Greenwich, CT First Half 2019 Real Estate Report

We had 60 sales in June 2019 totaling $156 million. Year to date we have had 226 sales totaling $556 million. Our volume of sales would be the envy of many other towns, but it wasn’t a good June for Greenwich. Our 60 sales were down only 6 sales from June 2018, but June 2018 was not a good year for sales either compared to our 10-year average of 84 sales.

6/30/2019 Inventory Contracts Last Mo. Solds Last Mo Solds+ Contracts  YTD Solds  YTD+ Contracts Mos Supply Mos w/ Contracts Last Mo. Annlzd
< $600K 6 2 2 4 8 10 4.5 4.5 3.0
$600-$800K 23 4 5 9 14 18 9.9 9.6 4.6
$800K-$1M 32 14 5 19 18 32 10.7 7.5 6.4
$1-$1.5M 79 13 12 25 45 58 10.5 10.2 6.6
$1.5-$2M 114 16 8 24 35 51 19.5 16.8 14.3
$2-$3M 154 23 10 33 52 75 17.8 15.4 15.4
$3-$4M 107 15 7 22 25 40 25.7 20.1 15.3
$4-$5M 71 5 3 8 12 17 35.5 31.3 23.7
$5-6.5M 52 6 3 9 6 12 52.0 32.5 17.3
$6.5-$10M 56 2 5 7 8 10 42.0 42.0 11.2
> $10M 35 3 0 3 3 6 70.0 43.8 #DIV/0!
TOTAL 729 103 60 163 226 329 19.4 16.6 12.2

We had some bright spots. Sales from $6.5 – 10 million were double last years sales with 8 sales so far and 5 of those sales were in the month of June. We also have seen more sales from $2 – 3 million where we had 52 sales up 4 sales from last year. Unfortunately, in both of these cases, our contracts for those price ranges are down and inventory is up so this may be a short-lived increase.

When you look at the bottom-line numbers our inventory is up, sales are down 17% and our contracts are down 14%. This is after we saw a significant recovery in May sales with 57 sales, which matched our 10 average. Part of this sales spurt in May came from a bunch of contracts closing quickly that month, which resulted in us going into June with a reduced number of contracts. At the end of June, we are down 17 contracts compared to June 2018. Most of this reduction in contracts is because of the weakness from $1 – 3 million, which unfortunately is the heart of our market.

One contract bright spot is the over $10 million market where our 3 contracts are 3 more than we had in June 2018. On July 1, we also saw a dramatic drop in inventory, as we do most years, since many listings expire on June 30 as the first half of the year ends. So, as of now we are looking at 699 listings. This will help our months of supply, which for the overall market is at 19 months of supply up 4.6 months of supply from last June.

New York and New York City are continuing to help out our market as the mansion tax in New York City just dramatically increased on July 1st. In NYC the city “mansion” tax starts at 1% at $1 million and increases to 3.9% for sales over $25 million. This tax is traditionally borne by the buyer, which certainly won’t encourage sales. In NYC, the seller pays a 1.425% transfer tax starting at $500,000. Meanwhile if the buyer actually takes out a mortgage, the buyer gets to pay a 1.925% mortgage tax if the mortgage is over $500,000 and only pays 1.8% for mortgages under $500,000.

This compares to Connecticut’s single conveyance tax that is 1% below $800,000 and 1.5% above that amount. Starting July 2020, we will get our own mansion tax as the conveyance tax will be 2.5% over $2.5 million. Now the new Connecticut law purports to give that increase back if you stay in the state for three years. As I wrote before it’s a silly tax that doesn’t raise much revenue and gives the New Yorkers a chance to claim that we have a mansion tax just like they do. We, however, only have one tax and they have three.

All this is happening at time that Wall Street is setting record highs, unemployment is low, and the economy continues to hum along, so the second half of the year may well look better. Let’s also hope for a repeat of last year where the peak sales month was in July rather than June as it normally is.

I have an Accepted Offer, What Could Go Wrong?

 

by Mark Pruner

As a realtor, my primary job is to get the seller or buyer to an accepted offer and then send that to the attorneys for them to transform the terms of the offer into a contract that can be signed by both parties.

The whole thing starts with the buyer and seller negotiating back and forth to an accepted offer including inclusions and exclusions of personal property and fixtures attached to the property. The parties then send their attorneys the accepted offer. Back in the 90’s when I was a practicing real estate attorney, the attorneys generally drafted a contract at this point with an inspection contingency and a mortgage contingency, if the buyer was using bank financing. This quick contracting had the effect of transferring control of the deal to the buyer. The buyers could decide whether they wanted to exercise the inspection contingency and either walk away, ask for repairs or a price adjustment.

Now days, the seller’s attorney usually wait for the inspection results before drafting the contract. This keeps control with the seller, as the rule in Greenwich is that there is no deal until the contract is signed. As a result, sellers can accept offers from other buyers and if they do the first buyer may find themselves in a bidding war or just be out of luck. If the first buyer had already done their inspection, the polite thing for the seller is pay the first buyer the cost of the inspection, but the seller may or may not do that.

