What’s Your House Worth Now?
By Karen Maserjian Shan
Pop!
Yep, it’s finally happened.
We’d love to tell you that the days of bidding wars, quick sales, and ever-escalating prices are only on a very short hiatus — that they’re right around the corner again — but you know better. Unless you’ve been living in a bubble of your own, you’re well aware that the almighty real estate bubble — the one that we’ve been hearing about for years — has finally burst. So now what? What does this really mean for home owners in the Hudson Valley? Have you morphed from a millionaire to a mendicant overnight? Will you ever be able to sell your house? Or are you stuck forever in what once seemed like your castle, but now seems more like a prison?
The answers aren’t so simple. While TV and newspapers seem to indicate that the news is all doom and gloom, in reality, it’s not all bad. Yes, foreclosures are on the rise, houses are languishing on the market for weeks and sometimes months, and the dramatic price increases we saw over the last several years have ground to a screeching halt. But on the flip side, the price dips in the housing market are not spread over the entire Valley (in some counties, median house prices even rose in 2007). And if you’re a first-time home buyer or are looking to upgrade — this market may be just what the doctor (or at least your accountant) ordered. uuu
Finding The Right Price
“Houses are still selling, it’s just that they have to be aggressively priced,” says Patrick Fleming, broker/owner of WorldSelect Real Estate in Wappingers Falls. But price is a sticking point with many sellers, most of whom are reluctant, if not dead-set against, lowering them. “Unless the seller’s in a state where they have to sell, they try to stick to their guns, believing that the property’s still worth what it was nine, 12, 18 months ago,” says Brian J. Herman, owner/principal broker of
The unwillingness of sellers to lower their asking price is a big reason properties linger on the market. In Orange County, for example, home prices have dropped less than one percent on average. Houses in the county now sit on the market for eight months, up from five months just a year ago, says Chris Scibelli, president of the Orange County Association of Realtors and broker/owner of Keller Williams Realty in Central Valley and Goshen. With prices stagnating, “The average buyer is taking longer to make a purchasing decision,” he says, with some waiting for prices to bottom out.
But sellers who do bite the bullet and lower their prices can also face an uphill battle to sell. Take Angela Gullotti of Fishkill. She put her ailing mother’s two-bedroom ranch in Stanford on the market in February 2007. Built in 1968, the 1,200-square-foot house was painted, cleaned, stripped of its 1960s-style gold wallpaper, and listed at $270,000 on the advice of Richard Rundle, an associate broker with WorldSelect.
Rundle showcased the property in an open house that spring and worked with Gullotti on the home’s pricing during the nine months it was on the market. The asking price was lowered twice. In all, three offers were made on the home, two of which fell through. The first buyer couldn’t sell the house he already owned; the second offered cash for the property, but at an overly reduced price. Finally, a couple bought the house last November for slightly more than $232,000. “I think if we had put it on the market the year before, which we wanted to, it would have sold a lot quicker,” Gullotti said. “In the beginning, in February, the houses in the area were selling in the $270,000s, $280,000s, $290,000s. And then we saw everybody dropping their prices.”
Overall, prices have declined some in the past year, but not as dramatically as they rose in the preceding years. In Dutchess County, for example, the median price for a single-family detached house rose 63.7 percent in the past four years, from $247,900 in 2002 to $409,200 in 2006. This reflects an exceptionally high appreciation, especially when compared to the 15 percent rise in national median costs during the same period, says Santo Tambone, executive officer of the Mid-Hudson Multiple Listing Service (which serves Dutchess County).
While prices have recently started going down, the number of properties for sale has been increasing. Mortgage lenders have adopted more-stringent requirements to cope with the subprime mortgage disaster (see page 37). The result: a 12 percent drop in the number of single-family detached houses sold in Dutchess in 2007. Occasionally, a seller may opt to rent or go with a rent-to-buy arrangement for his languishing property. But often, “When people are dedicated to selling a property, they want to sell it. They don’t want to rent it,” said Edwin J. Maldonado, president of the Ulster County Board of Realtors and a broker associate with Win Morrison Realty in Kingston. Even so, the Columbia/Northern Dutchess Multiple Listing Service recently began including listings for rental properties.
