What Philly Agents Are Saying About 2014

As a Philadelphia Real Estate Appraiser, I know what trends I’m seeing day-to-day in the neighborhoods of Philly. However, I thought it would be fun to ask some area Agents what their thoughts were on a couple of issues. Below are the questions I asked along with some of the responses from some of the Philadelphia region’s top agents.

1. How would you describe the Spring market in Philadelphia Metro area so far? and where do you see it going for the remainder of 2014?

2. What do you think has the greatest influence on the market right now…Inventory? Interest Rates? Buyers back in the market?

 

The Coyle Group - Mark WadeMark Wade

Center City Condos

www.CenterCityCondos.com

I hear a lot of talk about the up’s and down’s of today’s market. And what most Realtors are witnessing is multiple offers, properties selling at or above asking    price and a decreased “days on market” statistic.

For the majority of the Center City market, there are more buyers than available inventory and the shift in that relationship will give rise to actions that we see more of today than we would have even six months ago- such as multiple offer bidding. I just encountered three offers on the same home in one day and that home had sat idle for almost two months.

Also becoming common are full asking price offers or even over asking price offers. I think it makes sense (many buyers see the time as being right to snag a condo out of the clutches of others and are therefore willing to put their best foot forward). I am now telling my buyers that IF they see a home they want – do not hesitate to go in quick and strong. Because nothing is more painful than a bidding war. Good for sellers, not so much for buyers.

Lastly, Realtors I speak with also confirm that they are seeing a decrease in the “days on market” calculations. Many homes are selling within days, even hours after being listed for sale

I think the biggest influence today is the lack of overall inventory.

 

The Coyle Group - Dan CaparoDan Caparo

Coldwell Banker Preferred

Vice President
www.DanCaparo.com

Although we had a setback in sales due to the harsh winter for the first quarter for 2014 the spring real estate market has arrived and is brisk for buyers and sellers alike.   Our Real Estate market is built around school year more so than the seasonality of the warmer months – they just happen to go hand and hand.   People like to have their children finish school at their current district and start fresh with a new one by September.   There is a considerable inventory shortage in our regional marketplace and well-priced homes don’t last for more than a week.  I still find that price points of $800K+ are moving along in a more healthy fashion but still not to the level of the under $800K markets.

A housing shortage has a great impact followed by the continued challenges of mortgage financing and our tight money policy.  As the mortgage market opens up and loosens its restrictive barriers and other investors [in addition to Fannie / Freddie] enter the home finance market we will see continued improvement in unit sales volume and appreciation.  I believe that rates shouldn’t be a problem until they begin to reach 6%+ because at that point we will see affordability issues.

 

The Coyle Group - Matt DonnellyMatt Donnelly

Coldwell Banker Preferred

www.donnellyrealestategroup.com

BUSY! Any properties hitting the market that are priced right, move in ready, and in a semi-desirable location are going under contract within 3 weeks on the market. With rising interest rates and more consumers being approved for mortgages I expect 2014 to remain a hot market. Buyers are ready to purchase but need to act quickly because there is a lack of inventory of good, saleable listings.

There are plenty of buyers in this market, and interest rates are still historically low. The greatest influence right now appears to be lack of inventory. We need more sellers!

 

The Coyle Group - Frank DefazioFrank DeFazio

Berkshire Hathaway HomeServices Fox & Roach, REALTORS
www.CenterCityTeam.com

The spring 2014 market is off to a hot start likely due to the pent up demand from a frustratingly cold winder and fears about potentially rising interest rates.  Demand continues to outpace supply and so we are seeing a lot of multiple bids and escalation clauses which is driving home sale prices up. As long as inventory is low and demand is high prices will continue to increase, which is great for sellers but not for buyers.

 Low inventory. Agents have been pounding the pavement for listings since January of 2013 but demand is strong and homes that are priced well and move in ready continue to sell in days, often with multiple offers.  Builders have taken note and new construction inventory is coming towards the end of the summer but for now low inventory continues to cause feeding frenzies and high competition among buyers.

