You know you are in a different time and place when:

1. House prices are lower this year than last year and last year’s prices were lower than the previous year’s prices.

2. There’s a continuing danger that the equity in many homeowners’ properties is at risk, especially the down payment for recent purchasers. In today’s real estate market, down payments evaporate if prices fall.

3. Despite recoveries over the past seven months in terms of prices, sales and reduced numbers of foreclosures, markets are still weak. The Wall Street Journal reported that new home sales dropped another 11 percent in January 2010 (after a December 2009 decline of 7.6 percent) to a seasonally adjusted rate of 309,000. This is the lowest level of new home sales since record-keeping began in 1963!

4. Interest rates are at historic lows yet consumers are not buying most things, including houses.

5. Tax shelter is increasingly being viewed as a bad thing in the housing market (since it results in higher asking prices today). Brokers may promote it as an advantage to homeownership but buyers, especially first-time buyers, would rather not have to pay the premium built into the settlement price.

6. Sub-prime loans, Alt-A mortgages and Option ARMs were heralded as favorable innovations by industry and consumers alike; soon afterward, they became dreadful memories.

7. Defaults and foreclosures have become everyday terms around America’s water coolers. Once a fraction of one percent, now these are everyday problems.

8. It’s good news when the number of borrowers in arrears increases but at a decreasing rate.

9. Mortgage modifications currently total over 116,000 but four million borrowers seek help.

10. The federal government has announced a new program to bail out borrowers in states with large price declines and high rates of unemployment — but even before it’s implemented, government officials are lowering expectations. As important as $1.5 billion will be to those five states (California, Arizona, Nevada, Florida, and Michigan), it’s not going to solve what is a catastrophically large problem.

11. “Strategic defaults” are beginning to be questioned as immoral financial decisions.

12. Even the market for jumbo loans is very tight. A recent report indicated that a borrower with $8 million in assets could not refinance his home mortgage.

13. “More affordable” is about the best thing you can say about the current housing market.

14. Rents are falling and are expected to continue to decline.

15. In terms of legal issues, the authority of eminent domain is a significant government threat rather than the major constitutional protection of private property in the U.S.

16. Commercial real estate defaults are likely to be the next shoe to drop. One report indicates as much as $1.4 trillion in commercial mortgages will require refinancing over the next four years. Expect $200-$300 billion of defaults threatening as many as 3,000 banks.

17. While the housing market is on a “path to recovery,” no one believes there will be significant appreciation, revived sales activities or shortages of inventories for a very long time.

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More consumers are looking for homes that are energy-efficient and more ‘green,’ said REALTOR® Steve Matthews of Prudential New Jersey Properties, Montclair, NJ, who’s seeing an increase in consumer demand as his region is limited in new construction.

Matthews, who has a GREEN designation, said, “In the northeast, we’re still playing catchup to the west coast in terms of looking at issues like greening our homes.” Many northeast metropolitan areas have little or no space for little new construction and consumers have focused on how to make existing homes more environmentally friendly.

Clients thinking about selling an older home can make a few changes:

• Add blown-in insulation and energy-efficient windows. Document the difference in your energy savings. “It doesn’t sound like a lot to start with but during the winter  months these can make significant savings,” Matthews said.
• Conduct a home-energy audit to see where the house is losing energy. An audit will show cold or hot spots.
• Add Energy Star appliances. These appliances add value to the home and make the home more energy efficient.
• Make changes to the landscaping. Use indigenous plants that require less maintenance and less water.
• Use low VOC paints when repainting the home.

“Keep documents on everything you do,” Matthews added. “Make them available to potential buyers. If someone’s especially interested in green aspects, this gives him extra confidence in what you’ve done.”

Kate Hart of Hart and Associates Staging and Design of suburban Philadelphia  agreed with Matthews. “You don’t have to gut your house to make your home more energy efficient. There are some simple things to make a difference,” she added. “Replacing windows and garage doors helps the appearance of the home and helps with energy savings. And some items are available for a tax credit as well.

“Make a list and show it when potential buyers come through,” she said. “Show the buyers the savings you’ve seen in your utilities. With the deregulation on utilities in Pennsylvania, buyers are going to be concerned as they’re looking at a new home.”

REALTORS® can get assistance from EasyStreet Insurance Services, a licensed insurance agency that was created especially for professionals who work in the real estate industry.

“We understand the challenges of the real estate professional and provide them the solutions for their insurance needs,” said Dan Reed, PAR’s director of insurance services.

EasyStreet Insurance Services is a service of the Pennsylvania Association of REALTORS® and its for-profit subsidiary BSRE (Business Services for Real Estate).

Duration: 2:26

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Remarkably, one of the eligible properties had once supported a small body shop in a small block structure that was still in serviceable condition. Research revealed that 20 years previous, the then-owner was an antique car enthusiast who made extra money working on other collectors’ cars on weekends. 

