Bright MLS March 2022 Delaware County PA Residential Housing Report

Showing Time, using Bright MLS statistics, has released their Local Market Insight report for single family homes in Delaware County Pennsylvania through March 2022. If you would like information about this or any other County or any specific municipalities in the Delaware Valley, please contact me or visit my web site, AndrewWetzel.com. I am only a phone call, an email or a text away! I respond promptly to all inquiries.

The overall market continues to be affected by lingering effects of the pandemic which contributed to (if not caused) an inventory shortage. Combined with historically low interest rates and increased post-pandemic interest in home ownership, the historically low inventory levels created a huge surge in pricing which many are confusing with the “bubble” we experienced some 15 years ago. This is different!

Interest rates have risen rather dramatically recently with some increase in inventory but, for the most part, prices and competition remain intense. As always, your experience may differ depending on your location and how you have been personally impacted. As I always say, the decision to buy or sell Real Estate is a personal one and the current environment typifies that as many sellers stay off the market while many buyers do extraordinary things to beat their competition.

The report compares current year-to-date results to one-year ago, same time period. As with all Real Estate statistics, two things are true. First, the performance within individual zip-codes can and will vary significantly from the overall County. Real Estate is local and results can vary from neighborhood to neighborhood and even block to block. There is no such thing as a “national” Real Estate market any more than there is a national weather forecast so, whether you may be thinking about selling or buying, please contact me for details about your areas of interest. I can provide current information and keep you informed about the evolving market. Deciding whether it is the right time to sell or buy is a personal decision typically involving a number of variables. I can provide the knowledge and insight to help you decide what works for you.

My second point is that, unfortunately, all Real Estate statistics involving sold data are stale. This is especially true if you are relying on Internet valuation models which use recorded data rather than up-to-date MLS information. Even then, while a sale may be reported as settled or closed today, the real question is when was the offer presented and negotiated? Typically, financed sales can take 45 to 60 days to close so the market today may be different from when the offer was presented and negotiated. Up-to-date information, even if not perfect, is important!

As far as the statistics, there were 1868 new “for sale” listings through March 2022 compared to 1862 through March 2021, a slight decrease of .7%. There were 1577 closed sales through March 2022 compared to 1498 through March 2021, an increase of 5.3%. The median selling price through March 2022 was $269,000 compared to $245,000 through March 2021, an increase of 9.8%. The flat number of newly listed properties had no effect on the number sold while substantially increasing their selling prices. The number of currently available properties (391) is below one year ago (444). The Days on the Market (DOM) (29 vs 27) and “Sold to List Price” ratio (101.2% vs 99.5%) are improved while the MSI (Months of Supply) is less than 1 month (at .7 months), down 42% from one year ago. The low inventory combined with pent-up demand has created our current market. Again, these numbers vary throughout the County:  the underlying data shows a wide range of results in all categories among the 49 different municipalities in Delaware County. What happens going forward?

Generally speaking, low inventory levels in some areas continue to produce multiple offers and a frenzy among buyers, some of whom may live to regret a hasty decision to get a property under contract. During the shutdown when “in-person” Real Estate activity was not permitted, many buyers started making offers “sight unseen”, some without inspections to improve their odds. Buyers have tried to be very creative to give themselves an advantage. The effects of that remain to be seen, perhaps taking a number of years, but Real Estate, perhaps with the exception of those properties acquired strictly as “investments” with documented income, is generally not something given its expense and complexity that the typical buyer would want to purchase without an in-person showing let alone removing the protection of an inspection contingency. Technology, including photos, virtual tours, 3D tours and other things, however advanced, has its limitations. I think buyers need to walk through a house!

One major difference between the present day and past years in terms of competition and all that results from competition is the presence of investment groups buying large blocks of Real Estate, often with cash and limited contingencies, solely for the purpose of using them as rentals. Unfortunately, many of these purchases include properties that generally appeal to first-time buyers. The competition for them has driven up prices and prevented many new buyers from becoming homeowners. As long as rental income remains strong, these investors will continue to acquire properties. The irony is two-fold. First, rental income remains strong as many are unable to purchase their own homes which creates competition for rentals. Second, the elevated rental pricing is preventing many from saving for the down payment they need to obtain financing. I am not sure there is a way to change this in the short term.

What about the properties that did not sell? Many came off the market and still remain off the market. As the pandemic has evolved, some properties did come back on the market but many have not. Did owners delay, change or give up their plans? Buying activity has been very strong but some sellers are reluctant to allow showings or may have issues they are dealing with, especially if they need to buy their own “next home”. While selling their home may produce a ‘windfall”, what will buying cost? My only concern is whether people are making an informed decision or reacting to what they “think” is happening in the market. As with the market 15 year ago, the sellers who jumped in early may have had the best success if they needed to buy another home. Along the same line, some sellers will wait too long and miss an opportunity to maximize their proceeds.

Buyers and sellers need to do the same planning and preparation that those tasks typically require, regardless of the market. Easier said than done! Anyone looking to sell or buy needs to understand their local market and decide how to react to the pandemic as a “variable” that has evolved over the past two years and, hopefully, will be gone in the near future. However, the effects of buying and selling remain for years. They are important decisions and likely require the knowledge and insight that a professional can provide.

I tell my clients that I cannot guarantee that their house will sell if it is on the market but am fairly certain that it will not if they take it off the market. Anyone trying to sell now may have less competition and more offers to consider. Buyers may have more competition and fewer houses to consider. Hiring an experienced, trained and educated professional is more important than ever.

Despite the pandemic, every house will not sell. Houses may get showings without generating offers unless buyers think they are priced within the range of their perceived “worth”. Most property listings whose contracts are canceled or allowed to expire have asking prices considered high for their market and/ or they were poorly marketed, meaning that some buyers and agents may not have even known that a house was available to look at or purchase. Some buyers may even make “full price” or higher offers just to control the process only to have remorse later as inspection results are revealed. Of course, this may well depend on the ratio of buyer and sellers so there is more to this than raw statistics.

If a market has a lot of inventory, some buyers may not be willing to look at houses priced high compared to the rest of the market:  why try to negotiate a price down when other similar properties are available at more competitive prices? Many sellers open to negotiating their price will never get the chance. I will be happy to discuss specifics with you.

The overall economy, despite some people touting specific statistics, has serious issues that will keep some out of the market. Statistics aside, what are you planning to do? Real Estate is generally a long-term investment unless you are looking to fix and flip it or planning to move within a short period of time. There are opportunities out there. As with the stock market, it is very difficult to pick the best time to make a move. All you can do is get the best available information, determine what is in your best interests and then start the process. I am a phone call or email away and getting started is easy once you take action.

If you want or need to sell any type of Real Estate, now or in the future, whether you tried and did not succeed before or are planning for the first time, it is never too early to start the planning and preparation. Please do not wait for what you think is a better or the best time to start. Buyers look all year long and can only see and buy properties that are available to see. Based on what we experienced in 2021, is waiting something you would consider?

There is no time for inexperience, empty promises or false expectations! 

HIRE WISELY:  We are not “all the same”!

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When Should You Reduce Your Asking Price?

That depends.  Depends on what?  There are several things to consider.  Let me discuss two.

First, pricing is an art and not a science.  No matter what data and information went into determining your asking price, the price is an educated guess at best.  Is it realistic or hopeful?  If there is little or no information to rely on, it might just be a shot in the dark.  Either way, what would convince you to consider lowering it?  Some sellers think a reduction is the same as a loss when it might well be the difference between selling or not.

I suggest that a seller give this some thought at the beginning of the market process.  Their thinking may change but waiting to consider how to react to the market when a house is on the market can be stressful and cause a seller to miss a great opportunity.  Some sellers measure success by showings.  However, a lack of showings may the result of poor or ineffective marketing.  What about a house that gets many showings but no offers?  That is likely a price problem as it suggests that buyers found more for the same price or the same for a lower price.

Second, a listing agent needs to have a discussion about pricing.  The points already mentioned would make a great conversation.  In addition, a market analysis will provide historic information as well as some insight into what is happening now, both of which have a degree of subjectivity and built-in error.  As part of looking at the market and evaluating what the owner is selling, a listing agent needs to know their seller-client’s motivation:  is it time or money?  If the seller is committed to selling sooner rather than later, a price reduction would be more likely to be considered.  Of course, in that instance an asking price might have been aggressive at the start.  If it works, great.  If not, some sellers will think they have already agreed to accept less than the market value.  If they prioritize the amount they receive, they may be reluctant to reduce at all and if they agree, it could take time.  Again, having this discussion early on will save time later and may prevent problems.

