West Essex Neighborhoods and Homes: Brian McCabe (Coldwell Banker Residential Brokerage)

I've always thought that Montclair had a certain mystique. I've lived in and around Montclair for all of my 60+ years, and I'm amazed at how so many people, from so many places, speak so fondly of Montclair.

However, recently I locked horns with a Montclair skeptic. He was interested in buying a home in the west Essex area, but said he thought that Montclair's reputation was undeserved. A scuffle ensued...not really...but I took what he said as a challenge to prove him wrong. So, using a residential real estate valuation system that I developed called Game Changer, I put together some information that blew both me, and him, away.

My goal was to prove that Montclair's mystique influenced how home buyers spent their money. In order to make the information meaningful, I needed a trial horse so I compared Montclair with West Caldwell, and I did so for two reasons: West Caldwell, like Montclair, is a wonderful place to live, and I happened to have West Caldwell data on hand.

Now, on to the results...
Everyone who sells or buys a house comes face-to-face with Original List Price (OLP)...the price that's floated by sellers to start the marketing process. Sellers hope to get it, and buyers hope they don't. So, why are OLPs important? Well, standing alone they aren't, but when paired with sales prices (SPs), they tell us a lot about how much buyer activity there is in a market. Consider the following table, which reports sales that took place at original list price or more (OLP+) in West Caldwell from 2006 to 2009.

The highest percent of OLP+ sales (25% and 26%) took place when there were more buyers in the market than there are now (great days, weren't they?), many of whom made offers on the same properties. When that happened, sellers had little reason to discount their prices, which led to higher percentages of sales at OLP+.

Well, things are a lot different now, but OLP+ sales didn't go away; they just became less frequent, as is evidenced by 2009, when 20% of sales were at OLP+. We'll revisit this information when we compare it to Montclair's OLP+ sales, but, before we do, take a look at the following table. It uses price-points to analyze homes sold in both West Caldwell and Montclair in 2009. (Price points are a hallmark of Game Changer's market evaluations.)

The table includes all single-family detached homes in both markets, and it divides the prices paid into 20 price points.

It came as no surprise that the Montclair market was far more active than the West Caldwell market; after all, Montclair is a larger town. What was surprising, however, was that while there was virtually no market in West Caldwell for homes priced above $680,000, Montclair had 96 sales above $680,000, 37 of which took place at $920,000 or more!

Okay, here comes the first test of whether Montclair's mystique influences how buyers spent their money. The West Caldwell table (below) is a reprise of the one you just saw. The second table is new. It shows Montclair's OLP+ sales.

During the comparatively slow market of 2009, 31% of Montclair buyers paid sellers their OLP or more, compared with 20% in West Caldwell. Better yet, back in the rarified air of 2006/2007, more than half of Montclair's buyers did so. Hmmm, sure looks like something "mystique-ish" is going on, doesn't it?

You probably saw this coming. The following table combines the OLP+ information with the price points of sold houses. Specifically, the table shows the percentage of sales in a price point that took place at OLP+. This is a really big deal, because a higher percentage of OLP+ sales in a price point means that multiple buyers want the same homes.

Yellow highlights indicate that 25% or more of a price point's sales took place at OLP+.

Take note of Montclair's $600,000 - $640,000 price point. Isn't it remarkable that 69% of sales took place at OLP or more?

The nice thing about this is that it makes sense.
More buyers means more demand, and more demand means firmer prices. The same logic works on the flip side, as well. Fewer buyers means weaker prices. Clearly, information like this...broken out by price point...has great currency for both sellers who don't want to leave money on the table, and buyers who want a deal.

One more fact confirms Montclair's special attraction to home buyers. In fact, it's something that both West Caldwell and Montclair have in common, and it has to do with the speed with which deals get done...specifically, sales that took place in 60 or fewer days.

