Every week, we ask an Boston real estate professional for their thoughts on the top trends in Boston real estate.
This week, we talked with Nick Aalerud, a principal broker with AA Premier Properties, LLC.
Boston Agent (BA): In the last twelve months, Massachusetts has continued pushing down its foreclosure inventory. However, the serious delinquency rate remains relatively high but still around the national average. With pending changes to mortgage rules scheduled for later this year, do you fear those delinquencies could turn into a large amount of new foreclosures, why or why not?
Nick Aalerud (NA): While I don’t necessarily feel that the tightening mortgage rules would strongly impact the amount of delinquencies relevant to foreclosure inventory, I do feel that we have a large amount of foreclosure inventory coming down the pike. Our sister company, Short Sale Mitigation LLC, is in the business of negotiating and seeing these sales first-hand. Many factors contribute to the delinquency rate remaining high; one major one being the post-recession fallout we are still seeing, with individuals who took a reduction in pay or job loss from years ago, who now have an added family expense (family member sick, child birth, etc) that sent them over the edge. Banks and investors used to be fairly understanding when one of these loans was starting to go bad, and they understood the financial and time they would save by agreeing to approve a short sale (selling below the mortgage amount owed). Now, as many have come to think of the market as a “seller’s market,” we’re seeing a trend where they are holding out for more and more money, even on the most dilapidated of properties. It’s usually these properties, where the lender does not understand the true value of an unfinanceable home with a roof falling in, mold all over the walls, the plumbing all in disrepair and water in the basement, where the home ends in foreclosure.
I see the city ending up with additional foreclosure inventory and it is mainly due to the large amount of Ibanez “toxic titles” that were unable to have their title cleared. That was until the court case Daukas v. Dadoun in July of this past year when a judge ruled that titles can now be considered clear if: a. the foreclosing lender conducted and recorded a proper foreclosure by entry; b. the entry was conducted by a lender who was the proper holder of the foreclosed mortgage; and c. three years have passed since the foreclosure entry.
That said, lenders are finally able to start taking action and disposing of the inventory they’ve been holding onto for years – which would definitely provide the inventory to the lower-end owner occupants and investors. If homeowners are currently in a pre-foreclosure situation, or they know they’ve been “living mortgage free” for a while, it’s definitely time they consulted a knowledgeable attorney to see what their options might be.
BA: Urban Land Institute’s predictive “Emerging Trends in Real Estate” report puts Boston as one of the most promising markets in the U.S. in regards to investor prospects. What do you think is driving the large amounts of investor interest?
NA: Boston has always, and will always have a super strong investment base rating. Why, you ask?
We have everything here. History, both quaint and luxury living, great schools and unmatched higher educational institutions. It’s the engineering and bio hub of the universe. We have uber passionate sports fans. It’s in close proximity to gorgeous Northern New England for ski weekend getaways and foliage sightseeing, the coast for the ocean lovers and a short one hour flight to NYC, where we can do business and visit friends without paying the killer price tag of being in THAT city; although, we’re getting there.
I’m mostly in tune with the residential and multi-family markets. That said – rental rates have been increasing, and notably, condo prices have started to go through the roof, which to some, call out to all non-locals to sweep in and buy as many as possible. A great article by Scott Van Voorhis does a nice job of relating them to the financial market, where he says (and can be verified through MLS) that condo prices have gone up 71 percent since the beginning of the 21st century.
There is a lot of new development being churned out, including the Christian Science luxury condo tower, scheduled for completion in 2017. Another fixture in the Back Bay, it’s supposed to rival the prudential center for looks and be considered the first “luxury” condo tower to serve Boston proper.
I am always of the mindset, though, that when prices are at this level and institutional investors have already entered the market, it’s time to find somewhere else – if the highest returns are what you’re after. However, if you’re looking for safety and stability, it’s agreed that you can’t beat the stability of demand anywhere in or near the Boston market due to all its offerings. This is why the institutional investors and hedge funds come in, pay a higher price point and settle on the lower cashflow returns (4 percent to 6 percent ROI) of the rentals. They know that “there just ain’t any more land being made” around here, and that over time the market appreciation will more than likely outweigh any S&P fund they invested in.
BA: Curbside appeal is an important part of maximizing the value of a property. What do you do to improve curbside appeal?
NA: Ah, the best question for a seller to ask! And if they don’t ask, it should be the seller’s agent’s job to instruct it for them, as this is what brings the “money” in “Show me the money!”. Thinking first impressions? Curb appeal is about getting the buyers OUT of their car and to your front door without driving away saying, “this place looks terrible.”
Having worked with and also being a “rehabber” buyer for investment purposes, I get this question often. It obviously depends on your budget, but here are the “top 5” budget-sensitive things I always recommend to my clients: landscaping, front door and hardware, repair any wood or siding rot, clean and/or paint the siding and trim, and clean driveways and walkways. Simple as that.