Real estate involves some of the biggest decisions in our lives. It’s about where to we live, where to raise our children (affecting who they will become), who we spend our time with, and an awful lot of money. Buying or selling, or just looking at the state of your current investment (your home), there’s good reason to take a long hard look at the town in which you staked a claim. Here are five of the biggest issues that are going to keep you up at night, or hot opportunities that make you rest easy with optimism. It’s a market to shop and play in. Here are the game changers.
To buy or not to?
Like a window or aisle seat, or sparkling or flat water, the choice between whether to buy or rent a home in recent years has seemed to have been something of a toss-up.
Putting aside financial considerations for a second—monthly rental payments and monthly mortgage payments can be fairly similar, after all—either option ends up putting a roof over your head. And because the crop of rental housing has improved by leaps and bounds in the past few years, brokers say, one often can’t tell the difference between the living room of a leased or an owned property.
In 2012 that conundrum wasn’t resolved unequivocally, at least in terms of what residents seemed to want.
For starters, would-be renters had a lot of options to choose among, as nonseasonal rental properties in Westport remain at historic highs. Indeed, 340 homes were rented in 2012 in town, according to data from the Greater Fairfield County Consolidated Multiple Listing Service prepared by William Raveis Real Estate.
Though that total is shy of the 383 homes rented in 2010, the data shows, it eclipses the 292 in 2008, during a super-slow market, when one might have expected desperate sellers to be renting out their houses.
And the pickings aren’t slim: At the end of the year, available houses included an antique four-bedroom Colonial with a tennis court and a pool at 231 Greens Farms Road for $11,000 a month. Renting, and investing other equity elsewhere, has appeal, brokers admit.
“Sometimes renting is the best option,” says Julie Vanderblue, an agent with the Higgins Group, who advised a client transplanted from Germany to rent a 5,000-square-foot stone home in Westport to decide if the town was right for them. “It’s a great way to test-drive a neighborhood and a house,” she adds.
More significantly, the house, which is listed at $2.5 million, could wind up being sold to renters. Under the terms of the lease deal, the renters get a right of first refusal on the house, for twelve months, at an agreed-upon price, and if they pull the trigger on a purchase, the seller will credit them a few thousand dollars of rent money toward the sale, says Vanderblue, explaining that deals like that are now common.
On the other side of the equation, the sellers have some revenue to cover their mortgage, with extra to spare. Also, by delisting the house for several months, they are also able to “freshen” the listing, by resetting the clock on its total time on the market, Vanderblue says. Plus, because the house’s empty rooms are now furnished, new photos can be taken and added to the online listing.
On the other hand, buying outright has never been a better idea, brokers say, even if this mantra has been repeated for the past few years. “The real estate market is really in the bottom of the valley,” says Michelle Genovesi, an agent with William Raveis Real Estate.
In fact, with interest rates continuing to drop and prices still below where they were in boom times, the numbers for buyers are very compelling, Genovesi explains. “They actually can pay less than what it costs to rent,” she says, “and then have an asset to write off and have equity in.”
Buyers may even have it too good. Because banks are now valuing many homes below what the market dictates, sellers are being forced to trim their prices at the last minute to make deals happen—like recently in Weston, where the owners of a 5,000-square-foot, three-bedroom had to slash $300,000 from the accepted offer price because the appraisal came in low. Genovesi says,
“They decided to negotiate.”
A Light Year
ng costs may be high, but so is interest in reducing them with alternative fuels. In 2012 good news came to Westport homeowners who prefer a renewable resource like the sun to power their homes, instead of a limited resource in the ground.
The town was one of four picked for the first phase of the state’s Solarize Connecticut program, which is an effort to reduce the cost of installing solar panels. Through a state deal struck with installers, residents got a bulk-rate discount if they signed up en masse over a six-month period, which cut costs dramatically.
Indeed, with the current rate of participation of about fifty households, and including a 30 percent federal tax credit, a typical home paid $11,000 for a panel system, down from the standard $30,000. That’s according to Tim Sadler, a consultant at Encon Solar, Westport’s state-selected installer. If enough solar energy is produced by the panels, homeowners can actually pay nothing every month for electricity, except for a $16 plug-in fee, Sadler says.
