Martha's Vineyard Condos are getting cheaper, but are they a wise investment?

We all know prices have dropped during the last 4 – 5 years, and in some areas like Las Vegas the roll back has been crushing and as much as 60%. But for most of the country it has averaged 25-35%. On Martha’s Vineyard the roll back has been to 2003 and 2004 prices, or about 15-20%, and in some price lines and Island towns there has been practically no depreciation.

Now that prices are dropping below $400,000 for a ‘habitable’ SFR, condo prices are also going down. As a result, more buyers who want to get a foothold on the Vineyard as home owners are turning to the less expensive condo market. However, there are growing concerns to be aware of when purchasing a condo in this economy and at this time.

All condo communities have associations and association dues that each owner is responsible for on a regular basis. The dues go toward day-to-day maintenance and taxes as well as maintaining a cash reserve for emergencies and major repairs like replacing roofs and siding. Because of the down turn in the economy -- loss of jobs, etc., many condo owners are unable to pay their fair share and that puts the burden on everyone else.

It is important to examine the homeowner’s association by contacting the association board and asking to review the financial documents, which you have a right to do before you close on a condo unit. You also want an inspector to examine the condition of not only the unit you are purchasing but also the common areas that the association is responsible for. You want to find out how dues are paid and what percentage of owners are current on their payments.

According to Leonard Baron, professor of finance at San Diego State University, in an interview for the WSJ, here are some important points to consider when purchasing a condo.

· The condo docs, master deed and financials can be voluminous and the information is tedious to go through, so don’t wait until the last minute to review them and do make sure you get all the documents. Prof. Baron advises that you request to review the condo docs the minute you are in escrow, and request at least three days to review them.

· About two-thirds of any condo association's budget should be operating expenses such as water, lights and landscaping. The remainder should be allocated as a reserve fund for items like roof and siding maintenance and road repair -- any items that are not considered routine and regular maintenance. “See if expenses exceed revenues due to foreclosures, unpaid dues or other reasons. If they do, ask the association what their plans are to make up the shortfall, and whether you should expect an assessment increase or higher dues. Ask also if there are plans to save costs by cutting pool hours, or the number of mowings or clubhouse cleanings. This could affect not only your comfort, but also the future marketability of your home.”

· Find out if a reserve study has been done. This is not required in every state, but it is becoming more common. A reserve study looks at all long-term anticipated maintenance and projected structural replacement items (i.e. roof) over a 30 year period. The costs are tallied and put together onto a payment and maintenance schedule. Your monthly dues should cover the monies that needs to be put away to establish the reserve fund account. Baron says "Many times the boards, under pressure by the owners, will hold the line on raising fees, to the long-term detriment of the property.” He estimates that most associations are only funded 50% or less, and you should have serious concern as to the health of the association if they are funded below 40%. "You could be hit with thousands of dollars in assessments if something expensive fails," he says.

In a number of markets where condo complexes range upwards of fifty to one hundred units, unless the association confirms adequate funding, many banks will not approve a mortgage. I have never been enthusiastic about condos on Martha’s Vineyard; it is not what I consider to be Vineyard lifestyle. Despite what you may think about upkeep on a home verses a condo, on Martha's Vineyard modest single family homes are very easy to take care of, and you own the dirt. Keep it simple; isn’t that why you want to be here?

Happy Days Are Here Again, but For Whom?

I take my responsibility as an EXCLUSIVE buyer’s advocate very seriously. I have been saying for many months, now is the time to get into the market, but very few people listened.

The recover in the housing market, not only in Massachusetts, in many parts of the country has occurred faster than we thought it would. My concern is that the market does not understand the new dynamic and that will create discontent and an unreasoned lack of agreement between buyers and sellers.

Now that the summer season has officially ended we are seeing a deluge of properties coming onto the market For those sellers who wanted to spend one more season in their Island homes before they put them on the market, the time has come and that is why we are seeing the appearance of some really nice properties.

And for some who have been suffering the discomfort of their evaporated portfolios, their hope for the kind of seasonal rental income that would support their vacation homes until next summer, that income may not have materialized due to the soft summer rental market, so those properties are now for sale.

For property owners who were smart enough to refrain from cluttering the inventory until the market showed signs of recovery because they were not distressed and did not have to sell; they are being induced to test the waters again. Their reemergence is fueled by a pervasive attitude that the economy appears to be improving, along with statistics to support the fact that the bottom has generally come and gone.

“The percentage of listings with price reductions declined slightly from July to August, and when sellers did slash their asking price they made smaller reductions”, according to a national study by Zip Realty.

In another study done by Zillow.com comparing listing prices to selling prices during July, “U.S. homebuyers paid 3.3 percent less than list price on average, down from 3.5 percent in June and 4.6 percent in January”.

Although we are seeing an apparent rush to market on both sides, the fact is buyers can no longer assume owners with properties for sale are highly motivated, In fact, we have been at the bottom of the market for a while now and the horizon is clearly brighter for sellers than it has been in the last 5 years. I received this email from a local bank the other day:

“Our mortgage staff reports that there are a lot of inquiries, a lot of requests for prequalifications, and applications have begun to pick up…all of this is certainly a good sign that the market is a "happening" place. People are obviously past the point where they are just perusing the real estate guide and trying to figure out just how low they can convince a seller to go…..this rate reduction should be a further spur to deals being made. We all wish you the best of luck this fall…to paraphrase my favorite Irish saying, ‘May the wind always be at your backs from now on!!’"

Here is positive spin demonstrating that the region shows signs of rebound.

The real estate market cannot be rated as a good or a bad market because what is good for one can be bad for another. For the last 3 years it has been considered bad for sellers because no one was buying, yet if a buyer decided to make a purchase, the market was good for them. I think we can all agree the recession has bottomed out and with interest rates still historically low --- under 5%, and with no immediate signs of inflation; this is still an excellent time for buyers to take advantage of once in a lifetime opportunities. But it is also good for sellers. Sellers are no longer feeling as though they are being thrown to the wolves. The market is starting to balance out and sellers are feeling more hopeful and empowered.

In order for you as a buyer to be successful you need to adjust your thinking a little bit and keep your eye on the prize --- a home on Martha’s Vineyard.

1) You are no longer in total control so your expectations of ‘take no prisoners’ will no longer work.

2) You will no longer be able to present a litany of demands to sellers and expect them to acquiesce. You need to be reasonable and willing to leave something on the table --- choose your fights.

3) You have to look at your investment opportunity from the standpoint that the market has gone down anywhere from 10 to as much as 30 percent in some areas and in some price lines. So no matter what, you have to realize you are making a much better purchase than you would have within the last 4-5 years.

4) You have to be willing to negotiate, be patient, be flexible and in the end remember that Martha’s Vineyard is a lifestyle, an emotional decision as well as one of the better long term investments you will make. This Island is a finite commodity and it is not growing any larger.

For buyers today what is most important is to have good representation by a skilled negotiator. Someone who is knowledgeable about the entire market, someone who will thoroughly investigate all details of the property you select so you are fully informed and not surprised later on by things you did not know about. You want someone who will represent you 100% throughout the process and be there for you afterward. You want an exclusive buyer agent. You want SplitRock Real Estate, LLC.

Entering into the home buying process is like wandering through a corn maze, you can make a lot of wrong turns if you are without a knowledgeable guide who knows the way.

A Vineyard Primer Not Just For The Obamas

When I was a young child, my family would “summer in the Hamptons”, which describes the three towns near the far end of Long Island, NY. I remember the trip out there as if it were yesterday. It was an easy but boring 3-hour ride from Westchester County in our 1949 Ford “Woody” station wagon. We knew when we were getting close because the scenery would turn into potato fields and all you could smell was duck and chicken poop. The houses my family rented looked like the barracks I lived in during my military basic training and none of them were air conditioned, but they were right on the water. We would stay all summer and we rarely had a TV, but life was wonderfully simple.

The other night I watched the pilot program for a new TV series, ROYAL PAINS, on the USA Network. It’s about a young surgeon played by Mark Feuerstein who is fired from a hospital, sued for malpractice and blackballed. He decides to go to the Hamptons with his brother, the accountant, for a weekend of party crashing and debauchery, but he ends up staying for the summer as a concierge doctor to the rich and famous. What I like so much about the show is that it presents a showcase of the Hamptons in 2009. It sure has come a long way since I was a little boy or even since I went back there during my college years for fun and mischief.