 

I’d like to thank Mark, Dan, Matt and Frank for their insights.  I find it interesting that they all cited “low inventory” as being the greatest influence on the Philadelphia 2014 real estate market.   I couldn’t agree more.  This market is quickly turning into a text book Sellers Market.  We all know when inventory is low and demand is high, prices will rise.  That’s good for everyone…except maybe Buyers.

The Coyle Group’s team of Philadelphia appraisers is a leading provider of appraisals for Estate/Probate, Divorce, Bankruptcy, Tax Appeal and Pre-Listing appraisals.  If you need a guest speaker at your next sales meeting, please give us a call.  We would welcome to opportunity to speak to your group and field any appraisal related questions you may have.  For more information please visit our website at www.TheCoyleGroupLLC.com  You can also contact The Coyle Group at 215-836-5500 or appraisals@coyleappraisals.com

 

 

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FHA Guidelines (a Cheat Sheet)

The Coyle Group - HUD LogoThis is a special announcement to all of our real estate agent friends out there.  The Philadelphia Appraisers at the Coyle Group just published “The FHA Cheat Sheet”.  It was developed in response to agents, who for years, have asked us “is there a comprehensive list of FHA requirements?”  Well, it may not be comprehensive but, The Coyle Group has compiled a list of 40 of the most frequent FHA repair items and issues that face sellers, buyers and agents.  Gain some insight on how the FHA views defective paint or cracked pavement.  See what to do about broken window and graffitti…plus a whole lot more.  We’ve even include a BONUS Tip at the end!

If you are interested in receiving a PDF copy of the FHA Cheat Sheet, please send an email with your full name and email to appraisals@coyleappraisals.com be sure to put FHA in the subject line. 

For more information be sure to visit our website at www.thecoylegroupllc.com or contact us by phone at 215.836.5500

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HELP! My Condo Shrank!

Last week, while looking at condo in Center City, the owner showed me a copy of her tax record which indicated that square footage of her unit was 3,155SF.  She was concerned because a previous appraisal stated that the unit was 2,678SF.  In her mind she was sold (and was paying taxes on) a unit that was 3,155SF.

As I measured the unit, I showed her my measurements and made the calculations in front of her.  I came up with 2,698SF, which supported the numbers from the first appraisal.

Then why did the developer, the agent who sold them the unit and the tax records all say that their unit was 3,155SF?  The answer is pretty simple. 

When calculating a unit’s square footage, developers and architects will typically include areas taken from the approximate centers exterior walls to the approximate centers of interior demising walls.  They will also include portions of perimeter walls, ducts, chases, beams and other concealed areas contained within the boundaries of the unit.  This can really add up, especially if the exterior walls are 1’ to 2’ thick like some of the older condo conversions in Philly.  To perpetuate the problem, the tax assessors will typically get the square footage for a unit from the developer or architect’s plans.

Appraisers tend to measure condo units from interior wall to interior wall.  We look at “useable interior living space”.  If you can’t stand on it, it’s generally not included in the Gross Living Area (GLA).  This method is consistent with guidelines published by Fannie Mae.

This can really pose a problem for appraisers when making comparisons to other units.  Often, we have to rely on the public records, condo plans or a developer’s website when researching comparable units.  Who is to say that the GLA reported in the records is representative of the unit’s “useable living space” or if it includes portions of exterior walls?  This is why it is so important for appraisers to know their market, intimately.  It is just as important for the appraiser to clearly explain and reconcile the inconsistencies in GLA; and make an adjustment when necessary and deemed reflective of the market.

This is also something that agents must be aware of, as well.  Make sure you educate your clients about possible discrepancies in reported square footage.  If your client thinks he’s buying a 1,200SF unit, you better be sure that’s what you’re selling.  The number one reason that agents are sued these days is for misrepresenting the size of the property.  If you’re not 100% sure that the square footage is correct, measure it yourself or hire an appraiser to measure it for you.

