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.