Martha’s Vineyard could become, maybe it is already, the new home of the rich and famous --- the CEO and celebrity playground. With properties like Steve Rattner’s newly completed 15,000sf plus compound on Obed Daggett Road on Cedar Tree Neck, and the equally excessive estate properties belonging to high rollers like Brian Roberts, Dirk and Robert Ziff, Jerome Kenney and Bill Graham in the area, Martha’s Vineyard is losing its battle to stay small and simple the way it was 40 years ago when I first drove my yellow Corvette roadster off the ferry.

Many of us have received calls from the White House advance agents inquiring about accommodations for August rental lodging. The general consensus here is that the President will be renting a house on Temahigan Avenue close to the State Police headquarters, maybe the old Gloria Swanson house on the water side. There is still no definitive word on what the Clintons are planning, but we keep hearing about Ted Danson’s home up-Island and Chelsea’s wedding plans at the large Chilmark estate of long time Clinton friend and Washington power broker Vernon Jordan.

I guess we will just have to accept the fact that we are no longer inaccessible and anonymous; we have a reputation now that people like to brag about, and complain about. Maybe one day we will change our name to Martha’s Vineyardton. Here is a short essay that appeared in the Boston Globe titled A Vineyard primer for Obamas that provoked dozens of reader comments. The comments section is always fun to read because people have such strong views for and against what is Martha’s Vineyard. The Vineyard is all about passion and emotion and trying to hold onto what most of us remember as being so special and what so many new comers imagine still is so special. It is all of our jobs and responsibility to do all we can so that we don’t become just another East Hampton. Sure we have famous people here, but on Martha’s Vineyard no one gives a damn and we leave them alone. If you ‘GET’ the Vineyard and you want to be here, I can help you get the right place to live your dreams and balance your life. SplitRock Real Estate represents Buyers Only and their dreams.

Good Property Opportunities on Martha's Vineyard

This nicely constructed spec house was just completed. It started out priced at $750,000, but the price was just reduced to $599,000. This puts it at a number for which you would not be able to reproduce this new home. The lot alone is assessed at 258K.

Click here to view property > Oak Bluffs - 10 Eastville Avenue

Good Property Opportunities on Martha's Vineyard

There are two properties that I want to bring to your attention. I know they are on opposite ends of the price spectrum but they are both worthy of comment.

The first one is a simple extended Cape that has just been reduced in price to $495,000. The 2009 assessment is 533K.

Click here to view property > Vineyard Haven - 81 Hazelwood Avenue

The second property is an architect designed contemporary in the West Chop area. This is in my opinion a beautifully designed home with a very good address.

Click here to view property > Vineyard Haven - 97 Golf Club Road

WHAT’S “WRONG” WITH THE MARTHA’S VINEYARD REAL ESTATE MARKET

Starting with the premise that commerce is activated by supply and demand, I want to look at what is wrong with the Martha’s Vineyard real estate market today. What I discovered was that, in fact, there is nothing wrong with the Martha’s Vineyard real estate market; it is just that this market is confusing to many people and even more confusing today given the dire conditions in the financial market and a disparity in seller motivation factors. But first let me establish a few facts as guidelines:
<> This is not a place people have to be, they want to be here. Martha’s Vineyard is a destination and for the most part, a second home market.
<> This Island is only 20.5 miles long, 87.48 square miles in total land area --- they are not making any more of Martha’s Vineyard.
<> With home prices averaging almost 100% higher than the national average, ranging from $300,000 for a shabby ‘fixer-upper’ to $25,000,000 and above not everyone can afford to swallow that pill.
<> The cost of living is about 60% above the mean, so once again living here is surely not for everyone, but that does not diminish its popularity.
<> There are between 775 and 850 properties on the market, depending upon the method of tabulation used, which is about four times as many properties as there were at the height of the market.
<> The current inventory is about one-quarter of what we had to deal with after the market broke in 1988, and the population density has increased significantly since 1990.

The total inventory at the time of this writing totals 777 properties. I want to break down that number, which includes all classifications of properties so you have a better perspective:
<> Up to $200,000 = 7 properties (Note: This includes a share in a fishing camp, an aircraft hanger, time shares and an office condo.)
<> $201,000 - $400,000 = 86 properties
<> $401,000 - $600,000 = 162 properties
<> $601,000 - $800,000 = 140 properties
<> $801,000 - $1,000,000 = 85 properties
<> $1,100,000 - $2,000,000 = 157 properties
<> $2,100,000 - $3,000,000 = 51 properties
<> $3,100,000 - $5,000,000 = 54 properties
<> $5,100,000 – $30,000,000 = 35 properties

Only 18% of the inventory is above $2,000,000. That means the so-called lower end of the market is where the fat is. However, within that segment lies a misleading inflationary factor --- sellers who do not have to sell.

For a few years now we have been reading about how the real estate market has tanked in some areas of the country, falling into what many view as a fathomless abyss. The media has us believing this was the general condition everywhere. In an attempt to educate consumers, the National Association of Realtors® launched an educational campaign proclaiming ‘all real estate is local’. This is true, all real estate is local and in many parts of the country the market has been pretty much stable or a recovery is under way. But the message came too late, the die was cast, and for most of the country sales activity started to stall. Sellers started to panic and buyers delighted that the tide was turning in their favor. No longer would the buyers be at the mercy of a seller’s market. Even on Martha’s Vineyard buyers believed they finally had a chance to get a foothold on their dream Island.

Overall, however, property values still remain solid on Martha’s Vineyard. Yes, I am serious. If you are interested in real estate on Martha’s Vineyard, you should be paying attention to this local market and not be influenced by broad brush studies that are based on limited national metropolitan samplings. I don’t deny there are pockets across the country where prices have fallen 40% or more. These areas are not the norm. On Martha’s Vineyard, overall, the price drop has only gone down about 14% since 2006. For anyone who invested in Martha’s Vineyard real estate 5, 10, or 20 years ago, the good news is their investment has increased handsomely in value over that time period, even with the occasional bumps in the economic highway.

Exclusive Buyer Agents, such as SplitRock Real Estate, work very hard to educate consumers and create Power Buyers. I have a number of buyer/clients who have been working with me for 6 months, a year, even three years or more. They have a sincere desire to be here if they can only find the right property at the right price (Isn’t that typical of what motivates buying decisions?). Much to their chagrin they are discovering that prices on the Vineyard make no sense. Comparables are difficult to come up with, and ultimately the buying decision has to be an emotional decision. For those who are thinking long term and understand the fundamentals of real estate investment, the fact that prices overall have not gone down much should be a reassuring factor that lends more confidence to a buying decision. For others, if they cannot afford to make the investment now they will regrettably join the ranks of the would-have, should-have, could-have buyers.

So what is wrong with the Martha’s Vineyard real estate market? Buyers who enter the Martha’s Vineyard real estate market, regardless of whether it is an up or a down market are confused and scared. They do not want to make a mistake or appear foolish. There are many sellers who are sincerely motivated and will actively compete, engage and negotiate with buyers to sell their properties in this market. I am not including what we call distress sales, i.e. short sales, foreclosures and bank owned properties (aka REO’s). The problem lies with the ‘ego seller’ who lists their property for sale, but really does not care if they sell now or two years from now. They are not willing to listen to the market (IE their seller agents), and insist on holding a hard line because they think their properties are special, and their posture is "I don't have to sell". I call this the ‘goose that laid the golden egg’ mentality. Sellers who are not competitive are like buyers who are not qualified; they are wasting everyone’s time and money. If you are a serious seller, please don’t be offended by an offer you receive. Be willing to graciously engage with a meaningful counter offer. Properly educating buyers is a difficult, time-consuming process. When they get to a point where they are comfortable making a reasonable offer, if they are coldly rejected by a seller, it sets the whole process back considerably. If you recall the moral of Aesop’s fable, he who wants too much loses everything. In this case it is the entire Vineyard real estate market that is losing.

As average buyers watch the market week after week, the inventory continues to grow. Some buyers hold out, sitting on the sidelines, as they keep hoping those overpriced properties will come down in price. They resist making a buying decision waiting for sellers to cave in. The result is a slow market with minimal inventory absorption. When the inventory was limited, the demand was greater and the market moved briskly. If this market is going to get back in stride, it is my opinion that sellers, who don’t need to sell, should remove their properties from the current inventory. If sellers don’t like where the market is today and they are not willing to be competitive and engage in negotiations, they should wait and relist their properties when happy days are here again. And surely, this too shall pass and happy days will return.