In West Caldwell's case, all the sales that took place at OLP+ did so in 60 or fewer days (only the percent is shown). Eighty-eight percent sold that fast in Montclair. However, the differences between the towns are noteworthy: because Montclair is a larger town than West Caldwell, the tendency of buyers in Montclair to pay more is confirmed by volume; and, the willingness to pay more is spread across an incredibly wide range of price points...from under $200,000 to many millions of dollars.

So, is Montclair's mystique justified? I sure think so, and so does our skeptic...now. So, for all you Montclair enthusiasts out there, isn't it nice to know that your beliefs are supported by facts?

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Brian McCabe spent 25 years in the magazine business. His associations included Woman's Day, Redbook, New York Magazine and The Reader's Digest. For 12 years he was a principal of Ferret/New Media, Inc., an advertising and sales promotion agency specializing in private banking, media and technology. He is currently a licensed Realtor with Coldwell Banker Residential Brokerage in Caldwell, and his company, Ferret Properties, is rolling out Game Changer^®, a residential real estate market evaluation program.

Game Changer^® is an MLS-based, price-point focused, market information system.
It uses the flow of money, time and inventory to analyze residential real estate markets, uncover opportunities for buyers and sellers, and meet client objectives. Use the links on the right to see more Game Changer examples, and be sure to subscribe to my blog in order to watch the game change.

Everyone knows the odds on a coin-toss. It's 50% forheads, and 50% for tails. But what if there was a third possibility? Like the coin landing on it's edge. That would change the odds, for sure! So it is with active listings and sold listings...two sides of the same coin...except in this case there is a third possibility: expired listings.

The chart to the right shows just how significant expired listings were in West Caldwell in 2009. The first figure in the value label is the number of listings and the second is the percent of all listings.

With there being so many expired listings, it's interesting that some Realtors argue that they don't really reflect what's going on in the market, because the homeowners aren't sufficiently motivated.

My belief is that not only do expired listing reflect the current state of the market, they also inform how best to sell houses in the market. Take the following table, for example. On both the West Caldwell and Montclair sides of the ledger, the number of expired listings is consistently distributed across the price points that the towns have in common, irrespective of price point sales volume.

However, the one huge difference between the towns is the ratio of expired listings to sold listings. For West Caldwell it's about 60/40 (sold vs. expire), and it's about 75/25 for Montclair. That variance is directly related to buyer demand. One of the things it means is that a listing which sold in Montclair might very well have expired in West Caldwell.

But I think the most telling and useful information about expired listings comes from the following 2 charts, and their accompanying discount tables. They compare the differences between Original List Prices and List Prices for listings that sold and for those that expired. The following chart notes will walk you through the charts:

• The two charts compare original list prices to list prices for both sold and expired listings.
• Market price range is on the vertical axis: All listings that sold or expired in the 24 months ending June 30, 2010 had prices that fell into a range from ranged between $380,000 - $730,000.
• The horizontal axis shows price points as defined by percentiles: For example, houses priced at the 80^th percentile are higher in price than 80% of the other sold or expired listings. A house at the 20^th percentile is lower in price than 80% of the sold or expired listings.

The charts uncovered 3 significant things:

1. Expired listings are more likely to be higher priced.
2. The spread between OLP and LP for expired listings is more than for sold listings. This is the 800-pound gorilla in the closet, because the greatest amount of buyer interest and activity takes place during the first couple of weeks of marketing. If a house's OLP is too high, buyers and agents will not show up and the homeowner, along with his or her agent, will be on the slippery slope to expired-ville.
3. Regarding the idea that homeowners of expired listings weren't sufficiently motivated to sell, the chart of expired listings dispels it. The reason is that unmotivated sellers wouldn't bother with serious adjustments to their OLPs if they were content to let their listings expire. My personal belief is that what starts out as a trial balloon pricing...let's see if someone will pay more than market value...takes on a life of its own. And, by the time adjustments are made, the market has moved on.

One last thought about expired listings. As it is with most all Game Changer^© calculations, real estate markets behave differently. Those differences have a way of becoming opportunities. Finding them is what Game Changer is all about.