Historic sales are just that.  Depending on the time frame you use, they may cross months, seasons and even years.  Even if a property settled yesterday, when was the offer made and negotiated?  It could be weeks or months old and not indicative of the current market.  A look at the pricing for houses under contract, while not providing the number the seller accepted and not being subject to an appraisal, will at least tell you what one buyer found compelling enough to consider.  You may see a trend higher than or lower than the settled pricing.  Of course, any agreed-upon price could be quite different from the then-current asking price and you won’t know that until after settlement.

Depending on the market, I believe that when a new listing hits the active market, it has its greatest chance of attracting interest as there may be more prospects looking at that time than will enter the market in the next few weeks.  It has been my experience that new listings can and should get a flurry of activity quickly and then, if activity or interest has been lacking, the seller has a decision to make.  Generally speaking, activity drops as the supply of buyers reforms, meaning new buyers come on the market, sales fall through or buyers have shopped and are ready to make an offer.

Many think you should give a house a week or two to gain maximum exposure to attract most of the buyers.  That makes sense.  After all, if you are satisfied with the marketing, meaning that agents and buyers will be able to find your property in their search results, a lack of activity generally means that buyers are not interested or they are simply more interested in other properties.  Again, activity is a poor measure if an owner wants a sale.  Showing your house to an endless parade of lookers gets old fast.

If buyers can find houses similar to yours for a lower price, you either need to meet the competition or wait until the competition has been sold.  If they can find houses priced like yours that offer them more, assuming you will not make improvements, you need to re-price to offset what you do not have.  Some sellers will consider making upgrades but that is risky and most will cost you more than they are worth.

The bottom line is that pricing is a tool.  It is used to connect buyers to properties.  However, Real Estate is NOT retail:  the price is generally considered negotiable.  The market helps determine whether the asking price is a “floor” or a “ceiling”.  Ideally, a price should take into account your location, the features and the condition while being competitive with other properties.  Owners determine their asking price and buyers determine the value.  If you believe that the price is the reason people aren’t coming or aren’t making offers, you can re-position your house with similar competition.

The real question is how much do you reduce?  If you are getting showings but not getting any offers or only low offers, the situation may not be as dire and perhaps your agent can contact the buyer agents who have visited to see if there is a price that would work.  A good buyer agent will initiate contact if their buyer-client has interest but not at your asking price.  A good listing agent won’t wait to see if you get any feedback. 

I believe that your first price reduction should be substantial and that you need to review the competition, stay engaged as the market changes and select a price that makes sense from a competitive standpoint and a technology standpoint.  Some houses need more than one reduction either because a house is simply priced too high even after being reduced or because the market changes.  When you pick your price, you pick YOUR competition.  There is no magic to it:  a reduction either changes “your luck” or it doesn’t and needs to be looked at again.

There is no time for inexperience, empty promises or false expectations.

HIRE WISELY:  We are not all the same!

Should a Buyer Agent Represent Two Buyers Bidding on the Same House?

This is a question that most agents and buyers never really have to think about.  How often does this happen?  I like to raise the question in my ethics classes for these very reasons.  Once people do think about it, it can generate a lively theoretical discussion which generates emotion and opinion.  I am not sure there is a perfect answer but I think it has so many aspects to it that it is worth discussing.  Better now than in an ethics hearing.  Let me start with some disclaimers.

First, this is my opinion and not intended as legal advice.  Second, I am in PA where this practice is not considered “dual agency”.  In fact, our contracts specifically allow this to happen which I will discuss later in further detail.  However, it is considered “dual agency” in some states which makes me wonder why, how can that be:  it either is or it is not “dual agency”.  How can it be looked at differently in different states?  If it were considered “dual agency”, which is not allowed in some states, that would at least provide some direction as to how to handle it and remove my concerns.  Third, my intent is not to interfere with any existing business relationships although I would respectfully suggest that buyers should know if this situation might come up so that they can make an informed decision before entering into a business relationship that might not work for them.  In PA many agents refuse to act as “dual agents”.  I wonder how they view this topic?

I am an analytical thinker so I will look at this from several perspectives.  Let’s start with some contract information, meaning some language that a potential buyer-client should know before hiring an agent to represent them.  This assumes that a buyer hires an agent and actually discusses their respective roles.  Of course, if an agent does not follow our rules and regulations, a member of the public may not be as well informed as they should be.  While well over 90% of the public searches online for Real Estate listings and information, I do not believe that most really understand agency representation.  We do more than open doors and write contracts.  Do prospective buyers know what to ask agents they might hire?  Are they resistant when an agent tries to do their job by discussing contracts and agency disclosures?  I am going to talk about this from the perspective of being a REALTOR, not just a licensee.  This means I will refer to out REALTOR Code of Ethics as well as our state’s “standard forms”.

Article 1 of our REALTOR Code of Ethics requires that we protect and promote the interests of our clients above all else.  While we are required to have a business relationship contract with someone to represent them as our client, rather than as our customer, that is not always the case and not having a contract is not an excuse when a problem arises.  What is important is what a buyer thinks of our relationship.  Our conduct may convey a perception that they are our client when they are technically not.  That poses potential problems and it likely means that they know less than they would have had they seen the proper forms.  This Article brings up the topic of fiduciary duties which I will discuss later.  These are owed to a client but not to a customer.

Article 2 states that “REALTORS shall avoid … concealment of pertinent facts relating to the property or transaction ….  REALTORS shall not, however, be obligated to …  disclose facts which are confidential”.  This Article brings up the topic of confidentiality which I will also discuss later.

In PA we have a form called a “Consumer Notice” that all licensees are required to present and explain to any member of the public before having a “substantive” discussion with them, referring to their “needs and wants”, and entering into a business relationship.  It describes the different relationships available as well as reviewing a number of agency/ representation-related issues. 

Under “Buyer Agent”, it says that we “work exclusively for the buyer”, that we “must act in the buyer’s best interest” “and must keep all confidential information, confidential”.  I mentioned a relationship called “dual agency”.  This occurs when an agent or Broker “works for both the seller and the buyer” in the same sale.  As stated in our Code of Ethics, this relationship requires “full disclosure to and with the informed consent of both parties”, meaning in writing, before acting in that capacity.

The Consumer Notice also includes several other important details.  All agents “must disclose, as soon as practicable, all conflicts of interest”.  A dual agent may not take any action that is detrimental to either party.  In a typical seller/ buyer scenario that is perhaps best explained by saying that a dual agent cannot disclose how low a seller will go or how high a buyer will go in their efforts to sign an agreement of sale or negotiate details later such as inspection issues.

Based on what I have presented so far, my non-legal but educated opinion is that representing two buyer-clients bidding on the same house seems like “dual agency” to me.  Again, I do not understand how some states see it that way while others, including PA, do not but I think that there is no harm in treating it as “dual agency”.  I have never heard a client complain that their agent over-protected their interests, have you?

Now let’s discuss “fiduciary duties”.  Working with a customer, meaning there is no contract, has requirements.  Working for a client expands that list as there is agency representation and six fiduciary duties.  The list includes:  obeying a client’s lawful instructions, being loyal to their purpose or goal, disclosing what you know that could help them succeed, keeping their information confidential, being accountable for keeping them on track with what they need to do throughout the process and providing reasonable care and diligence in your representation to protect them.  There is much more to these duties but imagine representing two buyers with similar intentions.

In a “dual agency” relationship two of these fiduciary duties are compromised or negated:  you cannot disclose to one party what the other party wants kept confidential.  This does not refer to “material facts” that must be disclosed if known.  It does refer to things that could hurt someone’s negotiating strategy.  A critical question is what is meant by confidential?

A listing agent can share details about an offer presented to them by one agent with another agent.  Many agents and consumers do not know that.  This is another topic that gets my classes going!  Absent a previously signed “confidentiality agreement”, such as is often used in commercial listings, the details of an offer are not inherently private and can be “shopped” to get a better offer.  Of course, this does not include the buyer’s name or personal information.