1031 Exchanges and Vacation Homes actual text for IRS Rev. Proc. 2008-16

IRS Rev. Proc. 2008-16 on Safe Harbor for Like-Kind Exchange of Dwelling Unit

IRC Section 1031 IRC - Section 280A Document Date: February 15, 2008

This revenue procedure is scheduled to be published in Internal Revenue Bulletin 2008-10, dated March 10, 2008.

Part III

Administrative, Procedural, and Miscellaneous

26 CFR 601.105: Examination of returns and claims for refund, credit, or abatement; determination of correct tax liability.

(Also Part 1, §§280A , 1031).

Rev. Proc. 2008-16

SECTION 1. PURPOSE
This revenue procedure provides a safe harbor under which the Internal Revenue Service (the "Service") will not challenge whether a dwelling unit qualifies as property held for productive use in a trade or business or for investment for purposes of § 1031 of the Internal Revenue Code.

SECTION 2. BACKGROUND
.01 Section 1031(a) provides that no gain or loss is recognized on the exchange of property held for productive use in a trade or business or for investment (relinquished property) if the property is exchanged solely for property of like kind that is to be held either for productive use in a trade or business or for investment (replacement property). Under § 1.1031(a)-(1)(a)(1) of the Income Tax Regulations, property held for productive use in a trade or business may be exchanged for property held for investment, and property held for investment may be exchanged for property held for productive use in a trade or business.

.02 Rev. Rul. 59-229, 1959-2 C.B. 180, concludes that gain or loss from an exchange of personal residences may not be deferred under § 1031 because the residences are not property held for productive use in a trade or business or for investment.

.03 Section 2.05 of Rev. Proc. 2005-14, 2005-1 C.B. 528, states that § 1031 does not apply to property that is used solely as a personal residence.

.04 In Moore v. Commissioner, T.C. Memo. 2007-134, the taxpayers exchanged one lakeside vacation home for another. Neither home was ever rented. Both were used by the taxpayers only for personal purposes. The taxpayers claimed that the exchange of the homes was a like-kind exchange under § 1031 because the properties were expected to appreciate in value and thus were held for investment. The Tax Court held, however, that the properties were held for personal use and that the "mere hope or expectation that property may be sold at a gain cannot establish an investment intent if the taxpayer uses the property as a residence."

.05 In Starker v. United States, 602 F.2d 1341, 1350 (9th Cir. 1979), the Ninth Circuit held that a personal residence of a taxpayer was not eligible for exchange under § 1031, explaining that "[it] has long been the rule that use of property solely as a personal residence is antithetical to its being held for investment."

.06 The Service recognizes that many taxpayers hold dwelling units primarily for the production of current rental income, but also use the properties occasionally for personal purposes. In the interest of sound tax administration, this revenue procedure provides taxpayers with a safe harbor under which a dwelling unit will qualify as property held for productive use in a trade or business or for investment under § 1031 even though a taxpayer occasionally uses the dwelling unit for personal purposes.

SECTION 3. SCOPE
.01 In general. This revenue procedure applies to a dwelling unit, as defined in section 3.02 of this revenue procedure, that meets the qualifying use standards in section 4.02 of this revenue procedure.

.02 Dwelling unit. For purposes of this revenue procedure, a dwelling unit is real property improved with a house, apartment, condominium, or similar improvement that provides basic living accommodations including sleeping space, bathroom and cooking facilities.

SECTION 4. APPLICATION
.01 In general. The Service will not challenge whether a dwelling unit as defined in section 3.02 of this revenue procedure qualifies under § 1031 as property held for productive use in a trade or business or for investment if the qualifying use standards in section 4.02 of this revenue procedure are met for the dwelling unit.

.02 Qualifying use standards.

(1) Relinquished property. A dwelling unit that a taxpayer intends to be relinquished property in a §1031 exchange qualifies as property held for productive use in a trade or business or for investment if:
(a) The dwelling unit is owned by the taxpayer for at least 24 months immediately before the exchange (the "qualifying use period"); and

(b) Within the qualifying use period, in each of the two 12-month periods immediately preceding the exchange,

(i) The taxpayer rents the dwelling unit to another person or persons at a fair rental for 14 days or more, and

(ii) The period of the taxpayer's personal use of the dwelling unit does not exceed the greater of 14 days or 10 percent of the number of days during the 12-month period that the dwelling unit is rented at a fair rental.

For this purpose, the first 12-month period immediately preceding the exchange ends on the day before the exchange takes place (and begins 12 months prior to that day) and the second 12-month period ends on the day before the first 12-month period begins (and begins 12 months prior to that day).

(2) Replacement property. A dwelling unit that a taxpayer intends to be replacement property in a §1031 exchange qualifies as property held for productive use in a trade or business or for investment if:

(a) The dwelling unit is owned by the taxpayer for at least 24 months immediately after the exchange (the "qualifying use period"); and

(b) Within the qualifying use period, in each of the two 12-month periods immediately after the exchange,

(i) The taxpayer rents the dwelling unit to another person or persons at a fair rental for 14 days or more, and

(ii) The period of the taxpayer's personal use of the dwelling unit does not exceed the greater of 14 days or 10 percent of the number of days during the 12-month period that the dwelling unit is rented at a fair rental.

For this purpose, the first 12-month period immediately after the exchange begins on the day after the exchange takes place and the second 12-month period begins on the day after the first 12-month period ends.

.03 Personal use. For purposes of this revenue procedure, personal use of a dwelling unit occurs on any day on which a taxpayer is deemed to have used the dwelling unit for personal purposes under § 280A(d)(2) (taking into account § 280A(d)(3) but not § 280A(d)(4)).

.04 Fair rental. For purposes of this revenue procedure, whether a dwelling unit is rented at a fair rental is determined based on all of the facts and circumstances that exist when the rental agreement is entered into. All rights and obligations of the parties to the rental agreement are taken into account.

.05 Special rule for replacement property. If a taxpayer files a federal income tax return and reports a transaction as an exchange under § 1031, based on the expectation that a dwelling unit will meet the qualifying use standards in section 4.02(2) of this revenue procedure for replacement property, and subsequently determines that the dwelling unit does not meet the qualifying use standards, the taxpayer, if necessary, should file an amended return and not report the transaction as an exchange under § 1031.

.06 Limited application of safe harbor. The safe harbor provided in this revenue procedure applies only to the determination of whether a dwelling unit qualifies as property held for productive use in a trade or business or for investment under § 1031. A taxpayer utilizing the safe harbor in this revenue procedure also must satisfy all other requirements for a like-kind exchange under § 1031 and the regulations thereunder.

SECTION 5 . EFFECTIVE DATE
This revenue procedure is effective for exchanges of dwelling units occurring on or after March 10, 2008. No inference is intended with respect to the federal income tax treatment of exchanges of dwelling units occurring prior to the effective date of this revenue procedure.

SECTION 6 . DRAFTING INFORMATION
The principal author of this revenue procedure is J. Peter Baumgarten of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this revenue procedure contact Mr. Baumgarten at (202) 622-4920 (not a toll free call).

Narragansett Bay Insurance undercuts Fair Plan

In the past few years virtually all residents of Cape Cod and the Islands have been caught in the mass exodus of insurance companies from the region. Policies have been abruptly cancelled with the only option being the government Fair Plan insurance with its higher rates and deductibles. Now a company in Rhode Island is attempting to offer insurance plans that will be more affordable than Fair Plan insurance.
Follow this link to read more > Narragansett Bay Insurance

Catastrophe Fund Backed To Insure Coastal Homes While Deductibles Skyrocket

As a homeowner on Martha's Vineyard Island, living on the water, I can tell you I have felt the bite of insurance companies backing away from so-called high risk locations. Before I was forced into the Massachusetts Fair Plan, a representative from my home owners insurance provider came to my house and subsequently I received a terse letter saying if I did not remove and cut back all the trees that were close to me house, the insurance provider, Vesta would cancel my insurance. I was bewildered and called my local insurance agent. I was surprised when my agent told me to ignore it because --- Vesta was going to cancel me anyway. They filed for protection with the US Bankrupcy Court, and became another casualty of the disastrous hurricane season in 2005.

According to an editorial in the Boston Globe reported by Bruce Mohl, "A special legislative commission called for the creation of a state-run catastrophic event fund to help reduce the cost of home insurance in Massachusetts. Few details were provided in the report, but the fund would be set up to sell reinsurance to companies at below-market rates. Industry officials participating on the commission dissented from the majority view, saying the fund would drive up insurer costs. Consumer groups also dissented, saying they wanted caps on the increases being sought by the Massachusetts Fair Plan, the home insurer of last resort. Insurers have been canceling policies or raising premiums along the coast on fears of a major hurricane. The Fair Plan provides coverage for about 40 percent of homes on the Cape and islands."

