Seminar Series - Warren Engineering

It's official... winter is coming! Well, almost....

If you're still resisting the urge to bust out the holiday decorations and play your favorite Christmas tunes, don't worry. You won't have to wait much longer! The winter holidays are right around the corner and the Mark Siwiec Team is beginning to enjoy the brief respite brought on as the real estate market falls into its early winter slumber.

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It's during this time that I tell members of the team to take a longer lunch, skip out of the office a little early to finish last-minute holiday shopping, or take some extra time to spend with their family and friends. This year, we've decided to implement a new custom into our winter routine. Every Wednesday for the next several weeks, we've invited various professionals to come in and participate in an educational lecture series. These seminars will feature a wide range of topics from engineer's inspections to mortgages to the attorney approval process. We are always looking for ways to improve our customer service and better serve our clients, and, as is always the case, knowledge is power.

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Up first in this weekly series is Doug from Warren Engineering who spent some time answering our many questions about home inspections. This Q&A may help you out when it is that you decide to purchase your next home. Or, it may help you better understand certain mechanics that exist (or don't exist!) in your current home. Either way, we hope that you enjoy this lecture series and ascertain some useful information!

 

Warren Engineering Q&A

How has the home inspection process changed in recent years?

 

What is the purpose of an inspection?

 

What do you think is reasonable to ask of a seller after a home inspection?

 

Are there issues that buyers and sellers should expect to come up during an inspection?

"I think when you're listing a house, I always tell people- if you haven't had the furnace serviced, have it serviced. If you haven't had the chimney inspected and cleaned, have it done. Because it always comes up!"


What are some nit-picky things that buyers want you to point out during a home inspection?

  • GFI (ground fault interrupters) - these are the electrical outlets that are typically found in moist areas of your home (i.e. bathrooms, kitchens, etc.). Since created several decades ago, these have saved a lot of lives. Any home without them in potentially wet areas are technically not up to code. However, the purpose of a home inspection is NOT to bring your house up to code. Inspectors are not code-compliance officials and attest that most existing homes would never fully meet code.
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  • Grounding Electrical Services - look at some of the outlets in your home right now. Are some of them 2-prong? Do they look like this? If so, those are not technically grounded.
  • Hot Water Heater - all gas hot water heaters need to vent to the outside. If your H2O tank is 40,000 BTU or higher, the piping needs to be 4 inches in diameter. Many are 3 inches... Your tank would work just fine, but it is technically not up to code. There is also a pressure relief valve that needs to be 3.25 inches in diameter with piping that comes 3 inches off of the floor. When the measurements aren't "perfect", home inspectors have a duty to point this out. This does not automatically mean they are unsafe.

 

What are the biggest, most expensive issues that can come up during an inspection?

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  • Roof Issues - by far the most expensive and essential aspect of a home. 
  • Foundation Issues - hairline cracks are not usually a big deal. Larger, gaping cracks can indicate an unstable foundation. Vertical cracks are due to downward movement and settlement. Horizontal cracks, on the other hand, are indicative of a problem on the ground (i.e. water).

FAQ - Should I rent my property?

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In many ways, October is one of my favorite months of the year - crunchy, vibrant colored leaves under your feet, warm Starbucks Pumpkin Spiced Lattes, and cackling witches flying through the brisk air. (That is, however, unless it's October of 2017, in which case you may still be sporting sunglasses and a tank top...) Either way, this is the time of year when I finally get to pop my head above water, catch my breath, and begin the process of settling in for the colder weather to come. 

Unfortunately, late autumn also happens to be a month in which many sellers begin to experience the pre-holiday, winter angst (and, in some cases, desperation) about the fact that they have not yet sold their property. An incredibly common question this time of year is, "What should I do?”. The standard and traditional answer is that there are four options for homeowners who find themselves in this situation (this may look familiar if you've followed our recent blogs!!).

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1. Take the house off of the market until after the first of the year.

2. Improve or renovate the property so that it's worth what it is that buyers are saying it is currently not.

3. Lower the price.

4. Rent the property.

If you read our last blog on price reductions and felt a bit nauseous, you're probably scrambling for any other viable option. From my perspective, the least intelligent and potentially most harmful of these four options is that of leasing your property to a prospective tenant. Inevitably, the exercise of renting your residence is one of doing nothing other than putting off the inevitable. 

