Hoboken Mom Condo Living
Planning the long-term & juggling the everyday

It’s a good idea to have a real estate attorney ready to go before you receive an offer since the seller’s attorney is the one who will draw up the contract (normally the buyer’s agent does this). Since most sales are through the MLS, which has its own standard purchase contract, selling FSBO is more complicated because attorneys are not familiar with the process.

Most buyers make verbal offers (one of my offers was verbal and the other via email), so once you finalize the purchase price, the contract and the deposit constitute the formal offer. After you and your buyer sign the sale contract and the buyer gives your attorney a $1,000 deposit (a personal check made out to the seller’s attorney, it will go into his/her escrow account), both you and your buyer will have three days for the attorney review period. Don’t stress too much about what the contract says since it is standard practice for the buyer’s attorney to hammer out all the details in the rider that is the product of attorney review. The $1,000 deposit is fully refundable until the conclusion of attorney review and will be credited toward the buyer’s closing costs.

You will need to provide the following information to your attorney in order for him or her to draw up the contract: Date, Buyer name(s), address, Seller name(s) & address, property address, offer amount, amount for deposit (10% is standard but I recommend 5% as a courtesy to buyer cashflow) and desired closing date.

As soon as you go into contract, you should apply for a smoke detector certificate for your unit. That can take 3-4 weeks to arrive and is good for six months. Since it is required for you to close, it’s a good idea to get that out of the way and not have to scramble at the last minute (and possibly delay your closing!)

Once the contract rider is executed by the attorneys, the 5% deposit will be due immediately from the buyer (also a personal check made out to the seller’s attorney), and that will conclude attorney review! The contract is now irrevocable unless one of the contingencies is not met ( a mortgage contingency is standard, and you might have others such as a sale contingency on a property the buyer owns).

So your best case scenario has come true, and you have two offers on your unit (true story, this happened to us). One is substantially higher than the other, so the obvious answer is to go for the higher one, right? Not necessarily. You have to also consider all the other attributes that come along with each offer to decide which one is the right one for you.

There are two major factors to consider when weighing a buyer’s offer: 1) can he or she qualify for a mortgage, and 2) is the buyer going to do whatever it takes to complete the purchase? Real estate transactions these days are not for the faint of heart since nothing is guaranteed until the closing is over (ie. buyer fails to get a mortgage or the property appraises low). Nobody knows what to expect anymore from lenders since Fannie Mae and Freddie Mac keep adding on more and more requirements (I had to put 25% down plus get supplemental flood insurance and a fidelity bond for both the condo association and management company of my new 4BR).   The purchase process is especially difficult for loans above $417k.

If you aren’t in a rush to sell and can afford to restart the sale process to find a new buyer if  an offer falls through (I think of the sale process as similar to running laps; you finish one lap and then start all over again), then you can gamble on the higher offer. The real risk is that if that deal falls through, you have no guarantee that your second offer is still going to be there, ready and waiting. There is so much inventory on the market now that buyers have lots of options. If you have someone who truly loves your property (our buyer made an offer within four hours of viewing our unit), the peace of mind may well be worth taking a lower price.

Inventory is up. Sales volume is down and prices are 20% lower than their 2006 #s. It’s a great time to buy, but how do you know what the right price is to pay? We all want to buy at the absolute bottom, or at least be sure we won’t lose money, but how will we know what is too much?

I have a friend who used to run a major real estate investment fund. He said something that gave me much-needed perspective, “It’s very hard to time the bottom. Do you buy on the way down or on the way up?”

A good pricing standard for the bottom are the 2004 sale prices of comparable units, which is where most short sales are selling right now. NJ has an online tool listing all recorded sale prices. It’s a bit difficult to use but you should be as general as possible (only input the street address and nothing else) to see the historical sale data for a building or area.

