J. Philip's Westchester Real Estate Blog

I have written before on what a buyer's market is and what a buyer's market isn't. Westchester County and our surroundings are a sought after destination; even if a home has been on the market for a year, once the price is right it will sell. I wish I could impress this upon a few buyers who have lost opportuntities when more motivated people came along and outbid them.  

We recently listed a newer build in a desirable subdivision. While it was a short sale, it was also upscale. Not long afterward, an offer came in almost 15% below asking price, a hefty discount not supported by any other market activity. The rationale? It's a buyer's market!

The seller countered, and the would-be buyer raised their number gradually, but well short of what we thought we could submit to the bank for acceptance (by "we" I mean my seller and their attorney). This went on for weeks. They never came up to the bottom line number we felt we could work with, and this resulted in some frustrated emails and phone calls from the agent. Then even the buyer called me directly. I don't know if the buyer thought they could be more convincing than the professional they had representing them, but I told the person both times that there was no comparable sale that justified accepting the offer. 

"But it's a buyer's market!" I was told. The house has been for sale for TWO WHOLE MONTHS and hasn't sold. I was risking having the bank take the house back if my client didn't take their offer. Furthermore, I was told, they were perfectly happy to wait until the bank repossessed and buy it at foreclosure to get their price. 

How lovely. This actually happened with two different byers on the same house- the same pattern and rationale. 

In each case, I asked the agent to ask the buyer to stop contacting me and go through their rep. 

Not long afterward, another buyer came along and made a stronger bid, which was accepted. They got the house.

Fatal mistake number one: Buyers should NEVER assume that they are the only game in town.  
Fatal mistake number two: A "buyers market" does not give the buyer fiat to set the market unilaterally. Comparable sales matter. 
Fatal mistake number three: When a buyer circumvents their agent and tries to negotiate on their own, they aren't accounting for the fact that they probably suck at negotiation and are hurting their own cause.  

In all three cases, the "buyer's market" phrase was thrown around as if it were some childhood game wildcard phrase that granted immunity from logic or true market forces. And in that buyer's market, the would-be buyers lost a home because they were their own worst enemy. The people believed that if they gave in just a little that they'd "lose." 

Pigs get fat, hogs get slaughtered. 

With apologies to Bill Clinton. 

My firm sells a wide range of properties: upscale 7 figure estates right over to a $7500 trailer. Among our niches is the area broadly described as the distressed property market. This could vary from short sales to bank owned foreclosures to property that is owned free and clear but in poor shape. The latter category could be an estate home or a house that sustained fire damage. Westchester has tons of pre-war builds, and we never seem to run out of this inventory. It is often a very good opportunity. 

Virtually all distressed property, especially bank owned and short sales, is sold "as is." Even a neophyte buyer seeking something they can fix up can deduce that if they want the fixing done before they buy that it really isn't a fixer upper anymore.

With the new year and new freshman class of buyers entering the market, the definition of "as is" appears to be subject to a nuanced interpretation that challenges the meaning of the word "is." A contributing factor to this trend is a pool of licensees who say they are buyer agents but seldom do more than unlock doors and act as carrier pigeons for uneducated buyer clients they do not have the intestinal fortitude to advise. 

If you seek to buy a distressed home sold "as is" that means that you are buying it subject to much of the following:

• Code violations
• Old open permits
• Non conforming work, such as illegal baths, decks, or additions
• Environmental issues like mold, radon, and submerged oil tanks 
• Shag carpeting

What can you buy in Yonkers for $350,000? So glad you asked. I happen to have a fresh example of just such a home that closed earlier today for $350,000 right in Yonkers a stone's throw from Bronxville. The property is a charming Tudor with loads of awesome, pre-war appointments like leaded glass windows, classic molding, pretty hardwood floors, and awesome curb appeal that. 

The home has 3 bedrooms, a full basement, a detatched garage, a rear patio, a walk up attic, formal dining room, first floor den, and a woodburning fireplace. The location is also wonderful, literally minutes from the Bronxville train station.

J. Philip Real Estate listed the property and brought the buyer as well- we wish both our seller client and buyer customer nothing but the best in their new surroundings. Total time on market from listing to closing: 86 days. This one went fast with multiple offers. But we have more- just log onto WestchesterDreamHome.com to find one of your very own. 

