it, do not be surprised. A lot of us took the same course. Not yet sure, how to ‘use’ this new social utility, but a least we are entering the area. If on the other hand you are a long time facebook devotee, and you want to have a laugh, check out some the new continuing education Realtors who are trying to engage a totally new curriculum. Lol.