Jennifer LeBow

Terminating a home purchase contract

October 22, 2022 by Jennifer LeBow Leave a Comment

Relocating to Philadelphia's Main Line — Be sure you understand how and when you can get your deposit money back if a home purchase falls through.

How and when can you terminate but get your deposit back?

The answer to this question will vary from state to state, depending on the contracts used in different regions. That said, many states have similar rules. I am licensed in Pennsylvania, so this post will refer to PA contract law. Let me begin by addressing some of the scenarios in which a buyer would NOT have deposit money returned.

When you don’t get your deposit back

The catch-all heading of buyer actions that result in a termination in which the buyer loses deposit money is “buyer default”. Here are some examples of buyer default:

Your inspection period is over and you have not terminated in writing, but decide you don’t want the property anymore. Tough–the seller is entitled to keeping your money.
You do not send in your second deposit by the due date.
You knowingly supplied false information to your lender or on your Buyer Financial Information form resulting in your not qualifying for the mortgage or otherwise being able to financially complete the transaction.

When you do get your deposit back

You terminate in writing as a result of unsatisfactory inspection results–as long as it’s done in writing, using the correct documentation and within the allowable time period.
You terminate due to a low appraisal. This reason for termination results in a return of your deposit as long as you didn’t waive the appraisal, offer any kind of appraisal gap coverage or amend the appraisal portion of the contract in any other way.
You terminate due to another contingency not being met. Beyond apprasial and inspections, if you’ve elected any other continencies (other than the mortgage which I’ll address in a moment), you may be within your rights to terminate with return of deposit if those contingencies are not met.
You do not qualify for the mortgage under the terms set out in the contract. Technically, this topic covers the low appraisal mentioned above, as well as not getting an interest rate below the cap indicated on the contract. Additionally, if your lender will not grant you a mortgage, even after pre-approving you, you get your deposit back (in most cases). There are some nuances here–like what happens if you lose your job or if you don’t get the bonus you were expecting–so speak to your lender about the specifics.
Seller default–this category includes seller behaviors like not making repairs the seller agreed to or not vacating the property by settlement. It also covers actions like not keeping the property in the same condition it was in when the buyer agreed to purchase it, committing fraud on the seller’s disclosure and not settling by the stipulated date on the contract.

Boring but important

While this discussion is not likely to keep you glued to your screen, it is a good idea to have a basic understanding of the circumstances under which you can and cannot get your deposit money back. Talk to your lender about any issues of concern in qualifying (for example, people who own their own businesses for less than two years can have trouble). Talk to your agent about the contract language so you are clear on the “how and when”. The last thing you want is, if a transaction to purchase a house falls apart, to be surprised that you aren’t entitled to your deposit being returned.

If you are relocating to the Philadelphia/Main Line area, please go to my blog page and search for posts using the relocation tag. Contact me to discuss your Philadelphia area relocation! jen@jenniferlebow.com/610 308-5973

Why sellers need to pay close attention to mortgage rates

October 21, 2022 by Jennifer LeBow Leave a Comment

relocating to Main Line Philadelphia — Sellers need to understand how recent mortgage rates increases affect a buyer’s purchasing power.

What is happening in our economy

There is a lot of noise out there as far as housing market predictions. We are currently in the midst of an extremely complex economic situation, with many different factors exerting influence. We have low inventory of homes, high inflation, a spike in mortgage rates, a job market that seems to keep going strong, even though experts continue to predict it to soften, oil prices fluctuating wildly, political events and talks of sanctions and more. Everything I read indicates that there are so many issues in play, all pulling the economy in different direction, it’s impossible to make accurate predictions.

The effect of higher mortgage rates

That murky, hard to dissect economic landscape baffles economists, so it’s no surprise that the average layperson selling a home can’t extract any meaningful data that can help price the house more accurately. Except one: the interest rate increase has a concrete, measurable effect.

