Sullivan County Real Estate

Extend the Homebuyer Tax Credit? Not So Sure

In February, as part of the economic stimulus package, the Federal government enacted an $8,000 tax credit for first time home buyers that met certain income limits. That tax credit is set to expire on Nov. 30th. Now there is a flurry of activity on Capitol Hill to extend and even expand the program, with heavy lobbying from the real estate industry, including the National Association of Realtors (NAR) and the National Association of Home Builders. As a member of NAR, I've been getting regular emails to contact my congressperson to encourage extension of the tax credit.

But I'm not so sure. I've been doing a lot of reading on the web. The program is costly and there is some question about how many incremental sales (e.g. sales that wouldn't have been made if there wasn't a tax credit) it generated. But the program is very popular with the middle class, and the middle class votes. It is so politically popular, in fact, that legislators are looking to not just extend it, but expand it. Some proposals call for increasing the tax credit amount, to $13,000 or even $15,000, raising the income limits to $150,000 single / $300,000 couple, and eliminating the first time home buyer requirement.

I'm all for helping first time home buyers get into houses. We have a number of state and federal programs to do that. In New York state, SONYMA (State of New York Mortgage Agency) provides funding for below market fixed rate mortgages with very attractive terms for low to moderate income buyers. FHA mortgages are also a great option for first time home buyers who need a lower down payment loan to get into that first home. I'm a big proponent of streamlining and strengthening these programs to increase affordability for qualified home buyers.

But the tax credit — particularly if the amount is increased and income limits raised — is starting to feel not so much like a stimulus as a giveaway. NAR points to the 9.4% increase in single family homes in September as a strong indication that the tax credit is working, to increase sales and stabilize the market. I would agree that the tax credit has had some impact. I wonder, however, how many of those sales would have happened anyway over the next six months, but have been pushed up by buyers looking to get in under the Nov. 30th deadline?

The October 'Looking for Land' Ritual

Hunting 'season' starts in early October. No, not the deer rifle season which is what most non-hunters think of as hunting season. Deer rifle is the 'big event' that opens the weekend before Thanksgiving. But in October, the ramp up starts with turkey leading into a deer bow season, and that gets hunters thinking hunting.

A curious thing happens in early October. I start getting calls and emails from people looking to buy 50 or 100 acre parcels of raw land "that would be good for hunting and maybe build a little house." Now, anyone who's serious about buying hunting land this year has already bought it. There's very little chance that anyone calling about buying hunting land in mid October would have it bought by late November in time for deer rifle.

Most Realtors up here have caught on that these calls are primarily from folks who are looking for land that might be vacant or unused to hunt without leasing it or buying it. There are quite a few 'tells' that this is what they're up to. They ask for tax maps or survey maps and directions to the property 'so they can just drive by and take a look.' But the big giveaway is that they don't seem at all concerned about price. Why should they be? They're unlikely to actually buy it. At every other time of the year, the price per acre is one of the key parameters of anyone looking for hunting land.

Now, if you're a regular reader of this blog you know that I don't do a lot of raw land. However, I do occasionally work with raw land buyers, particularly for larger parcels, including hunters. But I don't do it at all starting October 1st through mid-December, the end of deer rifle season. It's not because it's all that dangerous walking property this time of year. I have enough orange paraphernalia and garb to be seen from the moon, and my dog has a selection of orange outfits as well. It's more that I find the hunting land lookers time of year are generally scouts, not buyers, and showing large land parcels this time of year is a lot of wheel spinning.

Amy Miller Starts Personal Chef Service

Amy Miller, the proprietress of the Golden Guernsey B&B in Cochecton, who is quite the cook and all around local nice person, is offering personal chef services. Her new offshoot is called Early Bird Cookery (www.earlybirdcookery.com) One of the services she's offering is a "Welcome Home Package", where she'll stock your kitchen and cook up a slew of meals that will be ready when you arrive for the weekend or week.

The $100,000 Getaway Challenge

Recently I've gotten a lot of requests from new shoppers about second home getaways under $100,000. Often, an email inquiry includes a list of houses they've selected from online sources they'd like to come up and see. Usually I know something about the houses, particularly the negatives that have kept these apparently great deal houses from selling. For example, there's a house in Callicoon that looks great on the internet — a 1900's charmer with beautiful woodwork listed for $118,900. That one house is the most frequently emailed listing I get. The drawback? It sits on a tiny 1/5th of an acre lot smack at the intersection of Route 17B and Route 97. There are a half dozen other houses that buyers regularly email that have equally major drawbacks, from being located in a flood plain, to having a front porch view of a state prison to being a totally gut renovation handyman special. (There usually is a reason why there are no interior photos in a listing!)