But not so fast. If tree branches envelop the yard, the panels won’t work. Plus, the roof should have about a 35-degree pitch and angle south for maximum effect. In fact, about half the people who called in to inquire about the program were told it wouldn’t work, Sadler says. Others may not like the look of panels. “Curb appeal can be hurt if people can see them on the front of a house,” says Sadler, summarizing conversations he has had with Realtors.
Still, that’s not stopping other owners from going green with their interiors, says Julie Haroun, an agent with brokerage Westport Residential. Her husband, Robert Haroun, a local builder, says buyers today prefer natural gas or propane heating systems instead of oil and some are retrofitting their homes.
Westport architect Peter Cadoux agrees, noting the last four homes he completed use gas. And where natural gas is not available, large-capacity, buried propane tanks were installed. He cites considerations such as future availability and the efficiency and convenience of a single source for cooking, heating the pool, running a generator and using fireplace log lighters or gas log sets.
“Unlike underground smaller propane tanks dedicated to pool heaters, cooking or generators, where running out of fuel at the most inconvenient time is fairly common, whole house propane is both predictable and consistent and may be fitted with monitors that are linked directly to propane providers to ensure automatic deliveries,” he says.
Still, the type of energy “rarely tips the scales,” Haroun says. “I am still a firm believer in the total package.”
Despite notable gains in the single-family sales market in Westport 2012, competition for buyers remains fierce, so much so that brokers are aggressively recommending that homes get “staged,” or redecorated, even if that means a major overhaul.
Besides, new construction is in vogue with buyers, so giving old homes a new sheen is critical. “It is absolutely essential, yes,” says Jane Jones, an agent with Prudential Connecticut Realty and Westport resident, who staged every one of her twelve listings last year. Among her directives: Garish wallpaper must go. Countertops should be granite. Framed photos should be tucked away, though leaving a few out “gives the house character, for sure,” Jones says.
Yet, telling sellers their art is unattractive can strain relationships between brokers and sellers, which is why Birgit Anich recommends using an outside staging business like her own. “You have to tell them, it’s not about the taste of the homeowner, it’s only about the taste of the home buyer,” she says. Her fee is $250 for a consultation, though staging can run to $10,000 for a typical three-bedroom, especially if someone has to rent furniture, says Anich, who promises that any costs will be recouped in the sale.
An important benefit is that online photos improve, she says, like with a five-bedroom Wilton listing that was empty and now boasts leather club chairs, orchids and sculpture. Also, a Fairfield home sat unsold for two years before it was staged, including having its dark oak kitchen cabinets painted off-white. It sold three weeks later, Anich says, adding, “Staging has become more and more of a standard.”
Refi Blues & High Notes
With a nod to Dickens, 2012 may have been the best time to refi, and the worst time to refi. For starters, interest rates on home loans continue to be bottom-scraping low, points out Mike Daversa, president of Atlantic Residential Mortgage. In early January, a thirty-year mortgage in Fairfield County cost about 3.25 percent a year, with just slightly more for a “jumbo” loan, “which has never been seen before,” Daversa says.
About half of the forty-two banks that re-finance home loans continue to cover closing costs, which can easily total several thousand dollars. Although the banks that offer these so-called credits usually don’t have the best rates, homeowners lap up those deals anyway, thinking that having any money up front is best because they won’t stick around in the house long enough to enjoy lower interest rates.
For those who don’t care about credits, it’s also a propitious time to refi, bankers say. Lenders like Hudson City Savings Bank, People’s United Bank and Astoria Federal Savings are offering low rates. But there are rubs. Some complacency has set in among owners, who assume that the Obama administration will keep rates low for years to come to stimulate the economy and acting now is unnecessary. More critically, property values in the area have declined, which can jeopardize getting more favorable terms on loans. To wit: If banks determine that because of the home’s diminished worth, the amount owed on it is suddenly greater than 80 percent of its value, they “could put a kibosh on the refi,” Daversa says.
That homes aren’t worth as much as they were in the boom times of five years ago perhaps shouldn’t come as a surprise—town-sponsored revaluations, the most recent of which occurred in Westport in 2010, similarly found double-digit declines.
Still, a lot of animosity exists in the brokerage community. “The appraisers are ruining a lot of deals,” said one longtime Westport broker who asked to remain anonymous. She jokes taht among brokers, “beauty parlors have been doing well because gray hairs were popping out all over.”
Daversa says, “They love to criticize us, but lower values also have a stimulative effect on the purchase market.”