Main Line Real Estate | Jennifer LeBow, Realtor

Helping You Relocate to Philadelphia's Main Line

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Should I look for a starter or long-term home?

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Philadelphia Main Line Relocation
Should you buy a starter home with the expectation of moving in a few years, or is it wiser to look for a long-term home? It depends.

What should I look for?

Some home buyers look for a “starter” home–one that will be in the budget today, but that they expect to outgrow (or otherwise want to move up from) fairly soon. On average, people stay in those houses around six years before looking to move. Other house hunters are looking for a “forever”, or at least very long-term, home. If you wonder how you would make that decision, consider the pros and cons of each type of house.

Starter Home

Starter homes tend to be smaller, more modest and often less appealing as far as location, lot size, school district, amenities and sometimes condition than forever homes. By definition, most people who identify their search as one for a starter home don’t expect to stay in it long-term. Why might someone look for a home they don’t plan to stay in?

Advantages

  1. Starter homes are typically more affordable. Buyers who can’t yet afford what they might consider a forever home can still own a house if they purchase a starter home.
  2. With a lower mortgage, the buyers’ financial risk is reduced, in case unexpected expenses arise. This fact is especially important for younger people who sometimes don’t figure in all of the maintenance and other (often hidden) expenses of home ownership.
  3. Another financial advantage is the ability to build equity–with a manageable payment, people who purchase starter homes can  build equity (by paying the mortgage down and because real estate tends to increase in value over time) which converts to cash upon the sale of the house. This money can be used to help them purchase the next house, or for anything else they need it for.
  4. Starter homes, since they have a lower mortgage, allow for greater flexibility in the event the owners want to move or have a job change. They are also usually easily saleable as there are always first-time home buyers who are looking for starter homes.
  5. Starter homes can be a great teaching tool–they can help buyers determine what actually does and does not matter in a home and property. Sometimes, things people think are really vital end up not being all that important, like a garage, for example. Similarly, there may be things, like a finished basement, that might not have seemed important, but now becomes a must-have.

Disadvantages

  1. Starter homes are usually small. If your family grows, or you need work-from-home space or an area for hobbies or other specialized activities, you may feel cramped.
  2. Moving is expensive. Not only are closing costs (here in Pennsylvania) high, but you have moving trucks, time off of work and other costs.
  3. Moving is disruptive. No one likes moving and if you have kids in schools that will change with a move, you need to consider whether that change is major or minor.
  4. You may see lower appreciation in a starter home if it’s in a less desirable area or has certain features (like very limited closet space, for example) that are hard to overcome/change.
  5. If you’ve put money into updating the property, the return on your investment may be financially negative if you don’t stay in the house long.
  6. Creating community can be hard if you feel like you won’t be staying in the neighborhood. If you are hoping to establish roots and deep relationships with neighbors and people who use the same gym/day care, etc., recognize that those friendships may be hard to maintain if you don’t live nearby.
    .

Long-Term Home

Many people are looking for something they plan to stay in for many years. Often, though not always, these are people who have owned a home previously and have reached a life stage where they have a clearer picture of the future–income expectancy, family size, where they ultimately want to be, etc. Here are some of the pros and cons of purchasing what is expected to be a long-term home.

Advantages

  1. More space is often the most obvious difference between starter and long-term homes. Extra room is a luxury which can be used for storage, a growing family, hosting guests, and potentially even housing an aging parent. That extra interior space is often mirrored outside–more room for a dog or kids who want to play oustide.
  2. It’s usually less of a financial risk to make updates and improvements to a house you expect to stay in. You can worry less about resale value, since the expectation is that you will live in the house for a long time and benefit from the improvements. For the same reason, you can customize them to your specific needs and taste with less worry about how someone else will like them when you sell the house, since that probably will be many years away.
  3. Houses in more desirable neighborhoods (which is normally where people look for long-term homes) tend to appreciate more, so investing in these properties is usually a wiser financial move.
  4. Remaining in a neighborhood for a long time increases the likelihood of making lasting connections in the community, vs. moving after a few years.