Consider a buyer who began a home search when rates were 5% and is still looking today, in October of 2022 when current rates are 7%. As a seller, you need to understand what that difference means in the monthly payment for that buyer. A buyer whose monthly principal and interest budget is $2,167 could have afforded (an 80% loan for) a home costing $500,000 at 5% interest. In order to keep the monthly payment at $2,167 at today’s rate of 7%, the same buyer could afford an 80% loan for a home costing $407,125. Think about that. There is a significant difference in a $500,000 house and a $407,125 house. Similarly, a $1,000,000 house back when interest rates were 5% would equate today to a house priced at $806,875.

Value can’t be based on a simple formula

Please note that I am NOT suggesting that it’s a simple as that–I am not saying that a house valued at a million dollars when rates were 5% is now only worth $806,875. From a strictly mathematical standpoint, if a buyer were putting 20% down on a million dollar home, that would be $200,000. On an $806,875 house, 20% would be $161,375 So that cash “savings” of $39,825 would potentially come into play as far as adjusting the perceived difference in value (as seen through only the interest rate lens). Don’t forget, though, that the loan amount a buyer qualifies for has to do with monthly income. So even if you look ONLY at mortgage rate increases, there is still no simple way to recalibrate home values. The point is that, as a seller, if you don’t think about how affordability has changed for buyers who are relying on mortgages, you may be out of touch with the market value of your property.

How sellers can combat poor home condition

October 12, 2022 by Jennifer LeBow Leave a Comment

Home sellers can combat poor condition — If you are selling a home that could use some tlc, here are some ways to allay buyer concerns and increase interest in the property.

What should you do if you’re selling a home that isn’t in great condition?

While some buyers are “looking for a project” and would prefer to do their own updating so it is done exactly to their taste, most buyers prefer an already updated house. They also tend not to want to make major repairs like replacing a roof or fixing rotting wood or leaking basements. When it comes to properties feeling “tired” or “dated”, sellers often don’t recognize their properties as fitting into those categories. If you are a seller and your agent suggest that your home may present that way to a buyer, you’d be wise to listen. It also might be useful to go and see some of your competition (other homes for sale) if they are in better shape so you understand how yours shows in comparison. Ask your agent if you can see some of the competing listings.

Here are some strategies you can employ to encourage buyer interest.

Make the repairs and/or updates. This option is the most obvious and usually the most effective but many sellers don’t have the money, time or inclination to fix the problems.
Offer the seller a credit to make some of the repairs and updates themselves. Sometimes it’s challenging to adequately estimate how much things will cost, especially if the price varies based on individual preferences (more when updating things like kitchens and baths vs. repairs like fixing leaky pipes).
Provide the buyer with a copy of a pre-listing inspection. You have to be careful with this one. The benefit is that the buyer isn’t making assumptions that there is more “wrong” with the house than there actually is. However, it can backfire if there ARE lots of issues. I always recommend a pre-listing inspection as it allows the seller to know what the concerns are and enables her to decide what she wants to fix, update or offer a credit for. Keep in mind, if a material defect is discovered, the seller is required by law (at least in PA) to disclose it. Some sellers don’t do a pre-listing inspection expressly to avoid having to disclose problems. Keep in mind, though, that buyers will discover them during their own inspections. It is true, though, that some buyers are waiving the home inspection. That scenario makes a valid argument for why a seller might not opt for a pre-listing inspection. So, again, this is a tricky one.
Offer a home warranty. While warranties don’t cover everything and there is definitely fine print to read, they do provide a certain level of comfort to many home owners.
Offer to pay for service contracts and other insurance policies. For example, you could offer an HVAC contract that includes a seasonal check of the systems and coverage up to a certain amount for required repairs or replacement. You can also buy insurance policies that cover things home owner’s insurance (and home warranties) don’t, like water and sewer pipe insurance.

Try to put yourself in the buyers shoes and pretend you are thinking about purchasing the house that you are currently selling. What improvements would you feel strongly about doing? What would they cost? How inconvenient would it be to have them done? Try to be objective (a tall order, to be sure). Then, when you have an honest, accurate picture of your property as it will appear to a buyer, consider using one or more of the above suggestions as a way to mitigate buyers’ concerns about purchasing your home.

Bath towels, pillows and linens, oh my!

October 5, 2022 by Jennifer LeBow Leave a Comment

Linens should attract, not detract — Too often, pillows, throw blankets, bed linens and towels actually detract from the look of your home, especially in listing photographs. Have a critical eye.