A Hoboken realtor posts a weekly roundup of MLS contracts and sales, so you can get a sense of how much properties are selling for right now.  Nobody knows exactly what will happen with real estate, but my sense is that prices will stay flat for a few years, so you should buy with the expectation of staying in your property for about five years. With that kind of timeframe, you should sell your property for at least the same price as you paid, and you will reap the benefits of deductions and building equity.

Unless you are naturally very neat (not me!), don’t drive yourself crazy keeping your home ready to show at all times. If you have good pictures on your website, that is enough to set the stage for most buyers. I rented a small storage room where I put the extra baby gear, books and sports equipment and spent about two hours tidying up before each showing. Most 2BR owners are families with small children, so a serious buyer will overlook clutter as long as they know just how awesome the rooms can look.

There are two schools of thought to showing: 1) Giving buyers a guided tour, and 2) Letting them roam freely and encouraging them to open closet doors and poke into corners. I ascribe to the second approach because it makes buyers feel more comfortable. I gave out copies of my floorplan (with the website address featured prominently so they could access more information about your unit after the showing) and then set them free to go independently from room to room. It has the added bonus of making them feel at home, which helps facilitate a sale (since your property actually will become their home!) You should include showing guidelines on your website about the amount of notice (24 hours is standard) and preferred times of day.

A showing is an opportunity to convey to your buyer how flexible you are on the asking price. In this environment, most buyers are looking for deals, but there is a big difference between selling 2% under your asking price and 10% under. Buyers want to know why you are moving, so have a short answer ready (ie. job offer, move to suburbs to raise kids). The kind of answer you give will provide them with a clue as to how far under your asking price they can offer. If you tell them you need to move quickly because you have an accepted offer on a larger home, that is code for being willing to entertain any reasonable offer. Meanwhile, if you say you need more space but aren’t sure yet where you want to go, that sends the message that you are not going to sell for much under your asking price.

Above all, keep the conversation casual and positive, emphasizing how much you have enjoyed living in your unit and how regretful you are to leave it. Do not schedule buyers to overlap with each other since one buyer’s comments can negatively impact another buyer’s experience. Give yourself plenty of time between showings since buyers often arrive late (although my FSBO buyers always showed up exactly on time!)

Let’s talk about real estate property marketing. You have about 30 seconds to capture someone’s attention with an ad. If you fail to convey the strongest selling point about your 2BR, then someone looking for those attributes won’t realize this is their dream unit and will skip past your ad. Every lost opportunity decreases the chance of selling your unit, so make the most out of each exposure!

Here are the items I recommend to properly market your unit:

• A web domain (choose something short and easy to remember, and try to get a .com extension)
  My sale website was hgcondo.com

• A Postlets ad (at $5 lifetime fee per listing, this one is a no-brainer)

• Really great photos of every area of your home (one per room)

• A glossy color flyer with the most attractive property photos and a brief description on one side and the floorplan on the other

• An oversized postcard mailer

To keep your message consistent and make it easy for somebody to keep track of your unit’s status, I recommend directing all traffic to your website. Postcards get lost and Craigslist ads expire (and get buried in an avalanche of newer ads), but a website is static.

In addition to being the home base, the main strength of a website is that you can convey an enormous amount of information in an unobtrusive manner. You need to construct the site so an increasing amount of detail is available as buyers click deeper into the site. The home page should convey the same clear, simple information as your postcard and flyer, the next link should be a good quality floorplan and photos, and then the tertiary pages should have every detail you can think of about your property for the truly serious buyers to peruse.

The message conveyed on your home page should be about the single greatest strength of your property. That might be about the awesome location, outdoor space, or the den that makes your 2BR usable as a 3BR. What ultimately really sold you on your property? For the right wording, go on realtor.com and look at ads for units similar to your own. See which phrases jump out at you and then copy them for your marketing materials.

Talk to your neighbors, especially the ones who bought units similar to yours. Data and feedback are critical to the sale process because you are going to need to refine your message as you go along to make it more effective. Fortunately, having a website makes tweaking your message very easy since all you have to do is login online and presto! Done.