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Interested in west Essex County, NJ, or surrounding towns in Morris and Passaic Counties? Game Changer knows things you should know...things like where deals are, and how to get asking price. But there's a risk? The risk is that you don't reach out to me because you think Game Change is a bunch of hype. If that's you, subscribe to my blog right now so you can see for yourself that Game Changer is the real and that I am, too. Then contact me.

However, if time isn't on your side then drop the dime and let's talk. It's important.

Game Changer^® is an MLS-based, price-point focused, market information system.
It uses the flow of money, time and inventory to analyze residential real estate markets, uncover opportunities for buyers and sellers, and meet client objectives. Use the links on the right to see more Game Changer examples, and be sure to subscribe to my blog in order to watch the game change.

You have 100 cases of Pampers in the back room, and sales volume is 10 cases per week. Einstein you don't have to be to figure that it will take about 10 weeks to use up the inventory. Similar math is used in the real estate business: 10 houses are for sale and the market absorbs one house per month. Therefore, it will take 10 months to sell the inventory of houses. Data like this is useful when comparing markets.

What it isn't useful for is giving homeowners reasonable estimates on how long it will take to sell their homes. This is because the data fails to include essential information...information that the Game Changer model is built on.

The first two items to get entered into the Game Changer system are the price point of the seller's house and the seller's desired time to sale. The next entry is an appropriate date range that will identify sales in the seller's price point. A date range should be selected that is broad enough to find a reasonable number of sales in the price point and, at the same time, is reflective of current market conditions. For demonstration purposes the second half of 2009 was selected. Once those three items have been entered, the estimate is prepared. 

Seven houses in the seller's price point sold during the 6 months ending 12/31/2010. Rather than being interested in all 7 houses, our focus will be on that sold in 3 months or less; there were 6. Finally, there were 6 active listings (plus the seller's listing) in the seller's price point; they represent the competition. Put it all together and a sale within 3 months is a mathematical certainty (100%). This is because there were 6 benchmark houses in the seller's price point...all of which sold in 3 months or less...and there are 6 active listings in the same price point. It's reasonable, then, that the market should be able to absorb the active listings, as it did the benchmark houses.

This above example lays out very favorable market conditions for a seller. Obviously, not all price points are so favorable, as the following example shows:

 In this case, there is only a 40% chance of meeting the 3 month sales goal, because of a high inventory of competitive houses. The math works like this: there were 4 benchmark houses that sold in 3 months or less. Because of that recent history, the assumption is that the market will absorb 4 of the 10 listings (40%). So, for our seller to meet his sale objective of 3 months, his house must be one of those 4. With that understanding, a solid plan can be developed that will give the seller a good chance to get her house sold within 3 months.

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Interested in west Essex County, NJ, or surrounding towns in Morris and Passaic Counties? Game Changer knows things you should know...things like where deals are, and how to get asking price. But there's a risk? The risk is that you don't reach out to me because you think Game Change is a bunch of hype. If that's you, subscribe to my blog right now so you can see for yourself that Game Changer is the real and that I am, too. Then contact me.

However, if time isn't on your side then drop the dime and let's talk. It's important.

I came across this while browsing around the ActiveRain site:

"The quieter you become the more you hear." 

Posted by Lou Ludwig of Boca Raton, Florida, the quote caused me to recall a business training initiative on effective listeniing which became a core element of Xerox Corporation's business skills training program. In an article entitled Xerox U (Time/CNN) reported, "Since it set up its industrial-education program in 1965, the Xerox Corp. of Rochester has cranked up sales of crisp courses in business skills to 20,000 a month. Currently boasting three short (up to three days) courses that include drills on sales and problem-solving techniques as well as 'effective listening,' the program has drawn more than 500,000 students from such companies as Pfizer, General Electric, Burlington Industries and Eastern Airlines." So, effective listening is clearly a  big deal and Lou's quote, "The quieter you become the more you hear," is an elequent expression of it.