Disadvantages

  1. Long-term homes are usually more expensive, requiring a larger down payment, higher closing costs and more substantial mortgage payments.
  2. With a larger mortgage, and more cash/savings being spent on the purchase, the financial risk is greater in the event of a change in financial status.
  3. Due to the financial constraints of a more expensive home, you will have less flexibility if your circumstances change as far as selling/moving.
  4. Larger homes often require more maintenance and upkeep, particularly in an area where most of the housing stock is older. So keeping the trees trimmed, the driveway sealed, replacing windows, updating HVAC systems, replacing roofs, remodeling bathrooms–all of these projects are expensive.
  5. Sometimes, the things that are important to buyers in a property/community change over time, and if you determine the neighborhood is not what you expected or no longer suits you, you have a lot more invested financially than if you’d purchased a more modest home. So it’s important, if looking for a “forever” home, that you feel confident it will be a good fit for many years, not just for now.

Obviously, there is no right or wrong answer as far as whether you should look for a starter vs. a longer-term home. It depends on your current and (future expected) financial situation, how clear you are on what kind of home and neighborhood you will want not just now, but 15+ years from now, how predictable or unpredictable your future is (how likely job changes are, whether it’s probable you might want to move to be closer to family members, etc.) and other lifestyle factors. Consider your priorities and how each option aligns with your goals.

Closets matter!

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Why closets matter when selling your house
Why shouldn’t you store extra clutter behind closed closet doors when selling your home?

Preparing to list

Houses that are being lived in often appear crowded or cluttered in photographs and, remember, those on line images are what prospective buyers are paying most attention to when deciding whether to tour your property. In almost all cases, listing agents suggest that home owners pare down, clean out, declutter, etc. While most people do report that being forced to evaluate what they really need/want to keep DOES help them in the long run, it’s still a colossal pain to do it. I empathize with sellers who are trying to neaten their homes in order to list them for sale, but I believe the effort will be reflected in a higher sales price.

Where to put all that stuff

Some sellers use a storage facility or a pod; you may also be able to box things up and put the boxes in a basement, garage or attic. Can’t you just stick some stuff in closets? I’ll ask you NOT to. Why? Four reasons:

  1. People look in closets.
  2. Closets that are full give the impression that there isn’t enough storage space, whether for clothing or other possessions.
  3. Messy closets may suggest that the sellers are generally not tidy/clean (even though there may be no correlation).
  4. Shoving extra items in closets may lead buyers to wonder what else a seller has “hidden” behind a closed door, hoping buyers won’t notice. It’s all about perception!

When to start cleaning out

My advice is to start this paring down process when you begin THINKING about listing your home. Don’t wait for your agent to tell you to do it. If you are going to move, it’s a good idea to go through things to determine if some of them may not be worth taking with you. If you declutter gradually, it’s easier and there’s an added bonus in that you can feel good about donating/recycling things.

 

 

Are enhanced real estate photos misrepresentations?

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When listing photos are enhanced
When listing agents put pictures on the MLS, sometimes they are significantly enhanced. Should digital alteration be allowed?

Digital photography editing

In the world of digital photography, the opportunities to change a photograph are countless. It started with getting rid of glare, adjusting contrast or fine tuning the color balance. It’s a slippery slope, though. For example, many pictures feature overly saturated colors, so lawns look rich and lush in the pictures, but are truly bleached out in person.

Not only can you remove unappealing parts of an image; you can add things, too! In most cases, listing agents add things when the home being photographed is empty or has less than the expected furnishings. Virtual staging is the name for adding beds, tables, sofas, chairs, dressers, plants, rugs, art, etc. to demonstrate what a vacant space could look like if set up in a certain way.

