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As we all know these days – the real estate market has been a veritable rollercoaster. Therefore the best thing to do before dipping your toe into the market is to get some guidance from someone who knows of what they speak. Alex Coates, Broker / Owner of Malvern Realty Group is a very knowledgeable and personable kind of guy; licensed since 1992, Alex is an undergraduate of Boston University with an MBA from Villanova. Malvern Realty Group has been his baby for the past five years, a –small non franchised private real estate company located in a lovely old building smack dab in the middle of Malvern. With six licensed Realtors on hand as well as in-house mortgage, appraisal and title services from T.A. Title Alliance Financial Services Inc. www.tafsi.com and PMA Philadelphia Mortgage Advisors. It’s one-stop shopping for all your real estate needs.
So what’s the state of the market these days? Well first off, Alex points out that “the two biggest misconceptions are that you can’t sell your house and you can’t get a mortgage in this market; absolutely not true! If you price your home for the market it will sell, and probably pretty quickly at that. Your home needs to appeal to the buyer (staging might not be a bad idea) and be in decent condition. Buyers want something pristine unless they’re looking for investment properties; “smart investors are buying real estate right now, it’s an excellent market to accumulate investment properties for the long haul.” Alex says that Sellers should focus on bottom line and “if that means $5K in closing costs to the buyer with the same end result to the seller then so be it.” Now on that same topic Sellers don’t want to get too hokey; if they’re offering a two week vacation in Hawaii as incentive to buy their home they should bear in mind the transparency of such an offer. You’re likely to get a buyer who says “well why not just take $20K off the price instead?” Upgrades that statistically have the best returns are kitchens, bathrooms and finished basements. Capital improvements like a new roof don’t bring the highest but may be necessary before listing the home. He also points out that “when you discuss real estate you have to discuss sub markets.
Fannie Mae requires declining value statistics to be based on just the neighborhood for that particular house, which is considered the competition. That analysis may lead to 4% reduction in prices and of course varies according to the neighborhood. Fannie Mae defines submarkets for lending purposes and they all have their own behavior – the submarket could be a township, neighborhood, or in some instances just a particular street.
Average days on market (DOM for you real estate hounds) is a statistically normal 2-4 months, unless of course it’s overpriced. Seller’s are finally starting to wake up and realize that it’s better to take it off the market than to let it sit there and continually reduce the price. He says “the longer the house stays on the market the better chance of the seller unnecessarily ending up with less money.” Lack of seller motivation, overpricing and poor marketing will not sell a home. “Get with a realtor that will provide you the best expertise and service, don’t just focus on the company.” Bear in mind that if you’re considering selling your home on your own, you’d better be prepared to end up with less money and more work. From a net proceeds perspective the FSBO (For Sale by Owner) anticipates higher proceeds but they rarely get it on the day of closing.
Currently Chester County’s median sale price is down 11% from last year (March 08 – March 09) and according to Alex those numbers will most likely continue through the balance of the calendar year. “My personal opinion based on heavily researched opinions, is that the 2nd quarter leading into the 3rd quarter will show a bottoming out of negative numbers with slow but steady improvement moving into 2010, not necessarily the whole country but Chester County specifically.” Think about this – year over year from March 08 to March 09 the number of homes that went to settlement are off 21%, having nothing to do with value or prices, just the volume of homes. Pending units are down 10% year over year; from 2007 – 2008 they were down 24%. Overall volume is down, no doubt. As Alex points out the spring market has heavily increased activity so hopefully in the next 90 days the number of settled units should increase. Backed up inventory is starting to change, pending and settled units have increased dramatically but from a very low starting point. To sum it up: “it’s not back to normal but its way better than it was last fall.”
Don’t be bummed out though, first time buyers have incentive to purchase with the $8000 first-time homebuyers credit, and upsizing is good with the current weakness in the market, buying can be a very smart decision these days. e perks for potential buyers is the increase in seller concessions and “lease to buy” properties. Not to mention that interest rates are extraordinarily low right now. The average 30 year fixed mortgage can be had at right around 5% with no points; as Alex says “it’s an amazing rate.” FHA loans run about the same or slightly lower, a great place to start if you have less than 20% for a down payment. Because of this entry level homes have sold pretty rapidly. Financing is totally obtainable, just go with common sense. If you have income, decent credit, and are borrowing a reasonable amount (say no more than 80% against the house value) it’s flowing like butter. Higher loan to value is available through FHA but the exotic financing is gone – good riddance! The irony of the buyers market is that typically the definition is no buyers in the market – today it’s the exact opposite yet it’s the best time to buy.”
If you’re looking at new construction watch the bigger builders with new homes to build in already large communities because they’re on a mission to sell that inventory. “They’re slashing the prices up to 100k under what they sold for months ago” Alex says, “because they’re trying to sell those last 15 units. Unfortunately it puts unfair pressure on the guy who bought a few years ago for 500k and looking to sell when an identical home today is going for 400k.” He’s hopeful that things will level out in 12-18 months. As far as vacant land goes the Builder spec home market is essentially gone. Alex explains “there’s no more buying a lot for $350k, putting up a $1.2 million home and seeing what happens – that’s over. Not only is the market slow but lenders just aren’t moving that product right now; largely due to financing uncertainty and anticipation of the commercial sector as the next phase of weakness. Nationally the outlook isn’t good but probably won’t translate to the Philadelphia area with any vehemence.”
So I dropped the “F” bomb: foreclosure. Alex didn’t even flinch; he says that although there is foreclosure and sheriff sale activity in the county (check the pages of the Daily Local on any given Sunday). Fannie Mae wants conformity to lend money so they want to know if clustered foreclosure activity is the main driver for bringing values down. In other words if five out of seven homes selling on the street are foreclosures, that will heavily impact the homeowner living on the same street. The good news is that in Chester County they’re usually not clustered enough to be the main driver of value. If you’re in the market to buy a foreclosure Alex will tell you that it takes a lot of time and effort to get the deal; “People will call and say hey can you show me all the foreclosures and I’ll just pick the one I like?” Unfortunately, as Alex says, “it doesn’t work that way.” Each category pre-foreclosure, foreclosure, attending sheriff sales and finally buying bank owned homes are “enough work to be a full time job.”
But whatever route you decide to go, look at the bright side – you certainly don’t have to travel alone.