That being said, some people are very private and consider things “confidential” that others may not.  Learning this is part of getting to know your client.  Do you see how this can impact having more than one buyer client interested in the same property?

In PA we have two different buyer representation contracts, one is “exclusive” while the other is “non-exclusive”, the difference being whether a buyer works solely with one agent or has more than one agent assisting them.  That alone can present issues but is not my point here.  Unfortunately, some agents do not present either form to their prospective clients or they do so at the point of creating an offer on a property.  Better late than never!  I know that some clients are resistant to signing contracts or they may be willing to be a customer rather than committing to one Broker/ agent and getting the benefits of full representation.  However, there is important information they need to know and an executed contract proves they were at least informed of this information.

In both the exclusive and the non-exclusive contracts, there is the same language regarding issues related to conflicts with two clients.  They both say that a “Broker may not take action that is inconsistent with a buyer’s interest”.  They both say that an agent “may show the same properties to other buyers and may represent those buyers in attempts to purchase the same property that a buyer wishes to purchase” and that doing this is not a “breach of duty”.  They both say that “It is a conflict of interest when a Broker … cannot put a buyer’s interest before any other”.  “Unless permitted by a buyer or required by law, a Broker will not knowingly reveal or use any confidential information of a buyer”.  However, it does not specify what the word “confidential” mean.  It does talk about not treating the “existence, terms or conditions of any offer as confidential unless there is a confidentiality agreement” but the sentence ends with “between a Buyer and the seller”.  I guess the word “exclusive” only works one way, meaning that the buyer is restricted to one agent but the agent is not restricted to one buyer.

Then both contracts go on to say that “it is a conflict of interest when a Broker or licensee … cannot put a buyer’s interest before any other”.  The section concludes by saying that if there is a “conflict of interest, the broker will notify the Buyer in a timely manner”.  How does all of this sound to you?

These are not guidelines or suggestions, they are rules.  How do you accept all of these rules and properly manage the home searches of two buyers who want to pursue the same house?  Of course, if two or more buyers are looking in different areas and price ranges this may never be an issue.  But buyer’s plans change.  Many buyers end up buying a house vastly different from what they said they wanted.

I am not an attorney but these sections seem to conflict, don’t they?  Wouldn’t having more than one buyer interested in making an offer on the same house be about as conflicted as it gets?  While the rules say that an agent must mention having a conflict, it does not elaborate.  Do I need to do more than say “I have a conflict”?  Can I say what the conflict is?  Here is the best part:  to whom do I mention the conflict and what is the remedy?  Do I tell both buyers?  Can I just end my relationship with one of the buyers and keep working for the other?

That raises an interesting question:  who is allowed to terminate a contract?  While I could have another agent take over with one buyer, I think that poses a problem as I would still know information about that buyer that I would not normally know and that could harm them.  In fact, when agents encounter problems with seller/ buyer dual agency, I suggest that they completely remove themselves from both client relationships to avoid any perception of problems with disclosure or confidentiality.

As with all Real Estate paperwork, the buyer contracts do encourage the prospective client to seek the services of an appropriate professional, such as an attorney.  While that makes sense, is there time to do that?  If a buyer has done as I suggest, all of this would have been taken care of before I showed them any houses.  Conflicts that arise after that may not be able to be undone and it could impact a buyer’s opportunity to make an offer and get it signed.

Let’s drill down further to the real issue.  Aside from whether one agent can truly best represent the separate but conflicting interests of two different buyers, remember that only one buyer gets the house, does the agent have the right to tell each buyer-client about the other’s interest in the same house?  Does doing that conflict with the fiduciary duties owed to each buyer-client?  What is the goal?

I have had agents tell me that they want to be “fair”.  Really?  Who gets to decide what is “fair”?  What does that even mean?  The REALTOR Code of Ethics used to have that word in Article 1:  it said that, while we had a duty to protect and promote the best interests of our clients, we had a duty to treat people fairly.  If you are a sports fan, what is fair?  Is a pitch a ball or strike?  Did a referee miss a penalty or make a bad call?  The word, however nice it sounds, is confusing because it is unclear.  Do any two people, especially those working on the same sale, define the term the same?  Again, only one buyer can win.  Perhaps neither buyer will succeed but that does not mean that all is well.  Anyway, the Code of Ethics was amended years ago to say that we have to treat people honestly.  I’ll leave that alone but telling two buyer clients about the interest of the other is not a measure of honesty to me.

Years ago I had an agent in my office show one of my listings.  They brought me an offer which was negotiated, accepted and signed.  When I called to tell them that it was signed by my seller-client they made a very unusual request of me:  they asked if I would enter my name in the MLS as the buyer’s agent.  I asked why and was told that this agent had sent the same property listing information to four different clients but only one seized the opportunity and quickly got the house under agreement.  The agent was concerned that the other three would blame them for not telling them what had happened.  I commended this agent for what they did!  I can’t imagine what might have happened had they shown the house to the other clients and written and negotiated multiple offers on the same house.

The question then becomes what happens next?  Let me explore a couple possibilities.

• If neither buyer gets the house, there may have been no harm done but the question of whether our actions are ethical or professional is based on our conduct and not the outcome.  “No harm, no foul” is not the measure.  Did our actions possibly cause both buyers to lose a sale?
• Suppose one of your two buyers wins.  Did they improve their offer because they knew they had competition?  If so, did they spend or do more than they really had to and might have done if they did not know?  Did the other buyer hold back or drop out because they felt they could not win?  Some people want to compete, even if they overdo it, while others will not compete even if they might succeed.  Saying that both buyers knew that other agents had interested buyers does not change my opinion.

To conclude, there is a lot to what seems like a simple question.  Ultimately, it “appears” that our forms and contracts allow us to represent more than one buyer interested in buying the same house but I am not sure there is sufficient guidance as far as what to do when this situation comes up.  I have disclosure and confidentiality concerns.  I think each client should be allowed to make that decision.  I would guess that both would like to know about the other even if wanting their own interest kept quiet.  Suppose one cares and the other doesn’t?  Is it fair for one to know but not the other?  There is that word again, “fair”.  Trying to work this out once the situation comes up is too late. 

Let me add two thoughts.  First, this is not the same as a listing agent sharing the details of your client’s offer with another agent or having them let you know that other agents have made offers on a property that interests one or more of your buyer clients.  You must tell them that information.  However, you have no fiduciary duty to the listing agent, the seller or any other agent’s buyer clients.

My second thought is more of a question.  Suppose you write and present an offer for one buyer-client and it is rejected or countered without leading to having a signed agreement of sale.  Do you have the right or authority to tell another buyer-client the details?  While telling them what did not work with one buyer-client seems to make sense, perhaps that offer would work now if no one else has made a better offer.  Seller expectations do change.  Does telling another buyer how the seller countered an offer accomplish anything?  There is no guarantee that the seller would still be interested in that amount with a different buyer-client and, if the market is competitive, your current buyer client may only get one chance to make an offer.  Suppose you tell them a number and they lose.  An offer is more than the price and two buyers offering the same number may have very different terms and conditions.  Suppose the buyer-client whose offer failed decides to make another offer?

I am not trying to scare anyone but, if nothing else, I hope that people who read or listen to this will better understand how Real Estate works.  It is not retail where everyone is able to buy a product for a known price and there is ample supply.  Again, we do so much more than open doors and write contracts.  Real Estate requires experience, training and education.  It is not for everyone and it can get more complicated than it needs to be at any given moment.  Life would be easy if sellers would just accept their asking price or if buyers would just offer the asking price when they make an offer.  Of course, both of those statements are unrealistic if not ridiculous.  If they were true, you wouldn’t need a professional!  This is EXACTLY why I end my blogs and podcasts like this:

There is no time for inexperience, empty promises or false expectations.

HIRE WISELY:  We are not all the same!

2020 Delaware County PA Reassessment Results

The court-ordered Delaware County (PA) reassessment project is nearing its conclusion.  When  completed, the County will have a total value for all of its over 203,000 parcels of Real Estate.  Then they will determine the “millage rate” or tax due per thousand dollars of Real Estate owned needed to generate the tax revenue required to fund the different parts of government including school districts.