If you don’t have a floorplan on hand, you can request one at the Hoboken tax collector’s office in City Hall (their phone # is 201-420-2083) under the Open Public Records Act (OPRA).  Make sure you specify the construction dept since that is where the floorplans are stored. It takes about a week for the plans to become available after your request.  Make sure you have your unit’s block, lot & qualification #s available when you go to fill out the request form.

Because it provides so much information, a website is also useful to make buyers aware of potential negatives about your property. If someone is never going to buy your unit because of something you can’t change (in our case, it was the location), wouldn’t it be better to not waste their time and yours showing it to them? FSBO buyers tend to do exhaustive research before going to see a unit, so providing them with all the details on a website helps weed out all but the truly serious buyers.

Your marketing efforts are a work in progress. Ask for feedback after showings and use it to tweak your marketing materials or showing strategy (we had to move an ottoman before each showing because its normal position made the living room seem cramped). You can also use the opportunity to answer any questions or concerns your buyer may have, so it could help make a sale. Buyers are often timid about expressing their concerns, so you need to encourage them to ask you questions about your property.

Next up: How to show your unit

When I first found our new apartment, I was flabbergasted. A 4BR in Hoboken? I didn’t even know they existed! And best of all, the price was actually pretty reasonable; when we went to go see it, the asking price was $825k. It is actually a 3BR w/den (no windows so it cannot legally be called a bedroom), but since the den is 240sf, it can easily be used as another bedroom. The developer still owns the fourth floor unit in this line, so if you are interested, email me and I will ask him about it when I move into the building. I have no clue what his price would be, but hey, it can’t hurt to ask, right?

We are really happy to be staying in Hoboken. Yeah, the schools aren’t as good as they are in the suburbs but they are decent. And Jersey City has the highest-rated high schools in NJ, so I feel confident about my kids’ academic future. Also, the private school tuition in Hoboken is downright affordable compared to NYC (Stevens charges $12,500 for grades 3-8 vs $33,100 at the Dalton School). And we are also confident that the whole Hoboken tax mess will get sorted out soon because it is so egregious, nobody can hide it. We are confident enough that we are willing to put our money where our mouths are!

Lori Heidenry, another Hoboken mom, kindly sent me a link to The Manor Garden, which has a 4BR and several 3BR units located at 1st and Garden. The building is still under construction but is expected to be completed by late 2009, and is already about a third sold. The asking prices range from $999k to $1.6 million with square footage from 1,535 sf up to 2,166 sf. The finishes look pretty nice and right now you would have a lot of options in terms of finish customization and merging units, so check it out!

Here are the steps I took when I sold my unit:

1. I set up a website (hgcondo.com)
Feedback: FSBO buyers loved the clickable floorplan (they liked the way they could see exactly what each room looked like in relation to the others). They also liked all the information about both the unit and building.

2. I set up a Postlets ad (pointing to the website)
Feedback: FSBO buyers thought the main photo was very accurate in capturing the look and feel of our outdoor patio.

3. I listed on Housepad.com (this gave us a MLS #, and we were paying buyer’s agents 2.5% commission under the realtor-only section)
Feedback: We had one showing as a result of this and three requests for showings that we were not able to accommodate and who did not reschedule. The feedback was that our apartment seemed cramped and had a lot of baby gear all over the place. The buyers really liked the outdoor space but thought the living room was too small.

4. I advertised on Craigslist using the Postlets script (this made for a
very pretty ad) and pointing to my website.
Feedback: We had two showings from buyers who stuck with me and made multiple attempts to reschedule their showings around my kids’ schedule. We had one requested showing that I declined to pursue and multiple requests for an open house. The feedback was that the buyers had been in the building before and were pleasantly surprised at how quiet my unit was since the patio wall blocks out almost all of the train noise compared to higher floors. Both loved the outdoor space and interior layout. Both showings resulted in offers.

