Not a fancy topic but an important one! If you own a home/or want to own home in Philadelphia or the Suburbs pay attention.
Older homes in this area were built with cast iron sewer and drain lines. If you look in an unfinished basement they are usually the two large pipes riding along the bottom of the wall. Why are these important? Basically what they do is one carries out your rain water and the other carries out your sewage and used water. These pipes run throughout your house in areas you may not be able to see them and out to the street. You may even have PVC exposed piping then at the walls there is a black coupling which connects to cast iron once you get in the wall. I rarely have seen a home without some cast iron in it.
You are responsible for those pipes out to the street!
If you have these pipes in your house they are most likely decades old. Unless they have been properly maintained they are probably deteriorating even where you cannot see. These are usually one of the ticking time bombs I see when showing homes, buying homes myself, or going over inspection reports. They can be tens of thousands to replace. Think if these pipes run from the back to the street outside your house what you would have to tear up to get to these pipes and replace them. If outside your yard/sidewalk is getting torn up. I had a client who told me in the past had dealt with this issue. The pipes ran under their den which had to get torn up, then the concrete floor of the den, all in they said it was a 30k expense. If you do not have the necessary insurance you most likely will not be covered by general home insurance. Usually I hear the expense is 10-15k to replace them but it could be more.
The picture on the left is the back of a basement where PVC pipes have been connected to the cast iron pipes. On the right is a split cast iron pipe which can be patched but will need to be replace eventually. These are from an inspection report of a home I almost bought.
How can we fix the pipe issue?
Not everyone has 10-15k or more to go and replace pipes after buying a house. When I originally bought my first house I had a really hard time finding anyone to insure these pipes for me. I got a rider from Erie Insurance which is additional insurance and only covers me I believe up to 10 or 15k in the even these need to be fixed. It is raised my insurance a lot also.
A new insurance however come to market a few years ago called American Water Resources. From talking with them they informed me they will insure the pipes for an unlimited amount. So if the pipes rupture and it costs 30k to replace them it will be covered. There are two different plans on to cover the drain and sewer line.
The water and sewer line protection together is only 7.98! I think that is an amazing deal which removes the burden of worrying about when these pipes will go. When I bought my first house this insurance didn't exist and I called 20 different companies trying to insure them.
Here is the link below to the plans (just make sure you put in your specific zip code):
I always think insurance and inspection are the two best ways to spend money! These repairs happen but they can be small problems when you have the right insurance.
One of the great things offered to home owners in Philadelphia is the Homestead Exemption. This is only offered to people who own their primary residence in the city limits of Philadelphia. If you own an investment property this one is not for you.
The exemption itself allows you to reduce your tax assessment by $45,000. Your tax assessment is the value the county deems your home to be worth. They then have a millage rate which varies per county and using those two numbers arrive at your tax bill.
Once you apply for the Homestead Exemption you never have to apply again as long as you continue to live there.
The below is info that can be found on the Philadelphia housing website:
The above application can be found by going to the below link. https://www.phila.gov/media/20191220150105/Homestead-Exemption-application-2020-English.pdf
It is really easy to fill out the only portion people get caught on is the OPA number. An OPA number is Office of Property Assessment number. An it can be found by going to this link:
All you have to do is put in your property address and your OPA number will come up.
Simple as that. So if you live in a home that you own start saving today!
As America is in our 4th week of quarantine I have been getting a ton of questions lately on the state of the real estate market. Are people still buying and selling? How are people buying and selling? What do we expect to see when the shutdown ends? I'll answer all these in the below and more.
It is no question that the economy is being affected from the current government shutdown to curve the Covid-19 pandemic. Thursday March 19, 2020 Pennsylvania Governor Tom Wolf ordered all non-life-sustaining businesses in the State of Pennsylvania to close which includes most real estate services.
How is this affecting Pennsylvania real estate?
All in person real estate services ie: touring clients through homes, in person listing/buying consultations, open houses, and any other face to face service has ceased until further notice. In addition closings will not be happening at real estate offices anymore. Closings are being held remotely which is a welcomed change in the industry and should make life easier moving forward.
How is this affecting the Pennsylvania real estate market?
New listings and new under contract homes have gone down this April compared to last April. Many people believe this is a temporary issue and are waiting to list until after this is over. Spring is one of the best times to list your home on the market. The urge to buy has not wavered. People are increasingly looking to buy and sell as we get deeper into Spring.
The Opportunity for Sellers -
We have seen incredible price increases in properties of the past several years. The market has been very competitive for buyers. While demand remains high for new listings, inventory is lower compared to last year at this time. For sellers who are listing now your competition is greatly lower than in normal Spring markets! The urge to buy is still high so capitalize on this opportunity while it lasts! I will later touch on how sellers are listing their homes today and what has changed.
The Opportunity for Buyers -
"Be fearful where people are greedy and greedy where people are fearful" - Warren Buffet. There is always opportunity in any market and there are some great ones for buyers in this current market. The Spring market is one of the hottest, which I touched on earlier usually we see multiple offers on listings, bidding wars, and homes going quickly. I was seeing that this Winter which had been uncommon. Which to me indicated this Spring was going to be extremely competitive for people trying to buy a home.
Since buyers cannot tour homes right now people are waiting until they can tour homes to begin putting in offers. There are great homes on the market right now that people can make offers on without competition, getting bid up, and running into having to make concessions they normally would have to make. I will touch on how buyers are doing this later.
What we expect to see after quarantine ends -
As I said earlier the urge to buy and sell is still as it would be in any Spring market and seems to be growing each year. Once the government shutdown is ended we expect to see a surge of tours, multiple offer situations, and properties getting bid up.
