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

Craigslist is a notoriously loose site. It’s designed to be very basic, which means there isn’t much oversight. That means that if someone flags a post as abusive, the site takes it down automatically (the notice sent says that if you disagree with the decision, you are free to repost). The flip side of the looseness is that you can post in the broker section even if you are FSBO.

Why would you want to post in the broker section? For starters, 90% of sales are through a broker. That means that most buyers are going to automatically look in the broker section. Meanwhile the owner section looks like a spam folder, with all sorts of nonsense about learning to invest or how to buy short sales. A good quarter of those postings are not for actual properties, which your average buyer is not going to bother wading through. You might as well maximize your odds and post in the broker section.

When my husband and I first started looking into buying a home, we found out that we have really great credit. I think the direct quote from the Wells Fargo mortgage banker was, “Wow, all three scores are above 800 for both borrowers! I only see that once a year!”

I knew we had good credit but assumed it was in the high 700s, not above 800. When I learned of our (pleasantly unexpected) credit boost, I picked the banker’s brain to find out what happened. It’s not like I was actively working to improve our credit, so what was I doing right? And the timing was truly fortuitous because our credit scores opened up all sorts of unexpected doors to us. Lenders rely heavily on credit scores because people with really high ones essentially never default, so we qualified for an obscenely low interest rate as well as a secondary loan, which I did not expect to receive because that type of loan is how this country wound up in a recession.

We all know the basics on good credit, but why had our credit scores suddenly shot up? Was it the fact that we paid off our auto loan? Stopped carrying balances on our credit cards (I finally got tired of playing games with 0% APR cards and just paid off the balance I had been carrying ever since I furnished our 2BR back in 2004)? What?

When I started asking questions, I found out that the answer was none of the above. It was something I had been doing inadvertently. It made sense once the banker explained it to me, but I never would have figured it out on my own. It turns out that the credit reporting agencies don’t know what the limit is on your credit cards. The only way they can tell is when you actually spend up to the limit, which most people don’t do because who spends $20k in one month? So they look at your monthly balance as a percentage of the highest balance you have ever carried, and score you better if the % is low.

Because I had been bouncing around a balance from card to card that carried 0% teaser APRs, I had been inadvertently spending up to the maximum on pretty much every credit card we own. And then when we kept a bunch of those cards after we paid them off to try them out to see if we liked them, that also improved our scores because the agencies want you to have a minimum of four credit cards. So in addition to being a great place to live, our 2BR accidentally provided us with the tools to build really great credit scores (those 0% offers really pile up when you live in the same place for a long time). Good things have a way of bringing company, and I will always be glad we bought our 2BR.

There’s a lot of discussion going on right now about interest rates rising. Rates are up from when I purchased my 4BR (I locked my rate a whole three months ago) and my Wall Street contacts tell me the scuttlebutt is that rates won’t be this low in 12 months since the dollar is weakening and other countries (ie. China) won’t want to lend to us as much as they do now.

Let’s look at a hypothetical monthly payment for a 2BR. On a purchase price of $500k, 20% down, that leaves you with a $400k mortgage.

4.5% rate = $2,026.74 + $500 tax + $479 maintenance = $3,005.74

5.5% rate = $2,271.16 + $500 tax + $479 maintenance = $3,250.16

Most people make the assumption that if they buy in at a high rate, then they will later be able to refinance down to a lower one. That is not necessarily true unless they put down a huge down payment (30% or more). The first five years of a mortgage are almost entirely interest payments, so you are not significantly paying down the principal. Also, the terms for refinancing are much stricter than they are for a purchase. I doubt I would be able to refinance today into a 4.5% rate, which what I am paying for my jumbo 30-year fixed rate mortgage.

If rates really go up, that means people will be looking for bargains even harder. Well, let’s say you pay $450k for the same 2BR. 20% down leaves you with a $360k mortgage.

5.5% rate = $2,044.04 + $500 tax + $479 maintenance = $3,023.04

This monthly payment is virtually identical to the 4.5% rate on a purchase price of $500k. What have we learned from this exercise? Basically, for every percentage point rate increase, you would have to pay $50k less to achieve the same monthly payment. That’s a 10% drop in purchase price.
I know that my seller would not have sold for another $50k less; if you are planning to stay in your home for five or more years, I don’t know that it’s worth stressing about finding the absolute bottom of prices.