5. We signed a listing agreement with a high-producing local realtor for a 4% commission (I believe the split was 2% to the listing agent and 2% to the buyer’s agent, and this was advertised in the MLS section that only realtors can see).
Feedback: We had 20 requests for showings. 4 of them actually showed up (5 canceled or no-showed, and we could not accommodate the other 11, who did not reschedule). The feedback was that the property location is absolutely terrible, the unit did not show well and there was baby gear everywhere. All the buyers loved the outdoor space but could not get past the location and/or the interior.

As far as links went, I linked to my website from craigslist and postlets because I wanted a stable address to point people to (that is why you want to choose an easy domain name so people remember it and come back when they want more info). I also set up a glossy flyer and postcard mailer that helped make the sales, but ultimately Craigslist and my website were the key elements to my sale. Unfortunately, you cannot link to a non-realtor controlled website from the MLS since there are all sorts of regulations and guidelines, so I don’t think any buyers who went through a realtor ever saw my website.

I cannot emphasize enough how important it is to market your unit properly. If your unit has one outstanding element (ie. location, outdoor space, or incredible building amenities) that made you buy, isn’t it a good idea to make sure any interested buyers are immediately aware of it? Highlight it in your subject line so they click on your link, and have a great photo as your main image!

My realtor contract gave me a 4% commission while allowing me to sell (I would pay my realtor $1,000 if I sold on my own). I believe the breakdown would have been 2% to the buyer’s agent and 2% to the listing agent. There are realtors out there who will give you similar terms, but they are difficult to find. I am trying to line up a few of them to offer contracts to sellers if I do the marketing (apparently they do offer deals like that now since it saves them a lot of work and money by not having to market the property). I would set up a website and Postlets listing, design and print a flyer, and post Craiglist ads every week for your unit. Please shoot me an email if you are interested in an arrangement like this.

When we first thought about selling our 2BR, our immediate reaction was to rent since it would free up our equity and allow us to buy a bigger place (the down payment would be liquid and we wouldn’t have lender problems caused by owning two places.) It made sense to sell, rent a 3BR and then take our time buying a 3BR or 4BR. I took a look at rents on realtor.com and figured out it would cost us between $3k and $4k to rent in Hoboken.

Everybody knows that now is a great time to buy. Interest rates are incredibly low (we qualified for 4.5% with one point on a 30-year fixed-rate loan!), prices are down and the market is really slow. The problem is, nobody knows what is going to happen with housing prices. If the economy improves soon (before the end of 2009) then will housing prices rebound? What about 2010? And if the recession continues for another year or longer, how far will housing prices fall before they hit bottom?

Once you own real estate, you do not exist in a vacuum. You cannot expect the price of your 2BR to stay high and the prices to drop on 3BR units in the same area. If you can afford to either live in your unit until the prices improve or rent it out for enough to cover your mortgage, you are less vulnerable to the market, but a 2BR owner is in a unique position because we own a unit but have a finite timeline for how long we can live in it before we outgrow it, unlike most 1BR and 3BR owners.

A 2BR owner is in a very delicate position that could pay off or be disastrous. When I first started thinking about buying back in early December 2008, some realtors told me to rent my unit for a couple of years until the market improved and I would get what it is really worth while others told me to go ahead and buy and not worry about selling because it would be easier to show after we moved out plus the spring market would be stronger (that one scared me because a vacant apartment just screams distressed seller, plus we would have to sign a 12-month lease to qualify for a mortgage, so how would I get the tenant out if a buyer showed up in month 2? I would have to buy that tenant out, and that could be serious money. And mortgage lenders will not accept a lease from a family member, so renting to my brother was out.)

What really made us change our minds about renting was that we were seeing some amazing properties pop up in our price range. The other factor was, who knows how long interest rates are going to stay this low? It’s safe to assume another six months, but I doubt they will be this low in 12 months and once the economy recovers and we feel more comfortable buying, interest rates will go up. We need a bigger home, preferably yesterday, and I didn’t want to be competing with all the other families out there for the same homes at the same time. We could have gone for a short sale but the logistics were too complicated (would our buyer be willing to wait six months to close?) Plus, while there are great bargains out there, none of them were what we are looking for.