In the meantime, as of December 15, 2007 many residents of Martha's Vineyard insured under the Massachusetts Fair Plan will have the highest windstorm and hail deductibles in the country, up from a minimum of two to five percent. The increase will affect homes valued up to $500,000.
Follow this link to read > Bills Grow Larger For Home Insurance

What is it going to take to get the Martha’s Vineyard real estate market rolling again?

There is one thing for sure, wishful thinking is not working. Neither is the constant stream of anemic price reductions week after week. How about those incentives and broker bonuses? You know what I'm talking about; the three-year old Range Rover in the driveway, the 24' sailboat, a 60" LCD TV, seller paid closing costs, seller paid Land Bank fee, first payment in six months, a vacation in the Bahamas or $50,000 to the agent that brings the buyer. None of that is working, and any additional compensation offered to an agent that brings the buyer should be considered a conflict of interest and bribery.

So what is working, and how is it working? Home "Staging" is working to some degree, but once buyers wise up to the fact that this kind of eye candy emotional sizzle is costing them thousands of dollars more in the price for the home, they will stop falling for it and start backing away from homes that look just too pretty. They will wonder what lies beneath the dining room table that is set for a 5-course formal dinner party seating twelve.

In an article written for Bloomberg News, John F. Wasik says, "Buyers just want price," he quotes one real-estate attorney/broker/consultant based in Stuart, Fla., as saying. "Buyers have become more educated and they can easily cut through the fluffy incentives". Hmmm. I don't think we're there yet. Everyone loves romance and people shopping for a home on Martha's Vineyard want to fall in love. This market is like going to Las Vegas for the first time and getting lost in one of the Casinos. Know the feeling?

What is the first question buyers ask? "How long has the house been on the market?" This has almost become a joke among real estate professionals, but buyers ask the question because it is commonly assumed that the longer a property has been on the market the weaker the seller's resolve to hold firm on price. You see, overpriced listings that languish on the market reduce the seller's negotiating ability as time diminishes their power. Once a listing has gone unsold, even if they take it off the market for a while or remove it and relist it with another agency, the information is in the public domain. There are definitely exceptions; EG: the seller doesn't have to sell, or the seller just likes to see their property advertized at some inflated price.

I think it is obvious that if a seller is serious --- I am NOT talking about desperate; homes priced to sell will sell. That means being ahead of the market instead of chasing the market. A good deal starts to get noticed if it is at least 10% below its competition. But when you see a good deal, do you think you are the only one who sees that good deal? Heck no, and usually you end up competing with other consumers who want what you want. What that can do is create a bidding war, and that is exactly what the seller wants --- or should want. A bidding war is probably the best and truest way to establish market value. I hate bidding wars, and right now I don't have to worry about it because sellers on Martha's Vineyard are following the same bloodletting technique; they all price high and week after week pull a few thousand dollars out of their last price. My clients feel like they are standing around the markdown sale table at Macy's waiting for the 70% off sign to go up.

There is a lot of misleading statistical information out there right now. Many agents talk about price-to-price ratio. In the recent 2007 NAR Report on Buyers and Sellers it states that "sellers sold their homes for 97% of list price." Does this mean 97% of the original listing price or 97% of the current listing price? The property could have been on the market for a year and transitioned through a half-dozen price reductions before it finally sold.

To sellers my advice is to listen to your listing broker when they give you an 'honest' price recommendation. In this market, if you interview several brokers, hire the broker who gives you the lowest price recommendation because they are probably the one telling you the truth. Many times a broker will agree to a listing contract with a seller because they are thinking, "If I don't take it, my competitor will and I will lose it." They know full well the property will never sell at the listing price. They are banking on the seller eventually coming to their senses and seeing the light. The conversation goes like this. "Mr. Seller, it has been three weeks since we listed your property and we have had no interest, so it is time to reduce the price." By then it is too late and that conversation will most certainly be had again --- and again.

To my buyer clients I always say if you like a property, pay little attention to the asking price and don't be afraid to make a "Bold Offer". By this I mean make an intelligent well thought-out and thoroughly researched offer. I make it perfectly clear on my website > ATTENTION SELLERS: A Low Offer Today, May be a High Offer in 60 Days .

Federal Funds Rate Down Again

Today the Federal Reserve once again in less than two months lowered its target rate for the federal funds rate by a modest 25-basis-points to 4.5 percent and the discount rate to 5 percent.

In a statement announcing the Fed’s decision today, members of the Federal Reserve's Open Market Committee said that "after this action, the upside risks to inflation roughly balance the downside risks to growth."

Some analysts concerned that the housing downturn will lead to a recession were hoping for another 50-basis-point reduction in the federal funds rate, but the Fed has to weigh consequences such as further weakening of the dollar and inflation.

However, on Martha’s Vineyard, the mortgage market has little effect on our high-end market, because most real estate transactions are all cash.

GREENSPAN SPEAK(S)

If you watched the most recent interviews with Alan Greenspan you may or may not be pleased with what you heard. As for the housing bubble, Greenspan says it is a global problem and we still have some distance to travel before the market levels off. He said, “We, unlike the rest of the world, are showing some modest price declines.” When asked if a recession was on the horizon, his answer was, “The evidence so far, is not yet. The economy at this stage, despite this fiscal problem, despite the financial problem, is still holding up.”

In hopes of slowing the downturn in the housing market and lessening the credit crunch the Fed is expected to lower federal funds rates to at least 5.0 percent; it is now at 5.25%. However, Greenspan still sees a great deal of pain ahead for those who overextended during the boom. “I think we're going to have to go through this adjustment, as indeed all the other countries are in the process of going through it. There are going to be a lot of people who will have very tragic stories," said Greenspan.

It appears Greenspan is less optimistic about the economy than he was while writing his memoir, The Age of Turbulence, and estimates the probability of a recession at just above one-third. One of the problems, according to an interview published in the WSJ is the “very large” inventory of newly built and unsold homes resulting in increased pressure on builders to sell them quickly.

Martha's Vineyard for the most part is a high-end resort and second-home market where many expensive properties are sold without need for mortgage financing. However, in order to stave off inflation in the future, Greenspan said the Fed would most likely have to raise interest rates to double-digit levels for the first time since the 80’s, but that increase period would be short lived. If you are contemplating a real estate investment on Martha’s Vineyard and need financing, I think that prediction alone is a good reason to get into the market while the rates are low.

Living On The Edge; That’s Where The Action Is

Everyone knows that living in a coastal area, be it north south or west means risking certain forces of nature. Floods have become an ever increasing threats in many parts of the country, but people still flock to river front towns even if it means living below sea level, because that is where the action is.

Earthquakes are a threat, particularly along some of the west cost fault lines, but that does not stop anyone from living in the fun in the sun state of California, because that is where the action is.

Hurricanes are a huge threat and in recent years have affected the Gulf Coast and eastern coast of Florida with devastating effects, but people still gravitate to those areas, because that is where the action is.

Living on an Island is certainly living on the edge --- or possibly over the edge, but we love it and many people dream of having a home on Martha’s Vineyard. What about the possible treat from Nor-Easters and those dreaded Hurricanes? Sure, we are always anticipating the next named storm and when it materializes we all start thinking about how to prepare for it, not having too many choices for where to run. But we love it here, because that is where the action is.

Many of my clients are not only concerned about hurricanes and the flooding associated with it, but they even have included elevation above sea level to their shopping criteria. I suppose that has to do with Al Gore and all that global warming stuff.

For Martha’s Vineyard, there seems to be some good news to report. We have had an unusually cool spring and summer and not a lot of rain so far. That means the water around us will not heat up until much later in the season. Oh yeah, the fishing has also been really good. Hurricanes thrive in warmer water, so I guess that means we can relax more than we usually do, at least according to the latest Reuters news report.

Follow this link to read more > Forecaster cuts 2007 hurricane outlook

The Real Estate Shell Game

By Peter C. Fyler with editorial input from Jon Boyd, 2007 President, National Association of Exclusive Buyer’s Agents
© 2007 SplitRock Real Estate, LLC

I’m an exclusive buyer agent on Martha’s Vineyard and my job is representing buyers; that’s it plain and simple. I have no allegiance or responsibility to sellers beyond the rules of courtesy and common decency set forth in my REALTOR® and NAEBA Association Code of Ethics.