Don’t visually accost would-be buyers

Is it just me? I am beginning to think I’m the only person who finds vibrantly colored and patterned pillows, towels and linens incredibly messy-looking in home interior photos. If your furniture has patterns or non-neutral colors, be very careful about introducing more. The worst offender, in my humble opinion is the self-consciously nonchalant blanket thrown over the back of a sofa or club chair (or at the end of the bed).

Pay attention to how the room photographs

To my eye, it always looks untidy and I want to put it away in a closet. Pictures of living rooms with lots of throw pillows (with or without those shabby chic blankets) look busy and the very antithesis of serene or elegant. I could easily live without serene or elegant; personally, I prefer a space to look inviting, but these rooms just look tacky to me. The biggest surprise is that the stagers are often the culprits who bring in these loud, clashing linens. I think they may look at the space in person, but not at the pictures of those spaces. Remember, the pictures are what prospective buyers use to decide whether they should visit the property.

Make your bed!

While we are on the topic of linens, I have found that the most disappointing pictures of listed home are often the bedroom shots. Why? Because it’s actually very hard to get bed linens to look crisp and taut. Rumpled and wrinkled is more common. I’m amazed at how often I see sheets hanging out at the edges of the comforter or pillows that still have head indents in them. Consider getting an inexpensive, very plain comforter to use, at least for pictures, when you are selling your house and maybe a couple of new pillows, too.

Throw in the towel

A brief note on towels: the stained kitchen towel hanging on the stove handle needs to go. I’d opt for “less is more” and not put one out at all. In the bathrooms, any kind of hand towel should be clean (you think that would be obvious, but you’d be surprised). Finally, and this is incredibly common, think about how your bath towels smell. That’s right–if your towels are damp, they don’t smell very good. Put them in the wash or hamper and either replace them with fresh ones or leave the bathroom towel-free prior to showings.

Setting the right listing price for your home

October 2, 2022 by Jennifer LeBow Leave a Comment

setting the best list price for your property — When you are preparing to sell your house, there is a lot to consdier in order to set the best listing prcie.

Examine current market conditions

Are sale prices increasing or decreasing?

If they are falling, be very careful not to be “chasing” the market by continually needing to lower the price to remain competitive. That tactic will leave your house sitting on the market and selling for less in the long run. If prices are increasing, while you definitely don’t want to leave money on the table by not asking as much as you could, consider that, even if your price is slightly lower than market value, you may still end up getting top dollar for it due to the amount of interest and number of bids that underpriced homes usually generate.

Are days on market increasing or decreasing?

If properties are starting to sit on the market longer, take note. Not only does that statistic affect the likelihood that yours will too, but it is usually connected to a softening of values. If there aren’t lots of people who rush out and make an offer the first week, it indicates that demand has lessened. Reduced demand goes hand in hand with lower prices. Conversely, if houses are flying off the market, you are well-positioned to sell. You can set a higher price if the general level of buyer demand has houses selling very soon after they are listed.

Is amount of inventory increasing or decreasing?

Similarly, a change in inventory levels is closely tied to values. If there are more homes for buyers to choose from (unless there is a correesponding increase in buyer demand, for some reason), your property isn’t as valuable. Buyers don’t have to offer the sun, moon and the stars to get your house if there are plenty of others available. If, though, there is a dearth of supply, you can expect your home to fetch a higher price. Severe competition for very low supply translates to higher sales prices.

Analyze the comps

All comps should be as similar as possible for the comparisons to be valuable. Comparing a small, old Colonial to a recently updated split-level doesn’t provide much useful information. While certain characteristics are quantitive and fairly simple to adjust for (like square footage, lot size, number of bedrooms and baths), consider differences like whether there’s a garage or central air or a finished basement. Furthermore, condition of the property and how updated it is, along with features like how busy the street is or how desirable the lot is come into play as well. Coming up with a value range for a property based on analyzing comps is definitely more of an art than a science.

Solds

Some agents only look at properties that have been sold. We call these “sold comps”. To be fair, they do give the clearest picture of what the public valued similar properties at. Therefore, they are most predictive of value. Note: sold comps do need to be as recent as possible, since market dymanics can shift quickly and what a similar property was worth eight months ago may not be what it’s worth today.

