Setting Realistic Expectations in 2011

Although there has been no dramatic change in the market since our last newspaper was published, when I try to recap the past year two adjectives come to mind – 2010 was a busy but difficult year.

Busy, because buyers continued to buy despite the fact that the economic situation remained mostly bleak. We are proud to report over 130 transactions in 2010.  Difficult, because almost every transaction was marked with numerous hurdles starting with challenging negotiations and bank appraisals, down to the final conditions for mortgage commitments as banks continued to scrutinize every applicant,  every piece of paper and every property-specific detail.

As we have reported before, unlike in many other parts of the country, demand for homes in our area has rebounded to a certain degree, due to such factors as continued growth of immigrant population, lack of vacant land and new development, proximity to New York City, well-performing schools and relatively low property taxes.   In addition, the combination of historically low mortgage rates, lower home prices and relatively high income levels of two-earner households in New York City has created a very favorable buying opportunity for many families.   Having said that, I want to make it clear that the buyers of the last few years are much different in their approach to buying than their predecessors:  they are not speculators, they are buying a home to live in and they realize that their very large investment may not show any appreciation for a long time, therefore, they are pragmatic, they set up a budget, (often necessitated by strict lending guidelines), they shop and compare and they expect to get the best value they can find. They prefer to buy a house in good condition and if not, they want to make sure that the repairs and updates that they need to invest in are well reflected in the selling price of the home.

Gone are the days when buyers could decide on purchasing a home on their first day out looking. Today, serious buyers do not commit to an offer until they are absolutely sure that they have done their research. Even then apprehension may get the better of them and they can change their mind before the sellers have a chance to respond.

In this climate, I can’t emphasize enough the importance of setting realistic expectations for both sides, buyers and sellers.

One of the biggest frustrations for realtors has been the phenomenon of so-called “perpetual buyers” in the marketplace – these are buyers who have set out to buy a house as long as two years ago but haven’t been able to purchase one because they set unrealistic expectations of what a “good deal” is.   A lot of these buyers go out to look at houses that are worth hundreds of thousands of dollars more than their budget in hopes that they can discount the price and buy them way below the market value because they heard on the news that the market is bad.   They keep making extremely low offers and losing these homes to more reasonable buyers who are also better qualified for the higher price range.   No matter how bad the media paints the state of the real estate market, houses that are priced close to their market value get sold within 95-96% of their asking price (at least according to our own track record).    Making an assumption that an offer of $100,000 below the asking price will be entertained by a typical seller in the marketplace is similar to relying on hitting a jackpot each time one visits a casino.   Until these buyers change their mindset and start matching the homes they select to their pocketbooks, they will continue to lose out on prime opportunities to realize their dream of homeownership at historically low mortgage rates.

 On the sellers’ side, it’s been only five years since the peak of the real estate market but many home owners are still expecting those high prices to return before they can make important decisions about changing their lifestyle, retiring, downsizing, etc.  Well, the truth of the matter is that these prices are not coming back this spring or anytime soon.  The economy has a long way to go before everybody feels secure about their financial future and the entire philosophy of buying real estate has changed for a long time to come if not forever.  Let’s remember the last downturn in real estate values occurred in the late 1980’s and lasted for an entire decade. It wasn’t until the late 1990’s and beginning of 2000’s that the prices began to recover and rise noticeably.  We most likely have several years before we might be able to see a replay of the values from 2005-2006, therefore,  it is important for today’s sellers to seek comparisons to homes sold within the last 6-12 months rather than focusing on unattainable values of years past.    The strategy of pricing your home at the current market levels will create more exposure, resulting in more showings to savvy buyers who will appreciate the value and place realistic offers quicker out of fear of loss.

For some homeowners who may be fighting an uphill battle with negative equity, unaffordable mortgage payments and feeling that there is no way out, options do exist, predicated upon their financial situation. You cannot turn on the radio without hearing ads for companies that arrange loan modifications, however, many of them do not provide valid solutions for all. You must carefully research this option before pursuing. The article inside this issue provides some helpful advice on this topic.

Comparing our statistics from the past two years, we have maintained the same ratio of sell price to list price, 96% in both 2009 and 2010, and the average “days on market” has stayed below 60 – 58 in 2010 and 56 in 2009, while it took an average of 70 days to sell houses in 2008. This panoramic “snapshot” of the past two years in our market is indicative of signs of a slow, yet steady recovery.

Here are some recent examples of our proven sales strategies at work throughout the neighborhoods we service:

In Jamaica Estates, the end of 2010 saw us breaking the $1 million mark – more than once: a fully renovated custom colonial on Kildare Road closed in excess of the list price at $1,135,000, while an all-brick colonial estate on an exceptionally large property on Radnor Road commanded $1,500,000; renewed interest in re-building older homes created a frenzy  over two handyman specials: a cape on a 64 x 100 lot on 189^th Street ended up selling for more than $25,000 over the list price of $749,000, and an expanded ranch on Aberdeen on a 56 x 134 lot went quickly for $750,000.

In Jamaica Hills: multiple bids resulted when we listed a 3-bedroom, 1.5 bath Tudor colonial in need of complete renovation – this home on Gothic Drive recently sold for $570,000, while a well-kept attached Tudor sold for $415,000 within one month.

Hollis Hills continues to be full of activity: a well maintained colonial on a 50 x 100 lot on Hartland Avenue with 3-bedrooms and 1.5 baths sold for $665,000; a spacious Country Ranch situated on a 65 x 102 lot on Peck Avenue at $732,500, sold for almost 98% of the asking price; a renovated expanded cape on another oversized property on 86^th Avenue went to contract quickly for full list price of $799,000; a brick ranch on Stewart Road in original condition and in need of complete renovation recently sold for $580,000, while a custom built 5-bedroom house on an unusual 80 x 100 property commanded a selling price of over $900,000.

In Fresh Meadows: a “turn-key” 2-bedroom colonial on 182^nd Street found a new owner for the price of $630,000 — over 97% of the list price; an immaculate semi-detached colonial set on an oversized corner property with room for expansion sold for $562,000 – not that far from prices on some detached single family homes!; a renovated 3-bedroom, 1.5 bath colonial with a fabulous yard on 173^rd Street snagged $670,000; an expanded brick and frame colonial on 193^rd Street will be closing shortly at $675,000.

In Bayside, a lovely but smaller Tudor cape on 223^rd Street with an updated kitchen and other improvements closed at 97% of the list price at $637,000; while a spacious colonial in need of updating but on an oversized 70 x 100 property in the Tall Oaks section just closed for over 96% of the list price at $700,000.

The good news is that no matter where you decide to move after you sell your home, you will find the prices of homes and condos have also adjusted downward with the market.   And even better news is that there are buyers out there who want to buy a house and can qualify for the mortgage and we have their names.  More so, we have the experience and expertise to help these buyers to choose the right home and lead them through the buying process to a successful closing overcoming all the hurdles and hassles.   So, if you are toying with the idea of selling your home and are afraid that the market may not be good, give us a call and let us appraise your home for you and answer all the burning questions and address all the concerns you have – you may be pleasantly surprised when you hear what we have to say!