I served on 1 of 5 auxiliary tax reassessment appeal boards and have reported on various aspects of my experiences including the purpose of the process and suggestions on how to appeal your proposed assessment.  The purpose of this report is to provide an overview of my board’s results.  I have no way of knowing how these compare to the other boards nor do I know what happened after my board rendered its decisions.  Those whose appeals were rejected had a final opportunity to appeal our decision.  Some may have accepted our decision or decided to wait to see what happens to their taxes.  Perhaps some whose appeals were accepted decided to appeal further, seeking an additional reduction.

As far as my experience, our board remained intact for 26 days of hearings, we were scheduled to hear 1389 appeals, 329 appellants did not report for their hearing (23.7%), 59 appeals were withdrawn after being scheduled, 13 scheduled appeals were re-scheduled and we actually heard 988 appeals (71.1% of those scheduled).  493 (49.9%) of the appeals were done virtually, meaning over the phone.  18 of the appeals resulted in our not making a decision due to their complexity so we referred them to the Board of Assessment.  Few appellants used attorneys.  In a number of cases, both in-person and virtually, a school district sent an attorney to observe or listen.

In a number of our hearings it was a school district appealing the proposed assessed values, seeking to raise them which, while perhaps adversely affecting individual property owners, spread the school tax burden more uniformly.  Only a few property owners appeared to refute their school district’s argument and some of them were able to retain the County’s proposed assessment.

A significant number of appeals were accepted.  The people who came prepared, generally succeeded.  The best preparation consisted of one of two strategies:  appraisals, if based on the July 2019 timeframe, substantiated the contention that the proposed assessed value overstated “market value” and pictures demonstrated that the County had an incorrect view of property condition, especially when the interior of the property was in “below average” condition since the process relied on exterior views.  Unfortunately, for a variety of reasons, too many came to their hearing unprepared to document their case, with many assuming that the new assessment would proportionately increase their tax burden.

While a few questioned the “constitutionality” and/ or purpose of the project, many seemed unaware of the basic information that had been provided by the County.  Board members are County residents so we got the same information as the appellants.  The County and the media provided a lot of information about the process as well.  Admittedly, I realize that different people interpreted the information differently but I do not know why so many did not realize that they had the burden of proving the new value incorrect, coming to the hearing expecting us to make a change based solely on what they told us.  It did appear that some of the confusion lessened as the project progressed which suggests that people heard from others who had already had their appeal.  At the very least, there was one final appeal after our involvement.

I had an opportunity to discuss how one school district’s appraiser arrived at their value and proved something that I raised with several property owners.  As I have reported before, a number of property owners attempted to appeal their proposed assessment by using an argument based on “price per square foot” which we generally denied as not being an “apples to apples” comparison of supposedly similar properties.  The school district appraiser I mentioned used that as a method to complete his assignment.  He stated that he had not visited any of the properties in question, that he relied on public records for lot size and living space and that he reduced his comparables to a “price per square foot” to arrive at what he thought was a “fair market value” for the properties in dispute.  Please keep in mind that the property owners will get a chance to refute his argument and I am not sure why so many did not attend what they were apparently advised was a hearing to raise their assessed values and therefor their tax burden.

I asked the appraiser directly about using “price per square foot”, specifically suggesting that it did not account for different “property conditions” that might influence a prospective buyer.  He agreed that it (and therefore, he) did not factor property condition into his conclusion.  A lender’s appraiser or one hired by a homeowner would have entered and viewed the “subject property” although the current pandemic has apparently resulted in some “drive-by” appraisals.  As far as the reassessment project itself, it was physically impossible for the process to include in-person visits.

Overall, I found this an interesting process and came away with several thoughts to share.

1. While using “market value” as a way to levy taxes makes sense, there is no perfect way to analyze and categorize over 203,000 parcels of Real Estate given their having different layouts,  locations and uses.  Even if in-person visits were used, we have different opinions and there would be too much subjectivity.  Numbers are objective and provable although predicting a future buyer’s behavior is impossible;
2. The process used to arrive as a basic assessment makes sense and, given that the property owners were provided with information to dispute as far as what the County had on record for their property and their proposed assessment/ valuation, I am not sure what else could have been done.  Many owners never reported errors until the hearing and many did not show up or canceled their hearing for whatever reason.  Owners can appeal their taxes every year and many may decide to do that next year if they are not happy with their tax rates in 2021;
3. The process relied on the last assessment and employed a variety of tools to compare the current property to what was “known” during the last assessment in 1999/ 2000.  I believe that many properties likely remain under-assessed for a variety of reasons and do not know how to remedy that.  Computer algorithms can only do so much.  If improvements are made without “permits”, errors will occur.  Vacant land presented issues.  We had about 50 lots whose assessments were questioned but the amount in question was usually significant.  The technology used “assumed” that most of the lots were “buildable” and considered them “primary” space, assessing them as such.  However, if it was proven or obvious that land was unbuildable, we reduced its assessment.

We also saw a number of interesting anomalies that defied the algorithm.  We saw instances where a property owner owned two adjoining parcels with one being a vacant lot.  In one case there was a house that sat partially on both parcels which the system picked up as two parcels with structures on both.  The owner said he received tax bills for both parcels but that he was not over-taxed.  The reassessment could have created an issue.  We also saw cases where a property owner essentially rendered their “extra lot” unsaleable and wanted the lot’s assessment lowered even though it was their action, unintentional as it was, that essentially rendered the lot unsaleable.  In one case an owner installed a driveway on an adjoining lot to access their residence which was situated on the adjoining parcel.  In another, a property owner installed a patio enclosure that ended at the boundary between the two parcels in conflict with a “set back” requirement that would have affected both properties had they been separately developed.  When an owner owns an adjoining lot, you have to ask why they bought it.  While it may be too small to build on or have some other defect that renders it unbuildable, it does add value to their residence, even if only for privacy, so the issue is not as clear cut as some might want to suggest.

All in all, while I found this process interesting, I have to admit that I was not prepared for many of the sad stories we heard, largely centered on whether property owners could afford to remain owners after their taxes were raised.  As I mentioned earlier, many assumed that their taxes would rise in proportion to the change in their assessed values.  It was very typical to see an assessed value double simply due to the change in “target dates” between reassessments.  Regardless, it is always sad whenever a property owner fears losing their home, especially when their concerns may be unfounded.

Reassessments are rare so I wonder how long it will be before the next one.  How many of the people we met will be asked to go through the process again?  Hopefully, we prepared them for a final appeal.  The purpose of reassessment boils down to fairness and uniformity:  property taxes should be objectively levied based on relative property value and not any subjectivity.  The County is not allowed to see a windfall as a result of the process but the tax burden will be reallocated with some seeing a reduction, some seeing an increase and some remaining consistent.  I wonder how many bought or are in the process of buying without having any idea what their taxes may be let alone knowing that the County has even been undergoing a reassessment.  My personal experience with prospective sellers and buyers proves this. Regardless of how their hearings turned out, my board attempted to make sure that everyone understood the origin of the reassessment, meaning that it was court-ordered, that they knew that the goal was to assess everyone based on the July 2019 “fair market value” of what they owned to ensure that their tax burden was “fair and uniform” and that there was another appeal if they disagreed with our decision.  We also explained what we were looking for in terms of proof that the County number was incorrect.  While some were disappointed and blamed others for their not understanding the purpose of the process or their hearing, many did seem to appreciate our explanations and thanked us for taking the time to help them better understand the overall process.

Delaware County PA August 2020 Local Real Estate Market Insight

Bright MLS has released their Local Market Insight statistics for single family homes in Delaware County Pennsylvania through August 2020.  If you would like more detailed information about this or any other County or any specific municipalities in the Delaware Valley, please contact me.  I am only a text, email or phone call away!  I respond promptly to all inquiries.

The overall market continues to be affected by the pandemic and resulting economic impact.  However, generally speaking, the results in many areas are encouraging and, as always, your experience may differ depending on your location and how you have been personally impacted.  As I always say, the decision to buy or sell Real Estate is a personal one and the current environment typifies that.

The report compares current year-to-date results to one-year ago, same time period.  As with all Real Estate statistics, two things are true.  First, the performance within individual zip-codes can and will vary significantly from the overall County.  Real Estate is local and results can vary from neighborhood to neighborhood and even block to block.  There is no such thing as a “national” Real Estate market any more than there is a national weather forecast so, if you are thinking about selling or buying, please contact me for details about your areas of interest.  I can provide current information and keep you informed about the evolving market.  Deciding whether it is the right time to sell or buy is a personal decision typically involving a number of variables.  I can provide the knowledge and insight to help you decide what works for you.