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As you’ve probably heard numerous times by now, homeowners need to secure an offer and sell their home before the market closes down in the middle of November. Given that this is Rochester, NY, the value of a property doesn't increase tremendously over a 6-month period of time. If one is lucky, a seller may see an increase of 2% in the value of their home. This increase needs to be weighed against the prospective damage that a less-than-fastidious tenant may inflict. Stated another way, if a $200,000 property is taken off the market in October and remains tenant-occupied until April, the house may increase in value by $4,000. However, what are the costs associated with having painters come in and touch up dirty or damaged walls? What is the cost of having the carpet steam cleaned? My experience points to the fact that newly minted landlords typically spend close to $1,500 in order to bring their house back to the condition that it was in prior to tenants taking up residence. 

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When couched in these terms, most homeowners quickly come to the realization that it’s not worth renting their home for six months for the possibility of a $2,500 gain. There’s just not enough upside but there is a lot of potential downside!! Smokers come to mind, as do pets. What about evictions? One obvious expense that we haven’t touched on is the difficulty of finding a tenant to rent your home. Experienced landlords know that it’s incredibly difficult to find a tenant to rent an apartment or home from October 1st through March 1st.

In short, even under the best of circumstances, the task of finding a tenant willing to pay enough rent to cover your monthly mortgage, and, at the same time, maintain your residence without doing a lot of neglectful damage is a tough one to expedite. It’s probably best to recognize that renting your home is doing nothing other than kicking the proverbial can down the road – a road that is fraught with real, potential danger. Do yourself a favor – consider the other three options laid out as possibilities earlier in this blog and choose one. You’ll be much better off!

Sibley Square Tour

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When you hear "Sibley's", what comes to mind? Perhaps you remember stories of your grandmother popping into the Tea Room after a long day of shopping to enjoy some cucumber sandwiches. Or maybe you think back to the elaborate Christmas displays as you hustled past on your way to work. Or, it’s possible that nothing comes to mind at all, in which case, you’re much, much too young…

Established in 1868, Sibley, Lindsay & Curr was once an iconic Rochester-based company with the largest department store between New York City and Chicago. Their flagship store was originally located in the Granite Building until a devastating fire in 1904. The company then rebuilt itself at the northeast corner of East Main Street and Clinton Avenue in the building that came to be known as the Sibley Building. After incredible success, Sibley’s sold their company to May Department Stores in 1986 and the Sibley Building closed its doors to retail. As many of you know, Wilmorite’s acquisition of the building in the late 1980's resulted in a vacant building idly collecting dust while property tax bills went unpaid. Eventually, Monroe Community College chose to establish their Damon City Campus in the Sibley Building in 1991 and continued to operate there until just recently, when they relocated to a building across from Kodak Tower.

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So what's next?

The Sibley building, now referred to as Sibley Square, was acquired by WinnDevelopment five years ago for just $5M with hopes of restoring the landmark to its former glory. Before diving into any detail, you should know that Winn has already spent upwards of $100 million on this renovation, with no intention of letting up. Their plans for the building are to re-establish it as a mixed-use centerpiece for downtown. Unlike so much of downtown revitalization, Winn has remained true to their reputation and are sparing no cost or expense in making their lofty pronouncements a reality. Ken Greene, whose company, Greene RE Solutions was just assigned as the Asset Manager for the 1.1M sq ft property, was kind enough to walk us through the plans! Ken is in the process of collaborating with the broker community and a full 6% commission is available for office and commercial space!


So what does Winn plan on doing? 

In addition to mechanical and structural renovations (roof, floors, elevators, HVAC, windows, etc.), much of the revitalization of Sibley Square will focus on how to transform this incredibly large property into a place that serves the community. To do so, Sibley Square will become home to a combination of business, retail, and residential space. 

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  • Residential - Spectra at Sibley Square will soon become one of Rochester's most beautiful luxury apartments. Floors 9-12 feature over 104 apartment units, and let me tell you... they are spectacular. No expense was spared, no detail unnoticed, and the finishes are top-of-the-line. Floor to ceiling windows allow for panoramic views of the city. There's a 24-hour fitness center, a rooftop deck, media theater, onsite daycare, attached parking garage, and even an indoor pet playground. Yes, you read that correctly. A place where your furry friend can play or even get walked by a staff member. The apartments will be officially complete by year's end and at the risk of sounding hyperbolic, they may be the nicest apartments to rent in downtown Rochester... In addition, there will also be 72 affordable apartment units for the 55+ community complete by year's end.
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  • Business - The 6th floor of Sibley Square will be home to High Tech Rochester, a nonprofit organization that acts as an incubator for innovation-based development and entrepreneurship. This is where local scientists, entrepreneurs, and high-tech businesses will be able to rent office space. This floor includes what used to be the Tea Room, so Winn has made sure to carefully preserve all of the incredible historic details that helped make Sibley's so iconic (including the egg-and-dart molding pictured below!). To give you some reference, Winn spent $100,000 just to restore the ceiling! Renters on this floor will also have access to their own rooftop garden which includes a rare glimpse of the back of the Clock Tower! 
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  • Retail - Once a booming retail-driven institution of Rochester's downtown, Winn hopes to re-establish Sibley Square as a desirable epicenter for shopping and dining. With over 50,000 surrounding residents with a median income of $67,000 and an average work commute of under a half-mile from the building, there certainly appears to be a demanding demographic. Ken described plans to welcome various local restaurants and regional markets for an indoor public-market-type feel. Trendy boutiques, local eateries/bistros and art galleries are the goal for this section of the project.