You’re a Buyer looking for your dream home, and if you do what most buyers do today, you start looking for that dream home on the Internet. You may go from one real estate company’s website to another plowing through their listings looking for that perfect property. You must be aware the listing company and all its agents represent the seller, not you. With that said, let’s take a look at the real estate shell game.

Shell #1 - Loss Leader: You see what you think is your dream home listed by company A. Excitedly, you call company A and you ask the listing agent answering the phone about the property you saw on their website. You are told apologetically, that it’s under contract to be sold or already SOLD! The agent says they were about to change the status or remove it from the website, and then they immediately suggest other properties in their inventory. Most likely this was not an accident or oversight on the part of the real estate company. In general commerce, they call this kind of advertising ‘loss leader’ or ‘bait and switch’.

Our Martha’s Vineyard Listing Information Network (LINK) provides a system of codes designed to keep information current, but LINK cannot dictate behavior to its subscribers. Not all real estate agencies ignore their responsibility to keep information current, yet many excuse themselves saying they will not change the status until the last contingency is met or even until the deed is signed. Probably more than 95% of the transactions here on Martha’s Vineyard go to record. Another excuse is to say it’s just business in a competitive market; it makes the phone ring, and perhaps the buyer could be steered to another property. Who does that benefit? It benefits the real estate company and the sellers of those properties still languishing in the unsold inventory. It does not benefit buyers like you and it frustrates buyer agents like me.

Shell #2 - Show Me the Money: Another trick is for agents in traditional real estate companies to call themselves buyer agents. At best, they are Designated Buyer’s Agents, Dual Agents or Transactional Agents better known as Facilitators. Look at real estate websites and print advertising, what do you see? You see dozens of properties advertised for sale. All of these properties are supported by seller agency written contracts and an agency commitment to get the highest price and best terms for the seller. Furthermore, advertising is very costly and therefore another incentive to get as much for the seller’s property as possible. A true buyer’s agent is always a buyer’s agent and never switches roles; they only represent people, not property. Only Exclusive Buyer Agents exhibit advanced skills in property analysis, price evaluation and negotiation. There is one more trick I want you to know about.

Shell #3 - The Meat Grinder: While you are surfing the Internet looking for your dream home, most likely you have come across some intriguing and very slick real estate websites boasting to be your number one real estate resource. Many of these companies will not let you look for an agent or review properties for sale until you fill out a complete contact information form. Even then, you may have to wait for a response with the promise that you will be contacted by the best real estate agent in your area, a real estate agent that you did not personally choose. These are not real estate companies, they are advertising companies only interested in one thing --- making money. They may even send your contact information to several “best” agents. They don’t care who or what they represent. If a real estate agent can pay the price, and it’s a steep price, these companies will send them “leads”, or display listings for them, even if those listings don’t belong to the company advertising them.

If you have ever inquired about listings on one of these websites, you most likely realized the information was quite often inaccurate or obsolete. It is all about getting the leads. As I said before, these leads are expensive, so the agent subscriber will want to recapture their advertising expense, and you can bet that will be at your expense --- the BUYER.

Another unfortunate aspect of these lead generation services is the agents that buy your contact information are often the least experienced agents in the market. Some of the companies that do this type of pay-per-lead marketing are Connect2agent, Homegain, Neighborhoodscout, Realtyconnect and Servicemagic. Many of my seasoned colleagues who have tried these services will say you gain almost nothing for the money spent. Common sense should tell you the smartest way to find the best agent or properties in the area you are interested in, is to look for a company in that area.

I've Seen It All On Martha's Vineyard

For as long as I can remember it has been a mystery to me how some home owners here on Martha's Vineyard decide to sell their family home, hire a seller's agent, agree to pay a fee and put their home on the market but never take the time to clean and fix up their home and property, not even just a little.

One would think a seller would at least fix that broken staircase to the second floor bedrooms so a prospective buyer would not have to use an outside staircase to get to the second floor living area. One would think the two Rottweilers running loose in the house would be sequestered outside when the seller's agent shows the property.

A prospective buyer coming into a house and contemplating living there needs to see through the distracting maze of stuff the home owner has accumulated over the last 30 years; they need to see themselves living in that home. They will see nothing if they are trying to dodge the growling dogs, making sure their child doesn't fall through a broken staircase, or navigate around dirty laundry strewn across the living room floor.

Staging and Feng Shui is all the buzz now, but for the most part we still ignore it on Martha's Vineyard. I guess you might say the pervasive attitude is “We’re Martha's Vineyard and we’re hot so deal with it!”

I belong to the National Association of Exclusive Buyer Agents (NAEBA) and below is an article being circulated throughout the media in this country. You may get a chuckle out of it, but more importantly, if you are a seller, pay attention and give your agent and my buyer clients a break. Remember, sellers want to sell, buyers want to buy and real estate agents want to make it happen.

Buyer Beware: Skeletons in the Closet
(and Aliens in the Basement)
ARLINGTON, Va., June 22 /PRNewswire-USNewswire/ -- How much do you suppose a pile of crunchy dead bugs on the basement floor will affect the selling price of a $500,000 home? How about a life-size skeleton hanging in the closet, or an open coffin in the basement with a dummy vampire inside? Or an overly-ripe kitty litter box under the kitchen table?

The National Association of Exclusive Buyer Agents (NAEBA) recently conducted an online survey of their members to rate the items they found most annoying when searching for a new home with buyers. Since these real estate companies are always looking out for the buyer's best interest they don't pull any punches. The results of the survey are revealing, surprising, and sometimes downright weird.

Here are the top five things exclusive buyer's agents find most annoying when previewing a home:

1. Broken door locks preventing access to the house.

2. Pet deposits in the back yard or dirty cat boxes.

3. Missing light bulbs in the basement.

4. Sellers that ask you to remove shoes and then have wet carpet or dirty
floors.

5. Having loose stairs on a stairway or missing banisters.

Other reported annoyances include:

6. Low hanging dining room light fixtures in a vacant home.

7. Closet doors that fall off or are not adjusted properly.

8. Going into a vacant home and hearing animals in the walls.

9. Halloween decorations that are left out.

10. Dangerous children's toys left out.

11. Dead cars in the driveway or yard.

12. Homes on large lots without a survey or description of the lot
boundaries.

13. Political signs.

14. Graffiti on a home for sale.

15. Dead birds or animals in or around the home.

It seems that many home sellers are not overly-endowed with common sense. Closet doors falling off? Dead animals in the front yard? The pitter-patter of mousy feet in the walls? Scary Halloween decorations all over the house? These should all be no-brainers. Sending buyers away disgusted or frightened out of their wits is probably not the best of business decisions. Neither is killing or maiming them with dangerous children's toys left as booby traps.

Jon Boyd, President of NAEBA, relates some of the unbelievable things he's encountered over the years when going through homes for sale. "Once I was previewing a fairly expensive home by myself. I go into the huge basement and I can't find the light switch. As I'm reaching around a corner I catch a light switch and turn it on. About 8 feet in front of me is a life-sized model of the ALIEN MONSTER LOOKING RIGHT AT ME! My heart starts beating again in a few minutes when I figure out what the stupid thing is, but whose idea was it to leave the thing there while the home is on the market?"

At another house Boyd almost became an unwitting participant in a Chaplinesque silent comedy. "I'm stepping into the basement the first time with buyers right behind me, again without good lighting. My foot hits something and when the light goes on I see I just barely missed stepping off the step onto a roller skate. I'm serious. Can you picture me flipping over onto my back like a cartoon character? If my foot had come down 2 inches to the left..."

Silliness aside, there is an important lesson here for home sellers. "In all these cases the buyer's attention is diverted from evaluating the home to something mildly disgusting or frustrating," says Boyd. "If sellers have a dead pigeon lying on the deck it will just help our buyers negotiate a better price because of less competition. But let's try to leave the skeletons and coffins for the Halloween party!"

The National Association of Exclusive Buyer Agents was founded in 1995 to help consumers become educated homebuyers. NAEBA is a nonprofit organization whose purpose is to be the "champions of real estate buyers' rights and representation." It has over 500 members nationwide. Starting in the mid- 1990s, savvy buyers wanted the benefits of a real estate representative working for their interests exclusively. They turned to EBAs, Exclusive Buyer Agents, to do the job. NAEBA is an industry group dedicated to supporting EBAs in serving clients to the best of their ability. NAEBA offers industry standard certifications, ongoing education, client referral service, technology and information sharing. The NAEBA Code of Ethics pledges undivided loyalty to real estate buyers only. More information about NAEBA can be found at http://www.naeba.org.