I think that the first step towards effective listening is valuing silence as an important part of a client relationship. Dead air does not have to be filled with my words.  Rather, the silence should be allowed to act as a vacuum to be filled with our clients' information...information that will help us serve them better.

Consultant Germaine Knapp, president of Wordsmart Inc., a consulting and training firm in Rochester, N.Y. notes: "Effective listening--we call it power listening--is one of the strongest assets in professional life today.  Too few of us take advantage of it, but all of us could. There are dozens of field-proven techniques and tactics for applying the power of listening, and they get results."

The second step is realizing that, as realtors, we exist only to help our clients reach their goals...and to do that we have listen.

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From the
Coldwell Banker Residential Brokerage
Market Watch Newsletter...

Two months ago, 60% of homebuyers were first-time buyers. Last month, 60% were repeat buyers showing that more homeowners are moving up. As the first-time buyers with the $8,000 tax credit incentive bought the starter homes, more sellers could move up to a new, larger home. Today's environment with lower prices is the perfect model for "moving up".

Selling High and Buying Higher

The fast moving days of 2004-2005 actually were not the best time for buyers. There was a sharp increase in home prices and although there was low inventory giving rise to those increases, a significant number of homes were sold. Sellers were selling high and buying higher as prices spiked up.

We know that this is a great market for first time home buyers, but...

Is this a move-up market?

You bet it is and here's why. If a homeowner wants to move from a townhouse or condo to a larger home, many are concerned their current home is not at the value it was a few years ago. Because all properties in the area have depreciated by the same percentage, there is a monetary advantage in moving up now. Assume a home was valued at $250,000 and then depreciated by 20%, leaving a current value of $200,000. A previously valued $500,000 home at 20% less is now $400,000. A homeowner would sell their home for $50,000 less than its high value, but could buy the larger home for $100,000 less, giving that homeowner a $50,000 positive increase.

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©2002-2009 Coldwell Banker Residential Brokerage. All Rights Reserved.

Ten years ago my wife, Linda, and I decided to do a major remodeling job on our home. We added more square feet of living space and moved the kitchen and one of the baths.  It was a big job.  The result of our efforts and investment was...and remains...the best thing we ever did.  So, what does this have to do with buying a first home or any other home, you ask?  It has to do with the clues one can look for to help in assessing the quality of a house and your potential home. 

As you probably know, building code officials need to approve the remodeling work that is done on a house including the framing, electrical and plumbing systems, fire alarm systems, etc.  With the help of our general contractor we selected subcontractors who were well known for the quality of their work.  In fact, it was common for inspectors to say things like, "This is Bob Stavella's work, isn't it?"  In other words, Bob Stavella had earned a reputation for doing outstanding electrical work, which not only made electrical inspections go more smoothly, it gave Linda and me a warm and fuzzy feeling knowing that we hired the best. 

Okay, you are out house hunting.  You step into a house for the first time and it's spotless.  It is very clear from what you see that the people who live there possess a deep affection for the house.  Then you descend into the basement and your eyes are drawn to the heating and plumbing system.  You are blown away.  Even if you don't know a whit about heating and plumbing you know you are viewing the work of a master.  In fact, if the house is in my neighborhood, you might be looking at the work of a master plumber and friend named Don Dowling, owner of Don Dowling Plumbing and Heating.  Here are some images that tell Don's story a lot better than I could. 

Pretty good, huh?  Could you confidently buy this house assuming it had the other things you were looking for?  You bet, you could and the reason is that quality in a home is viral.  It tends to spread from one system to another and from one room and floor to another.  Now, the chances are that you won't see too much work that looks like Don Dowling's, but you should be on the lookout for clues that signal quality even if it doesn't rise to the level of art. 

