As a New Yorker, of course I believe that we’re smarter than anyone else in the country. So, I don’t necessarily subscribe to our sharing the same deficiencies that home buyers who live elsewhere suffer.
But I do think that a recent survey for Zillow bears scrutiny.
Astonishingly, it found that 42 percent of polled prospective home buyers believe home values typically appreciate by 7 percent annually. I guess they haven’t heard the words that have followed “housing” for the last few years: “bust” and “crisis,” among others.
Even in good times, residential property appreciates just 2-5 percent a year.
Although we who live in the Big Apple haven’t been hurt as much as others in the U.S., the vast majority of us undoubtedly know better than to think that prices have appreciated 7 percent annually since Lehman Brothers imploded three years ago. And many of us are worried about the next few years as well, given economic uncertainties that affect everyone, especially those whose jobs and bonuses on Wall Street are in jeopardy.
As distilled by Realtor magazine, some of the other survey findings were these:
- Mortgage insurance: 41 percent of buyers think they will have to purchase private mortgage insurance (PMI), regardless of the amount of their downpayment. Reality: Buyers need to purchase PMI only if their downpayment is less than 20 percent of the home’s purchase price.
- Appraisals: 56 percent of the buyers said the purpose of the appraisal was to determine whether a home was in good condition. Reality: That’s the purpose of a home inspection; an appraisal estimates fair market value.
- Homeowner’s insurance: 37 percent of home buyers said that buying home\owner’s insurance is optional. Reality: Lenders require homebuyers to purchase homeowner’s insurance.
- Ownership: 47 percent of home buyers said a prospective buyer owns a home after the purchase contract is signed. Reality: The purchase and sales agreement is the beginning of the closing phase, but it can be a long process until they finally take ownership.
(The survey was conducted by Ipsos, a global market research company, at the end of August. A national sample of 1,012 adults ages 18 and over residing in the U.S. was interviewed via Ipsos’ U.S. online omnibus.)
To me, the survey is a useful reminder that brokers sometimes take for granted how well-informed our customers and clients really are, even in august Manhattan. The survey reinforces the need to check with them about their knowledge.
What drove home this lesson recently was a conversation that a listing broker and I had in front of my buyer on Saturday; it began to dawn on me that to her, we must have been speaking in code.
“Do you know what a condop is?” I asked, and, sure enough, this cosmopolitan investor didn’t. It turns out I also had to explain precisely how the condo application process is so much simpler than it is for a co-op.
The risk of ensuring that a buyer or seller understands everything is that questions will be perceived as condescension. But the greater risk is proceeding to contract with someone who harbors false impressions about even the tiniest detail relating to a transaction.
Tomorrow: Let’s buy a bridge
To take your own bite out of the Big Apple, start your search for a new home here.
Licensed Associate Real Estate Broker
Senior Vice President
Charles Rutenberg Realty
127 E. 56th Street
New York, NY 10022
Tags: appraisals, Co-ops, Condop, Condos, Homeowner's insurance, House prices, Ipsos, Manhattan real estate, Market research, Mortgage insurance, New York City, The Big Apple, U.S. Real Estate Market, Zillow