Given the number of inquiries I get in this price range, there is a lot of interest and demand. I can envision couples curled up on their sofas (well, more likely loveseats because they're in NY sized apartments) surfing through listings and making comments to each other like, "Wow, look at this house priced at $99,000!" and "This one looks great at $79,000." When they've collected 6, 8 or even a dozen or more listings and emailed them to me to come up and take a look, they're all excited about finding their little piece of heaven in the country for under $100,000.

So sometimes I feel like the Grinch who stole Christmas when I email them back comments about the houses. Often from their selection of listings I can tell what catches their fancy and will suggest that finding something similar, but in a better location or not on a main road, would likely start at X dollars, maybe $150,000 or $175,000.Sometimes they're amenable to looking in a higher range, sometimes not.

Can you find a getaway here under $100,000? Yes, but ... it probably isn't the country dream you had in mind. It might be a cozy 800 sq. ft. probably seasonal (summer use) cottage on a quarter of an acre in Smallwood, a 1,000 sq. ft. ranch on an acre with paneling, shag carpeting and neighbors, or an in-towner in Liberty or Livingston Manor. (The starting point for in-towners in Jeff, Callicoon or Narrowsburg pushes somewhat above $100,000.) Pushing into the $125,000 to $150,000 range opens up some possibilities with a little more land, a slightly larger house or a little more privacy.

I've pulled together a group of 11 houses in a range from $75K to $159K that are some good options in the affordable range without many of the drawbacks of some of the 'glitzier' online listings that might catch your attention.

Drilling Survey Response Needed

NY Senator Tom Libous (R-Binghamton) has an on-line survey on gas drilling which everyone must respond to ASAP. Libous is clearly in the pro-drilling camp. Generally the only people who access his website are already "Drill Baby Drill" believers. The  concern is that he will use the results of the survey to "prove" that everyone wants there to be no extension of the public comment period on the DSGEIS, that they all have complete faith in the DEC recommendations as is, and that they want drilling to commence immediately.

Please respond to the survey and show that we DO need an extension of the comment period, we are NOT satisfied with the DEC recommendations as they stand, and we do NOT want drilling to commence until all of the data is in, and the safeguards are in place.

Responding to this survey is not taking an anti-drilling position. It's just taking the position — which has been echoed by most politicians from Sen. Gillebrand to Mayor Bloomberg to many of the Sullivan County legislators — that the DEC's comment deadline of Nov. 30th is wholly inadequate.

Here's the website link.  It will take you 3 minutes, one for each question, because it's set up to knock you off after each question. Just keep using your back key to answer all three.

http://www.libous.campaignoffice.com/index.asp?Type=POLLING&SEC=%7B3DCCB57C-5FA5-4D3C-B76F-3E913DA544C8%7D 

Please forward this link to friends and acquaintances.

Unhitch Those Hoses

The weather is on the tip of everyone's tongue here this week, with the possibility of an inch or more of SNOW on Thursday night. That's this Thursday night, as in October 15th!  When October rolls around, lots of folks start taking freeze precautions, like leaving your heat on low and turning off your water pump when you go back to the city.

But there's one thing a lot of people forget before it's too late. If you have any hoses connected to those freeze-proof outdoor spigots, take the hoses off. Those spigots can freeze and crack if the water in hoses connected to them freezes. And when you take off the hose, also disconnect any attachments at the other end and bring them inside. (Any water left in nozzles and sprinkers can freeze and crack them.)

Current Market Conditions Report Up with September Data

I just posted the latest Current Market Conditions Report, with September's sales data. The suprising news is that the median sales price took a big tumble, dropping to $136,250 from the 3 month period ending September 30th, down almost 10% from the August 3 month tally. Both sales volume and the average sales price, however, held pretty steady. The drop can't be attributed to a jump in foreclosure sales, as they've been holding pretty steady at around 13% of total sales, but the $8,000 first time home buyer tax credit (scheduled to expire on Dec. 1st) could be stimulating some affordable/moderate range sales which is pulling the median down.

Check out my thoughts on the market in the latest Current Market Conditions Report for Sullivan County Real Estate then please drop on back and leave your comments on what you see the market doing.

Why Houses Aren't Appraising

Over the weekend, I heard about three more deals that fell apart because the houses didn't appraise for financing at the deal price. Get more than three Realtors in a room, and I'd bet that within a few minutes the topic of the "appraisal problem" will come up. Never do I hear Realtors frame it as "the price too high problem", as in "I encouraged my seller to accept an offer that was just too high, and there wasn't a bat in hell chance the house would appraise."

Granted, there are some technical and structural issues with the current appraisal process, largely stemming from the HVCC (Home Valuation Code of Conduct), and the use of large bureaucratic appraisal management companies by the big banks. Sometimes the issue with an appraisal and underwriting shortfall can be laid squarely at the feet of that unwieldy system.