Web site: http://www.naeba.org/

Not All Buyer Agents Are Created Equal

In the July 16 issue of Newsweek, there is an article outlining the benefits of using a buyer agent.

Please remember any seller’s agent can double as a buyer’s agent, but if the buyer expresses an interest in a property represented by that agent’s office, the agent can no longer represent the buyer’s best interests; they become a Dual Agent and it is in their best interest to sell in-house listings.

Exclusive Buyer Agency guarantees the buyer unconditional undivided loyalty at all times throughout the entire home buying process. Buyer advocacy requires enhanced negotiation and property evaluation skills.

Follow this link to read more > Real Estate: Call Your Agent

I Love Martha's Vineyard

I have lived on Martha’s Vineyard part time and full time for over 40 years, and I have seen a lot of changes --- some good and some bad. For the most part the Vineyard has still maintained its New England charm and tenor.

When I was a little boy my family summered in the Hampton's on Long Island. It was a magical part of my boyhood, but when I went back a number of years ago everything had changed.

I love these two lines from an article that appeared in The Record this past Sunday:

“Overrun? Maybe. Devine? Definitely!”

And then there was this quote:

"Southampton, eat your heart out!"

Follow this link to read about Martha’s Vineyard --- A Great Hideaway from the Rat Race

Buying A Home On Martha’s Vineyard Should Be Fun

House hunting on Martha’s Vineyard can be fun, and I make sure it is fun. However, I find many buyers new to the market get caught up in things that are irrelevant while failing to consider what’s really important. They may base their decision on a Japanese Maple tree in the front yard, the green granite counter tops in the kitchen, or the color of the carpeting in the living room. I believe it is my responsibility as an exclusive buyer representative to keep my buyer-clients focused on the big picture, even though some of that may be more sobering than joyful. Please read this report by RealEstate.com on Four Strategies to Make House Hunting Easier

Is Your Property Eligible for a §1031 Tax Deferred Exchange?

Since Martha’s Vineyard is a vacation community, many properties are purchased for investment purposes and not as primary residences. Therefore the Section 1031 Tax Deferred Exchange option (also called Starker exchange) is especially intriguing and ideal for many investors.

Many media articles, dozens of websites and some real estate agents are quick to pontificate offering themselves up as §1031experts, but not giving a clear or complete picture of the §1031 exchange process. It seems many taxpayers believe they can exchange a vacation home at any time and that’s just not the case” says Tom Oldfield, attorney and partner in Olympic Exchange Accommodators based in Washington state.

I believe the process is too dicey and very complicated. It is constantly changing and has many sensitive factors and critical pitfalls that can make or break a deal. As a real estate broker and exclusive buyer agent, my duty is as a facilitator to my principal; I am not an accountant or tax advisor, attorney or qualified intermediary (QI). I have relationships with several good QI’s and will refer and assist anyone interested in pursuing a §1031 exchange. According to David Greenberger, an attorney and California licensed QI, here are some questions a taxpayer should be asked when contemplating the purchase of an investment property:
· Are you considering selling or buying any property for investment or business purposes?
· Are you considering putting any of your equity from one property into another?
· Are you considering selling any property and buying any other property within 6 months of each other?
· Can I put you in touch with an accommodator who can give you basic information and guide you through your particular facts and situation?
· Do you need further advice or information from a tax advisor?
· Have you got a clear plan for your real estate?
· Should you be considering new categories of real estate or regions for your replacement properties?
· Should you start looking for replacement properties now so that you give yourself more time than the prescribed 6 months from close of the relinquished property?
· Are you aware your deposit for the replacement property may come from the exchange account you set up once you have sold your first property in the exchange?
· Should I follow up with you once you have closed on your replacement property to track performance and help you decide whether you might want to enter into another exchange on additional properties you may own or to discuss a reverse exchange when new properties become available?

Tear It Down or Renovate It: A Growing Dilemma For Home Buyers.

For quite some time I’ve been chanting that it’s time to let go --- let go of the notion that a 70-year-old house has enough charm and redeeming factors to be worth saving.

With energy concerns becoming more prevalent and the cost of utilities continuing to escalate, we need to change our thinking here on Martha’s Vineyard. Charm is a relative term and there is nothing charming or attractive about a tiny 70-year-old house with little to no insulation, cramped bedrooms, one bathroom with leaky plumbing and a tiny kitchen that is inadequate by today’s standards on a crumbling wet foundation.

Circa 1900 near Campground, Oak Bluffs

I’d even go so far as to say there is nothing charming or redeeming about some of the houses built during the last 20 to 40 years. We allowed some real junk to be constructed during the 1980’s real estate boom, and a lot of the circa 1970 construction is ugly and functionally obsolete. Aside from the emphasis today on energy conservation, modern high-technology in new homes is also important and advancing at a breathtakingly rapid pace. Today’s upscale consumers want that technology, but they don’t want the kinds of subdivisions typical of suburban America. They want the charm of the Martha’s Vineyard lifestyle because that is what attracts them. But they want that charm to include all the bells and whistles they are used to at home; they want the best of both worlds. The psychographic profile of people moving to the Vineyard is changing and that will make modern in-home high-technology even more important. No longer are we just a summer retreat or retirement community. People come here for a gentler way of life while simultaneously carrying on their off-Island careers.

It might very well cost you more to renovate an older house than to build a new home. So, what’s the answer? I think the eco-conscientious solution is to scrape them, raze them, bulldoze and remove them from the land and start over. Some people call this “Bash and Build”. It may sound shocking, but it’s been happening in other parts of the country for quite a while now. One off-Island builder who has worked on numerous teardown projects in recent years says, “In my opinion, it’s the hottest trend in real estate.” So how do you get this old house off of your nice lot? You can either have the structure demolished, lifted off the foundation and removed in one piece or deconstructed. The latter method which entails reclaiming lumber and reusable building materials will cost you more money and more time than just driving a bulldozer through the front door. Another option is to donate the old structure to affordable housing. It would then be lifted off the foundation and removed in one piece. This sounds like a good idea, but there is a backlog of inventory right now. Let your eco-conscience be your guide. You might also be eligible for a substantial tax deduction if you can donate the structure or the salvaged reusable materials.

Speaking of costs and savings --- it could cost anywhere from $20,000 and up to demolish and cart away the old structure. That cost doesn’t include the foundation, but the foundation material can also be recycled. When the site is clean, you can start from scratch building a new and possibly bigger dream home on that nice lot. In the end you may be paying more “all in” for the finished product, but you will be in a location you want, instead of next door to yourself in a new subdivision without the landscaping intrinsic to older quintessential communities like big trees (to provide screening and privacy). Remember, most of the best locations on this Island are already developed or in conservation. Another factor to consider is financing. If you’re not paying cash, the best solution is to acquire a two-phase loan for a project like this. The first part will be a construction loan which historically will be at a higher rate --- perhaps one-half to one point above prime. You will need a construction contract and approved plans in order to get the loan, but the plans don’t have to be set in cement --- no pun intended. The second part is for the conventional home mortgage. If you’re unable to get your ducks in a row for this type of financing you will end up paying closing costs twice.

We already have a number of cookie cutter subdivisions on the Island, but there are a number of mature small and medium size communities in great locations on the Island where the houses range in size and style unlike the uniformity of modern subdivisions. In off-Island communities it has always been understood one should never to have the biggest home in the neighborhood. But on Martha’s Vineyard that is not a concern. The teardown trend is starting to become more accepted, and inadequate and smaller houses are being replaced with more substantial houses. I am not talking about “McMansions”, nor am I a proponent of them. I believe smart buyers who have identified and moved into the older communities by replacing dilapidated homes with new homes will create an environment for more buyers to come in and build new homes. This will fuel a renaissance in these communities. The land on this Island is just too precious to pretend patch-and-paint houses contribute to the value of the land.

New architect design reproduction near Sunset Lake, Oak Bluffs
















I do think it is critical for neighborhoods to be vigilant and take responsibility for their future well-being. It will be important for residents of these communities to establish home owner associations if they don’t already have them. They need to create covenants to ensure there are safeguards to prevent someone from coming into the community and building an enormous A-Frame glass tent or Quonset hut that doesn’t fit the general character of the neighborhood. Variety is a good thing because it gives character to the community and ensures more expensive homes will blend in visually and economically. This is all part of preserving the future value of your investment and the value of this magical Island we all love to live on.