Christmas was not long in our rear view mirror when the calls started up again today. We love inquiries on our listings; that's what we work for. However, there are calls, and then there are calls. I can tell with some calls that these folks are first time buyers and just starting out. You have to start somewhere, but two calls in particular made me reflect on them more like they were incoming freshman who would need to get their feet wet than capable buyers. I just said to my wife that I wish I could fast forward to July with those two people after they learned the ropes. 

The details aren't important (although you might smile). What is important is that every year, a fresh batch of would-be buyers enters the market, and many jump in haphazardly without an advocate, representation, and without advice from a professional. Many get disappointed, hurt, or both. And most of the stories I'll hear in six to nine months will start out with the one of the following:

• We didn't use an agent. 
• We used a terrible agent. 

Even in the current down market, real estate mistakes in Westchester County are really expensive. The median home price is well over half a million dollars, and annual property taxes of $10,000 or more are commonplace. There is a lot to think about, and the agent listing a home you call on yourself was hired to eat your lunch. A casual throwaway remark can cost you $25,000. How do I know this? Because I have advised my clients to make moves based on those casual remarks when the buyer uttered them. But if you have your own agent, I can't hear a word you say because we'd never speak. 

Perhaps my colleagues can relate to the following scenario:

A buyer is interested in your listing. Their agent emails you a slew of questions, and you get all the answers. There might be one of those 2nd or 3rd showings where where half a dozen extended family members come by and stay for 90 minutes to kick the tires while your seller client improvises family dinner at Arby's. We recently had three generations of a family look at a house in Yonkers for 2 hours and when my seller returned to his house the washing machine was broken! What in the world were those people doing? 

We have had prospective buyers come back for 3rd visits and stay for hours. They've walked through with friends of the family. In laws. And that is fine in this cautious environment. But at some point, lines and protocols should be clarified, even in a buyer's market. Taking your contractor buddy, your HVAC guy, or your architect is not appropriate unless and until you have an offer in on that house. 

Unless you have really peculiar circumstances, structural inspections and most types of due diligence are done once you have a deal. In most areas this is known as the review period of contracts, and in Westchester County it is done before contracts but certainly after an acceptable offer is made. That's how it is done. 

BUT PHIL, I can hear some agents say, My people don't know if they want to make an offer until they make sure that their roofer/plumber/electrician/rabbi/sheetrock whisperer say it all checks out! To those agents I would say learn how to sell real estate. If I had a client ask me to do something backwards I would, um, tell them that is backwards. I would educate my client.  

BUT Phil, I hear another agent say, I don't want to WASTE MY TIME if they aren't going to go forward. We have to make sure everything checks out before I type up an offer ... To those agents I say, do your job and stop trying to cut corners. It is ironic that you are so willing to waste the seller's time. The occasions where there should be something verified before going forward exist, but they are rare. 90% of them probably involve you going to the town clerk or building department, not in the garage and attic. 

Deal first, due diligence next. Here's why. If I as the listing agent encourage my sellers to allow curious, albeit uncommitted buyers and their posse to track insulation dust throughout the house enough only to have them not go forward, at some point my clients blow an O-ring. The broker's job is to smooth out the process, not introduce a period of intrusive hell into their lives. Selling a home is disruptive enough. 

And when I represent buyers, it is the same thing. Here's why: If a buyer has a deal on  a house, he has leverage on the seller. The seller does not want to lose the deal. And if the discovery period yields an issue, the seller is more likely to address the issue for a committed buyer than with someone they perceive as a nuisance. Buyers get far more consideration than lookers. Doesn't that just make sense?

That's the takeaway for consumers. You have to give to get. It isn't about making things convenient for the seller (although that doesn't hurt- alienating the seller is not the way to start an offer), it is about leveraging a stronger position to get what you want. And if your agent says that something is a bad idea, don't get upset that they won't be obedient; be glad you have a strong agent with backbone. They'll be a better negotiator for you. 