On their first visit to the property, the buyer and his agent met the listing agent.  The buyer asked whether he would be able to operate a small, part-time body shop on the property and was told by the listing agent, “I don’t see why not. The previous owner did that for years.”  

This assurance – and others provided by the seller – never made it into the agreement of sale. Regardless, the buyer relied on these statements and the further assurance of the buyer agent who claimed to have received a similar answer from the township zoning officer.

When the buyer and his agent sat down to write the agreement of sale, the agent suggested inserting a clause that would enable the buyer to investigate the use restrictions and allow him to terminate if the property would not lawfully support a body shop. The agent cautioned, however, that since the property was being sold short, it likely would complicate the process. Both decided that based on the information received from the zoning officer, the seller and the seller’s agent, no such clause was necessary. 

After settlement — and shortly after taking possession of the property — a neighbor told the buyer that his newly opened body shop violated restrictive covenants that ran with the property. Within days, a lawsuit was filed by the neighbors. One of the defenses raised by the buyer was that no one objected when a body shop was operated on the property in the past and as a result, the neighbors lost the ability to now enforce the restrictive covenant. This defense failed, the neighbors won and the body shop was closed. 

Now it was the buyer’s turn to aim his gun sights and they fell squarely on his friendly buyer agent. The buyer agent was shocked. After all, she had word from the township zoning officer that the property could be used as a body shop. Further, she had the assurance of the listing agent as well as the seller. How could the fault be hers?

The buyer agent should know that a buyer is not entitled to rely on the representations of the seller and listing agent that do not appear as provisions in the agreement of sale. Every licensee is familiar with the Representations clause in the agreement that states: “All representations, claims, advertising, promotional activities, brochures or plans of any kind made by Seller, Brokers, their licensees . . . are not part of this Agreement unless expressly incorporated or stated in this Agreement. This Agreement contains the whole agreement between Seller and Buyer and there are no other terms, obligations, …”  Generally, if a representation is made before the agreement of sale is executed, that representation is lost unless it finds its way into the terms of the agreement. 

So why can’t the buyer agent take advantage of that same clause? She can when defending a claim of misrepresentation. The problem is, the buyer agent is going to be sued on the basis of her negligence. This clause does not help in that situation. 

Conducting due diligence with respect to use restrictions is a difficult task. A lawyer would not dream of advising a client on the basis of what a zoning officer says in a telephone call. The zoning officer only deals with the zoning laws of a municipality and may not know of other private restrictions or laws. Private restrictions, more commonly referred to as restrictive covenants, may have the very same effect as law, even though covenants are created between landowners and do not necessarily involve the government.

The negligence of our buyer agent may be that she allowed the buyer to sign an agreement of sale providing that the buyer would take marketable title subject to restrictions without ever having determined whether there were restrictions preventing the buyer from operating a body shop. The buyer agent could have done several things. She could have inserted a clause that the seller warranted and guaranteed that the property could be used as a body shop, however, I cannot imagine the seller would take that risk. The buyer agent could have elected an inspection option permitting the buyer to assess use restrictions and terminate the agreement if restrictions prevented use as a body shop. She could have advised the buyer to have an attorney search use limitations before the buyer made his offer.

All too often licensees have a limited understanding of the type of restrictions that can affect one’s use of the property. Commercial licensees are more experienced and quite often refer, as part of the due diligence investigation, to an attorney with experience investigating laws as well as private restrictions of record. Failing to conduct a proper due diligence can have expensive consequences not only for the buyer but also his agent.

Chandra Hall

Hall will present “The Good, the Bad, the Taxable and the Investor” during a three-and-a-half hour session each morning. The session will explain how REALTORS® who understand the numbers can provide buyers and sellers excellent service and opportunities in the profitable investment market. This course has been approved for 3.5 hours of PA real estate continuing education credit.

In the afternoons, her topic is “Systems Keep You Sane.” The program shows how taking advantage of the best systems can make a REALTOR’S® work day easier.

REALTORS® will also have an opportunity to visit with area vendors who will be exhibiting at each of the district conferences.

The conference is $59 for attendees. Register online or via fax at pref.biz.

Sponsored by PA REALTORS® Education Foundation (PREF), the conferences are scheduled for:

District 1: Tuesday, April 27
Mohegan Sun at Pocono Downs, Wilkes-Barre

District 5: Wednesday, April 28
Hoag’s Celebration Hall, State College

Districts 6 and 8: Thursday, April 29
Holiday Inn Washington-Meadow Lands, Washington

District 7: Friday, April 30
The Riverside Inn, Cambridge Springs

Photo credit: Kate Hart

It’s easy to make an older home look updated with an accent of a new, trendy color, according to Kate Hart, president of Hart and Associates Staging and Design in suburban Philadelphia.