In short, my team and I were incredibly fortunate to catch a glimpse into what will surely be one of Rochester's most exciting revitalizations. I look forward to seeing what Sibley Square is able to do for our city and can't wait to revisit in the very near future!

For any further questions or details, feel free to visit sibleysquareroc.com

Price Reductions

Remarkably, just two short months from now, the aisles of your local Wegmans will be filled with shopping carts bursting with succulent turkeys, decorative pumpkins, and aromatic apple pies. With the arrival of the holiday season, we say goodbye to the real estate year that has been and, we as agents, begin to focus on reclaiming our lives. The months of November and December are typically spent with family and friends, getting reacquainted with our loved ones while listening to hosts of angels singing about peace on earth.

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Yes. That all sounds wonderful – and it will be. Unfortunately, in the meantime, the fast arrival of the holiday season poses a tremendous challenge to those hoping to sell their home before the end of the year. Given the astonishingly short period of time that remains in this year's market, sellers intent on finding a buyer for their property need to focus on how, specifically, they are going to secure an offer. What strategies does one need to employ in order to transfer title before the conclusion of the year? More likely than not, the seller has done all that they need to do in order to prepare their home for market. And, if they’ve chosen the right agent, marketing strategies have been employed to drive prospective buyers to the homes that are available for sale. So, what's left?

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Unfortunately, the one quiver that remains in the arsenal of strategic options has to do with price reductions. Yes, we realize how painful this decision can be. However, holding one’s breathe while sitting on one’s hands, waiting for a buyer to come along and write an offer on your property that has been idly sitting on the market, collecting dust, probably isn’t the best strategic option. Here’s why…

First, let’s talk about sample rates. If one wants to determine who will be the next U.S. President, theoretically, he or she could ask every registered voter who it is that they intend to vote for, come Election Day. Despite that being nearly impossible, it is also the least efficient and intelligent option for determining outcomes. Instead, one could simply poll a sample of prospective enrolled voters. If a large enough sample is secured then more likely than not, you’ll have an accurate snapshot of who’s going to be the next U.S. President. In other words, you can extrapolate the data from your first sample of voters and determine, ultimately, what the entire electorate will be doing when they go to the polls.

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  • Likewise, in real estate, when you want to find out what it is that the buying public thinks about a home, it’s not necessary to ask each and every buyer that walks through, ad infinitum. Instead, you can simply rely on a sample rate of 20 prospective buyers. What it is that they say, or more accurately, however it is that they behave will remarkably forecast how it is that the next set of 20 buyers will react.

  • Another sample rate that we rely on has to do with Days on Market (DOM). Whatever it is that takes place in the first 30 days that a property is on the market for sale, you can be absolutely certain that the exact same response will play out in the ensuing 30 days. Stated another way, if during month one, buyers are reluctant to write an offer on your property, then the exact same outcome will play out in month two.
     
  • Two phenomena are at play here. The first, and most obvious is that, if buyers feel that a property is overpriced or in need of too much work (which amounts to the exact same thing given that both are related to money), they won’t write an offer, no matter how much time passes. However, the more insidious concern has to do with perception. Specifically, the longer that a property remains on the market for sale at the same list price, the more likely it is that buyers will perceive it as “damaged” or “stale”. At this point, buyers and their agents have a tendency to fill-in-the-blanks or craft stories (“Oh, that’s the property with difficult sellers…” or “That’s the home that must not be selling because of the smell of mold in the basement” …You get the point).