All Real Estate Is Local, but that has not been the perception?

In David Lereah’s new book, “All Real Estate Is Local”, he references the investment mistakes his Grandpa made by listening to the national news instead of paying attention to ”local influences and activity” He goes on to say, “Whatever the national trends are with regard to real estate – whether they are booming or busting – what really matters is what the market conditions are in your region, town, or neighborhood.” David Lereah is Senior Vice President and Chief Economist of the National Association of Realtors® (NAR).

Starting in 2001 real estate speculation began picking up steam in certain areas of the country that were growing in popularity. These areas were primarily coastal cities on the east and west coast. It would be five years before this trend would run its course. Investors were quick to jump on board with the hope of making a quick buck -- and they did. Properties were selling before a shovel touched dirt or a hammer struck a nail. We saw this in the 80’s here on Martha’s Vineyard when the construction and housing market was out of control, but we learned from that bad experience and won’t let it happen again.

When the press started reporting the news that the Boom was over, they did so by painting a national picture of doom and gloom with a broad brush. We all listened to the reports. Prospective buyers relished the thought of getting a good deal, “a steal”, and regaining control of what had been a so-called seller’s market that had all but shut out everyone except the well-healed from the Vineyard real estate market. Sellers, on the other hand, started to panic but refused to give up their position. They fervently resisted lowering what, in most cases, were overly inflated prices based upon subjective personal opinions instead of factual market price analysis provided by seller agents.

We entered a buyer-seller standoff period where nothing was happening, except at the very top of the market. But even there activity slowed down and sales were few and far between. No one wants to overspend and appear foolish regardless of how much they are worth. The wave of panic continued to build while rolling from coast to coast, and everyone was talking about a “buyer’s market” whether the perception was true or not.

On the Vineyard, sellers continued throwing chum at the market week after week in the form of insignificant price reductions. So like any good bargain shopper, buyers continued to wait, wondering how low the market would go. Personally, from the beginning I saw this as an opportunity for a leveling of the market and never believed the negative hype as it pertained to Martha’s Vineyard. Water seeks its own level and it would just be a matter of time, I thought, before we reached that point.

All of a sudden, but not by surprise, there was a new specter looming on the horizon. Was the housing bubble about to burst? Buyers had been led to believe there was no end in sight for the hot market and prices would just continue climbing. They were drawn into a false sense of security and anticipation of assumed future gains. Greed and some very creative financing products also encouraged buyers to overextend themselves by committing to attractive short-term, low adjustable interest rate loans. This enabled them to get into the market with little or no money down. But in some areas of the country the market suddenly came to a halt and prices started to decline. Frantic buyers not wanting to lose money immediately started canceling new home sales contracts and in many cases forfeiting substantial deposits.

With prices now plummeting by double digit percentages in many popular cities, and adjustable mortgage rates going up as much as double at the first reset, many new home owners found it easier to simply walk away from their homes purchased with up to 100% financed loans they could no longer afford. This was the case in cities like Boston, Cape Cod, Phoenix, Las Vegas, Los Angeles and Ft. Lauderdale where there had been overly zealous growth, but it was not that way throughout the entire country.

On Martha’s Vineyard the rate of appreciation was above average but not even half of what it was in the 1980’s. There were only a handful of speculators here that might have been in jeopardy. The Vineyard has always been a pricey market and that is not by accident. People who “get the Vineyard” are passionate about wanting to live here and make emotional decisions; quite often paying a premium to be part of the unique Vineyard lifestyle.

It was not only the home buyer who was affected by the slowdown in the market. Existing home owners who were courted and vigorously encouraged to take equity out of their existing homes for that dream vacation to Hawaii or that slick new Escalade were finding themselves in an unexpected upside-down or negative amortization position. The news of a threatened foreclosure glut loomed heavily on the horizon --- but once again we should have remembered --- real estate is local.

When a homeowner cannot maintain their mortgage or sell their home to save themselves, the end result is usually foreclosure and over a million home owners in the US are facing that end today. The foreclosure process begins when a borrower is over 30 days late with a mortgage payment. The lender will usually send a letter of notice to the borrower along with notification to the state’s Land Court notifying them of an action to foreclose. This does not imply a fait accompli, as most borrowers are able to work out the loan with the lender before they lose their homes. With prices continuing to decline in some areas, options have become more limited. However, in Massachusetts, the number of foreclosures is not even close to what it was in 1992. Government leaders are now calling for state and federal assistance to subsidize aide to home owners threatened with foreclosure.

Although Martha’s Vineyard is a wonderful and very special place, like all good things, greed can play a major part in pushing the envelope. We experienced a period for many years where everyone thought they had the goose that laid the golden egg. Many properties came on the market for ridiculous prices, both at the very top and at the very bottom of the market. Still, we relied upon the market to have the last word, but the astounding reality was that there was always someone who would pay the price. Today this is changing to a great extent not only because of the perception of a more level playing field or buyer’s market, but also because buyers are choosing to have their own agency representation.

So where are we today? I believe we are at a tipping point in the Martha’s Vineyard real estate market, but it will not be without a little more pain. One of my pet peeves is there are too many substandard, poorly maintained buildings of no important historic significance for sale here that have outlived their economic and functional usefulness. There is an old real estate expression, “underneath it all is the land”, and in many cases that is where the value is --- not what sits on the land. I maintain that many of the 40, 50 and 70 year old structures should be removed and replaced with more attractive energy efficient “Green” construction. Sellers have to realize they can no longer expect to get $400,000 to $500,000 for a property with a dilapidated house or unheated shack, when the value of the land is almost half of that selling price. Buyers need to realize they are not going to be able to “steal” properties. They must have confidence that if they pay a fair price for a property, they will have a solid investment that will appreciate in time, but not overnight.

We have to come to the realization on Martha’s Vineyard that this is not a buyer’s market, but an opportunity for a balanced market. A market where properties are priced fairly and sellers have realistic expectations. However, the lower to middle-end of the market is distorted because we still have a number of sellers who are not realistic or serious about selling their properties; they’re just fishing. Their perception of what their property is worth, albeit uninformed or ill-advised, overrides the facts. There are three phrases I constantly hear that always make me smile: “The seller is motivated”; “The seller doesn’t have to sell”, and “The price is negotiable”. What the heck does all that mean? Does it mean the motivated seller will accept well below market value or the non-motivated seller is firm on the price or will only accept above market value? Does anyone in the market today assume that prices are not negotiable?

The pool of qualified pre-approved buyers at the lower end or entry level of the Martha’s Vineyard real estate market is drying up. Lenders are adopting much stricter guidelines for buyers with limited resources and marginal credit. If you were pre-approved for a loan last year you may not be eligible for that same amount today. A larger down payment may be required and you will most likely not get a loan approval without verifying your income. If you are contemplating a purchase this year, save yourself disappointment and wasted time for everyone by going to a lender and getting pre-approved for a mortgage. Believe me, you are better off knowing your pocketbook will match your expectations. Negotiations are difficult enough today and being pre-approved will strengthen your bargaining position.

I’m the owner of SplitRock Real Estate, an EXCLUSIVE BUYER AGENCY and to paraphrase a statement from a REALTOR® sponsored national ad campaign, real estate is my life. I know my business; I study it and I’m passionate about it. My perspective is unique because I view the market from the buyer’s vantage point, and my goal is always to arrive at a fair deal. I will do my best to protect my buyer clients and will look after their best interests. My task is to educate and counsel my buyer clients so they can make informed decisions they will be comfortable with. I encourage you to begin or continue your real estate education at www.SplitRockRE.com .

Should Second-homes be subjected to a Lodging Tax?

On February 15th I commented on a proposed Lodging Tax that would affect second-home rentals on Martha's Vineyard and Cape Cod. People who depend upon the rental income of their second homes to partially offset their carrying costs, would have to pass along the tax to their tenants in order to make their numbers work. The rental rates on Martha's Vineyard are already high. We have to ask ourselves, at what point will vacationers start to look elsewhere for better values? For people dreaming of owning a home on Martha's Vineyard and relying upon rental income as part of the purchase equation this tax would deliver a real blow to the process. Here is an update on the debate taken from an editorial at CapeBusiness.net:

"Should second-home rentals be taxed? Some things to consider as the debate intensifies over whether to tax summer rentals:

"Yes, it would level the playing field. Latest numbers show a waning occupancy rate for hotels and motels in the summer, surely a result of competition from summer home rentals.