Significantly altered images

Personally, as a real estate agent, I can live with the digital enhancements I’ve just described. It gets much worse though: now you can have objects or blemishes removed by digital providers. So you know that pet stain on the wall-to wall beige carpet in the living room? Gone! Even more concerning, as far as not accurately representing the actual property, these digital magicians can show the spaces with significant changes/”renovations”. They can replace flooring so a room appears to have brand new hardwood. I saw a photograph of a large living room that had been altered to show a vaulted ceiling and added windows that didn’t actually exist, which portrayed a space that was a complete fabrication and bore no resemblance to the real room. While agents are required to indicate that the images have been digitally altered, the fine print is often very fine, indeed.

What crosses the line?

I find myself wondering where the line is between acceptable embellishment/correction and irresponsible misrepresentation. Of course, as listing agents, we all want to sell our listings, and the primary tool to encourage prospective buyers to tour a property is appealing photography–but shouldn’t the photographs be of the space in question and not a fantasy version of what it could look like if every surface (and often even the structure) were changed? Supporters argue that buyers often have difficulty envisioning how much better the house could look with some updating. So some agents feel like showing buyers these altered images (of what wallpaper removal/paint could look like, or how the living room would look with hardwood floors vs. stained carpet, or how the kitchen would look if it were remodeled) enables them to see a version of the property they might like. The idea is that if the buyer can see how nice the house could be, it might be worth it to purchase it and make the updates.

I’m not convinced, though. First the remodeled version being shown in the enhanced pictures is only one way the space might be changed. The reality is that each buyer who might consider a major update would conceive a different final product, with different colors, finishes, etc. So to arbitrarily choose one, seems a bit odd to me. What bothers me the most, though, is that it is fictitious. If you ask yourself what the role of the listing photography is, I’d say that it is to show (yes, in its best light) what the house and property look like. The pictures are intended to let buyers decide if the layout, size, and condition of the property makes it a possible fit.

Possible parameters

Maybe if agents were required to make it more obvious which pictures were “improved” it would be better. I also think that if they do choose to show “remodeled” rooms (with changes in finishes/structure), they should have to provide accurate cost estimates for thoese upgrades. That way, consumers who like the upgrades have an idea of what it would cost to make those changes. Curious what other people think….

What does a drop in interest rates REALLY mean?

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What does the interest rate drop really mean?
As much as we would all like a straightforward answer to how the housing market will respond to the interest rate drop, it’s not that simple.

What are the effects of an interest rate drop?

I am fielding this question a lot, lately, and I wish I could give a clear, direct response. Unfortunately, there is not necessarily a direct correlation between rate changes and market changes. How buyers and sellers react to news of a rate drop further affects the market.

Advantages to Buyers

  • You can borrow more money for the same monthly payment.
  • More choices, as more sellers will list as they perceive an increase in buyer pool for their properties (and more for them to choose from as well on the buy side, increasing their motivation to sell).

Disadvantages to Buyers

  • Other buyers can borrow more money for the same monthly payment, increasing competition, which drives prices up.
  • Sellers may increase their list prices positing that if someone can pay a higher price, but maintain the same monthly payment, some buyers may be willing to pay more for a house.

Advantages to Sellers

  • More buyers will enter the market, as they can borrow more money for the same monthly payment.
  • Buyers can borrow more (while maintaining the same monthly payment), driving purchase prices up.

Disadvantages to Sellers

  • More sellers trying to capitalize on the advantages can translate to more options for buyers, meaning less demand for all properties, including yours.
  • Increased competition on the buying side (IF it outweighs the decrease brought about by additional inventory) may make it harder for sellers who need to buy.

Murky unknowns

Recognize that the behavior of the real estate market hinges on a group of inter-related economic conditions. No single factor can be considered in a vacuum, without understanding how it affects the others. For example, increased inventory CAN lead to less competition for any single property (good for buyers, bad for sellers), though an uptick in buyers may increase competition for any and all properties, thus neutralizing any effects of greater inventory. Finally, this post doesn’t address and external influences like the election, unemployment numbers, world events or any of the countless other things that may affect housing prices. So there is no simple, direct correlation between the change in a single factor (like the interest rate) and how the market will react.