The other determining factor in our purchase was that we decided we definitely wanted to stay in Hoboken and we found our ideal home at sale price we never thought we’d be able to get (well under $1 million). We always thought we would have to move to the suburbs to get anywhere near enough space for our family, plus the schools there are excellent. The suburbs have also been cheap lately relative to Hoboken values.

We sat down and compiled a list of all the things we had to have in our next home. The list looked something like: 1700 sf or more, new construction (love that central air!), great schools, less than an hour away from NYC by car or mass transit, walking distance to the train and downtown stores, and great sun exposure. We would also prefer a culturally diverse area since we are an interracial couple. Then we went on realtor.com and started looking at the areas around Hoboken (Edgewater and JC for staying in the immediate area and Montclair and Tenafly for the suburbs).

We found properties that had some but not the majority of the attributes on our list. And the problem was that most of the items on that list were real dealbreakers. So even if we sold our 2BR and moved into a rental, there were no obvious places where we wanted to buy. We would solve our immediate problem of not having enough room, but then we would be stuck in a rental, dribbling away our savings because we lost all our deductions and possibly not even able to find our ideal home. And since we had a sale contingency clause in our purchase contract, if we did not sell our 2BR for the price we wanted, we were not obligated to purchase the 4BR. The worst case scenario was that we would wind up in exactly the same position; living in our 2BR.

We also do not like renting. We rented back in 2002 from the Applied Companies, and the quality of the units was much inferior to the ones we have owned, plus one of the wall-through AC/heaters was broken for 20 out of the 24 months we lived there. Between that and the long list of very high charges to do simple repairs ($17 to replace a light bulb?), we were not keen on becoming renters again.

You can rent from an individual owner or a luxury building, but an owner is not required to renew our lease and could sell or reoccupy the unit, and the rent on a luxury 3BR would be astronomical. There was no way I was going to pay upwards of $4k/month for rent, especially not if I could buy a comparable unit and pay the same amount for my mortgage, taxes and maintenance. And while the schools in Hoboken aren’t as good as the ones in the suburbs, they are decent and affordable. Hoboken also has free pre-k for 3 year olds.

No matter where you decide to buy, now is the opportunity to choose the perfect long-term home for your family at a monthly cost that is affordable. You also can buy a property that has attributes that would be desirable in any market (in our case, it is that fourth bedroom, which is incredibly rare in Hoboken.) Even if the price drops in the short term, we would be dealing with the same thing in our 2BR, plus since we now have enough space, we don’t have to worry about selling anytime soon so can wait until the prices come back up.

Next up: Applying a marketer’s perspective to real estate sales

In December 2008 I talked to several realtors about our condo’s value and got a range of $525k-$540k. The general consensus was that our ginormous outdoor space added about $30k in value, the same as a parking spot.

What was really interesting was their pricing strategies. One realtor told me to list my unit at $555k and several others told me to list at $525k with the argument that it would come up in more price range searches and I would get several offers at or above my asking price. Frankly, I wasn’t buying that argument. With the economy in the crapper, people are looking to get good deals on their condos, so why on earth would they offer at or above the list price? Every seller hopes for a buyer who falls in love with their unit and will pay a premium for it, but you can’t count on that happening. If it happens, great! But don’t assume your dream buyer will show up at the exact moment when you want to sell because the odds of that are very low.

It is hypothetically possible to attract multiple offers and play them off against each other, but my sense is that psychologically this is the wrong time to play that kind of game. Buyers have a lot of options now, so there’s no point in scaring them off by trying to get them to participate in a bidding war. I treated my two offers as independent of each other, which since they were operating on vastly different price scales and closing timeframes, they essentially were.