"But what happens if second-home owners dependent on that income find themselves faced with as much as a 9 percent tax increase? For them, it is seeing their property tax almost double. This on top of rising energy costs, insurance coverage increases and a harder time renting their homes due to an oversupply of rentals. At what point will second-home owners decide to put their home on the market because the economics don’t work – especially since they no longer can expect double-digit price appreciation?

"And if those houses go on the market, what impact will that have on all house prices, including those owned by primary-home owners?

"Will municipalities worried about waning occupancy taxes find that scenario better?

"Now add the fact that second-home owners spend more on average than full-time residents – according to some studies, 1.6 times more. If they bail out in the face of rising overhead costs, what other businesses on the Cape – from furniture stores to restaurants – will suffer?

"The reality is that the tax issue transcends tourism and municipal budgets. It is very much a complex macroeconomic issue with many moving parts. Look at it one-dimensionally and we are sure to suffer unintended consequences."

Edgartown Adopts Strict BOH Regulations in hopes of Protecting Sengekontacket Pond

On March 7th, I commented on this article.
Click here to follow link > Septic Ban Points to Pond Protection

I spoke with Matt Poole the day before the Board of Health meeting regarding certain concerns I had about the proposed new health regulations governing Ocean Heights and Arbutus Park. Matt was actually working on completing the draft for the new regulation when I interrupted him. I told him I felt this could present a real hardship to current property owners who may not be able to afford the cost of possible mandatory waste water upgrades as outlined by the new regulation. Those with vacant lots may no longer be able to afford construction costs on their lots with the added expense of new utility systems. Matt said, in so many words, anyone who owns or purchases property in these areas should be able to afford the hookups. He may be right because there have been some pretty impressive houses going up in these communities lately.

Ultimately, this will be a good thing but I think it will be very interesting to see how the new regulations create a paradigm shift in Ocean Heights and Arbutus Park. I agree installing enhanced systems with the thought of evading the new hookup and as a permanent solution would be ill-advised because I believe the enhanced systems will have to be abandoned eventually. In my opinion enhanced systems are not attractive looking and I think they’re a band-aid for what has been and is increasingly becoming more and more a very serious problem -- the pollution of Sengekontacket Pond.

I think it’s unfortunate that Edgartown does not focus more on existing problems in developed neighborhoods before it allows major new construction projects in equally fragile areas like the Edgartown Great Pond. We need to control and limit density here, not increase it. This Island is already choking; we don’t want it to lose its vital signs.
Click here to follow link > Strict Regulations to Protect Sengekontacket Pond

The times they are a changing --- on Martha's Vineyard

Septic Ban Points to Pond Protection is the title of a recent article in the Vineyard Gazette that outlines a new regulation affecting vacant land owners in Ocean Heights and Arbutus Park.

Water pollution is the #1 factor that’s going to limit the density and development of the Vineyard in all geographic areas. We’ve known this for years, and you don’t have to be Nostradamus to have seen it coming.

Last year the town of Edgartown implemented a “Wastewater Department Bedroom Regulation” that stated simply (?) will limit the number of bedrooms as follows: “Existing and future lots shall be allowed four (4) bedrooms for the first ten thousand (10,000) square feet of lot area.” The regulation goes on to outline guidelines for additional bedrooms, but I think you get the idea.

Our aquifer is essentially one large interconnected underground lake that supplies the entire Island and our numerous tidal ponds are very fragile. It doesn’t take a genius to figure out we’re at a tipping point. All you have to do during the summer when driving along Island byways and passing any number of these ponds is hang your head out the window of your car and sniff the air. Every year the BOH closes certain ponds at one point during the summer for recorded high fecal levels. That’s scary.

Read this article and keep in mind that buying land is going to require more than just a promise and assumption that you can build what you want on the land, even if the current zoning bylaws say you can. Rules are changing every day and I bet you’re going to see a great many lots in the Ocean Heights area coming on the market at fire sale prices, or being purchased by one buyer, combined, engineered and offered for sale anew at premium prices. I know of one group of lots in that area right now, not in MLS, available for $750,000.

Click here to follow link > Septic Ban Points to Pond Protection

Lodging Tax will effect Martha’s Vineyard Vacation Rental Homes

I’m an exclusive buyer broker on Martha’s Vineyard, so I don’t list property for sale. I also don’t handle any rental properties. Recently I received emails from several of my clients and Island neighbors expressing their amazement and supreme displeasure with a proposed bill that would levy a 5% hotel/motel room tax on all private rentals and timeshares.

This seems to me like an outrageous idea, especially because Martha’s Vineyard has always been a vacation destination and not everyone can afford to own a home here. Most Island lovers that find a way to own their dream home on Martha’s Vineyard do so by offsetting their expenses by renting a portion of the year. Only a very small percentage uses their properties like “temporary hotels”. According to a recent article in the Cape Cod Times, “homes, apartments, condominiums and timeshares that are rented for 90 consecutive days or less” would be subject to the proposed tax. According to this legislative mindset, “private homeowners will simply pass the tax on to the visitors. And if the tax is applied equally across the state, visitors will not head to the Berkshires instead of the Cape.” That may all sound well and good, but when you take into consideration the average vacation stay is two weeks with weekly rates starting at about $2,500 with many rentals close to beaches and towns priced well over $4,500 a week, and even into the tens of thousands, this is going to be a very hefty tax. Rental agencies charge between 10% and 20% for their services and most of them really earn it. So, you have to add that into the mix.

The article puts forth the claim that “what’s particularly unfair is that the people who rent these private homes still demand all the services that residents deserve, such as beach and road maintenance and police and rescue, but are paying no taxes to support the local services”. But they don’t take into consideration that these people pay their taxes just like year round residences; however, they don’t occupy their homes for as long as six months out of the year.

Here’s the Cape Cod Times article being referenced along with Chapter 64G under Title IX. Taxation. The proposed amendment to this law reads as follows:

“SECTION 1: Chapter 64G shall be amended by adding the following section:

“Section 13. Any city or town which accepts or has accepted the provisions of section 3A of this chapter may, by a separate vote, accept the provisions of this section and expand the imposition of said room occupancy excise tax to include other transient accommodations. Other transient accommodations is defined as any vacation or leisure accommodation, including but not limited to apartment, single or multiple family housing, cottage, condominium and timeshare unit, which is rented to occupants for a period of ninety consecutive days or less regardless of whether such use and possession is as a lessee, tenant, guest or licensee.

“For the purposes of this section, any definition in section 1 of this chapter, where the terms “room or rooms in a bed and breakfast establishment, hotel, lodging house or motel” are used shall be deemed to include the term, “other transient accommodations”

“In the case of transient accommodations, the owner of the apartment, single or multiple family housing, cottage, condominium or timeshare unit, shall be responsible for assessing, collecting, reporting, and paying over the tax and reporting as described for operators in sections 3, 4, 5, 6, and 7A, and shall be liable in the same manner as operators in section 7B.”

There’s no place like home, and no home is completely safe

Many of us own homes in areas considered to be living on the edge of ecological, topographical and geological hazards. Despite warnings based upon science and past history we keep flocking to these areas and paying the price because the view and lifestyle outweigh the risks. Martha’s Vineyard is one of those areas, hanging out in the Atlantic detached from the main land and in the flight path of hurricanes and Nor’easters. If you live in one of these so-called risk areas in time you will probably be touched by one of nature's phenomenas, but what about if you play it safe?

Some people are more cautious and look for what they hope will be a safe haven. There are no guarantees in life no matter how cautious you are or where you choose to call home. Two beliefs I try to live by are: You get what you most try to resist; make decisions coming from love not fear.
(Click here to follow link >) This was our Martha's Vineyard

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Martha’s Vineyard REALTOR® earns Resort & Second-home Property Specialist designation

Peter C. Fyler, REALTOR® Broker/Owner of SplitRock Real Estate, LLC, and an Exclusive Buyer Agent with 20 years of fulltime experience in the Martha’s Vineyard real estate market has earned the designation of Resort & Second-home Property Specialist. As one of the first 250 REALTOR® members nationally to earn the designation Peter is further distinguished as an RSPS Charter Member.

A recent National Association of Realtors® survey concluded there are more than 140,000 REALTORS® currently working in resort and second-home markets, and the numbers keep growing at a time when investment property and vacation homes make up a significant portion of the overall housing market, accounting for more than one-third of residential transactions.

Savvy buyers increasingly demand the expertise of a real estate professional with proven knowledge of resort and second-home market conditions, because 36 percent of second home purchases are more than 100 miles away from the buyer’s primary residence.