Ensure permits are closed

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Are their open building permits on a house you are bidding on?
When you are buying a house, ask if there were permits required, if they were pulled and if they have been closed.

Many renovations require permits.

If you are purchasing a home (especially one that is new construction or has just undergone a major renovation), ensure that the permits have been closed before you go to closing. Shockingly often, builders don’t schedule for the township to come out and close the permits because then they have to pay the final fee AND because it’s possible that the township will flag something and the builder will be required to remediate it. I am aware of one situation in which an addition had to be removed because what the owner built was so vastly different from the design that was originally submitted when the permit was pulled. Decks are notoriously added without permits and often found to be incorrectly supported–you definitely don’t want that!

How do permits benefit me?

Permits and their ensuing inspections exist for a reason. Often it’s for safety, so you should insist upon knowing that the township inspector has closed out the permits. I sold a house that had been remodeled by (what we came to later learn) a couple of unprofessional handymen. The permits weren’t closed and I told my buyers that we needed to be sure everything had been done correctly. There was a litany of things done wrong. Most important, the addition put them over the allowable impervious surface amount. There was no electrical outlet in the kitchen island (required by code), they had not hooked up the gas and electric (not exactly a minor item), the steps to the entry were too tall and a serious tripping hazard, and the list went on. In one new construction house I sold, the attic insulation had been installed inside-out!

No open permits? Delve deeper.

A logical question is, “What if there are no open permits”? Well, it means one of two things. It could mean (and this is the hope) that the project did not require permits. In this scenario, you’d still want to be sure it was done correctly, but might just rely on a home inspector or plumber/electrician/roofer, etc. to verify that it was. The more problematic scenario is that the contractor/seller tried to fly under the township radar and never applied for a permit for a job that DID require one. It’s this circumstance that often leads to the biggest issues, and you, the buyer, don’t want to be left holding the bag as far as penalty fees or, worse, having to fix something that was done incorrectly. If you know there’s been significant work done on a property you are considering buying, the easiest way to find out whether a permit was required and/or pulled is to call the township and ask.

Don’t assume everyone does the right thing.

There are plenty of people who honestly don’t realize they need permits, and, therefore, don’t file them. Then, there are others who know better, but want to save on the costs of the permits and, worse, may plan to cut some corners when doing the job. Either way, you need to look out for your own best interests and try to avoid inheriting a problem.

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

What Happens Between Accepted Agreement and Closing?

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What happens once you sign a contract on a house?
Once an Agreement of Sale/contract has been signed for a house, what is going on “behind the scenes”?

When is an offer executed?

In the state of Pennsylvania, once buyer and seller sign an Agreement of Sale, and all initials and dates are in the required places, that document is considered executed. Typically, especially if the buyer has a mortgage, the settlement occurs roughly six weeks later. Both buyers and sellers often wonder what happens during that time period, both behind the scenes and otherwise.

What are buyers doing post-execution?

Buyers need to:

  • Send a copy of the executed Agreement to their lender to officially begin the mortgage application process and provide any required documentation.
  • Send (check or wire) their deposit to the listing broker (some brokers won’t hold “escrow” and ask for it to be held by the buyer’s title company).
  • Arrange for any inspections being performed and then reviewing the report with their agent–if estimates are needed, those must be obtained and the buyer should furnish the seller with a Reply to Inspection within the time period mandated by the Agreement. Further inspection-related negotiations between buyer and seller will occur until buyer terminates, accepts property “as-is” or both parties sign documents stating what, if any repairs or credits have been agreed to.
  • Understand timing for settlement and moving; request time off from work, arrange babysitting/pet sitting, etc. if applicable.
  • Research homeowner’s insurance, which must be in place by closing.
  • Set up pool/lawn care services (and ask sellers whom they use)
  • Prepare for the actual move–secure a date for movers, start boxing things up, figure out specific logistics of moving day (and don’t forget to think about pets).
  • Contact utilities (water, electric, gas/propane, cable, trash) to transfer from seller to buyer.
  • Once closing is imminent, fill out mail-forwarding card at the post office.