“There’s a misconception that everything has to be white or beige,” Hart said. “If you want a home to feel new, exciting and trendy, especially a resale home, a pop of color instantly updates the space.”

Hart said the hot color of 2010 is turquoise. “Turquoise is a fun, tropical color,” Hart said. “It’s especially important in today’s market to have something that’s a pick-me-up. You want people to come into the space and be happy.”

Colors that work well with turquoise include lime green and coral.

“Using accent colors doesn’t mean that you paint the room turquoise,” she added. “Keep the walls, carpeting and furniture neutral. It’s easy to add a pop of color by adding pillows, lamps or a vase to bring some color to the room. It’s also a good idea to use this same color throughout the house to create flow from one room to another.”

Hart said she uses the 60-30-10 rule. “Sixty percent of the room should be one color like your walls, 30 percent is another color like the flooring and 10 percent is the ‘pop’,” she added.

Neutral colors are trending toward gray tones and whites are showing a gray undertone. Hart noted that homes with natural wood floors often continue using neutral colors with brown undertones.

Metal tones are going more toward brushed silver and nickel and away from bronze or brass tones.

“I try to remind homeowners that they really want to sell their home to one target buyer,” Hart said. “Who’s buying this house? What are they going to want to do with the rooms? Once you know who the target buyer is, stage for that buyer,” she added.

They found that 213 of the 299 cities selected for the study were over-valued. Number one on the over-valued list was Naples, FL, with a whopping 84 percent of its housing stock selling for more than what was thought to be the “correct” price or fair value. The 2010 follow-up study found that housing in Naples now sells at a 29-percent discount to fair value. Median prices fell from more than $390,000 to about $165,500.

By 2010, only 87 of 330 cities studied were over-valued. The most under-valued market in the 2010 study was Las Vegas at 41 percent below fair value, followed by Vero Beach, FL, down almost 40 percent; Merced, CA, down nearly 38 percent; and Cape Coral, FL, down almost 37 percent.

How do Pennsylvania cities compare? Here are the numbers:

All Pennsylvania cities show evidence of relative price declines from their fair value estimates from 2006 to 2010, except Harrisburg, which extended its over-valuation, and Scranton, which is about the same.

The primary implication of these numbers is that the median prices in the overvalued cities may decline further while the undervalued set (except Pittsburgh) overshot their fair values during the recent years’ declines. The Steel City was slightly undervalued in 2006 and is even more so now.

It is important to note that it is quite possible for over- or under-valuations to persist for some time. Economics and other forces exert pressure on prices to “revert to the mean” but this process may take several months — or even years.

The conclusion of the report observed that for a few years, the average buyer “should forget about home purchases as investments.” But homebuyers, especially in under-valued markets, can expect long-term appreciation as prices approach fair values.

As a result, PAR and its for-profit subsidiary, Business Services for Real Estate (BSRE), formed EasyStreet Insurance Services. EasyStreet is a licensed insurance brokerage that works with leading providers such as Highmark Blue Cross Blue Shield, Aetna, Geisinger Health Plan, Capital BlueCross and United HealthCare. 

As independent contractors, REALTORS® often have a difficult time finding a trusted source for their insurance needs. 

EasyStreet’s licensed insurance professionals are experienced, knowledgeable and qualified to guide you through many insurance matters. The staff at EasyStreet is interested and committed to understanding your personal or business needs.

“We’d like the chance to talk to you about your insurance needs,” said Dan Reed, PAR’s director of insurance services. “At EasyStreet, we’re not just interested in placing you with an insurance product.  We want to guide you in the right direction.”

Become a fan of EasyStreet Insurances Services on Facebook

A housing trust fund provides a dedicated source of revenue for the housing market, according to Liz Hersh, executive director of the Housing Alliance of PA. “Investing in housing helps the local economy as well as those individuals who can get a home that they can afford and sustain,” Hersh added. Pennsylvania stands to receive nearly $40 million in funding from the federal stimulus program. The PA Association of REALTORS® supports the Housing Alliance’s efforts to create a statewide housing trust fund. Currently, HB 60 is up for consideration in the state legislature. If enacted, Pennsylvania will join 38 other states that have created housing trust funds.

Duration: 2:50

REALTORS® and brokers are being encouraged to join the campaign to increase consumer awareness of the benefits of buying a home, to give sellers’ properties increased exposure and to spread the word about the expanded first-time homebuyers tax credit which ends April 30.

How is this weekend different than any other weekend in April? This is an opportunity for consumers to shop for a new home while:

• Affordability is good

• Mortgage interest rates are low (but expected to rise)

• Good supply of homes on the market

• The Expanded First-time Homebuyer’s Federal Tax Credit is still available. The contract has to be in place by April 30, 2010.

Additional information is available at parealtor.org.