My second point is that, unfortunately, all Real Estate statistics involving sold data are stale.  This is especially true if you are relying on Internet valuation models which use recorded data rather than up-to-date MLS information.  Even then, while a sale may be reported as settled or closed today, the real question is when was the offer negotiated?  Typically, sales take 45 to 60 days to close so the market today may be different.  Up-to-date information, even if not perfect, is important!

As far as the statistics, there were 5533 units listed for sale through August 2020 compared to 6532 listed through August 2019, a decrease of 15.3%.  Low inventory levels can have a major impact on the Real Estate market, depending on how many buyers are competing.  There were 4141 closed sales through August 2020 compared to 4682 through August 2019, a decrease of 11.6%.  Compare units listed to closed sales and it is obvious that many houses did not sell.  The median selling price through August 2020 was $249,900 compared to $234,000 through August 2019, an increase of 6.8%.  Interestingly enough, statistics just for August 2020 are much improved over August 2019, suggesting that the spring market was delayed and not completely lost.  Again, these numbers vary throughout the County:  the underlying data shows a wide range of results in all categories among the 49 different municipalities in Delaware County.

Generally speaking, low inventory levels in some areas have produced multiple offers and a frenzy among buyers, some of whom may live to regret a hasty decision to get a property under contract.  I still see people who regret decisions they made or did not make during the last boom.  During the shutdown when “in-person” Real Estate activity was not permitted, many buyers made offers “sight unseen” or without inspections.  The effects of that remain to be seen but Real Estate, perhaps with the exception of properties acquired strictly as “investments” with documented income, is generally not something given its expense and complexity that the typical buyer would want to purchase without an in-person showing and inspections.  Technology, however advanced, has its limitations.

What about the properties that did not sell?  Many came off the market and still remain unavailable.  As the pandemic has evolved, some properties did come back on the market but many have not.  Did owners delay, change or give up their plans?  Buying activity has been strong but the sellers may be reluctant to allow showings or may have other issues they are dealing with.  My main concern is whether people are making an informed decision or reacting to what they “think” is happening in the market.  As always, some opinions are just that.

For example, I am sitting on the Auxiliary Property Reassessment Appeal panel in Delaware County and to date have heard well over 400 appeals by owners questioning whether the new assessed value assigned to their property is realistic or not.  While I understand the concern about how the new values based on July 2019 market values will affect next year’s tax bills, many are saying that the pandemic has lowered selling prices which is a very debatable statement.  Whether true or not is easily demonstrated but, regardless, the new assessed values are based on July 2019 long before the current pandemic was known.  If 2020 numbers were used, many would see even higher numbers.

Buyers need to do the same planning and preparation that buying always requires.  Selling involves the same planning and preparation as in the past.  Anyone looking to sell or buy just needs to understand their local market and decide how to react to the pandemic as a “variable” that was not here last year and, hopefully, will be gone in the near future.  The reassessment has another dimension of uncertainty.  As always, the effects of buying and selling remain for years.

I tell my clients that I cannot guarantee that their house will sell if it is on the market but am fairly certain that it won’t if they take it off the market.  Anyone trying to sell now may have less competition and more offers to consider.  Buyers may have more competition and fewer houses to consider.  Hiring an experienced, trained and educated professional is more important than ever.

Despite the pandemic, every house will not sell.  Houses may get showings without generating offers unless buyers think they are priced within the range of their perceived “worth”.  Most property listings whose contracts are canceled or allowed to expire have asking prices considered high for their market and/ or they were poorly marketed, meaning that some buyers and agents may not have even known that a property was available to look at or purchase.  I have created a new blog and podcast on that very subject based on two very recent experiences, one with a seller and the other with a buyer.  Some buyers may even make “full price” offers just to control the process only to have remorse later as inspection results are revealed. Of course this may well depend on the ratio of buyer and sellers so there is more to this than raw statistics.

If a market has a lot of inventory, some buyers may not be willing to look at houses priced high compared to the rest of the market:  why try to negotiate a price down when other similar properties are available at more competitive prices?  Many sellers open to negotiating their price will never get the chance.  I will happy to discuss specifics with you.

The overall economy is coming back but many are still hurting financially.  Statistics aside, what are you planning to do?  Real Estate is generally a long-term investment unless you are looking to fix and flip it or planning to move within a short period of time.  There are opportunities out there.  As with the stock market, it is very difficult to pick the best time to make a move.  An educated consumer faces better odds than a lucky one!  All you can do is get the best available information, determine what is in your best interests and then start the process.  I am a phone call or email away and getting started is easy once you take action.

If you want or need to sell any type of Real Estate, now or in the future, whether you tried and did not succeed before or are doing it for the first time, it is never too early to start the planning and preparation.  Please do not wait for what you think is a better or the best time to start.  Buyers look all year long and can only see and buy properties that are available to see.

There is no time for inexperience, empty promises or false expectations! 

HIRE WISELY:  We are not all the same!

Buying Real Estate “Sight Unseen”

When we experience a “seller’s market”, meaning that there are more buyers looking than there are properties available for them to buy, the competition often leads to frustration.  This is especially true when getting to see inside becomes an issue.  It is not unusual for a buyer to have to bid on several houses before getting an offer accepted.  At least they got to see inside and make an offer, right?

A new policy created by NAR, the National Association of REALTORS, and implemented by Bright MLS has added to the drama.  As a result, some are making offers to buy Real Estate “sight unseen”.  What does this mean and what are the implications?

We have experienced “seller’s markets” before and we will again.  Generally speaking, a combination of low mortgage interest rates and low inventory causes houses to sell quickly, making many buyers and sellers act differently than they might in a more balanced market.  Asking prices may be the “floor” rather than the “ceiling” when it comes to making an offer and a buyer, assuming they have an opportunity to see inside a house and make an offer, may not get a second chance so it may be wise to offer their “highest and best” from the beginning.  However, the regulations covering appraisals are stricter than in the past so offering above the asking price is not always the best answer.  What to do?

Many buyers, frustrated by competition, bidding wars and houses they cannot get in to see, are trying to be creative.  They have several options in addition to the amount of their offer such as:  offering a high deposit, being flexible with a settlement date and waiving inspections.  Some may give up or delay buying.  Many sellers are overwhelmed by multiple showings, multiple offers and, as unusual as this may sound, not knowing whether their highest offer will appraise and, if they get an acceptable offer, whether they will even be able to find their “next” home.  One of the ironies of this type of market is how a seller who has a lot of leverage when selling will react when they are buying without having the same leverage.  The shoe may literally be on the other foot.

Enter the new NAR policy called the “Clear Cooperation Listing Policy”.  It has caused confusion and frustration although most REALTORS understand why it was necessary.  Frankly, it is impossible to deny its purpose.  It requires brokers to upload property information to the MLS within 1 business day, excluding weekends and national or state holidays, of any public advertising which includes a “For Sale” sign and social media.  Violating the policy may result in a substantial fine.  Absent public advertising, we are required to upload the information to the MLS within 3 business days.

Some think the new policy a direct assault on a long-standing business model known as the company or office “exclusive listing” where listings were taken and “publicly advertised” but kept off the MLS because the listing broker would not offer to compensate buyer agents working for other “brands”.  Real Estate prides itself in having many different business models as long as we operate within our various rules and regulations.  However, some of this creativity may appear to conflict with our core principles.  I discuss “exclusive listings” in an article entitled “Coming Soon” and will mention that, while still a legitimate business model, they are no longer able to be “publicly advertised”.

The MLS platform is a member-only web site for sharing property information among members to “cooperate” with them for our mutual benefit.  We are “match makers”, meaning that we help bring buyers and sellers together.  A major aspect of this is that we sell each other’s property listings. The creation of the MLS platform made our jobs easier by increasing the effectiveness and efficiency of how we marketed and learned about property listings.  Before the MLS, agents and companies were on their own.

The goal is to expose Real Estate to the broadest possible market which should theoretically “protect and promote” the interests of both sellers and buyers as required by Article 1 of the REALTOR Code of Ethics.  Presumably, this should allow sellers to achieve the highest possible selling price and the best terms in the shortest period of time by ensuring that as many buyers and agents as possible would be able to access property information, schedule showings and, if a buyer liked what they saw, make an offer.  It essentially levels the playing field by making information and properties accessible to all.