A reader, Susanah, wants to move to Hoboken ideally this summer. She is looking for a 2BR near the PATH for up to $475k. If you are looking to sell your large 2BR in that price range, email her and see if you can work something out!

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Kathy: Hello again. Just wanted to let you know that we have not had any luck in Hoboken! We’ve spent two weekends there though, and LOVE it. We put in an offer on a place on Madison/6th, but we were outbid by a cash buyer (15 unit building, parking in another building, 1079 sq. feet, no yard, 20 min. walk to PATH…went for 450K cash). Oh well. Haven’t seen anything in our price range with the same charm since (despite some setbacks, it was a lovely apartment w/ great sunlight). In any event, in case you know anyone selling, we are still looking for a 2 bedroom (max budget is 475K). Thanks again! Oh - and I read your article re: FSBO - ugh - I would SO much rather work with the owners. I just do not like dealing with the brokers. Unnecessary profession IMO.

Susana

Less damage to the seller’s credit score? No need to notify the bank until you have an accepted offer at the appraised value? Sounds like short sales are becoming a decent option for both buyers and sellers.  And it seems like the government is aware that short sales are infinitely preferable to foreclosure.

I have been working with four owners to help sell their 2BR condos (if you are interested in location, check out 807 Washington & 137 Park, and if you want amenities and space, 700 Grove & the Hoboken Grande are really great values) and have been watching the website stats. Week after week I see a good amount of traffic coming from Craigslist to the sites, but very few requests for showings.

The warmer spring weather usually brings a flurry of interest in real estate open houses, which I have seen when I take my kids for walks on the weekends, so what gives? The interest is there, yet there are very few transactions. The problem seems to be the huge divide between buyer and seller expectations. The gap was pretty wide in December when I was selling my 2BR and buying my 4BR (I had my buyer telling me he could wait until spring when the prices would drop, and my seller telling me that if our deal fell through he would relist in the spring at a much higher price -clearly it was impossible for both scenarios to come true) -now it seems to be impossible to bridge.

Let’s look at some #s. I originally listed my pretty standard 2BR at $550k, dropped the price to $525k and then $500k over the three weeks it took me to sell. My buyer offered $425k (the same price as a short sale in our building) and the final sale price was $460k (but since I didn’t have to pay a commission, that’s like selling at $490k through a broker).

On the buying side, my seller listed his 4BR sometime during the summer at $924k. He had a couple of price drops down to $799k, then raised the price to $824k, which is when I saw it. I offered $750k, and we wound up settling at $787k (we got the agents to agree to cut their commissions by 0.5% each, which made the deal possible).

Each transaction took one hell of a lot of communication, goodwill and creative thinking. I was afraid to let myself believe it would all work out almost up until the movers showed up because there were so many points where the transactions could have fallen apart. Our setup was also extremely unusual because the buyers and sellers were communicating directly with each other, which facilitated the transactions. It’s a lot easier to work together and make compromises when you have an actual person in front of you rather than going endless layers of attorneys and brokers.

Sounds familiar, anyone? This is why I am betting on Hoboken being in demand in the future.

I sometimes feel like a real estate matchmaker (except I don’t get paid a fee). Because I have fairly extensive connections in Hoboken, I sometimes am able to connect a buyer and seller. I’m always happy to make the connection because that way they both save some money, plus the transaction tends to be fairly painless. And getting properties sold indirectly helps my property value while bringing desirable owners to Hoboken.

I have a mental rolodex of properties for sale and also of prospective buyers. The difficulty is often that the two don’t match up. Money is an obvious issue, but I have noticed a trend lately in the types of units buyers want. They all seem to want to buy the same apartment; 1,000 sf 2BR/2BA in an elevator building for a pretty cheap price ($400k-$475k). And yes, thy are only interested in Hoboken, with some being more picky as to location.

I can empathize with this desire. We bought that exact apartment back in 2004 for $392k, and it really was the perfect apartment. We were able to save tons of money there because our monthly carrying costs were low, to expand from using the second bedroom as a junk room to putting one and then two kids in there. And then we sold it at a decent profit two months ago, although we would have loved to have kept it if it weren’t for the fact that we would not have qualified for the mortgage on our 4BR. That, and I don’t feel like being a landlady.