If you are a buyer and the house feels like home but you have a reservation about the physical condition, that is what inspections are for. Lock the deal in first, then you do your due diligence. Any risk that you'll find vampire bones in the basement is abated by the seller being more likely to fix the issue for a good faith buyer than a looky loo. Deal first, due diligence next. That is the rule of engagement, and that is why the protocol works. 

Update: Read Debbie Gartner's comment: 

 I'll also add perspective from the contractor's end...it is very frustrating and a waste of your time to have us do an estimate, if you are not even sure that you are going to buy the house.  I've wasted too much time doing this.  It's one thing if I lose an estimate to someone else, but totally different if the customer doesn't buy the house.  my time is valuable too.  I try to avoid these like the plague.  I'm happy to go if it's in contract.

The best use of an agent's time is to be in front of someone who wants to buy or sell real estate. That is what we work for- we advertise, blog, do mailings, answer the phone, and some even knock on doors to be belly to belly with someone who want to buy or sell real estate. 

So I really have to laugh when I get a phone call from an agent who wants to speak with me for 15 minutes about  one of my listings when just reading the information, a simple drive by, preview, or (shudder) an appointment with their client would answer everything. I understand calling ahead to see if the yard is flat or something that doesn't make them a time vampire. But these pre-showing interviews really are over the top. 

Do we really need to chat all through lunch to decide if my listing is right for your client? When an agent tries to monopolize my time with a ton of questions a visit or showing would uncover, their answer to my asking why we need to "interview" is always the same:

I don't want to waste my time if they won't buy the house. 

Now, the sarcastic side of me says things like Waste your time? What would you be doing if you weren't with the client? A crossword puzzle?? Farmville? Are you inventing a vaccine for stupidity that you can't be interrupted to go see the house? 

What could possibly be a better use of one's time than showing a client a home? The idea that homes must be screened to a fault before you can show the client misses the point. NO client looks at one home. They look at a bunch. And the ones they don't buy are not a waste of time. They are important work. It's like dating. You have to get out there and kiss frogs. That's our work. 

I have learned plenty about clients on days when we didn't find the house but spent an afternoon together. It helps me get them. We bond. It makes me more attuned to their needs. It is part of the job. As a matter of fact, I have earned my share of loyal buyers who appreciated that I told them I thought a place wasn't the right fit instead of closing them after every showing. 

If the home fits their criteria, Mr/Ms agent, show them the home. It is the best use of your time and far more productive than asking me how old the roof is and a hundred other questions that make no sense if they haven't seen the place. 

Buyers in this real estate market enjoy many more liberties and advantages with sellers than I have ever seen since I was first licensed in 1996. Not only do they have the lowest rates in half a century, they have far more bargaining power, and in Westchester County, where a starter home can cost $500,000, that is huge. It is a great time to be on the purchasing side. The one thing they don't get to do, however, is consider themselves exempt from reasonable scrutiny regarding their qualifications to buy. Simply put, I as the listing agent have to verify things, and no amount of annoyance or insistence to the contrary can change that. 

I have written previously how cash buyers simply have to show proof of funds if they want to be truly taken seriously. Today, I will reiterate that fact for buyers getting a mortgage. If you are going to submit a pre approval, or in today's case, a prequalification, it is part of my job to verify things, and that goes beyond your agent's "cross my heart" reassurances. It means in many cases calling the loan officer on the pre qualification letter and asking questions. Here are some that I would ask:

• Have you verified the borrower's credit?
• Have you verified income and employment? 
• Have you run  the borrower through your underwriting software (an industry standard)? 

Today, we had an offer where it was disclosed that they were in the process of selling their current home, it was submitted with a pre-qualification from a mortgage broker, not a direct lender, and the amount on the letter was less than the offer. My question to the buyer agent was shrugged off with a reassurance that all would be fine because they had extra money. Perhaps that is all true, but my job is to verify, not take assurances blindly. Like I said, in Westchester, with the competing number of homes for sale, real estate mistakes can be very expensive. Having a deal die can cost my clients tens of thousands of dollars. 

SO...I called the listing agent on the property they were selling (under contract, strong buyer) and I also spoke with the loan officer. I heard what I needed to hear from those I needed to speak with. Without getting into too many details, this did not sit well with the buyer, who actually called me directly. 