But, alas, many houses you will see in your search...especially a search for a first home...will have some glaring deficiencies.  Even if the house has been well cared for, the baths need redoing, the kitchen looks like it's out of a 50's sitcom, and the boiler prompts a quick look for a coal chute.  These are deals, but they are not necessarily big deals.  The key is to know what you are getting into and that's where I can help.  As a former developer and rehab contractor I have seen it all and have transformed some pretty ghastly structures into some very good homes.  I'll use that experience to help you navigate around some big deal issues that you probably don't want to tackle.  Your home inspection service (using one is an absolute must) will do the rest. 

So, you see a bunch of houses and finally buy one that you really love at a price that you love even more, because it needs some work.  Now what?  My recommendation is to hire the best contractors that you can, because it will be their work that potential buyers will see when you are ready to move to your second dream house. 

By the way, you can reach Don Dowling at (973) 228-7400.  He does wonderful work in my neighborhood.  Tell him McCabe sent you.

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There are those who will say that realtors don't make a difference and I'm not going to engage that debate except to make one point; if a realtor only facilitates the paperwork-intensive process of buying or selling property, that's a good and valuable thing.  That said, I believe, as do many of the realtors I know, that buyers have a right to expect more than that, and I suspect you do, too.

Of course, the big question is: how one can know what an individual realtor brings to the table?  In that regard the Web has made a huge impact.  For example, I spend a great deal of time, money and energy putting as much information as I can on the Web so that buyers can pretty much make a decision about me before we ever meet.  You'll find that information on my blog (www.westessexneighborhoods.com), as well as on my Web site (www.wessex-homes.com). 

The Web also enables you to see the same listings I do.  As a realtor I see more information than you do but what you see sure is useful.  I can't speak for other realtors, but I think that buyer access to this kind of information is a benefit to all concerned, and especially to first-time home buyers.  A first time buyer can identify favored home styles (ranches, capes, etc.), the must haves and the nice to haves, and what areas and towns make sense.  What online listings don't tell you, however, can make a big difference.  For example, a good realtor will tell you about the potential costly impact of a recently conducted town-wide revaluation.  Online listings also won't tell you about the oft-experienced difficulties in closing short sales.  And here's one.  I buyer showed me a new listing that seemed to meet his needs and the he wanted to see it.  What he didn't know was that the house had been on the market for over a year prior to being re-listed.  The point is that realtors can give you more information with which to work and some of that information has to do with the special knowledge that the realtor has accumulate over the years.

My special knowledge derives from my experience as a real estate investor, where I bought, rehabbed and sold formerly distressed houses.  Some purchases were conventional and some where short sales, which I negotiated.  All were adventures, especially those that had been abandoned.  What I learned with the help of some very knowledgeable contractors, was how to spot serious problems, how to modify floors plans in order to increase value, the cost of modifications and how to work with city officials.

This kind of knowledge is especially relevant to first time home buyers because lower priced houses sometimes have issues that more expensive home might not have.  Having an advisor nearby is real benefit but, as I always point out, every buyer should arrange for a home inspection. 

In short, I do not believe that I should try to direct or unduly influence a buyer's decision.  What I do believe is that I should help the buyer process and evaluate of a lot of information and, where I have special knowledge, offer to share it. 

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Note:  It is forbidden for any realtor to offer legal advice . 

I think many home buyers underestimate the importance of the area that surrounds the house they are considering. That includes the block, neighborhood, town, the surrounding towns and even the region.  That isn't to say that buyers ignore these things. Rather, I think the surrounding area should be weighted more heavily in the decision.  That is why I love living and doing business in the western-most towns of Essex County, NJ. 