Yet our real estate outlook isn’t as dire as it is in other areas of the country. One thing going for us is the relative proximity of New York City. “We’re 90 miles or less to Manhattan,” said Fleming. “That helps contribute to our housing market being stronger than it is in other areas.”
Upgrading
Of course, everything is relative. If you bought at the height of the market in 2005-2006 and you need to sell now, you’ll probably take a hit. But if you’re trying to buy a bigger home in the same region, then it may well balance out. “I know a couple who recently sold their condo in Wappingers Falls and bought a single-family house in Hyde Park,” says Rundle. “Yes, they got less for their condo then they would have two years ago — but the house cost less, too.”
While this couple’s transactions went off without a hitch, upgrading in this market can be tricky, cautions Rundle. “It’s really a tightrope right now,” he says. “No one wants to accept an offer that is contingent on someone else selling their house, because you’re placing your future in someone else’s hands. We like to try to at least get the house in contract before making an offer somewhere else.” And the type of house you’re shopping for makes a difference. “If you’re looking for a ranch, a split, or a colonial, that’s pretty easy to find,” he says. “But if you’re looking for that 16-acre farmhouse with Victorian details — that’s extremely difficult to find.” In that case, it might be better to sell first, even if it means moving twice and putting your stuff in storage. “Being saddled with two mortgages for six, eight, or 10 months, whatever it takes now, could be financially devastating,” Rundle warns.
You Never Forget Your First Time…
Especially in this market. “It’s a great market for first-time home buyers,” says Rundle. “Especially for those who have done what everyone should have been doing all along and saved some money. Now you’re coming in with 10 or 15 percent down and you’re also going to be able to reap the benefits of the lower interest rates. And obviously, they don’t have anything to sell.”
Rundle is seeing more first-time buyers than in past years. Still, “a lot of people are very nervous. It’s nerve-wracking being a first-timer in any market, but then with this media frenzy all around. At this point, everyone has a friend or family member who didn’t time the market right and has been turned upside down or lost a significant amount of equity. They’ve got the whole peanut gallery telling them ‘be careful.’ ”
One Man’s Palace Is Another Man’s Shack
With the first-time buyers out in force, sales of homes less than $350,000 are still moving briskly. And high-end homes — expansive properties and estates priced $1.5 million and up — haven’t taken a hit, many experts say, since those interested in purchasing them have the financial means to weather the bumpy economy. It’s the houses priced between $350,000 and $500,000 that are really getting caught in the middle. “There is a lot of stuff to choose from,” says Fleming. Many of the big spenders are purchasing high-scale second homes, particularly in the Valley’s northern regions — Columbia, Greene, Ulster, and northern Dutchess counties. “Ulster County has been the beneficiary of being in the second-home market,” says Maldonado. “We’re within striking distance of the metropolitan areas.”
Hagglers, however, may have a harder time walking off with a deal. Many of the old farmhouse-style homes sold as second homes in the recent past have since been fully renovated — often to the tune of hundreds of thousands of dollars — leaving those sellers in no mood to bargain, but looking for a return on their hefty investment.
Pete Nurzia, owner of Nurzia Construction based in Fishkill, has noticed a slowdown in the new home market. In the recent past his company built about 12 houses a year; now it’s down to eight or nine. Yet today’s buyers are more intent and better qualified, he says. “There are fewer tire-kickers,” he says of today’s prospective buyers. “The ones out there, right now, they’re for real. They’ve done their homework. They’re capable of getting financing beyond the sub-prime issues and they’re more serious.”
Nurzia, who works primarily in southern Dutchess, builds single-lot homes in two Pawling subdivisions. To date he has built close to 60 homes, ranging from $600,000 to $850,000 at the Highlands at Pawling. At Majestic View, six lots ranging in size from three to 20 acres, have homes priced between $1.1 to $2.5 million. (Two houses have been completed in the four years since its opening.) Prices for Nurzia’s homes have held steady, although he admits that he now includes amenities that he previously would have charged for, like roughing in plumbing for a future basement bathroom or upgrading a shower stall.