Actives

Active comps shine the light on the competition. If there are no similar active comps, that bodes well for the seller from the perspective that there is limited competition. However, if there are no properties for sale in your neighborhood because there’s not a martket for that area, you could be in for a challenge as far as selling. That said, it is usually considered beneficial to a seller when there are fewer similar homes for sale in the neighborhood.

Under Contract/Pending

Examining the properties that are under contract or pending demonstrate how long things are staying on the market under current conditions. If (and I say, “If”) your agent can discover what prices these properties are under contract for, that information is extremely useful in setting an appropriate price. If things are selling quickly, they are usually selling for list price or over, but, that’s not necessarily the case. On the contrary, if things are taking a long time to go under contract, it’s an indication that the market may be cooling and you should probably be considering a slightly lower price.

Pricing Strategy

Now that you have gathered the available information about the market in general and about the sales history of very similar properties (the comps), it’s time to process that information. Your agent should come up with a price range for your home. The reason it’s a range is that the exact price you choose will depend on your inidividual circumstances and motivation.

Pricing it higher than what the comps suggest

This strategy (which is not always a bad one!) may be more likely to appeal to a seller who has the luxury of time. Someone who is not in a hurry to sell. Additionally, a seller who doesn’t have to sell, but would if she could get a certain amount often chooses a higher price. There are a few key points to keep in mind if you set a higher than recommend price:

If you end up having to lower the price, it will probably sell for even less than if you’d started out at that lower price. Why? Because a listing becomes stigmatized when it has sat on the market and, even with a price reduction, buyers don’t feel that there’s much competition to purchase that home and tend to offer lower than asking price.
Properties see the highest level of engagement within the first 10 days of listing. If you price your home too high and it hasn’t sold by then, you will reach many fewer new prospective buyers from that point forward, reducing your buyer pool.
Some sellers in this category believe that there’s no harm in pricing above what the market value is as someone can “make me an offer”. If the home is significantly overpriced, that strategy brings in the wrong buyers–people who wouldn’t want to buy that home even for much less. Let me explain. If a property that is, realistically, worth $500,000 but the seller lists it at $550,000, the buyers who are looking in that price range and come to see it will be disappointed (as it doesn’t offer the same total value as other properties they are seeing at $550,000 that are priced at true market value). Those buyers are looking for a “better” house than what you’re offering. So they don’t want your house. They are looking at homes in that range because they are prepared to pay that much–but not for a property they consider to be sub-par as compared with others in that range.

Pricing it at the price the comps suggest

Pricing your home right in the middle of where the comps suggest it will sell is what most sellers do. As long as your agent is marketing it well, you should see a reasonable amount of interest and showings. Of course, that number is dependent on how active the market is when you are selling. Either way, if you have had several showings and no offers, you may want to reevaluate the price; it may be too high.

Pricing it lower than where the comps suggest

Pricing your home slightly lower than where you think it will sell has become somewhat more popular in our recent market where there is so much demand. Pricing the property a bit low drives so much traffic and such a feeding frenzy, that it almost always results in mulitple. over-asking bids. And remember, when there is that much interest in a given property, the bids are much more likely to waive contingencies (mortgage, inspections, etc.) in order to be as competitive as possible.

If you thought choosing a list price for your home was cut and dried, you probably realize now that it is not. Market conditions can change quickly, and markets are hyper-local. So it’s vital that you understand the current market in your neighborhood. Interpreting the comps requires assigning monetary value to things like a flat vs. sloped lot or a quiet vs. busy street. Then the seller’s personal situation and strategy also must be factored in. Good luck! For more, click here.

What does your housing assessment really mean?

September 27, 2022 by Jennifer LeBow Leave a Comment

Main Line Relocation — In Pennsylvania, your assessment may not reflect the current value of your home, but it definitely affects your taxes.

First, let me say that this post is designed for Pennsylvania residents as our properties are reassessed roughly every 30 years.

What is my property assessment?