It helps, of course, to have a love affair with NYC, which I unashamedly have (NYC is only 15 miles to the east), but the area also stands on its own as a wonderful place to live and raise a family.  In fact, that core idea is the reason I launched my Web site called West Essex County Neighborhoods and Homes (www.wessex-home.com).  From the home page:

Welcome to My Neighborhood
My name is Brian McCabe. Over the years I have sunk some pretty deep roots in Essex County. At one time or another, I've lived in Belleville, Nutley, Glen Ridge, East Orange and Montclair and I currently live in the Caldwells. For the past few years, I have purchased and rehabbed single- and multi-family houses in Newark, Irvington and East Orange. Now, as a realtor in the Caldwell office of Coldwell Banker Residential Brokerage, I want to share with you what I know about Essex County and help you find your dream house in this incredibly diverse and dynamic neighborhood.

Don't be under any false illusions.
You will not get a fair and balanced point of view from me because I could be New Jersey's biggest cheerleader. I love the towns, houses, restaurants, shopping, parks, mountains, road-side vegetable stands, the Jersey shore, seafood, the Giants, Jets, Nets, Devils and Essex County.

I love Essex County because of its rich mix of urban and suburban neighborhoods...and even a working farm or two...combined with its proximity to the greatest city in the world, New York City. So that's why I've made New Jersey and Essex County my home and they may be some of the same reasons that influence you to do so, as well.
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Please accept my invitation to visit my wsb site at www.wessex-homes.com where you will get a hefty dose of geographic bias (did you expect anything less?). 

When you think about buying your first home, think about your first love. 

Remember how all consuming it was, and how difficult it was trying to concentrate on anything else?  It was bliss...wonderful, obsessive bliss.  But, if your experience was similar to mine, the people who cared about you cautioned against moving too fast.  "Date more people," they advised, and they were probably right.  Not to say that your first love couldn't have resulted in a lifetime of happiness, but experience is a very capable teacher.

So it is with your search for your first home.  Don't fall in love too fast.  Really think it through and don't hesitate to ask for the advice of friends and family and, of course, your realtor.  But most importantly, look at a sufficient number of houses so that you can feel comfortable with your selection.  And remember, the choice of a house also includes the choice of a block, a neighborhood, a town and an area.  My Web site, www.wessex-homes,com, covers the west Essex County neighborhood, an area comprising eight towns...Caldwell, North Caldwell, West Caldwell, Roseland, Essex Fells, Verona and Cedar Grove...each one a great town in which to live.

Now, were you to ask me how many houses you should look at, I would say that only you can answer that question.  Actually, there's a well-known saying about pornography that informs the house hunting process: it's tough to define pornography, but you know it when you see it.  In other words, you'll know when you have seen enough houses.  That said, I would caution against allowing external factors to play too much of a role in your decision-making.  For example, suppose a good buy comes on the market...one that's likely to sell fast.  Your realtor will most likely tell you that, but there are two ways that the message could be delivered. 

1. The High Pressure Way: This is a great house.  If you don't act now you are going to lose it. 
2. The Informative Way: This is a great house and it should sell fast.  If you think it's the right house for you, consider making an offer, but do so only because it's the right house for you. 

Which style of communication makes you feel most comfortable? 

That brings us around to the role that a realtor should play in your search for a first home.  If we were working together, I would want you to see me as a guide, a consultant, a set of experienced eyes, a financial advisor, an advocate and a watchdog.  While that may seem like a lot of hats to wear, it's really only one hat: the hat of someone who will do what's necessary to make the purchase of your first home a memorable and joyful experience. So, as you engage the process of buying your first home, be in the moment.  You'll only have it once.

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If you use wire transfers from time to time as I do, getting an email stating something like this is not completely unlikely:

"The money transfer you have sent on the 20th of April was not collected by the recipient. Due to the Western Union regulation the transfers which are not collected in 30 business days are to be returned to sender. To collect cash you need to print the invoice attached to this mail and visit the nearest Western Union branch."

I have learned never to open a document from an unknown source so I did not "print the invoice attached".  Had I done so, here is what would have happened according to http://fraudo.com/2009/05/21/western-union-uncollected-money/:

"The email has an attachment that is supposed to be an invoice. Instead the attachment infects your PC with a virus that waits for you to use internet banking then steals your password."

So, beware!

Brian