Information is your friend. I checked my condo’s estimated value on Zillow.com, and I went on realtor.com (consumer version of the MLS minus all the juicy details like if a unit is vacant) to see what other 2BR units were selling for. I checked price ranges both above and below my asking price to see the prices on units similar to mine (new construction, 1,050 sf, 2BR, 2BA, parking & outdoor space). I stopped searching above my price once I hit units that were obviously nicer than mine, and similarly established a minimum.

You also need to check recent contracts and sale data, preferably within the last three months. You can find a lot of information weekly on hobokenrealestatenews.com, although I have noticed that the contract data is incomplete (my 2BR unit was never listed on there before I closed, so there might be other contracts that are not getting included). You will need to periodically reassess current prices of condos like yours to make sure you are still in the right ballpark.

Buyers typically search for properties in increments of $50k (ie. min 2BR from $400k-$550k). You want to price your unit so it falls within or slightly above the upper limit of the type of buyer you want to target. In my case, I knew I was looking for a first-time buyer, ideally a professional couple in their twenties (my building tends to appeal to people in their late twenties; old enough to want to be away from the mayhem of Washington Street bars and established enough to have $100k+ in savings, but still young enough to want to be in Hoboken and enjoy a full-service building with a PATH shuttle).

A similar 2BR on my floor sold in January 2008 for $560k, so I knew I had to price mine below that. The asking prices I set for our unit depended on our situation as it changed. When we were in no rush to sell, I set the price high at $550k because I was not prepared to move unless the sale price was close to that. Then when it looked like there were several 3BR and 4BR units that might work for us to buy, I lowered the price to $525k so it would sell at a reasonable (but not my ideal) price. We dropped the price further to $500k when we went into contract to purchase our 4BR (that was actually one of the terms of our contract) to ensure that we would sell quickly.

One of our offers came in when our 2BR was advertised at $550k and the other at $525k. Be prepared for lowball offers (10% under your asking price) in this market, but if you don’t need to sell imminently, then all you need to do is counteroffer at or close to your asking price.

Once you determine what your 2BR is worth right now, you have to look at historical data (propertyshark.com is a good resource) for units like yours to get a sense of where the value could go (take a look at 2004 prices to establish a floor). Maybe you don’t need to sell today, but how many of us are prepared to hold onto our units for 2 years? What about 5 years, or 10? That ’s how long it may take for housing values to increase again, and in the meantime you either have to live in your unit or rent it out. We couldn’t stand to live in our unit with our two babies for more than another year (I had fantasies about buying a trailer for our outdoor space), and even that would have been pushing it. We also wanted to give ourselves plenty of time to sell so we weren’t desperate and reduced to taking whatever offer came along.

If you need to sell in the next couple of years, you may have to take a loss on your unit. Even if you can rent your unit and purchase a bigger one, with rents softening, there is no guarantee that you will be able to find a new tenant every year at a rent high enough to cover your mortgage, taxes and maintenance. Since we could not afford to carry two condos for more than about six months, once we decided we were going to buy a bigger home, we also decided that we would sell if the price was reasonable. We made a decent profit and don’t have to deal with renting and then selling our 2BR. We didn’t want to have to worry about the price dropping within the 2-year timeframe we needed to sell and it is not easy to sell a unit with a tenant in place since access can be very difficult. Also, what tenant is going to keep the place ready to show at all times? And you have to pay income taxes on rental income, so chances are you are going to have to subsidize your tenant.

If you know you need to sell in the next couple of years, wouldn’t it be better to take a small loss now rather than the same or larger loss in two years? If you are buying a bigger place or moving into a cheaper rental, you can justify the loss by the discounted price you pay for the bigger condo or else the savings in your monthly costs that allow you to save money every month. Also, if you find a bigger home that has everything you are looking for, and a buyer comes along who offers less than you would like, you have to consider the opportunity cost involved. I figured I would be willing to take $20k less if I was able to time my sale and purchase simultaneously because I wouldn’t have to pay to move and rent.

Next up: Deciding whether to buy