What is your assessment, anyway? Well, it’s a couple of things. In its most basic form, it is the value at which the county tax assessor has assessed your property’s value. So, in theory, it’s what your house is worth. And (again, in theory, and I’ll get to the reason in a bit), it was the value of your house at the time that assessment occured. The reason is is not an accurate reflection of the current market of your property is that the assessment is around 30 years old (or less, if the home is newer than that). So it’s quite rare that your home’s assessment is a reliable predictor of today’s value.

Then why do I care about the assessment?

The reason you care about the assessed value of your property is that it is the number upon which your taxes are based. If your assessment is lower than your neighbor’s, your taxes are lower. Here is how the assessment affects your taxes: the different tax bodies (county, municipal, school) determine their budgets for the coming year. Then they take all the assessment values from all the real estate in their purviews and divide the budget by that total assessment dollar amount. The result is a multiple referred to as a millage rate. It’s that number, that changes annually, that is multiplied to your property’s assessment value that determines your taxes. So, for example, if the school district millage rate is 30, and your property assesment is $315,000, your school taxes would be $9,450.

When or why are properties reassessed in PA?

Unlike in many locales, the sale of a property (unless it’s new construction) does NOT trigger an assessment. Taxes do not change based on the sale. However, there are events which will result in an updated assessment. Those events include adding bathrooms, adding square footage (they will always increase your assessment). There are also potential assessment changes if a property owner challenging the current assessment.

When might it make sense to request a reassessment?

If you determine that your property has appreciably higher taxes than nearby properties of similar current market value, you might consider a reassessment. Often, these discrepancies are the result of your home being newer than the surrounding ones–if yours is 10 years old, but the other are much older, your assessment will reflect its value when it was originally assessed, which was five years ago. Let’s say that most of the neighborhood has homes that are 50 years old or more. In order for them to be of similar value, we will assume they have been renovated. If you can provide an appraiser’s or real estate agent’s current market assessement of homes that are worth roughly what they say your is worth, then your taxes should be similar. But remember, those other houses were probably last assessed 30 years ago, when values were less. That would be a scenario in which a request for reassessment could lower your taxes.

When it’s not wise to ask for a reassessment

Often, when people are selling their homes, if they believe the county tax record lists their square footage as less than they believe it to be, they suggest having it reassessed. Their idea is that, if the record shows more square footage, they can expect a higher price. While that logic is not wrong, they often don’t realize that initiating a request for a reassessment may result in their taxes increasing, often by a lot. Why? Because, remember, if their last assessment was 30 years ago, their new one will be in today’s dollars. So the assessment (with or without the country agreeing that there is previously unaccounted-for square footage) will increase. And when the assessment increases, the taxes increase. And THAT will be a turn-off to buyers. Additionally, if the house doesn’t sell, the owner has now increased his own taxes.

I hope to have cleared up some of the confusion surrounding tax assessments in PA and how/why you should care about them. For more Q and A about taxes, click here.

S(m)elling your house? Have some scents!

September 26, 2022 by Jennifer LeBow Leave a Comment

How does your home look, sound and smell? — When prospective buyers come to see your home, they SEE your home, as well as hear it, feel it and smell it. So pay attention.

How buyers experience your home

If you are selling your home, you know you have to be prepared for showings. Consider what visitors will be paying attention to when they tour your property: what they see, hear, feel, smell and taste. Let’s assume that no one is tasting your house (and if someone is, you probably won’t want to enter into a transaction with him or her anyway).

Sight

How your property looks is going to be the number one thing buyers focus on. Your agent will probably discuss staging with you, advise you to reduce the number of knick-knacks and personal photos you have out, tidy the closets, etc. You should also outfit all light fixtures with the highest wattage bulbs it can take and, of course, make sure you have no inoperable bulbs. These suggestions will help it look its best, both in pictures (the main tool for procuring showings) and in person.

Obviously, your house needs to look its best, which includes being clean. That includes power washing the exterior and any patios or decks, attending to landscaping, having your windows washed, having the rugs cleaned and having the inside professionally cleaned, top to bottom. There are liable to be some repairs/improvements your agent suggests, like tightening loose hinges and other hardware, fixing that leaky faucet, touching up paint, re-caulking n tubs, replacing any broken window panes, etc. You will need to discuss the return on investment on projects, especially larger ones like replacing appliances or carpeting. Your agent should be able to give you guidance.