What is the seller doing?

  • If buyer is having inspections performed, negotiate any issues that arise and sign documents stating what, if any repairs or credits have been agreed to.
  • Understand timing for settlement and moving; request time off from work, arrange babysitting/pet sitting, etc. if applicable.
  • Cancel homeowner’s insurance (as of settlement date).
  • Cancel pool/lawn care services (and offer info to buyers)
  • Prepare for the actual move–secure a date for movers, start boxing things up, figure out specific logistics of moving day, (and don’t forget to think about pets).
  • Contact utilities (water, electric, gas/propane, cable, trash) to transfer from seller to buyer.
  • Once closing is imminent, fill out mail-forwarding card at the post office.
  • Be sure to maintain property (including lawn) in same condition, especially if vacant

What is happening behind the scenes?

Once the property is under contract, the agents for both parties are acting as liasons between buyers and sellers (and negotiating any inspections, purchasing of furnishings, etc.) and making sure that the lender, title company and transaction administrators are all staying on track for closing. For example, the title company needs to order title and review all the paperwork to be sure the property can be transfered unencumbered by any liens. The title company will determine what reimbursements (from buyer to seller or seller to buyer) will be made and reflected on the settlement sheet. The lender will be reviewing financial documents, ordering the appraisal and all of the data will eventually be reviewed by the underwriter. Often, either the agents or their admin team is responsible for providing mortgage payoff statements and social security forms, and ordering tax and sewer certification. The agents arrange a time and place for settlement, make sure there is access to the property for the appraiser and that any documents required by any parties are provided.

Regulated industries don’t rush

Many people are frustrated that it can take a lender at least a month to close. Recognize that the mortgage industry is heavily regulated (for everyone’s protection) and that the lender has to verify everything–they are making a large investment and need to make sure they don’t miss anything important. Similarly, the title company has to look through all paperwork that may have been filed regarding ownership of the property, as well as check out your name to be sure you don’t have any outstanding legal issues that would preclude you from buying a home. It may seem like a lot of “fine print” or “legal mumbo jumbo”, but it’s there to protect everyone in a very high stakes transaction.

So many decisions when selling your house

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Decisions when selling your house
You’d be surprised at the number of decisions you need to make when getting your home ready to sell.

Selling your house? Evaluate its condition

This afternoon, I received a phone call from a client who will be listing her condo for sale.We spent 10 minutes talking about her options regarding a window shade that was broken. Thinking about it after the fact, I realized that the discussion was a vivid depiction of just how many tiny decisions require a seller’s consideration when listing a property for sale. While you can make any choice you like, the point is that you should understand which things merit your decision-making attention and evaluate your options.

A summary of our conversation will best illustrate my message:

Identify the problem

The seller told me that she had a (large, expensive) window shade that had a broken string. She also mentioned that it was faded and looked a little dirty, despite efforts to clean it. She asked if she should leave it as-is, have it fixed, replace it or remove it entirely. She said that she could just leave it (and disclose it was broken) because a buyer might want to replace it. In that event, she said, it wouldn’t make sense to spend money to fix it if the buyer were planning to get rid of it anyway.

Consider the options/scenarios

I couldn’t fault that reasoning, but, I said, many buyers are turned off by things that are disclosed as broken, because they not only know that they have to repair/replace something, but it can also negatively color their view of the general condition of the property. So, from that perspective, it might make sense to repair it. She had been quoted about $250 for a repair, IF it could even be fixed.

She expressed concern that it might still look a little dirty/shabby–was she better off spending a little more and replacing it altogether? Maybe. Again, though, was that money “thrown away” if a buyer were planning on getting all new window treatments?