Unfortunately, we still live in a society where some people or groups are excluded from opportunities to see and buy Real Estate.  Undercover investigations and complaints from the public still show this to be true even if not as obvious or pervasive as before.  It is unacceptable when anyone is prevented from being able to buy housing and live where they want to live when affordability is not an issue.

The reaction to any major policy change such as this one can be interesting and it remains to be seen how this one plays out.  Will any listing agent blatantly disregard the policy despite the MLS stating their intention to impose a severe fine for violations?  The public, including agents representing prospective buyers, also has options for responding.

What can a buyer or agent do when they cannot get the information they need about a property listed as “Coming Soon”?  The “Coming Soon” status means no showings are allowed to anyone but the MLS should provide information, shouldn’t it?  The concern is that some agents and their buyers, including the listing agent’s own buyer-clients, are being allowed to view these properties and make offers before they are made available to the public.  Instead of converting to an “Active” status many of these go right to “under contract”.  What are an agent and buyer supposed to do?  They will know the “projected” date when the listing status will change to active, allowing showings, and may even know when offers will be presented.  However, those dates can change without notice so should they wait and hope or take some other form of action?  Waiting may result in failure.  Some are making offers on houses without the buyer or their agent actually seeing inside.  This raises two concerns.

First, we have a fiduciary duty to represent our buyer-clients but what is our risk in preparing an offer on a home that neither of us has seen?  Suppose neither has actually visited the location to see the exterior or the neighborhood?  While I am certainly not a contractor or an inspector, I have seen a number of things both inside and outside houses that made me question the pricing or condition of a home and, when asked, I have offered my opinion on whether to pursue a house, how to negotiate the price and what to inspect.  Obviously an agent needs to make sure they are not exceeding their level of competence.

What options does a buyer have if they come to realize that a house is not as nice as they had hoped or expected based on the exterior or the MLS presentation including pictures and public remarks?  Suppose the listing has poor quality or no pictures and little or nothing in the way of a description?  Most agents will tell you that an inspection contingency provides a “way out” and, while it does, it has a cost to the buyer and it takes time.  Would they make an offer “sight unseen” without inspections?  I could go on.

Second, as a listing agent, as attractive as it may sound to sell a client’s house without their having the  inconvenience of showings, suppose a buyer uses a home inspection to terminate a sale when there is really nothing wrong or a seller would make any repairs they might request?  Perhaps they offered a low deposit and are willing to forfeit it to terminate a contract?  A failed sale stigmatizes a house, perhaps even worse than a lengthy time on the market.  If a house comes back on the market quickly after going under contract it generally means that something happened during the inspection contingency time frame.  That could negatively impact future interest as well as the eventual selling price.  Some listing agents do not report that a house is “under contract” to avoid all of this.

I have heard both sides and wish I had an answer.  There is no perfect solution and buyers and sellers, including their agents, will always have a different perspective.  If a buyer wants to make an offer without seeing inside, is this really the best option?  Where is the liability?  I am not sure.

Realistically, if I were a seller I would be reluctant to accept any offer without a showing especially if it contained a frivolous or easy way out unless there were a substantial, perhaps even a non-refundable, deposit.  If I were a buyer I would be reluctant to buy “sight unseen”.  At the very least I would want to walk the exterior to identify potential concerns and include them in my offer.  Otherwise, a seller might say a house was being sold “as-is”, another contentious term, and was priced accordingly or that any concerns should have been factored into the buyer’s offer.  The cost to inspect and potential time lost could prevent a buyer from seeing the best house.  Does it make sense to reduce buying Real Estate to essentially being like a “blind date” where neither side has any real obligation?

While “seller’s markets” will occur over and over again, the new “Clear Cooperation Listing Policy” has added a new twist to an old theme and time will tell how we all adapt to it.  The first fine for violating the new policy will have a major impact going forward.  A “buyer’s market” will change much of the drama.  Either way, there will always be another twist.

There is no time for inexperience, empty promises or false expectations!

HIRE WISELY:  We are not all the same!

Bright MLS December 2019 Residential Housing Report

Bright MLS has released their Residential Market Statistics for single family homes through December  2019.  In today’s podcast I will discuss 2019 results for Delaware County Pennsylvania.  If you would like information about this or any other County or any specific municipalities in the Delaware Valley, please contact me.  I am only a text, email or phone call away!  I respond promptly to all inquiries.

The report compares current results to one-year ago, same time period.  As with all Real Estate statistics, two things are true.  First, the performance within individual zip-codes can and will vary significantly from the overall County.  Real Estate is local and results can vary from neighborhood to neighborhood and even block to block.  There is no such thing as a “national” Real Estate market any more than there is a national weather forecast so, whether you may be thinking about selling or buying, please contact me for details about your areas of interest.  I can provide current information and keep you informed about the evolving market.  Deciding whether it is the right time to sell or buy is a personal decision typically involving a number of variables.  I can provide the knowledge and insight to help you decide what works for you.

My second point is that, unfortunately, all Real Estate statistics involving sold data is stale.  This is especially true if you are relying on Internet valuation models which use recorded data rather than up-to-date MLS information.  Even then, while a sale may be reported as settled or closed today, the real question is when was the offer negotiated?  Typically sales take 45 to 60 days to close so the market today may be different.  Up-to-date information, even if not perfect, is important!

As far as the statistics, there were 8931 units listed for sale through December 2019 compared to 8788 listed in 2018 with an end-of-month inventory level of 1022 compared to 1412 in 2018 with a monthly supply of inventory or MSI of 1.9 compared to 2.8.  6994 properties settled in 2019 with an average “selling price” of $289,411 and a “median” selling price, meaning that half of the sales were higher and half were lower, of $225,000 compared to 7057 settled in 2018, same time period, at an average price of $271,767 and a median selling price of $208,000.  The year-to-year change in settled properties declined less than 1% while the average selling price was up 6.5%.  The “days on the market” or DOM for settled properties was 42 in 2019 compared to 50 in 2018.  The MSI suggests a seller’s market with low inventory levels overall.  A 3-month supply of available inventory is generally considered a “balanced market”.  Again, these numbers vary:  the underlying data shows a wide range of results in all categories among the 49 different municipalities in Delaware County.

We can debate whether average or median numbers are more important but what really matters is how your property or one that interests you compares to those appraised and settled with similar location, features and condition.  Appraisers rely on nearby, recently settled properties so average or median pricing loses some validity but may provide insight for both the short term and the long term.

What about the properties that did not sell?  Many came off the market and still remain unavailable.  Did owners delay, change or give up their plans?  This happens more often as the holidays and year end approach which I find fascinating.  I tell my clients that I cannot guarantee that their house will sell if it is on the market but am fairly certain that it won’t if they take it off the market.  Anyone trying to sell now will have less competition and houses tend to show their best this time of year.  I understand that showing and selling a house during the holidays and winter-time can interfere with enjoying the season and it can be messier but buyers out looking now tend to be serious.  Of course, if a seller needs to buy their next house, the inventory level is much lower than normal.

Generally speaking, houses may get showings without generating offers unless buyers think they are priced within the range of their perceived “worth”.  Most property listings whose contracts are canceled or allowed to expire have asking prices considered high for their market and/ or they were poorly marketed, meaning that some buyers and agents may not have even known that a house was available to look at or purchase.  Of course this may well depend on the ratio of buyer and sellers so there is more to this than raw statistics.  If a market has a lot of inventory, some buyers may not be willing to look at houses priced high compared to the rest of the market:  why try to negotiate a price down when other similar properties are available at more competitive prices?  Many sellers open to negotiating their price will never get the chance.  I will happy to discuss specifics with you.

The overall economy is doing well with some adjustments here and there.  Statistics aside, what are you planning to do?  Real Estate is generally a long-term investment unless you are looking to fix and flip it or planning to move within a short period of time.  There are opportunities out there.  As with the stock market, it is very difficult to pick the best time to make a move.  All you can do is get the best available information, determine what is in your best interests and then start the process.  I am a phone call or email away and getting started is easy once you take action.

I hope you had a great holiday season and have a happy and healthy new year!  If you want or need to sell any type of Real Estate, whether you tried and did not succeed before or are planning for the first time, NOW is the time to plan for 2020.  Please do not wait for what you think is a better or the best time to start.  Buyers look all year long and can only see and buy properties that are available to see.