Let’s assume that another buyer doesn’t come in the picture and the buyer does an inspection to verify the house is in good shape. The inspector always finds a bunch of issues, but unless they significantly change the value proposition, the deal often goes forward “as is”. If there are major issues or if the buyer wants to get a better price, they can renegotiate the original deal.

Once the inspection issues are resolved, the seller’s attorney drafts the contract and sends it to the buyer’s attorney. The contract will almost always be the standard Fairfield County Bar Association contract which the attorneys revise from time to time as laws change. (Several year ago, I was on a contract revision committee and one of the great things about Greenwich real estate attorneys was that there really was an effort to be fair to both buyers and sellers, when considering the needed revision.)

Each seller’s real estate attorney has their own tweaks to the FCBA contract, but they are usually more in the way of clarifications or that cover unusual situations that firm encountered in the past. The seller’s attorney then sends the proposed contract incorporating the offer terms to the buyer’s attorney. The buyer’s attorney attaches a rider to the contract with various representations and other pro-buyer provisions. This is when the attorney’s negotiation really begin, but eventually the sales contract is negotiated to a final contract.

The buyers then sign the final contract and attach a downpayment check usually for 10% of the purchase prices. The sellers then sign the contract and there is a binding contract (which may have contingencies). The downpayment check is deposited into the seller’s attorney’s escrow account until closing. At this point any other buyers can only be a backup offer, as the buyer has a contractual right to buy the property.

The “binding” contract may have a mortgage or other contingency. Mortgage contingencies are usually 30 – 45 days while the buyer gets approved for a mortgage. Once approved the mortgage contingency is waived by the buyer. If the buyer is making good progress, but has not gotten final approval by the contingency date, the seller has the option to extend the contingency date, but if there is a higher backup offer, they may decide not to grant an extension of the mortgage contingency. Things can get pretty exciting for all parties when this is about to happen.

Between the contract signing and the closing, the seller is required to continue to maintain the property and fix any appliances that break. The seller has to deliver the premises “broom clean” and empty of all their personal property (i.e. anything movable). Ideally, the seller moves into to their new place in the week before closing, so the seller’s cleaning people have a day to clean the property, before the buyer’s final walk through.

All fixtures, such as chandeliers and wall sconces affixed to the real property stay unless the seller specifically excluded them in the contract. All personal property must be removed unless included in the contract.

Over my many decades as either a real estate attorney or real estate agent, the large majority of disputes at closing have been over inclusions and exclusions. The buyer does the final walkthrough and there is a hole in the dining room ceiling. At closing you hear, “The buyer should have known that the seller was going to take the dining room chandelier.” Alternatively, you hear buyers say, “The seller “should have known that they had to remove all those old paint cans and tiles”, since the buyer didn’t need them for touch-ups. It’s really important to cover each of these items that are exceptions to the rule that fixtures stay and personal property goes in the contract.

In the contract will be a closing date, when title passes to the buyer. At closing the seller’s attorney gives the buyer’s attorney the deed and the seller delivers all the keys, garage door openers, security codes, appliance manuals etc. Buyers are often surprised that the sellers are not at the closing, but the seller’s work is basically to sign the deed and a title affidavit and those are usually signed before and held in escrow by the seller’s attorney.

These days, and particularly, if it is an all-cash deal the buyer may not be at closing either. I always go to closing in case there are last minute issues. I have arrived at the appointed time at the seller’s attorney’s office only to find that the buyer’s attorney arrived 10 minutes early and everything is all done on an all cash deal.

Sometimes the seller will hold over after the closing with the buyer’s permission, because for example their new place isn’t ready yet. There will usually be a separate agreement if the seller holds over with provisions for payments, liability and damages. Conversely, sometimes the buyer will move in before closing and the title actually transfer to the buyer. Most attorneys prefer not to do these agreements as the situations create all sorts of legal difficulties should a problem arise.

At the closing, the buyer’s attorney gets the deed signed by the seller, the seller’s check for the Connecticut and town conveyance taxes, the conveyance tax form and a title affidavit saying that the seller hasn’t recently done and work on the property that would entitle the workmen to a mechanic’s lien on the property. The seller’s attorney gets a certified check for the balance of the purchase or the funds may be wired directly into her account.

Usually, the buyer’s attorney goes to the town clerk’s office from the closing table to verify that there are no new liens on the property and to record the deed and new mortgage if the buyers used bank financing. In the good old days, banks would send the seller’s mortgage release to the seller’s attorney to be held in escrow pending receipt of the money by the seller’s attorney. Now days, banks are a lot less trusting and won’t send out the release of the seller’s mortgage until they get the payoff money. So often the last thing that is done is the recording of the release of the sellers’ mortgage which can be weeks later.

The process can seem complicated, but each step is there for a reason and if you have two good attorneys that know the process in Greenwich, it can be relatively painless, but these days it usually isn’t. Having a good attorney can be a big help, when problems arise.