Then I mentioned that she could just remove it which would have no cost to it. Then the buyers wouldn’t see anything broken or in less than perfect condition. She pointed out that the window in question is very large and that any savvy buyer (or buyer agent) who noticed it had no window covering would realize the cost of purchasing a new shade/blind, which might be a turn-off, especially if it might not match.

Lots of small decisions

As “down the rabbit hole/in the weeds” as you might characterize the above conversation, the reality is that the seller DOES need to make a decision about the shade. It will come as no surprise that this example represents only one of several issues that will come up and require her to make choices. Selling a property “as-is” is absolutely an option. However, you should be aware of which aspects of your property might deter a buyer and consider ways in which you could remove or mitigate those obstacles. Then, think about time, effort and money/return on investment and make informed choices.

Incentives Home Sellers Can Offer Buyers

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How home sellers can get buyers to meet their price
Home sellers who can’t compromise on sales price have other ways to incent buyers to make it to the settlement table

When your bottom line is truly a line

All home sellers want to net as much money as possible. Sometimes, though, there are situations in which a seller will have major consequences if she walks away with less than a specified amount. Maybe she can’t pay off the mortgage otherwise. Or she might not be able to cover the costs for the purchase of her next home if she accepts a lower offer. In these scenarios, it’s vital to negotiate with a focus on other factors that carry weight for the buyer. Ask yourself how you can sweeten the deal for the buyer, without lowering the price you’ll accept?

Flexibility of settlement date

For some buyers, having flexibility in when they move can be tremendously important. Many buyers are afraid to list their homes for sale before they have found a new one. For a buyer like that, a seller who is willing to entertain an offer with a home sale and settlement contingency would be offering an enormous benefit. (Clearly, any seller Consider this example: a buyer is moving across the country and starting a new job in six weeks, but they don’t settle on the sale of their current home for eight weeks. They need the money from their existing home to purchase a new one. If you are able to offer them a pre-settlement rental for two weeks (and you have a place to go during that time, prior to receiving the money from your own settlement), it could be hugely valuable to that buyer.

Addressing repairs

Allowing an inspection contingency

Many buyers feel pressured to submit offers without inspection contingencies in order to be competitive. If you feel confident that any inspection will come back with very little of significance and consider an offer with an inspection contingency (or, even better, if you have a pre-listing inspection done), a buyer might be more likely to honor a higher price. You can add some language to protect yourself from being nickled and dimed (for example, you could require that the buyer absorb any and all issues that are estimated at below $4,000 to remediate).

Remediating existing problems

Making repairs, if you can do so in a cost-effective way, can help a buyer justify a higher price. Maybe you replace the old carpets, or take care of painting the interior rooms that need it most. Remember that most buyers use a mortgage, so when they pay more for the house, their monthly payment goes up a little bit, but their cash out of pocket to make the purchase usually only goes up around 20% of that increase in the price. However if they have to come in and make repairs, the cost of those repairs is paid in cash, not financed. You might also consider offering a home warranty which can reduce the cost of any repairs they do need to make.

Accepting mortgage-contingent offers

Some sellers avoid mortgage-contingent offers. This situation reflects concern over whether a buyer will actually qualify/obtain the mortgage as well as whether the property will appraise. If you, as a seller, can offer the buyer some level of comfort by taking an offer contingent on a mortgage, again, you might demand a higher price. When it comes to the appraisal, again, you can try to mitigate a major loss by requiring the buyer to cover a certain amount of appraisal gap.

Other pain points

The art of negotiation revolves around identifying the other party’s pain points and reducing/removing them. For example, for a buyer moving from a smaller home, the cost of furnishing your house may be one reason he doesn’t want to meet your price. What if you could offer to leave certain items behind? That cost savings to the buyer might make all the difference. Or, as I mentioned previously, you might consider a home sale or settlement contingency (but be careful!). Be sure your agent asks the buyer’s agent what, other than a lower price, would provide value to the buyer. That way, when you counter an offer, you will be better positioned to close the deal without sacrificing your bottom line.

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