How are buyers still making offers?
People still need to sell homes and move, buyers are taking advantage! Buyers know that their dream home won't wait for them and are making offers sight unseen which I know seems crazy but it is not the typical sight unseen offer. These contingencies make things safer for buyers.
30 day inspection contingency
An inspection contingency is a window of time that allows the client to bring an inspector in and learn more about the home. This protects the buyer and allows them to negotiate repairs or back out of the deal. Usually this is a 5-10 day window. However clients are doing 30 day inspection contingencies so that once the shutdown is lifted they have the opportunity to see the home and make sure there are no surprises.
PAR (Pennsylvania Association of Realtors) COVID-19 Form
"This form allows the buyer and seller to agree that in the event performance becomes impossible or impractical either party can unilaterally invoke an automatic extension of all deadlines (the default is 30 days) that have not yet passed, including the settlement date. This form is basically a pause button. It gives the parties a set time to figure out a backup plan without being under the gun with immediate deadlines, but it doesn’t change anything else in the agreement". - PAR.Org
Buyers and sellers still have to make a good faith effort to close on time!
It is a great resource for buyers along with the CTA which is a change in terms addendum. Both will cover most changes that would need to be made.
How are Sellers still listing properties?
Video Tours - Video tours are not new but are definitely now a vital part of listing properties today. Since clients cannot tour properties right now video tours do a great job of capturing most of what you would want to know about a property.
Virtual Tours - allow clients to virtually walk through a property online and something I think will be the standard for every property in the future. It even allows you to measure walls and floors. This is great because for anyone looking at homes often times pictures can make tiny rooms look huge. The How Group's Jacci Neerland utilized this for Her listing check it out below:
Click for Virtual Tour of 800 Belmont Ave
FaceTime tours - We may not be able to do in person tours but sellers can walk people through their homes over FaceTime.
Prerecorded open houses - Agents are prerecording tours through homes and posting them on Facebook/Instagram live while answering guests questions over the internet.
If you have any questions about buying or selling in this market get in touch with me @ 484-620-7798 / Matt.firstname.lastname@example.org / or you can go to the contact form and I will reach out to you!
The cost of living is one of our largest expenses! So why pay more than you have too? Many people are paying more for rent than what they would if they owned the same house that they lived in. I know a landlord who had the same tenant for decades and said they could own that house now with all of the rent that they had paid.
What is renting good for?
- Living somewhere for under a year
-No maintenance to worry about
Negatives of renting:
-You are most likely paying more than the mortgage + taxes + insurance would be
-You cannot make the house your own and redo a kitchen or bathroom if you would like to.
-If you want a pet it can drastically limit where you can live.
-You have a landlord some can be great some can be really pieces of work. So this one depends on your situation.
-You are paying someone else's mortgage
Positives of buying:
- You have an asset that will be paid off one day.
-You are gaining equity (the % of property you own) every time you pay your mortgage.
-You can choose to rent out the rooms and live rent free.
-If you want a pet that choice is yours.
-The home is yours to make your own, do projects, redo a kitchen or bathroom.
-Get to deduct the interest on your mortgage from your taxes!
-The home will appreciate (go up in value) as you own it (based off Philadelphia appreciation values).
-If you choose to move you can keep it as a rental and have an extra income stream.
-If you rent it out it could be part of your income when retired.
-If you choose to move you can sell and hopefully you did some work while you lived there or it appreciated. Now you can collect a nice check for living somewhere instead of renting.
Negatives of buying:
-Higher barrier to entry - need to put more money down
-You are the one responsible for maintenance
High barrier to entry - by using an FHA Loan putting 3.5% down and a seller's asset the barrier is not that much higher.
Maintenance - I have done most of the maintenance myself except fixing appliances. Doing the maintenance on most things can be fun projects and you gain a new skill. On appliances you really need a technician. These can be $250.00 costs to fix it. Or I paid $140 for someone to diagnose a problem with a fridge and found it was better just to replace it. I had to spend another $600.00 on that fridge. So the maintenance can be expensive and hopefully with the monthly payment money saved from buying instead of renting that will be saved as reserves.
More responsibility - The only area I have found owning a home to be more responsibility is in regard to maintenance. But in the places I have rented it usually resulted in me calling the landlord and waiting for him to send someone out. Then I usually fixed it. Now I just call a contractor. Same process different person.
Real world scenario:
Buyer Bob decides he is going to buy a property on the same street where Renter Rick is going to rent (I know the names are corny but it helps me from mixing the two up.)
(These numbers are based off real market properties. I have worked with buyers on this street as well as rented a home on this street).
I almost forgot to mention the rent difference over 5 years!
Bob spent 1350/mo while Rick spent 1750/mo.
(400/mo x 12 months) x 5 years = That is 24,000 over 5 years! There is Bob's renovation money he spent and then some.
If Bob chose to house hack and rent the other two rooms for 500 each. He paid 350/mo.
1750 - 350 = 1400
(1400 x 12) x 5 = 84,000 (before taxes).
The point is that on the left there is a lot of options Bob can choose from. He can choose to live alone or with roommates and reduce his rent (house hacking).
When Bob moves he can sell or rent!
Then the profit from that sale or rent gives him more options.
Rick has the option of paying rent that's it.
I know it seems almost incredulous that this is the gap of renting vs buying but it is real. Buying gives you options which usually people think it ties you down to one place. These are small differences in how you choose to lead your day to day life that can lead to incredible results.