But Rundle believes plenty of expensive homes have gotten caught in the downturn. “It depends. If you’re talking about a Toll Brothers, Lenar, or a Legends house — I don’t want to call them generic McMansions — but there are 30, 40, 50 of them available. So yes, prices have been affected, there are so many of them. When you get unique, historic properties that can’t be duplicated, then no, the price is not affected as much.”
The bottom line? Good deals are still available in this roller-coaster market, whether you’re buying or selling (or both). But chances are you’ll have to work harder to snag them now than you would have a few short years ago.
Set the Stage for Success
Putting your home on the market? Before you do, you may want to consider hiring a professional home stager. Maureen Henry, of Rockland Home Staging in Sparkill, shows home owners how to present their houses in the best possible light. Doing so, she says, draws serious buyers willing to pay top dollar. “The goal of staging is to make the home shine,” she says.
In staging a home, Henry may refresh outdated or dingy rooms with new paint, furniture, appliances, and accessories. The process — which kicks off with a two-hour, $200 evaluation — goes a long way toward creating an inviting interior that brings far greater financial gain than the typical $500 to $1,500 outlay most of Henry’s clients invest in it (see chart previous page). In fact, one study, said Henry, showed that staged homes sell for 6.3 percent more money — and in 50 percent less time — than properties that aren’t staged.
“There was one gentleman from Spring Valley who had his house on the market for eight months,” says Henry. “He kept getting feedback that his home didn’t show well. He went to California, where home staging is very big. And when he came back, he contacted me. And he was very good and did everything I said. It was just so cluttered and you couldn’t see how big the rooms were. We repainted and got it looking really good. He sold it in two days for his asking price.”
While more serious work — replacing a leaky roof, mold remediation, or having the home exterior painted — typically is outside the realm of home staging, such repairs still should be addressed. To that end, Henry says, either make the repair before putting your house up for sale, or lower your price. The problems will show up in a home inspection anyway, and then will give buyers an opportunity to bargain the price down. “When you put your home on the market, it becomes a product,” she said. “It’s not your sweet little home anymore. It needs to be marketed.”
Henry shares some staging tips:
Clearing out the clutter is the first step, since, as Henry puts it, “clutter eats equity.” Stow papers, toys, and other everyday paraphernalia, including personal items. Organize with storage bins and get rid of things you aren’t using or won’t be taking to your new place.
Depersonalize your home by putting away family pictures, ethnic treasures, religious pieces, and the like, so potential buyers won’t feel like they’re intruding on your space. “It’s not like decorating,” said Henry. “In decorating you’re trying to make your home really personal; your personal style statement. Home staging is trying to make it appeal to everybody.”
Update the look. Replace dated light fixtures, and give the place a fresh coat of paint in a contemporary, but neutral, color. In the kitchen, exchange outdated appliances for new ones and consider painting or refinishing old cabinetry. As for the bathroom, be sure it’s sparkling clean and fresh.
The cleaner your house, the better. “The home should be spotless,” said Henry, as people are put off by dirty homes. Consider hiring a professional cleaning crew to make the place shine, and take care to eliminate pet and other odors.
Outside the house, trim back overgrown plants, freshen up landscaping with new mulch, and plant flowers for visual appeal.
Mortgage Woes
The Hudson Valley is not immune to the foreclosure crisis gripping the rest of the nation. “One in seven clients is facing mortgage challenges,” says Orange County’s Chris Scibelli, “and one in 10 is actually in foreclosure proceedings locally.” There are many reasons why local home owners find themselves unable to pay their mortgage — including loss of a job, divorce, or illness. But most find themselves in this precarious position because — surprise — the rates on their adjustable rate mortgages have ballooned and they’re unable to make the new payments. “The mortgage companies just lost their senses. They were giving away money to people who absolutely, blatantly couldn’t afford it,” says Robert J. Bradley, a real estate broker with Holly Real Estate in Carmel. Higher property taxes have also crippled many home owners. And with home values on the decline, it’s not uncommon for people to owe more than the current value of their property, said Arnold Restivo, regional lending manager for Tuthill Finance in Fishkill.