Sound

Some people leave music or tv on. Don’t. Just don’t. Often it’s done to cover external noise, like the hum of a nearby highway. All it does is draw attention to the fact that it was left on to mask other noise. The result is that it ensures people will be worrying about noise they might not have otherwise even noticed. It also makes you seem sneaky and not open and honest. Finally, your choice of music might be distasteful to the buyer which could negatively affect the showing experience. So, I repeat: don’t.

Feel

While, in theory, people shouldn’t be touching your things, they might want to open kitchen drawers or closets; make sure they won’t get splinters or mystery sticky strawberry jam residue for their efforts. Also make sure railings and stairs and decks feel sturdy and safe.

Smell

Here’s the sensory experience sellers most often overlook. Let’s talk about a few specifics:

Pets–if you have pets, the house can smell like them. Make sure you’ve had any carpeting professionally cleaned just prior to beginning showings. Also, empty not only any cat litter, but take out food bowls because they can leave an odor. The same goes for dog beds or crates. Air out the house if possible as well.
Cooking smells–while it is understandable that you will need to prepare food if you are still living in the house, do your best to not make fish or other very strong smelling foods just before a showing. Use your kitchen fan, open the windows if the season allows for it.
Perfumed plug-ins, incense, sprays, candles–not to be redundant, but don’t. Same reasons as for the music; it only accentuates the fact that you are covering up an unpleasant odor. And even if that’s not the case, and you just like them, take my word that buyers will suspect bad smells are lurking in the background of any kind of scented air.
Recently used bathrooms–like using the kitchen, you need to use your bathroom. But when a prospective buyer walks into a steamy bathroom that is damp from a recent shower and smells like wet towel, it’s not likely to make a good impression. And other bathroom smells, well…I’ll leave it to you to sort that out as well as you can.

When you are getting your house “show-ready” think about all the ways we take in information: four out of the five senses will be heavily relied on by visitors. So take the time to try to, objectively, mirror what their experience would be in your home and make any necessary adjustments. Good luck selling!

Impervious surface allowances

September 22, 2022 by Jennifer LeBow Leave a Comment

Main Line Philadelphia relocation — If you are buying a home on Philadelphia’s Main Line, you need to understand what impervious surface is and how much is permitted.

What is impervious surface?

While I try to keep my blog posts interesting, there is no denying that some topics are drier than others. This one is a good example (though, when I think about it, “dry” is actually the matter at hand).

In the Philadelphia suburbs,we get a fair amount of rain. In order to ensure that adequate drainage is maintained (as well as keeping the area green and not too much of a concrete jungle), there are limits to the amount of impervious surface you can have on your property. Impervious surface is any kind of built structure, driveway, swimming pool, patio, deck–anything that doesn’t absorb water. Pretty much anything other than dirt.

How much is allowed?

Depending on the specific zoning, the maximum allowed is usually between 20 and 28%, though there are certain special circumstances. If you want to build a pool, add a garage or put on an addition, check with the township before bidding on a property. In addition to telling you the requirements/restrictions for the lot in question, they will almost always tell you that you need to have a survey done to pinpoint exactly how much impervious surface is currently in place.

Other zoning ordinances

Furthermore, there are other zoning requirements including setback minimums allowable types of fences. You may encoutner specific rules like not being permitted to add a garage. Other local regulations address the removal of trees (sometimes you must plant one if you take one down; in other places, you may not be permitted to take down more than a certain number). Storm water management is another possible complication. If you are doing any kind of regrading, there may be a maximum percent change permitted as well as restrictive requirements about managing the changed flow of water from those projects.

You also may not be permitted to run any kind of business (including an office client/patients come to) on a residentially-zoned parcel. Another “no-no” is the (popular in Colorado and other southwestern states) accessory dwelling unit (ADU). They are commonly known as granny flats. Here, unless the property is on multiple acres, you cannot have more than a single residence. There are plenty of rules and disallowed uses–be sure you check thoroughly before making assumptions about how you can use the property.