I have noticed a dichotomy in the sale market right now between distressed sales and non-distressed ones. There is a short sale in my old building right now, a 2BR/2BA with just under 1,000 SF. It went under contract at $425k right before we sold our apartment, and it is back on the market now.

Why haven’t I directed inquiries to that unit? I’ve known about it for months, and it only occurred to me today that it fits the parameters of the requests I’ve been getting. It’s not just because short sales are a giant pain; it’s also because I know the seller, and he is a giant pain. Without knowing the details, I am 99.9% sure he is the reason why he has failed to sell his unit for the 3+ years it has been on the market. I still haven’t recovered from finding his evicted tenant’s belongings dumped in the lobby about six months ago.

Buying a property is a hassle even at the best of times -dealing with a seller who is unrealistic and difficult makes it a nightmare. I would rather pay more to buy a unit I know has nothing wrong with it than get a bargain from a nutjob.

You may not have realized it from this blog, but I am extremely techie. That is how I was able to design and embed this blog in the company website I have owned for several years now, 24 hours after its inception.

Since I work from home, that means that I have to do my own desktop support (with some help from my husband, another techie). We have a very organic approach to computing; we never get rid of old technology but add on to our existing network as our needs grow and change. Right now we have a wireless network with two printers (one a multifuction scanner), a desktop PC and about four laptops.

Where am I going with this? Well, backups are critical to my work and personal success. Since I no longer have access to automatic server backups, that means that if my main computer goes kaput, I have to be able to switch gears seamlessly to another computer. That is why I have external hard drives hooked up to my desktop and laptop, both running backup software. Computers don’t last forever -this system has made my life effortless for many years now.

How does this tie into real estate? Well, I print and scan all my receipts, tax documents, pay stubs, and interesting articles to PDF. With memory so cheap, that means I have years worth of data at my fingertips.  Searchable data. And given how complicated it is to apply for a mortgage, that information was incredibly useful when we bought our 4BR in February. I had to dig back to my husband’s 2006 compensation history to prove he had received a bonus (note to self: Thanksgiving is a great time to buy a place because nobody is looking to buy, but it’s a horrible time to get a mortgage because you don’t have income tax returns for that year).

Just like you want to be prepared financially for lean times, you also want to cover yourself data-wise. For $105, the peace of mind is worth it.

That’s a tough one. I have rarely felt the levels of highs and lows that I experienced when I was selling my 2BR, and it took less than a month. Since the average unit is on the market for 88 days before it sells (and that is just for the 34% of units that sell) then when is it time to worry and bring in the bigger guns? And what if the bigger guns don’t work either?

When I first listed my 2BR FSBO, I did it on a lark because I figured we weren’t in a rush to sell, wanted to wait for our #, and could list with a realtor when/if we became serious about selling (ie. found a place to buy). Well, guess what? The realtor was totally ineffective! That blew my mind since it was the opposite of what I expected.

I don’t mean he didn’t try. He was very professional, gave me a realistic sale price, sent me pages of good comparables, set up the MLS listing and endless showings. And none of it worked. The feedback we got was overwhelmingly negative, and resulted in no offers.

The reason why I was able to sell FSBO was because all the buyers who came to see my unit were effectively coming for their second showing (their first being my FSBO website). It was incredibly nervewracking because I was getting so little contact via email and phone. But when I checked my website stats, I found lots of traffic from my Craigslist ads. What was happening was that all those buyers who would have come for a showing under a traditional arrangement and then disappeared were doing it via my website. Even though it stressed me out, I would rather have them disappear into the ether than waste my time, their time, and the realtor’s time with a wasted showing.

The other issue was that I felt the realtor was not adequately screening potential buyers. Why bother bringing someone over who is freaked by the location? I felt like the realtors were trying to show my unit to anyone with a pulse because that way they could get a sense of what the buyer really wanted to try to sell him/her one of their other listings. So the showings benefitted the realtor, not me.

All I can say is keep trying, and try to reach the right audience. What I found with my FSBO sale of my 2BR was that both my offers came from buyers who had friends in my building (and thus had already been in the building). I printed glossy postcards and left them in the lobby, plus gave them to friends. I also planned to post flyers on Washington Street since people who already live in Hoboken tend not to be as bothered by the location as out-of-towners.

Keep looking for ways to improve your marketing based on feedback, and keep trying! It may take months (and probably will) but eventually you will meet up with the right buyer. You just have to keep telling yourself that every time you get stressed about never selling.