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For these reasons, it’s important that sellers behave in a manner that is reflective of what it is that the market is saying to them. This is the most important piece of advice to remember. And also the most difficult to swallow. Unfortunately, every 30 days that a property is on the market, sellers need to decide whether to

a) Improve the property so that it’s worth what it is that buyers are saying it is currently not

b) Rent the property (A really, really terrible idea for reasons that I will disclose in another blog…)

c) Take the property off the market

d) Reduce the price

Unfortunately, as a result of the rapid pace at which pages of the calendar are moving forward, I traditionally advise my clients not to wait a full 30 days during this time of year. A change in price is probably warranted after only 3 weeks on the market at a given price. By acknowledging reality and making the difficult decisions today, this will, almost always, result in more money in sellers’ pockets on the day of closing. The $5,000-$10,000 that you lose today is almost always less than the cost of carrying the house and making mortgage and utility payments for the next 6 months…

Market Update

If, over the course of the past six months, you've had the opportunity to speak to someone who was in the process of looking for a home to purchase, my guess is that you’ve heard a lot of rumbling and grousing about how difficult the process has been. In extreme cases, perhaps even a tear was shed or a profanity exclaimed… It’s true. The market has been tough for prospective buyers, to say the least. It turns out that second quarter statistics in Monroe County show that the number of properties on the market for sale is down a whopping 37.5% from the same period of time last year. Of course, this has greatly impacted the total sales volume and number of properties that have transferred title. That figure has fallen a full 12%.

What's remarkable about these numbers is that they exacerbate a problem that we began to experience last year. As anticipated, the local real estate market began to falter in the summer of 2016. Why? Well, every four years, Americans refrain from making large financial decisions in the months preceding a Presidential election. So, it would make sense that home-buying, one of the largest financial transactions that one makes during the course of a lifetime, would take a hit. And let’s face it – the uncertainty associated with Clinton versus Trump didn’t make things any easier. In fact, last year’s campaign encouraged more people to move to the sidelines and wait to see how things played out than we’ve experienced in elections past.

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After the election concluded, our country was suddenly focused on the Macy’s Day Parade, Sugar Plum Fairies, and weight loss resolutions. Once the New Year took hold, the pent-up desire to purchase or sell property that had been growing in the preceding six months started to begin its release. Diverging from previous markets, this year’s spring market began, in earnest, the third week of January. This may have been due to the fact that, regardless of one’s political leanings, consumers took some comfort in knowing that, yet again, the peaceful transition of power from one president to another had taken place. This particular set of circumstances helps us to understand the local real estate market during the first six months of the year. Then, everything seemed to change…
 

So why is it that the stock market is dancing with historic highs while home sellers are behaving with a lethargy not seen since 1997?

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My personal theory has to do with the fact that Wall Street, an industry obviously populated by CEOs, tech titans and other big business hot shots, have applauded our current President’s pro-business agenda and as a result, the stock market has been sent soaring upward. Main Street and residential real estate, on the other hand, are industries populated by average Americans whose personal fortunes and sentiments don’t reflect the mindset of New York's financial district. Wall Street, for the moment, seems willing to ignore some of the uncertainty emanating from Washington, hedging their bets on the fact that the President’s pro-business agenda will ultimately lead to higher profits. Ma and Pa homeowners, however, seem less willing to risk potential loss. The President’s underlying “renegade approach” to governing is concerning to many and unfortunately, perpetuates the phenomenon that began to define the real estate market beginning 12 months ago. As a result of this mindset, average Americans are either

a) Remaining in their residences or,
b) If not currently a homeowner, are looking to the safety that is traditionally associated with homeownership.

In other words, high demand and low supply.
 

So where are we headed? 

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In all honesty, for twenty six years, I've written these updates and prided myself on having a very accurate crystal ball into the future of the real estate market. Going back and rereading, I was always pleased to see that, indeed, my previous newsletters and posts were surprisingly accurate. Unfortunately, my crystal ball is now a bit foggy and I’m unable to discern where it is that the market is headed. In the short term, it looks as if the next two and half months will be very strong. Personally, my team and I are listing sixteen new houses for sale in the next two weeks. As a result of the lack of good product, we're fairly certain that these properties will sell rather immediately.

Once November 15th arrives, we will, of course, experience the traditional slow down that sets in during the holidays. That brings us to the New Year and, unfortunately, anything beyond January 15, 2018 is an uncertainty. Your guess is as good as any… That being said, my gut tells me that it won't be all doom and gloom for the real estate market. The stock market continues to do well, unemployment numbers remain low, and despite Janet Yellen's stated desire to raise interest rates, a homeowner's ability to borrow money will still remain an incentive to purchase. An enormous uncertainly remains – Donald Trump. Let's face it. The first year of most presidencies is rocky until our Commander in Chief learns to navigate the hallways of our nation's capital. If the current occupant of the White House is able to learn from his missteps or, at the very least, create a greater sense of stability in the minds of Americans, next year's real estate market could be rather spectacular. Only time will tell!