What's a Hubbard Clause?

I'm learning to play bridge, and I am often stymied by certain conventions that are named after people I don't know and that mean nothing to me.  Real estate has some similar phenomena, and one is called the Hubbard clause.  Even we don't know after whom it's named, and, for all we know, it could be Mother Hubbard!

So what is a Hubbard clause?  Basically, from the buyer's point of view, it's a kind of right of first refusal.  It means that the seller has agreed to the terms of the buyer's offer, but that the buyer doesn't have to buy unless either s/he sells his/her current home, or until another bona fide acceptable offer comes along.  At that point, the buyer can agree to lift the condition about sale of a prior property and perform, or cancel the contract.  The seller cannot take another offer, even if it's better, until the time period for the buyer's choice has passed.

Why do people use Hubbard clauses?  To be clear, I am not a big fan of them.  I think they are better for buyers than for sellers.  However, sometimes sellers like them because there is a feeling that the buyer is psychologically committed to the property, and will work diligently to perform, or even take the risk that s/he can sell the current property before the closing date, letting the Hubbard expire and taking the chance.

Buyers use them because it gives them a clear last chance to purchase, and limits the price to what has been agreed to in the sales contract.  In some cases, they may actually be able to perform without selling the first house, but the Hubbard clause gives them comfort that they won't have to have two mortgages. 

One downside for the seller is that some buyers will not look properties with Hubbard clauses, if they know about them, because they may well be wasting their time.  The agent representing them may feel even more strongly about that possibility.  Of course, the seller's inability to take a later, higher offer is an even bigger negative, which could be countered by arguing that the first offer is almost always the best offer, and s/he has that in hand, with the Hubbard clause contract.

Reasonable people can disagree about Hubbards, but everyone should know what they are.  This to me is unlike the Stayman convention, which I can say exists, but cannot explain!

Property Taxes

Your House as seen by...

Yourself

 

Your Buyer

 

Your Lender

 

Your Appraiser

 

And . . . Your County's Tax Assessor

 

 

Conflicting Information on Prices--What to Do?

Yesterday's New York Times Business Section had some very interesting articles on the current state of the real estate market.  One of them took a few homes in different parts of the country, and compared the prices each had sold for at various points over the past twenty-five years or so.  They ranged from homes that had gone up or down very little, to ones which were now above the highest earlier sale, to ones where the value had not regained its earlier level.  This was excellent data, and is measured differently from the more often cited Case-Shiller Index.  The latter index is derived from taking the entire aggregate value of real estate prices in a city or SMSA, and comparing the whole package to the entire aggregate value of sales at another point in time.  That means that you are essentially comparing apples and oranges, although the sheer volume of data would indicate that it might be a pretty good predictor of overall values.

When you look at the history of one home, however, you can clear see the effect of any given downturn or uptick on whatever owner happens to be in place at a particular time, and it's so clear that the market is driving the price up or down, because, of course, it's the exact same house.  The NYT article included pictures, which always tend to make a story more compelling.  What was missing, though, for obvious reasons, was advice about how to apply such information to a personal decision.  How could it say what to do in Connecticut, when sellers all over the country were in such disparate situations?

Perhaps the best answer to the unspoken question of what to do in today's market is to focus on the overall variety of price levels, and conclude that there is no one right answer.  Which is, in itself, good advice:  Don't try to outguess every expert and every real estate seller or buyer.  If all the experts agree, and the whole country is in the same position, you are most likely too late to cash in on the upturn.  If it seems as though results are spotty, you conversely have a better chance, if you're a buyer, of landing a home that will increase in value over the next few years.

By pointing out that similar properties can have very diverse sales outcomes, the article reminds us strongly that a home is, after all, a home.  Buy what you love.  Live there because it enhances your life.  Sell when it's time for a change.  Hope that your timing is good, but don't plan everything on a certainty you can't achieve.  Sometimes people get lucky, and sometimes they don't.  It doesn't mean that you shouldn't be happy where you live.  We don't know what the future will bring, but the present beckons--buying now is a great option if you qualify for a mortgage at current rates, and can buy at current prices.  That's all you can know, and all you really need to know to take that first step!