Restivo mentions a client who is having trouble meeting the mortgage payments on a house he bought for $355,000 in 2005. He lives two blocks from a similar property that recently sold for $295,000, including a $10,000 seller’s concession. “When you have reduced equity like that, bankruptcy is the only way you’re going to be able to save your house,” Restivo says. Unless, he adds, your lender will agree to a short sale, where the property is sold for less than its mortgaged value. For example, say a person bought a house for $350,000 and mortgaged $337,000 of the cost. Three years later, the home owner has fallen behind on his mortgage payments and the lender has begun foreclosure proceedings on the property. Not wanting a foreclosure on his credit report, the owner has a real estate agent list his house, pricing it at its current market value of $290,000.
After a couple of months, the best offer made on the property is $285,000, which is $52,000 short of the mortgage amount still owed. If the lender agrees to forego the loss and accept the offer, the short sale has been made and the foreclosure of the property averted. Before accepting a short sale, a lender typically needs to see a report showing the home’s value plus the home owner’s financial records to prove his hardship. While such a deal saves a lender the time and expense of a foreclosure proceeding, it is a negation, said Restivo, and its acceptance depends on whether the lender has enough assets to cover the loss.
Of course, having trouble paying your mortgage can be so uncomfortable that some people avoid dealing with it altogether. But ignoring the problem can lead to a whole host of troubles — including the loss of your home. So take these steps at the first sign of trouble.
Contact your lender as soon as you realize you have a problem. Lenders do not want your house. They have options to help borrowers through difficult financial times.
Open and respond to all mail from your lender. The first notices you receive will offer good information about foreclosure prevention options. Later mail may include important notices of pending legal action. Your failure to open the mail will not be an excuse in foreclosure court.
Ask your lender the critical questions: What is the anticipated timeline to complete a work-out? Will the foreclosure sale be postponed while your servicer reviews the work-out option? What are your obligations under the work-out arrangement: due dates, amounts due, how long your servicer will postpone collection of payments, if applicable, and when such deferred payments must be paid back?
If you need additional assistance, check out the the U.S. Department of Housing and Urban Development’s (HUD) list of approved counselors (800-569-4287). For free counseling from NeighborWorks America and the Homeownership Preservation Foundation, call 888-995-HOPE or visit http://995hope.org.
Know your mortgage rights. Learn about New York State foreclosure law at the State of New York Mortgage Authority (www.nyhomes.org/home/index.asp?page=489). The agency’s “Keep the Dream” program helps households that are no more than two months behind in their mortgage payments to avoid possible foreclosure. The program enables families with adjustable-rate, interest-only, or other unconventional mortgages to refinance with the help of SONYMA and obtain a 30-year or 40-year fixed-rate mortgage at competitive interest rates.
Prioritize your spending. After health care, keeping your house should be your first priority. Look for optional expenses that can be eliminated, like cable TV, memberships, and entertainment. Delay payments on credit cards and other “unsecured” debt until you have paid your mortgage.
Use your assets. Do you have a second car, jewelry, or a whole-life insurance policy that you can sell for cash to help reinstate your loan? Can anyone in your household get an extra job to bring in additional income? Even if these efforts don’t significantly increase your available cash, they demonstrate to your lender that you are willing to make sacrifices to keep your house.
Avoid foreclosure prevention companies. You don’t need to pay fees for foreclosure prevention help. Use that money to pay the mortgage instead.
Don’t lose your house to foreclosure recovery scams. If any firm claims they can stop your foreclosure immediately if you sign a document appointing them to act on your behalf, you may well be signing over the title to your property and becoming a renter in your own home. Never sign a legal document without reading and understanding all the terms and getting professional advice from an attorney, a trusted real estate professional, or a HUD-approved housing counselor.