Sorry, but that is how it is today. I have to verify the qualification of buyers before I can advise my client to accept an offer. Spending months off the market under contract with a buyer who cannot close is not acceptable. Buyers are the belle of the ball now more than ever, but they don't get a mulligan on basic due diligence from the listing agent. It is my job to verify, and the notion that I am invading their privacy is fallacious. It is absolutely our business to ascertain that the buyer can perform. If I wanted to take some perverse pleasure in sticking my nose in someone's personal business, I'd watch reality TV. This is business, and should never be taken personally. 

One of the somewhat unique things about Westchester County, especially south Westchester, is that it was almost completely developed after the 2nd World War. What this means is that there are very few newer homes, and the inventory that we have is older, often much older, than a typical home in other communities around the USA. The home I am living in now was built in 1962. A home I spent a chunk of my childhood in was built in 1890. We have terms here like "pre war" and "turn of the (20th) century" that describe some neighborhoods. 

This means that things wear out. Roofs need to be replaced, Plumbing needs to be upgraded, Electricity needs to be modernized, windows have to be replaced, and on it goes. Older homes, like older bodies, require more maintenance. 

The other side of matters is that Westchester is one of the highest cost places to live you can find. My own property taxes are over $16,000. The median price of a home is $635,000. 

When you mix "old" and "expensive" and a you aren't talking about wine, then the purchase of the real estate requires due diligence. You have to do your homework, and you have to get a home inspection. A decent home inspection can be done for as little as $400. But the value of the $400 investment is priceless. It is more than a means of discovering possible defects and problems, it gives the purchaser peace of mind and serves as an instruction manual for home ownership. 

You just do it. To skip an inspection, or to rely on your friend the contractor to walk through and size it up is the ultimate in being penny wise and pound foolish. It can help you avoid a far more expensive mistake, and has almost always saved money for the buyer in my experience. Unless you know going in it is a gut renovation and nothing will be left after the work, you get the home inspected. It is the largest purchase of your life. Have a professional check it out before you go forward. 

Bidding wars are relatively rare in Westchester County except in those cases where the house is very special. Multiple offers are not uncommon, but having more than one offer does not mean the price necessarily gets bid up. Sometimes, when  we ask buyers for their best and highest, it can backfire and the competing offer walks, not desiring to go higher in price when there are so many other options out there. Sometimes, a buyer will get caught in the heat of competition and make an offer far higher than they are truly comfortable with. They later get buyer's remorse, and that's when things get messy. 

Upon occasion, we recieve a "contingent" offer on a listing. Most offers have contingencies, such as mortgage and inspection. But in Westchester and New York, a "contingent offer" is one where the buyer still needs to sell their own house (in nearby Fairfield County, CT it is known as a "Hubbard Clause"). Most of the time, our client wants nothing to do with waiting for another home to sell in order for them to sell their own. But what really makes the arrangement untenable is when the rest of the terms of the offer give us no reason to even consider the deal, even if the buyer's home is quite salable. 

When negotiating, win/win works best. If something about your offer is less attractive, you have to compensate somehow by adding something that is attractive. In other words, if you want the seller to take their home off the market (and wait for your home to sell risking that it won't and they'll lose 60-90 days on market), you can't expect them to embrace a low number. What's in it for them? Why wouldn't they just keep their home on the market and wait for a higher offer? 

Price and terms. Price and terms. Those are the magic words. Not just price, not just terms. They go hand in hand. Cash buyers know this, and that is why they leverage their strong terms with a lower price so often. They have leverage. On the other hand, if you are making a contingent offer, you have no leverage. None. Zero. Zip. Nada. Moreover, you are asking the seller for a huge favor, which is to share your own risk that your house might not sell. And yet we get some people who still make a low offer! Why would a seller do this? 

If a buyer truly believes that they can sell their own home and want to make a contingent offer to buy, they need to understand that their offer must be strong- very strong- to compensate for their contingency. It's only logical. If you are going to make a contingent offer, and you want to be taken seriously, don't lowball. A strong contingent offer just might be considered. And if you are making an offer on the home where you'll want your loved ones to live, don't you want your offer seriously considered?