But not all the time. I would venture, in fact, that the primary reason a deal falls apart because of financing is that the accepted deal price was just too high. Sellers and their listing agents almost always seem very surprised when the house doesn't appraise, and point blame at the big bad banks and appraisers. But if the listing agents had done their homework and had a few tough love talks with the seller, in most cases there shouldn't be any surprise at all.

When I negotiate a deal for a client, I do my homework. Before the first offer crosses a fax machine, I know the likely comps for the house and a range where I expect it to appraise. I give my clients a value road map with a stop sign. And with 13 closed sales under my belt so far this year, I've never personally experienced an appraisal shortfall.

A 100% close rate from the point of contract is achievable. I've done it. But most listing agents think it's about as possible as stopping smoking, losing 50 pounds and dropping 4 dress sizes in under a month. But it absolutely can be done, if listing agents do their homework and are upfront and direct with their clients, the sellers. If you have a house listed at $399,000, and the lowest counter the seller will put on the table is $375,000, will the house likely appraise for that? If you review the comps, and the best scenario you can come up with is an appraisal in the $325,000 range, why are you letting the seller take a $375,000 offer? Because listing agents hope for one of two possible — but unlikely — outcomes. First is that some sale will come through in the 4 to 6 weeks it takes to get to the appraisal stage that will support the price. And the second is that a low appraisal will give the seller a wake up call and dose of reality; that they will see the light and lower the price.

Who pays for that expensive lesson? Certainly not the listing agent, and not the seller, either. Most of it comes out of the buyer's pocket. By the time there's an appraisal shortfall and a mortgage denial, the buyer has spent upwards of $1,500 — for attorney contract preparation, home inspection and the mortgage application and appraisal.

Appraisal shortfalls should be rare, not common, and seldom a surprise. Sure, I understand that there are some properties, because of their uniqueness or position in a market segment with very few comps, that are very difficult to value. In those cases, it may not be possible to predict an appraisal value and the only thing that can be done is for all parties to be aware that the appraisal is likely going to be a crap shoot. But that's not what I'm talking about here. The appraisal shortfalls I'm hearing about are in more bread and butter property categories, where there are comps available to reasonably predict an appraisal outcome.

DEC Issues Proposed Gas Rules

The New York State Dept. of Environmental Conservation has issued it's much anticipated draft "Supplemental Generic Environmental Impact Statement" to regulate horizontal natural has drilling in the state.Why is this important to Sullivan County? Sullivan sits on top of what is believed to be one of the richest veins of the Marcellus Shale gas fields in the east.

You can find the actual draft SGEIS on the DEC website at http://www.dec.ny.gov/energy/47554.html, but be forewarned — it's a bear of a document at 801 pages! Various organizations are currently reviewing it, and the best place to get a synopsis is on one of the organization websites like Catskill Citizens for Safe Energy. Two local papers, the River Reporter and the Sullivan County Democrat are also providing coverage.

The final version of the SGEIS approved by the DEC will be hugely significant to the future of this county, which is why I'm including a post about it here. As important as the issue of gas drilling is, however, I'm always hesitant to post about it on here because it draws, by far, the most vehement, angry and not always well informed comments from drilling opponents.

Up until about a month ago, I was pretty agnostic about gas drilling here, neither a staunch opponent nor proponent. But then news started accumulating about fluid spills at a Cabot test well near Dimick, PA. That event, along with some other spills and contamination incidents in western PA, has moved me into the foe camp. Why? If a drilling company can't get it right when they just have a small operation, and when regulators are closely looking at examples of gas drilling operations to formulate regulations in New York state, how can they possibly get it right when they're engaged in industrial scale production? And while the NY DEC may publish hundreds and hundreds of pages of regulations, by it's own admission it only has 17 regulators. Before approving the first drilling permit in New York State, the public has to insist that there is adequate and fully funded oversight. Yeah, right! The gas industry will likely to everything in its power to ensure that the DEC is weak and underfunded (while I'm sure funnelling millions into political contributions.) Maybe oner way to ensure full funding of DEC oversight is to require that every dollar of contributions to politicians from the gas industry be matched by a dollar of gas industry funding of regulatory oversight.

One problem I see with gas drilling overall is that the bar for safety is unacceptably low and the tolerance for error unacceptably high. The safety bar should be more like airlines, and less like the MTA. Airlines are required to conduct ongoing safety checks. When even the slightest problem is found, entire fleets are grounded immediately until the problem is researched and rectified. And when an airline, or its maintenance contractors, take shortcuts that jeopardize safety or falsify records they face huge fines. If gas drilling is to proceed, the same level of safety expectation needs to be applied. No excuses, no "hey, sorry, we'll try to do better next time."