I am writing this piece to my REALTOR® friends. I have run into this issue over and over again, and perhaps, it is more problematic in a place like Philadelphia, where one street or two blocks can make a dramatic difference in real estate price and value. You have to know the blocks and streets to understand the pricing.
The issue, which I have run into, is clients/prospects running comps on Internet sites such as Zillow and Trulia. They tell me my judgment is wrong and give me evidence from these sites, which is not valid. The sites are furnishing properties, which are clearly not comps if you know the area. It can pull properties, which are less valuable or more valuable.
Now, I can run a CMA and have done so, but it is expressed that I am perhaps choosing the properties that suit my purpose. Yesterday, I told the client that the only thing I left out were 2 bedroom houses, and that I was showing all other closed properties.
So, I decided to waste some time and played around on the two aforementioned sites. I pulled the two following properties. The values supplied were generated by Trulia.
10XX Mollbore Terrace sold $225,000 10/13/2009
Similarly recently sold homes is $241,500
27xx South 12th Street listed $220,000
Similarly recently sold homes is $145,250
Now, each, of these houses, sit on a cute little square. In reality, the 12th Street property, in terms of land, is a little more valuable. It is closer to stronger neighborhoods. Also, the 12th Street property is larger. Now, I understand the sale price and the listing price being different. The 10XX Mollbore property has higher end finishes. How does Trulia, however, have such a large discrepancy in the "recently sold homes"? The "recently sold homes" should essentially be the same for each property, and they are not. I am looking at over a $90,000 discrepency. To me, it makes all of their statistics suspect.
Now, I have run into this issue more than a few times.
I have been wanting to write something on this subject since sometime last week. I know it is in no way related to my self named topics here in this blog, but feel I need a little bit of a rant!
PEOPLE WHAT ARE YOU THINKING AND DOING?!?!?!?!?
How much of a hurry are you in? How distracted are you? REALLY!!!!
This past week, I was almost hit straight on, as a pedestrian, in a relatively empty parking lot. I was walking through the lot, when a woman made a sharp turn in my direction and never looked straight ahead at me. I was really surprised. I saw her, but did not expect her to make that turn into the parking spots like that. She was looking at the stores. She looked at me at the last moment and jerked the wheel. She did not look the least bit phased. I WAS!!!!
As a driver, I saw endlessly stupid and dangerous moves by pedestrians and drivers. I saw more than usual. Is everyone really in that much of a hurry? Is it worth endangering your own life and lives of others just to get somewhere a few moments faster. It is not a good way to get on the six o'clock news.
Please, SLOW DOWN!!!! And use your turn signals.
I want to start by thanking one of my FACEBOOK friends for posting the names of two people identified as hackers on FACEBOOK and sending friend requests. They are a nuisance, and frankly, I don't get it!
Twice, I have had hackers pop up on FACEBOOK Chat. Both times they told me they were stranded in London, a sad story and needed money. The first one, I thought was my FACEBOOK friend, and I deleted him. Sorry Buddy! The second one had the same story, but they chose someone from my life. First, I have not seen her since 1984. Second, I know enough of about her that she would not be reaching out to me for help from London. Third, it was September, and she has children and would not likely be there at the start of school.
Of course, we have all had the hackers send messages and videos from our accounts. I hope by now, we realize it is the hackers at work. I once deleted another friend due to hackers. It was the first of many notifications that said I was reported for putting up objectionable comments and/or pictures. Sorry to that woman too!
There is another thing for my women FACEBOOK friends to look at. I have a lot of friends on FACEBOOK. Of course, I don't know all or them nor do I communicate with all of them. I was not able to get into my friend requests for several days. It was apparently one of those FACEBOOK problems we all know about and experience. I could address them on my phone, but not on my computer. I waited.
Some time ago, one of my FACEBOOK friends notified a group of us that this one particular man had only women friends, and they were all Realtors. I don't know what that fetish was about. I don't really care what it was about. I simply removed him.
Today, I went through the friend requests, which have built up. There were forty. Out of the forty, there were clearly two men that had no connection to me or a few women, and both had only women friends. I am not telling you not to accept these gentlemen as friends, however, I did not. I just question their motivation.
The other thing that troubles me is a lack of a picture, or some image other than a face. It is FACEBOOK! Generally speaking, I will not accept a request with no picture. If I know you in person, I will, but I will still go to your profile and make sure it is you.
Be careful friends, but don't be frightened! There are great people I meet through this vehicle all of the time!
I am sure like many other Realtors®, I have been contacted by new investors, who talk the talk "ARV". I don't know about other Realtors®, but it was not part of the lingo in my training. So, after some schooling on my own, it turns out the "ARV" equals the price the property will sell for at the end of rehabilitation.
So, I am continually asked what the "ARV" is. Well, the answer is very difficult to answer. How do I know what will be done with the property? What will the quality of workmanship will be? How long will it take to rehab the property? What will the market conditions will be at that future date? I can only go by two things: first, what are the current comps? And second, in what direction is the neighborhood going? And how much activity is there in that particular neighborhood?