How would you feel if you paid around $1.5MM for a condo only to realize that its 457SF smaller than you were told?  What’s the big deal you might ask, it’s only 457SF?   Well, that’s a  21′ x 22′ room.   Assuming that at 3,155SF the price per square foot is $475/SF…that missing living space cost them approximately $217,075!   That’s another reason why using price fer square foot (the go-to method for many agents and developers when pricing units) is not a valid technique for valuing condos but, that’s a discussion for another day.

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Another Reason to get a Pre-Listing Appraisal

Just the other day, I received a phone call from a Mortgage Broker friend of mine. Yes, appraisers and Mortgage Brokers are still allowed to be friends.

He wanted my input on a situation in which one of his former clients found themselves.  Let’s call them the Utley’s. (For the privacy of the parties involved, I will not use the actual names, streets, pricing or house photo in this post.)  The Utley’s currently have their home listed for sale in Springfield Township, Montgomery County for $345,900.  There home has been on the market for 39 days and they have an offer on the table for $339,000.  The Utley’s are concerned about whether or not they should accept an offer this “low”.

I began buy pulling up the information on the Utley’s home in the MLS and public records.  It is a nice 1939 colonial with three bedrooms, 1.5 baths, approximately 1,500 Sq.Ft.  A very common home in this area.

Then, I took a look at the sales and listing activity in the immediate area for similar homes.  What I found was surprising.  The last three sales in the neighborhood in the past year sold for $370,000, $370, 000 and $412,000.  There are currently two competing listings in the neighborhood listed for $370,000 and $469,900.  The home listed at $469,900 was a larger, four bedroom that was completely renovated, probably not the best comparable.

However, there was also one pending sale right around the corner from the Utley’s.  This house was last listed for $339,900 but, it lacked a powder room and was roughly 220 Sq.Ft. smaller.  It had also been on the market for over 160 days with an original list price of $364,000.

After looking at this information, my question to my Mortgage Broker friend was “why did they list it so low?”

By listing at $345,900, the Utley’s are basically telling the market “Hey, this is my pie-in-the-sky, hope I can get it number…but, I am probably willing to take less!”  The reason they are receiving “low” offers is because they apparently under listed their home, based on available market data.  They (and their agent) may have shot themselves in the foot.

To compound the issue, it turns out, the Utley’s agent is a “friend of the family” (probably not for much longer after this experience) that is a licensed agent but, who is not very familiar with their neighborhood.   In the end, the Utley’s may be leaving thousands of dollars on the table or may have to re-list at a higher price.

This is a perfect example of why Sellers and Agents need to have a Pre-Listing Appraisal completed prior to listing a property.  A Pre-Listing appraisal can assist Sellers and their Agents maximize their selling price without over or under pricing.  If the Utley’s and their Agent had an appraisal of the home done prior to listing they might have developed a different price point and might not be in a situation where they are entertaining such “low” offers.

For information on The Coyle Group’s Pre-Listing Appraisal services, please call our office at 215.836.5500 or visit this link.

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Tax Credit Expires

It happened over the weekend without much fanfare or comment.  The $8,000 homebuyer tax credit expired.  For some, it helped them make the move to homeownership.  For others, it was a much needed shot in the arm that boosted business and made everything feel like 2004-2005, again.  Many real estate agents, mortgage brokers and appraisers found themselves busy, some were even overwhelmed by the surge of business.  It felt so good that many pundits were touting the end of the housing crisis, claiming that the economic recovery is underway…look out, good times ahead!

While the economic recovery may be underway, it was not the tax credit that spurred it along.  The tax credit may prove in the weeks and months to come to have been a crutch upon which the housing market was propped. 

It will be interesting to see if the recovery has any legs now that the crutch has been removed. 

Based on what we’ve noticed in the Philadelphia markets, I think that we may see a dip in home prices in the near future.  The expiration of the tax credit may keep some first time buyers from entering the market.  This, along with new listings being added, will force pricing pressures downward as more listings chase fewer buyers.  It will be more important than ever for Philadelphia area Agents and Sellers to price their properites correctly and competitively.

The hand-out is over, interest rates are still artificially low and the tsunami of foreclosures is still on the horizon…it will be an interesting next few months.

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