Mixed Signals

The latest issue of the Commercial Record illustrates our current problem for sellers and buyers.  If you look at New Haven county for June, the most recent month available, compared to the same month last year, sales are down by 12% and prices for the whole county are up by almost 6%.  If you look just at the shoreline towns and add Woodbridge, to try to capture the higher end of the market, sales are slightly up and prices are down.  Go figure. 

I guess the lesson as a whole is that we can't pay too much attention to what we read in the national press.  Connecticut is following its own, slower, path to recovery.  Our listors at the high end of the market are beginning to accept that there seems to be a ceiling on prices for luxury homes, and that no one can say what a given home is "worth".  We can predict that it won't sell for what the seller thinks it should, given what money is in the house and what the condition is, but we can't find examples that will pinpoint the exact price.  We can't even promise that it will sell at a lower price, nor can we swear that we're not "making a market" by lowering prices, causing low prices to slip lower.  What can we say?  We can tell buyers that it's a great time to buy direct waterfront, or properties over a million dollars.

In other submarkets, the picture is murkier.  The numbers of months of supply in houses has declined, and is now in the range of a balanced market.  That should mean that neither seller or buyer has an advantage.  But, depending upon where you are, and the type of house you have, you could find a bidding war or few showings, with maybe a lowball offer.  However, the only way to test the market is to put the property on at a "fair" price and see. 

There is a bump every fall, when buyers try to close and move before the end of the year, and, this season, it may tell the final tale of 2013.  Let's see what happens.  We do know this--mortgage rates, over the long run, matter much more than a few thousand dollars here or there in the sales price.  So buyers should definitely act, because interest rates have already gone up about 15% from their lowest point, and will likely rise further after the elections.  Time is fleeting--carpe diem!

What is Staging, and Why Do We Do It?

Most people do not have the ability to look at a piece of property and imagine what it would look like with different furniture, or reconfigured walls, or even simply cleaned up.  Many of them end up not buying places that would be exactly to their liking without wallpaper, or with hardwood floors.  That's how there came to be a business called "staging".

Stagers come in and work with owners to "de-clutter" rooms and rearrange furniture, as well as make cosmetic changes and accessorize the space.  Since appearance can make a big difference in the offer a buyer makes, the cost of staging is often well worth it.  When you've lived or worked somewhere a long time, you can reach the point where you don't even see the flaws in a building.  It can take an outside, objective eye to point them out and mitigate them.  Stagers sometimes even lend furniture or "props" that will enable buyers to imagine the room after redecoration, or that will make a space seem less personal and therefore more able to be decorated to one's own taste.  

Real estate agents, who have often looked at thousands of homes over the years, can be effective in recommending changes, additions, or deletions to rooms.  However, when a great deal needs to be done, or when expert help is required, a stager can be just the ticket to a faster, better offer.

Winter Weather

You might think that, in such an evolved society, with so many technological advances, weather wouldn't matter so much.  But you would be wrong.  Last winter, with storm after storm hitting our region, most people didn't work a full week until sometime in March.  Most of us just hunkered down and waited for spring, which didn't even come early after all that snow. 

This year, we've seen almost the opposite.  We had that one freak snowstorm, which seemed like some kind of Ice Age event, as opposed to the start of winter, and very little since then.  The first winter storm came on a Saturday morning, when many people did  not have to be on the roads, and it melted quickly. 

So, you may ask, how does that relate to real estate?  The harsher the winter, the slower the spring market, and vice versa.  People want their homes listed before the spring rush, but it's not always clear when that will be.  It won't be before the streets and sidewalks are cleared.  Even though a bad winter should keep people indoors, getting ready to move, it doesn't seem to work that way.  Until they can come out from under blankets--either of snow or the literal kind--they don't get their homes ready to list. 

Since this year has so far proven to be mild, we are anticipating that the spring market may come early.  I'm writing this too early to know what the groundhog is going to do later this week, but I want to get in an early warning:  Get ready before the market takes off without you, whether you are a buyer or a seller.  Be ready to go when it pops.  And that means, this year, that it's already time to begin.