There is no time for inexperience, empty promises or false expectations! 

HIRE WISELY:  We are not all the same!

3 Signs that Buyer Remorse is Possible

In the “ideal world”, a Buyer will make an offer that either “seals the deal” or, at the very least, generates a fruitful negotiation.  Even if a Buyer and Seller cannot agree to terms, both should rest easy knowing they did their best.  The “ideal” does not always happen, leaving one party (or both) to wonder what happened.  This can affect their future planning (how soon will they resume doing what they were doing?) and even cause a client to wonder if their agent did their best.

Focusing on the Buyer, let’s assume that they have been financially pre-qualified and that they have spent time and effort really thinking about where they want to live and what they need and want in their first or next home.  In situations involving more than one Buyer this can get a little more complicated as the parties work to arrive at something that pleases everyone involved.  Knowing their financials puts a Buyer in a stronger negotiating position and provides parameters for their search.  Knowing where they want to live and what they need and/ or want in a house will help them focus their search on real “possibilities”.  That being said, there will still be “gray area” to discuss.

The reality of a Real Estate search is that sometimes the “best” or “perfect” property is unattainable OR the Seller is hard to negotiate with (this includes the Seller having a listing agent who makes the process more difficult than it needs to be).  If a Buyer finds it difficult to “check all of the boxes” when deciding which house to pursue, do they continue looking (maybe something better will come on the market later) or do they make on offer on the “best” of what is available?  Let’s look at “3 signs” of potential problems down the road.

(1) A Buyer keeps looking and looking, finding it hard to commit to a specific house.  For whatever reason, none seem to fit exactly what they are looking for.  Perhaps they feel that “the search” is NOT uncovering all of the possibilities.  Frankly, I often find incorrect information in the MLS and online:  too many entries are sloppy or incomplete, leaving someone who views the information unsure about what a house has.  This could mean that possible “matches” will not come out in the search results.  The best/ worst example of this is the listing without pictures or those that have no “remarks” as well as those that have the wrong features uploaded.  This happens!  An agent can help by making sure that a Buyer has realistic expectations as far as their financials, where they are looking and what they expect to find in the houses that are generated in their search results.  On a more basic level, an agent MUST know the limits of an online search so that they can  find properties others could not!

I have a time-tested process (the information is available on my web site under the Buying tab) that can put a Buyer in the best position as far as searching, evaluating and making a choice.  A haphazard process, which typically occurs when a Buyer is strong-willed and their agent is not assertive (I know the Buyer is the boss but a good agent is more than someone who opens doors!), will put a Buyer in the untenable position of finding something they like but fear pursuing because so many choices remain which have not been shown or perhaps even found.

Over time a Buyer should have seen enough to either “fall in love” with a specific house OR be able to decide which is the best even if not ideal.  Of course, some Buyers may delay taking action which is better than making a bad decision.  Sometimes Buyers have to plan to make a house into their very own “dream house” and that requires knowing what is possible when they see something that falls a little short.  Bringing a reliable contractor on a showing can provide insight (including the potential expense to address a concern) and go a long way towards knowing what to offer.  On the other hand, some Buyers seem to like multiple houses which really means that none of them may be “the one”.

Over time, which is more likely:  will something really nice come on the market or will those houses that interests a Buyer sold to others?  What happens to the Buyer who may have a house “under contract” or a lease expiring?  They need to find a new home.

(2) A Buyer is told that their offer was accepted and they do NOT seem thrilled!  I once had a Buyer cancel an offer before the Seller responded.  I never learned what changed their mind but was happy that that happened rather than dragging the process out only to be terminated later.  The residential Buying/ Selling process can emotional (generally speaking, investors tend to focus more on “making the numbers work”).  I compare it to “playing poker” in that the parties typically do not know what the other is thinking. Offering “full price” is no guarantee that tour offer will be accepted and you often have no way to know if there is any competition.

In terms of managing the process, when I write a purchase offer for a Buyer I want them to be able to sleep well that night, knowing that they are comfortable with their proposal. Buyers will NOT always be offered a chance to change their offer so, in some markets, they need to start with their “highest and best” and some will refuse to do that.  If/ when a Buyer ends up thinking they went too high, they may be able to walk that back a bit if the inspection results suggest that there were unknown issues with a house.  The thinking behind this is beyond this post but I would add that, if a Seller accepts another Buyer’s offer, you have to move on unless you want to wait to see if that one falls through.

(3) This is the most frustrating one:  the Buyer has had a house inspected and gotten “mixed results”.  While the “clock is ticking” as far as the time frame during which the Buyer has to decide if they will offer the Seller a chance to address “material” concerns or, unfortunately, to terminate a sale, some Buyers want to see more houses!  When this has happened to me, I ask what the Buyer what they are thinking. The obvious answer is that they are concerned about the inspection results however, there are times when a seemingly nice new listing has become available (Buyers can easily still search the Internet regardless of the state of a sale).  When this happens there is usually a specific house that interests them so I ask why they want to see that one.  During the conversation I review the inspection results and discuss how to handle them and the related costs and specifically remind them about the process we used to identify the house they bid on.  I remind them that no house is perfect and I tell them that, while a newly found house “appears” very nice, they do not know what the Seller expects as far as the selling price, we do not know if there is or will be any competition and, most importantly, we do not know how an inspection of that house will go.  In my experience, if we have done a thorough job identifying the house now under contract with my Buyer, they will usually stick with it.  However, when that process has been haphazard, there is no solid foundation and it should be expected that a Buyer will question how we got to this point and they may well have their eyes and mind drawn to what seems a better option for them.

There is far more to buying a house (or investment property) than looking on the Internet and writing an offer.  The cost to acquire a house, meaning the “closing costs”, is not cheap.  Buying a house that quickly turns out to be inadequate can be costly, meaning that you may not recover the closing costs, will have more costs if you buy something else and the price you paid may NOT be what the market thinks reasonable for what you are now trying to sell.

Looking at house is undoubtedly the fun part of the process because, at least at the outset, all things seem possible.  However, the best way to ensure a good outcome starts with preparation, sometimes well in advance of seeing inside any houses.  The Internet, both in terms of being able to access listing information 24/7 AND the ability to access what appears to be valuable guidance for buying/ selling, is too often a distraction rather than a benefit.  An agent’s job, in addition to providing guidance and support, now includes helping their client work through the overwhelming barrage of information too often presented as factual.  In and of itself, that can add to their being problems with the journey and how the agent and client interact.

Please visit my web site (AndrewWetzel.com) for a wealth of valuable content!

HIRE WISELY! 

 

Teams in Real Estate: Who Benefits?

“Teams”, meaning groups of two or more licensed agents working together within an office, have been around for as long as I have been an agent. Unfortunately, most of my experiences with teams have been very frustrating. In fact, several prospective clients have asked me if I was on a “team” before deciding to hire me. NONE of them wanted to hear “YES I AM”! They all had had similar bad experiences that influenced their plans going forward.

Real Estate teams are allowed although industry leaders have recognized that the practice, while making sense for some agents, may add potential risks for their clients. Regulations are being revised to ensure that a “client” is not adversely affected by working with a team. Frankly, poor representation can harm clients and poorly run teams can magnify the potential for problems.

Working in Real Estate is like driving on a multi-lane highway: we have many ways of reaching our destination with guard rails to keep us on track. The “lanes” represent different “business models” we can use to run our businesses while the “guard rails” represent the different layers of regulation. These include the Code of Ethics, RELRA (the PA real estate licensing and registration act) and the law itself. Newer agents, poorly trained/ poorly supervised agents and some who should not be representing others at all can all run afoul of the rules if they do not understand, care or lose sight of WHO IS THE BOSS (hint: it is the CLIENT!).

In my college years and beyond I extensively studied management and teams (Together Everyone Achieves More and there is “No I in team”!) and understand how partnering with others can have its benefits. Teamwork is essential to operating many businesses such as in sports. However, Real Estate is unique. We work for (as opposed to with) clients who expect us to “protect and promote their interests above all others”. They are likely making their biggest purchase or selling their biggest asset and depend on us to oversee, direct and lead the process. The “client” relationship is “special”, making “sharing” them with others them a challenge.