I can talk about the value of the property in terms of the capitalization rate, because I can determine what rents actually are in a particular neighborhood. And I can, therefore, run real numbers to assign value to the property without consideration of comparables, etc..
I have been shown properties purchased along with the "comps" given to arrive at the "ARV" and have found that many times, the comps are not comps. I don't know if the people providing the comps just do not know the areas, or if they are pulling a fast one on an out of town investor. I would guess that both things are happening.
When you are in a city like mine, Philadelphia, values can change dramatically in a block or two. You have to know the neighborhoods to make a good and informed decision. You have to know the neighborhoods to run the comps. If you pick the wrong area by a block or two, value at the end of a rehab can have a very different meaning.
Now, the reason that this term has come to mind today was because an out of town investor wanting to buy a multifamily property in Philadelphia put me in touch with a hard money lender. The lender started speaking about the "ARV" and throwing numbers at me. What I realized was that this person actually knew the values and neighborhoods and was equipped to deal with the meaning of the term. However, much of the time, the "ARV" is presented as a fantasy. A property will be picked and a similar property, which has been rehabbed, in a much better neighborhood will be picked and the buyer/investor will say that the "ARV" is that of the house in the better neighborhood. Well, bad news boys and girls, it won't be. It won't be until the neighborhoods are comparable. Wanting it to be so won't make it so.
Philadelphia is particularly confusing on this basis for many people. You can have the exact same house in several neighborhoods and the price varies by hundreds of thousands of dollars. It all goes back to the basic rule of real estate: location, location, location. Therefore, you must know the neighborhood in order to determine what an "ARV" can even be, but you must also know what the end product will be.
Just recently, I have been faced with questions about roof warranties. Of course, previous buyers were concerned about the roof, but either they were assured that they had a new roof, which the home inspector validated, or they needed a re-coating, or they needed a new roof, which the home inspector told them.
Of course, I work in an area with primarily flat roofs and the cost of a new state-of- the-art rubber roof generally runs from $1200 to $2200 for most houses. We are not dealing with $10,000 to $25,000 roofs. When buying a property here, I would always have budgeted money for a new roof, before I would do any work inside. I am always flabbergasted when someone does a rehab on a property and does not put a new roof on the house. It is such a big selling point, and general protection for the property and any work that has been done inside.
It seems, however, that I must be missing some current of conversation on this topic of ROOF WARRANTIES. All of a sudden, there has been a lot of emphasis put on this topic that wasn't there before. Generally, I always thought that the roof warranties did two things. One, forced you to re-coat the roof every three years whether it needed it or not, and two, did not really cover anything. So, I decided to do a little research to get to the bottom of it. See the following links:
NRCA (National Roofing Contractors Association) ROOFING WARRANTIES
Is Your Roof Warranty Worth the Paper It’s Written On?
It is as I suspected. The best warranty does not necessarily get you the best roofing materials or roof nor is it a guarantee that you will be covered when you have an event that needs said warranty. It may be that the company offering you the warranty is out of business or the small print in the warranty voids any ability to claim coverage.
Therefore, it would seem that doing the research and getting the best product and the best contractor for your roof and roof work would be the best way to go.
The results to the poll are as follows:
YES: 3 (27%)
NO: 6 (54%)
MAYBE: 2 (18%)
The comments on my FACEBOOK wall are as follows:
Pam Ziegler Bell, I voted. I don't know if it's too soon to tell or if it's because I am not sure how it really helps them. Most of them need the money to get to settlement. I am going to try to promote it a little more to see what response I get. What do you think?"
James Baxter, "... I am a Realtor in San Diego. I have been seeing an insane increase in activity since the first of the year. Personally I do not see a relation with the tax credit. But I do see a relation with all time low interest rates and low prices. Homes under 300,000 are on the market for a short time and are getting multiple offers. To me it makes seance. It is at prices people can once again afford."
It would seem in this unscientific poll that the "NO's" have it. I am, however, one of the
"YES" votes. I feel fortunate that I am in one of those markets where things are relatively good, and picking up. And this increase in business is the reason that I have been away from this blog. I am getting lots of calls as a result of the Tax Credit. How many will develop into contracts and closings? I don't know yet; too soon to say. But it seems, at least, here in Philadelphia that things are picking up, properties are moving and there is a lot of interest in buying.
I think any Realtor, Buyer or Seller should make a point to address and take advantage of this Tax Credit, while it is available. If you aren't talking about it, you should be.
I will confess that I was hoping to get a bigger response, but I am grateful for the responses I did get.
I put the following call out to Realtors®:
Are properties in your market getting multiple offers and snatched up?
The response was 8 yes (66%) and 4 no (33%). In addition, I received responses on my profile page on FACEBOOK as follows:
