Michael Pennisi's Blog

Missed the Tax Credit? Think again… To qualify for the Federal Tax Credit buyers had to be under contract by April 30, 2010. Many buyers who were not able to get under contract in time to qualify may feel like they missed out. Based on what interest rates have done since April, however, they should think again:

April, 2010 – Average Interest Rate : 5.20%

July, 2010 – Average Interest Rate : 4.75%

If the Average Loan Amount is $400,000.00 then the Total Interest Paid (30-year) is:

April, 2010 – $390,719.67

July, 2010 – $351,172.16

Total Savings $39,547.51 These lower rates also provide buyers with approximately 5% more buying power in this market of lower home prices. It makes $8,000 seem less important in the long run!
 

œMy Home Won™t Sell Because the Economy is Bad Right Now!!!

Anyone in the real estate market who has recently spoken with a seller has probably heard those words. Some Realtors may even agree with their seller because more then likely the agent doesn™t know any better. I am not one of those Realtors. In fact, when I hear, œthe sky is falling, I cannot help but laugh.

Now before you write me off as an unsympathetic Realtor who will always praise the market, take a step back and listen to reality.

I work in the Summit, NJ market. Summit, like the rest of the country, has been going through a period of depreciation. Why this is so shocking to people still puzzles me because real estate is cyclical. It goes up, it comes down, and one day it will rise again. To expect anything different is insanity because homes are driven by the same theory of supply and demand that you would listen to in Economics 101.

So if Summit, NJ is going through the same downward trend as the rest of the country, why won™t I agree that homes will not sell because of the economy? The economy is bad, is it not? Good questions I suppose, yet the answers are not as complex as you may have hoped. Look at the facts and not what the media, your co-workers, and the used car salesman are saying.

This means you need to study your local real estate market. When I pull up the Summit market and search for every sold home in 2008, I find an amazing statistic that you would not see if the economy was so bad that homes were not selling.

This amazing statistic is simply an original list (OLP) to sale price (SP) ratio over 100 percent.

Doesn™t sound too amazing? Let us take a look at how important this statistic actually is.    

Anyone who knows anything about real estate could tell you that a buyer would not pay over the asking price unless another buyer was competing for the same home. Since we also know that a buyer would never make an offer unless they perceived value, we can actually draw interesting conclusions.

1. Listings that sell over the asking price prove that demand is still a constant in today™s market.
2. To take advantage of this demand a home must prove valuable.
3. Value is defined by price and condition. Mostly price!!!

Let™s call this formula of OLP/SP the litmus test for whether a market is œgood. In fact, before you condemn your local market I want you to do you and your sellers a favor.

Pull up every sold home in any given town for 2008. List each of these properties in  descending order by original list to sale price ratio. By the way, I use original list to sale price ratio because this clearly proves the fact that pricing it right from the start will end most lucratively. Using the list price is a flawed system.

Ok, now that you have this list of sold homes, you should separate all of those homes which sold above 100%, those homes which sold between 90-99% and every home which sold 89% and lower. This will give you three groups. Find the average for every statistic in each of these groups and compare the stats. If this doesn™t restore your faith in real estate and the market, I don™t know what will.

Below is a copy of what this chart would look like for the town of Summit. In today™s market, 31% of Summit homes sold over their original asking price. Yes, that is a fact!

Summit Solds 2008 – Oct 21,2008.pdf

I™ve been around long enough to know that skepticism will occur. Indeed, I™ve heard many sellers try to claim that the reason these homes are selling quickly and for over the asking price is because they were priced at ridiculous values to begin with. œOf course they will sell fast and over the asking price, anyone can sell for a fire sale.

Well wait just a second Mr. Skeptical Seller; take a look at the average final sale™s price for the each of the three groups. Do you think that it might be more then coincidence that the group of sellers who priced their homes correctly averaged over $300,000 more then every other group?

I don™t know about what the media is saying or what your stock broker claims, but as a Realtor I let the market tell me what the answer is. The market doesn™t have an opinion. The market doesn™t think. The market just acts and with each change of the market we can interpret what needs to be done to successfully yield a seller top dollar for their home. This is what we, as Realtors, are being paid to do.

Imagine if a doctor walked into room where the patient was claiming to have a broken arm and said, œYou know what, broken arms are on the rise this year, we can skip the x-ray because I believe you that your arm is broken. Let™s cast that arm and send you away to wait until it heals. You would probably think he is the most incompetent doctor of all time.

The reality of the situation is that many Realtors make much more money then doctors and yet it is common place for Realtors to cave in to sellers on price because they don™t want to argue in fear of losing the listing. The market is our x-ray and misdiagnosing a seller™s home can be as costly as misdiagnosing a patient™s arm.

Read the market because you might be surprised how positive the trends could be. It will also make it difficult for a seller to blame the market when 1/3 of the market sold over the asking price. What this approach really does is shift blame from the market to the true problem, the price is too high.

Sincerely,

Buying a Home?    Good, Now You Can Afford More

When the US Treasury announced late Friday that it was taking over Fannie Mae & Freddie Mac, most of us figured that it would have a positive effect on mortgage rates. It sure has…and quickly!

Below is an example of Wells Fargo rate changes from last Friday to today.

Last Friday afternoon, Wells Fargo was offering qualified buyers with good credit the following:

30 year fixed rate (up to $417,000) = 6.250-6.375% , 0 points, 60 day lock

30 year fixed rate ($417,001- $729,750) = 6.375-6.500%, 0 points, 60 day lock.

Here’s today’s rates, for that same qualified buyer:

30 year fixed rate (up to $417,000) = 6.00-6.125%, 0 points, 60 day lock

30 year fixed rate ($417,001 – $729,750) = 6.125-6.250%, 0 points, 60 day lock

1/4 percent improvement, across-the-board!

Borrowers (who have not yet closed on their new homes), should request these lower rates because many companies allow them to make this change. One example, Wells Fargo, has a “return to float” policy, which effectively allows borrowers to “unlock” their loans, in order to get a lower interest rate. Please note that the rate reduction affects Fannie/Freddie loans; FHA & VA loans were already funded (indirectly) by the US government; those rate are essentially unchanged from last Friday.

Those buyers who have already registered loans with mortgage companies should see if their company is able to offer them better rates. Those buyers “sitting on the fence”, may now be persuaded to write a contract, now that rates have headed lower.

How much lower? No one knows. A federal government take-over of private agencies (Fannie/Freddie) is new territory; rates could go down further, or stabilize @ the 6% mark. All I know is, it’s good news for borrowers, and good news for all my buyers.

Sincerely,

Michael Pennisi

908.656.3858

Interested in Learning More about Real Estate – Click Below

Real Estate and Politics – How the Game is Played

Realtors like politicians are faced with limitless possibility. I realize limitless may seem extreme, yet what other career fields can offer a one time soccer mom the ability to grow a multi-million dollar business in a few years time. No disrespect to soccer moms because that is an accomplishment for any individual; educated, experienced, or not.

The fact of the matter is simple; real estate offers competent people the ability to live up to their potential. Now although you may not feel all politicians are competent, politics also offers everyday people the ability to make a difference.

The interesting aspect about both politics and real estate is that there is not one way to the top. Some politicians are corrupt and lie and cheat to get to the top. This is similar to some Realtors who put their own interests above that of the client. Then there are those politicians who remain morally incorruptible and still achieve great things just like there are those Realtors who do what is right for the client first and attain a good reputation. I guess the biggest question then becomes how do you play the game?

Before I continue to delve into my correlation between politics and real estate, I think it is important to understand what triggered this thinking. Last night I watched the Republican National Convention and listened as Vice President hopeful, Sarah Palin, gave her speech. Regardless of political affiliation, I feel certain that anyone watching could agree on the fact that she gave a powerful speech and nailed it. What I found interesting is how she was a self proclaimed “hockey mom” and gracefully rose into a position of power. Now she stands before our country as the next potential Vice President.

To me this is symbolic of our great nation and the opportunity we are given daily. What I also liked about her speech was her ability to “play” the game. Whether right or wrong, politicians are masters at telling people what they want to hear in order to gain support. Now don’t get me wrong, I am not suggesting Sarah Palin is just talking without plans to back it up. In fact, I don’t want to even express my feelings towards her politics because it is irrelevant to my writing this article. The important part is that I watched a woman who stands for what she feels is right become a force in today’s politics.

Now that I have explained the political setting, I need to talk about my real estate mind state. In the past eighteen months, I have lost nine listings due to my price being lower then the sellers wanted to hear. I cannot tell you how frustrating this becomes because in eight of the nine instances the sellers eventually sold lower then the price I gave them after sitting on the market for months and months. The only remaining home, of the nine, was actually a listing I lost last week and will undoubtedly sit due to overpricing.

With all of this being said I have come to the conclusion that I am a good Realtor but a really bad politician. Haha.

I feel as though I am terrible at playing the game because playing the game directly contradicts what I believe to be the right thing to do. What I mean is that I could easily have gone into these nine listings with an inflated number and walked out with a signed listing. Once that listing is signed I could then string my sellers along until they get frustrated and eventually drop the price to the point that the property sells. Then I can walk to the bank and cash my check. Instead I watch other Realtors do exactly that and walk away with a pot of gold. What am I left with then? Simple, I’m left with frustration and aggravation.

The sad part is I know how to price a home to sell. I know how to study a market better then most agents out there. I also have studied my market long enough to know that homes priced slightly under the market will sell quickly and sell higher. Those homes priced high will sit and the sellers not only get frustrated but will inevitably sell for a much lower price. I not only know this, but I can prove it with countless real life examples.

And now for the kicker; not only do I know all this, but I’m honest enough to be real with sellers about price. I risk thousands of dollars every listing presentation I go on because I know that correct pricing is best for the client.

The worst part about all of this is that sellers don’t care. Sellers hear what they want to hear and get greedy. Even if it means losing thousands of dollars in the long run they will take that risk and sign with a less competent agent willing to list their home for more.

What’s truly scary is that these same principles apply to politics. There are politicians out there that throw around grand ideas without the substance to back them up. Whether democrat or republican there are many people that get caught up in the games these politicians play with words rather then the integrity of the individual or even the plan they hope to act out.

It’s crazy but our society has created a system where it pays to tell people what they want to hear rather then what they need to hear. The unfortunate reality is that by setting the standards higher in theory, people will accept it as reality, even without the facts to substantiate the theory.

The problem I have is that I disagree with the game because I care about the clients I serve. I want to give them the benefit of the doubt and ensure that they obtain top dollar for their home. It disappoints me to hear that I was the best candidate for the job, yet was not selected because someone else lied to win.

If nothing else, I think this coming Presidential election and my recent real estate disappointments have taught me a valuable lesson. I always wondered why politicians would say one thing and act out another, yet real estate has taught me that this is a very successful strategy in gaining a vote of approval. This is a very difficult lesson to learn and would probably change the outlook of most individuals. Fortunately, I refuse to allow this world of politics and real estate effect my integrity as a person. If anything this experience has taught me to grow thicker skin and not allow those who choose not to be saved from affecting how I conduct my business. Thankfully, the disappointments in those nine instances have been drowned out by my many positive real estate achievements. It all comes out in the wash and even those people who did not select me know that my advice was accurate to begin with.

I keep in mind that real estate, like politics, is all about public sentiment. If you continue to hurt your clients they will not continue to support you and eventually it will take its toll on your career. The reverse is also true because if you continue to do what is right, people will begin to recognize your expertise and value your input.

So how do you play the game? How do you interpret what you are being told? Do you listen to the facts or is it politics as usual?

Sincerely,

Michael Pennisi

908.656.3858

Interested in Learning More about Real Estate – Click Below

“in the state of New Jersey, are offers on a home submitted in writing or can they be verbal offers? i have been working with a realtor in nj and i have made several offers on a home however i was told that they werent accepted/ i’m concerned if these offers are really being made by the realtor..i did not sign any agreement with him/ i met him at an open house and he offered to show me a few homes..  ”

Dear Buyer,

I appreciate your contacting me. In New Jersey, verbal offers are not binding. When a Realtor representing a buyer presents a verbal offer, the Realtor representing the seller is not obligated to present the offer to the seller. A written contract, however, requires the listing agent to present the offer to the seller. Although this is required by law, I always make a conscious effort to present all sellers with the contract in person. This is too ensure that the seller is actually receiving my client’s offer.

I realize that certain listing agents would prefer that the buyer’s agent does not speak directly to their sellers. The law, however, allows the buyer’s agent to present their client’s offer directly to the seller, unless the seller refuses this option in writing. I always request the ability to present these offers and if the agent declines this ability, I request to see the sellers written refusal. 9 times out of 10 the seller is happy to sit down with the buyer’s agent and it was the Realtor which had the problem.

Since my fiduciary responsibility is to the buyer, I wholeheartedly believe that presenting this offer is crucial to my client’s interests. It would be irresponsible of me not to  present all offers to the seller directly and I never present verbal offers.

I also want to clarify one important point. I am not suggesting that your Realtor is corrupt in anyway. In fact, he or she may be ethical. Why would a buyer’s agent intentionally harm his/her clients chances at buying a home? Since Realtors only get paid once a contract is closed, this would be a foolish decision. I actually believe that your Realtor is trying to do his/her job correctly, but does not realize that his/her actions or lack there of, is detrimental to your interests.

As unfortunate as it is, not every Realtor is morally just. By assuming that the listing agent is an ethical individual, you are jeopardizing your client’s interests. Remember that many Realtors, or better said many listing agents, would prefer to sell their own listings. This causes a direct conflict of interest that a buyer’s agent must work to avoid. If properly handled, the process of presenting an offer should be a smooth one.

I hope this answer has be beneficial to your understanding of the home buying process. I wish you luck in the future and want to remind you to always present written offers. These offers should also include a pre-approval letter if you are getting a mortgage and/or a bank statement if you are paying cash. If you ever have a question in the future feel free to contact me. I am always available to help you with any of your home buying needs. Again, I wish you the best and I look forward to speaking with you in the future. Have a great day.

Sincerely,

What is it about Summit, NJ that makes it so desirable?

If you are asking this question, then you probably do not live in Summit.

Summit, New Jersey  is far from a cookie cutter town. It consists of remarkable architecture, beautiful landscapes, and old world charm  with historical relevance. Although each of these aspects is true and sounds attractive, reality suggests that today’s buyers need more from a town.

What do today’s home buyers need?

In my experience, buyers are looking for a number of things from the place they decide to choose.

• Buyers with children are interested in the school system.
• Buyers who work in the city are interested in transportation.  
• Buyers who are savvy investors look for homes that will appreciate quickly.
• Then there are those buyers who need a yard or cannot live in a  place without a thriving downtown.

Thankfully, Summit, NJ appeals to each of these buyers. It is no wonder Summit homes are still selling quickly in this “terrible” real estate market. Next time the media claims the sky is falling, think of Summit as the umbrella.

To better serve those of you interested in learning more about Summit NJ, I have continued to update my website’s Summit page.

Most recently, I have added a complete community report and the 2007 year-end broker statistics for homes sold in Summit, NJ. Also if you have not yet read my “Summit, NJ 2006-2007 Real Estate Analysis” I suggest you do so. The information is completely unique from anything else you will see online.

In the near future, you can expect to find virtual tours of the Summit area. I know that many of my clients and readers are from out of the area and may be interested in seeing what Summit has to offer. Since a picture says a thousand words, I plan on providing you with a visual journey into Summit, NJ real estate. I will make sure to update you as soon as this addition is complete.

Until then, enjoy the recent improvements. If you have any questions or comments, feel free to contact me. I look forward to speaking with you. Have a great day.

Again click here for the link to Summit, NJ

Sincerely,

Michael Pennisi

908.656.3858

Real Estate Newsletter February 2008 Recap

I would like to thank all of the people that signed up for my real estate newsletter. The first issue was an overwhelming success. Based on the feedback I have been receiving, I am confident it has been enjoyed by many. I thank you all.

For those of you who have yet to sign up for my newsletter, I  decided to provide you with  the first issue below. If you enjoy this issue feel free to sign up using one of the many links I provided throughout the issue and my site. I appreciate your continued support and I hope you enjoy.

To access last month’s newsletter please click on the following link:

February 2008 – Real Estate Newsletter

In March I discussed three  topics that you may find interesting. They are the following:

1. How to Lower Your Property Taxes

2. Condo Vs. Houses

3. How Oil Impacts the Real Estate Market

If you would like to sign up to receive this issue please use the following link:

March 2008 – Real Estate Newsletter

The Truth about Finding a New Jersey Real Estate Agent

Many prospective home buyers are unaware of the truths about selecting a New Jersey Real Estate Agent. Since using a real estate agent to help you buy a home is free, in New Jersey, it is especially important to find a Realtor with your best interests in mind. To help clarify the truth, I have addressed a number of common myths below.

Home Buying Myth #1:

“I will get the best deal on the house if I call the agent listed on the For Sale sign or listing agent.”

Not necessarily true. In fact, the listing agent should be neither a positive or negative impact on the final sales price. Remember the agent represents the seller and is contractually bound to get the best deal for the seller. This doesn’t mean the agent can’t work with you in a fair and professional manner. This is called dual agency.   You should still not disclose confidential details to the agent until you are assured that the agent will keep your information confidential. If you fail to do this and you tell a seller’s agent the top dollar you will pay for a house, the agent must pass that on to the seller.  

Smartest Home Buying Solution:

The best way to avoid any conflicts of interest between the seller and you, the buyer, is to work with a real estate agent and company that does not allow direct dual agency. For instance, at Burdorff ERA, I would not be able to represent both the seller and the buyer in the same transaction. To avoid any issues of disclosure my manager would represent the seller and I would work solely with the buyer. This guarantees a fair transaction for both my seller and my buyer.
 

Home Buying Myth #2:

“I can find more homes for sale by calling lots of agents.”

Absolutely not true. All real estate agencies and companies belong to Multiple Listing Services. The Multiple Listing Service provides all companies with access to the same properties. Figure out which area the real estate agent covers. Some agents might work a multi-county area. Other agents restrict themselves to certain neighborhoods or subdivisions.

Smart Home Buying Solution
Remember researching and showing properties is time-consuming, so you’ll get better service if you find an agent you like (within a given area) and stick with that agent. If you decide that you would like to see homes within an area outside of your agent’s market be honest. Many times your agent will be able to provide you with an excellent agent in the other market.

Home Buying Myth # 3

“The real estate agent told me I had to sign a Buyer Agency agreement before he / she would work with me. I did, and now I’m unhappy with the relationship.”

In New Jersey, signing a buyer agency agreement is not a requirement. Many times buyers might feel they are a good match with an agent on the very first day they meet, but over time that agent becomes lazy or unreachable. This leaves buyers in a bad position. To avoid this problem try one of these alternatives:

1. Ask the agent to work under a verbal buyer agency agreement for a period of time. This allows you to test the agent’s ability and work ethic.
2. Request the agent agrees to a short term buyer agency agreement,  maybe a day or a week long.
3. Find out if the agent can offer a non-exclusive buyer agency agreement. The agent would be your buyer’s agent, but you would not be tied exclusively to him/her.
4. Find another agent

Smartest Home Buying Solution
If the agent will only work with you if you immediately sign a lengthy buyer agency agreement, you might be better off seeking another agent. Many real estate agents in New Jersey do not require buyer agency agreements. The buying process is based on a mutual loyalty between the real estate agent and the buyer. If the real estate agent feels the obligation to sign a buyer agency agreement it may raise questions as to why.

Home Buying Myth # 4:

“The agent with the most listings in town is the best agent to call.”

Think about that logic. If an agent has that many listings to deal with, how much time do they have for buyers, especially buyers who might want to look at properties other than theirs? Most top agents have teams of people, so time might not be an issue, but you may instead be dealing with an assistant. This is an important question to ask about when you interview an agent.

Smart Home Buying Solution

A full-time professional real estate agent who is new to the business can be every bit as effective as a seasoned pro. Someone working with fewer clients will have your needs in mind constantly. Hire the person, not a lineup of listings.

Important Advice on Working With Real Estate Agents in New Jersey  

Home buyers, particularly first-time buyers and those coming from other states or other countries, should be aware of some important market practices as they embark on their search for a home with the help of a licensed real estate professional.

Real Estate agents (Sales Associates) are not salaried people; their financial reward comes from the successful completion of transactions only.   No Closing-No Income.   Yet they are investing their time and efforts in helping buyers reach their goal.   Therefore, loyalty to a principal Sales Associate is appreciated and, more importantly, will pay off for the Buyer.   Once you feel comfortable with a Sales Associate, a consistent working relationship develops which allows the Associate to optimize his/her thorough knowledge of your particular requirements to deliver the best possible professional service.  

To maintain that consistent relationship, here are a few helpful pointers:

·               If you have already established a relationship with another Real Estate Associate within this or another brokerage firm, kindly let me know and I will refer you back to that person.   If this is not the case, I will be happy to be your œBuyer™s Agent.

·               If you see a œFor Sale sign, an advertised property in any media, including the Internet, and if you would like to see it, call me so I can show it to you and give you all the information you need.   In
New Jersey, almost all properties for sale are œmultiple listed and these can be shown/sold to you by any licensed brokerage firm, not just the listing/advertising broker.

·               If you drive by an œOpen House and want to see it, you should by all means: however, be sure to tell the Sales Agent who conducts the Open House that you are working with me as you Buyer™s Agent who would represent you in the transaction.

·               If you see an attractive œFor Sale By Owner, take down the phone number and address and I will inquire about details on you behalf.   As real estate professionals, we handle all of the details from contract to closing that you would miss in a direct transaction with the owner.

·               You will find that you are most effectively helped by working with one and the same agent for a specific geographic area (town or a cluster of towns).   If your search will take you beyond that territory, I will refer you to an appropriate agent in any other area.

I look forward to working with you in that spirit. Have a great day.

Sincerely,

Michael Pennisi

www.MichaelPennisi.com

(908) 656-3858

Michael-Pennisi@Burgdorff.com

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Have a great day.

Sincerely,

Michael Pennisi

(908) 656-3858