Briefly stated, here are a few of my experiences:

1) some 2-agent teams advertise that the client is hiring “two agents for the price of one”, so you can always reach one or the other. Interesting slogan but does it work? Suppose the team is a married or “involved” couple? I have found both agents on a team unresponsive or “busy”.

2) I have had both agents representing the same buyer call to schedule a showing of my same listing. The team concept only works if everyone involved is kept informed. Who is in charge?

3) I received an offer on a listing, discussed it with my seller-client and called the buyer-agent to provide a “counter-offer”. A different agent answered the phone and advised me that they were on a “team” with the agent I called but they were unaware of the offer. They asked me to tell them what my client said so they could relay the information. Later that day I received a call from the original agent, unaware that I had spoken to their “partner”. They asked to me repeat what I told the other agent since the second agent was not available. I told them I would do this ONCE and that, going forward, they had to decide who would be my contact.

4) I had a sale fall through which involved a buyer-agent who failed to terminate a sale within the property inspection time frame, resulting in the contingency expiring unresolved. As a result, their buyers had to forfeit their deposit. In trying to keep the sale going, I sent an email to the agent and their broker. The broker took more than a day to respond, told me that the agent was on a team and that the “team leader” would call me. That took another day. The agent never told me they were on a team and the broker in charge of the office did not seem to want to get involved. In the end nothing changed but terminating the sale took longer than it should have.

5) I had another sale fall through due to a buyer “defaulting” on the contract terms. In this case I knew the agent was on a team so I included the “team leader” in emails trying to keep the sale moving forward. Rather than taking charge, the team leader responded in a very unprofessional manner, asking why I needed to include them in an email since they met with their agent daily. I used email to keep my client involved while documenting the process. I advised the team leader that we apparently had different ideas about how a team should be run. My best guess is that team leader was preoccupied with “bigger fish” and the buyer agent had little or no supervision. I wonder how the buyer felt when they learned they lost the sale?

Several sellers have told me that they would never work with someone on a team again. They all told me basically the same thing: they got tired of talking to different people every time they called. Most thought they were hiring one specific agent only to learn that someone else was “their contact”. They felt uncomfortable NOT having an ongoing relationship with ONE SPECIFIC AGENT. This is a “service business”: can you imagine how that feels? I really have to wonder about the confidentiality aspect of their business relationship: who knew what?

While some agents form teams with people they like, many seem to do this when they are too busy to personally handle their own leads. I respect that. Clients may not be able to wait and referring them to other agents costs the lead-generating agent money so they build teams. As long as client-service is NOT sacrificed and the client agrees, there should be no problem! They may bring on experienced agents looking to grow their business or new agents learning the business. The team leader may focus primarily on generating business/ leads while delegating the details to others, perhaps doing little to supervise their group which can be problematic.

I understand that some brokers may like the team concept in the hope that the “team leaders” will properly hire, train, develop and supervise their own team members, making the broker’s job easier especially if they actively list and sell Real Estate. However, each office has ONE PERSON ultimately responsible for making sure that their staff, regardless if affiliated with a team or not, is PROPERLY SUPERVISED. As I learned years ago, “delegation without follow-up is abdication” and giving someone else a job to do does NOT relieve the person in charge of making sure that rules and regulations are followed.

Working with buyers and sellers requires creating an environment of trust which typically involves learning confidential information. Buyers do not want to share how much they like a property or are willing to pay for it; sellers do not want to share how much they want or need to sell a property or how much they are willing to accept to sell it. It is hard enough for many of us to share confidential information with one person. What happens with a team? Whether a team has agents acting as both listing and buyer agents or agents acting exclusively as one or the other, what assurances are there that any individual client’s confidences are PROTECTED AND PROMOTED ABOVE ALL ELSE??? The team concept would seem to allow a greater opportunity to inadvertently share otherwise confidential information, requiring added diligence.

As stated earlier, “teams” are perfectly legal as long as they are properly run and managed. They should not be an excuse for brokers or team leaders to abdicate their authority or responsibility. I have seen and heard of enough situations to make me wary of them and, apparently, so have some members of the public.

HIRE WISELY!

Property Tax Reduction: The Illusion

I think I can safely say the no one likes paying property taxes.  You save to buy a house. typically dependent on some “down payment” (your savings!), go through an often tedious and frustrating process, make 180 to 360 monthly payments, pay property insurance, incur maintenance costs and, hopefully, improve your “castle” to better fit your wants and needs to make it a home.  At some point your monthly payments end and you OWN your very own piece of planet Earth.  Then the tax bill comes.  There are several taxes but let’s focus on the largest one which pays for public education.  Those bills keep coming year after year and they go up and up regardless of whether your house is worth more or not.  Your assessed value may stay the same but the millage goes up to yield the revenue our elected officials say they need to meet their budget.  For years there seemed to be no control over how much they could raise YOUR tax bill but that has changed.  For better or not, we still are TOLD what THEY WANT!

Public education is a right, not a privilege so money has to be raised to pay for everything related to schools and education.  I will not debate specifics regarding salaries, the union or other topics often debated but I will express several underlying concerns.  They include:

• some municipalities have tax levies that make the monthly tax payment look like a “principle and interest” payment.  This excludes some buyers!  In fact, many buyers are diverted from areas solely because they do not qualify when the school taxes are factored in.  I guess this kind of “steering” is acceptable;
• properties are “assessed” relative to their local surroundings within their municipality.  There may be vast differences in assessed values for a variety of reasons such as between houses sitting on different sides of a municipal boundary, enhancing a home’s living space  (getting permits to do this may result in a higher assessed value), tax appeals and, frankly, inaccurate assessments (two similar houses may be reported differently in the tax records).  New construction is an anomaly as assessed values are based on a percentage of the selling price while other houses generally carry a stale assessed value.  County-wide reassessments make the system fairer and are generally intended to shuffle the deck without resulting in a tax windfall (if they want a windfall they have to raise the millage);
• seniors and people on fixed incomes often have difficulty paying property taxes. Many feel that these taxes should be waived at some point;
• while much has been made of switching some taxes to a “consumption” model, the school tax is not and that seems odd to me in terms of “fairness’.  Take three similarly assessed houses and all will pay the same tax regardless of whether the owners have no children, few children, many children or send their children to private school.  This does not seem fair, does it?

Over the years a number of suggestions have been made regarding how to address this topic since these taxes are the highest.  Some involve shifting how the revenues are distributed so that lower-performing schools can take measures to raise outcomes. Frankly, many do NOT want to see their tax dollars go out of their local communities. Some have suggested that regular reassessments will keep the system more equitable but the practice is expensive.  Another suggestion under consideration lately is eliminating property taxes altogether.  Sound good? The devil is in the details:  the revenue is still needed so another way needs to be employed to offset the lost revenue.  People being people want to know how a new system will affect them.  Will seniors and low-income folks need to be subsidized by younger, more affluent people regardless of who lives in the nicer home?  The devil is always in the details so when you hear about ANY proposal, you need to READ THE DETAILS!  I bet most people will not take the time and that those who do will not fully understand the details.  Have you ever read these resolutions?

Here is a novel idea:  ANY conversation about taxes MUST include some discussion about where the tax dollars are going and how they will be used.  We cannot keep “throwing money at problems” expecting that money solves everything.  It feels good in the short term but resolves little in the long term  At best it is addicting meaning that those receiving it become dependent on others; at worst it is debilitating to those who work hard only to see their income wasted.  Some of the worst performing school districts spend the most per student while many good ones operate more efficiently.  Frankly, perhaps we need to realize that some parents and their children are less devoted to meeting the standards that equate with taking responsibility for their own lives if and when they leave your parent’s home.  Perhaps emphasizing vocational training instead of pushing everyone to think college and expensive student loans a viable option.  There are some social issues that need more than money to be solved and taking more of our money will not serve the problem but will impact the lives of many who could better used THEIR hard-earned tax dollars.

I do not mean to make this an “us against them” argument but we need to stop wasting money that does not solve problems and we need to stop subsidizing bad/ inferior behavior.  As mentioned at the outset, I am ignoring a few topics that need to be better managed if we are to succeed.  Perhaps if property taxes were managed more effectively, some buyers could buy in “better” neighborhoods and that would help neutralize or cure some of our “hamster-wheel” social ills that seem to keep repeating themselves regardless of how much money we spend to make ourselves feel better.