Beware of this new scam

All of us know that there are many scams out there on the internet. "I'll send you a check for $5000 and you refund me $4000," etc... Well, there is a new one that we've come across recently and it affects those of you who have property listed for sale on MLS.

Recently sellers and agents have been getting strange calls from people interested in renting their properties. The prospective renters state they saw the ad on Craigslist, drove buy the house and are calling because they saw the for sale sign. The confused seller or agent, with no intention of renting the property, comes to find out that someone has taken the photos and MLS descriptions of their sale listing and posted the property for rent on Craigslist. With the increase in "free" access to all MLS data anyone can get a number of interior pictures and pretty much any other data for a sale listing. When the renter goes to investigate they see a sign out front, so it makes perfect sense to them on the surface.

A few people have chased down these fake landlords and engaged them in a dialog about renting. The story usually goes something like "We're taking a short term job and need to quickly move out of the country, and want to keep our house for when we return." In some cases the rent is so amazingly cheap that I'm sure a ton of emails or calls come in. In one example I know of a $1,000,000+ single-family home in a Boston neighborhood that was being "rented" for $1,600. In many instances, unless a prospective renter can make contact with the actual owner or agent, it's impossible to know when this scam occurs.

So, while the rental process is hard enough, and navigating the options on Craigslist is already way too difficult, everyone must be very aware of what they are coming across. In this time of trying to do all business on your own and by email without ever using an agent or meeting anyone in person, it is critical that everyone pays attention to who they are dealing with and where their information is being distributed.

Email this post to a friend.

Finding an Apartment to Rent is Hard...

I've been trying to help a family member find a rental apartment in Boston, Brookline and Allston/Brighton for the past week or so. We've only got Saturday and Sunday to go look and we've been trying to email and call craigslist advertisers to see the apartments they've got posted. Nobody will call us back. Then, I called a company that has a couple of hundred buildings and whose name is plastered all over The Fenway and nobody there will call us back. The vast majority of rental listing agents in Boston (not Brookline) just throw listings against the proverbial Craigslist wall and then just sit and wait. They don't put any pictures up, many of the descriptions aren't descriptive. You can never find an address, and there's no easy way to contact anyone. I even tried to contact that big company with all of the listings to see if I could represent my family member as an agent and they would not let me. Either way I'm going to negotiate against them as hard as possible and the rental commission would be peanuts to begin with, but why can't a consumer be represented in the rental process?

Back when my wife and I were looking at apartments we were moving up from the Baltimore region and we placed calls two weeks in advance to set up appointments. We booked flights and made hotel reservations, showed up in Boston and thankfully I called ahead the morning of to reconfirm our appointments because not a single one of the agents we set meetings with remembered us calling. This led to scrambling to show us whatever building they hoped they could get access to, etc... The most amusing was an agent whose name I remember to this day because of her absolute ineptitude. She forgot our appointment, then had this "amazing and wonderful" building to take us to that was perfect for our needs. We took the T out to Coolidge Corner (from Newbury St.) and she didn't have a T token for herself. We got off the T and she had no idea where the building was. Not having a phone with her she needed to borrow my wife's phone TWICE to get directions to this place that she was so excited to show us. When we finally got there it was nowhere close to what we were looking for and it was a fully staffed high-rise building that had its own rental department. Needless to say, I never spoke to that agent again and we didn't even return to Boston with her. I don't quite know how she paid for the T on the way back in, or if she even was able to find it.

If anyone has a good, reliable rental agent for the Back Bay/Fenway area, please let me know! There are some wonderful rental agents in Brookline, and they are restoring my faith, but who knows if we'll ever get to see anything in Boston.

AP poll: More avoid buying homes.

AP poll: More avoid buying homes - Boston.com

In the article from the link above we are seeing that the general public is responding to the media stories about the "downturn." We all know that the most basic economic principle is supply and demand. So, how does this consumer sentiment apply to the Brookline housing market?

We need to first look at one of the major elements of the "boom" of the past 3-5 years. While we know single family home sales have always remained strong and will continue to drive the Brookline housing market to newer heights, condominiums are the "bread and butter" of our market. Most Brookline residents cannot afford to live in the "average" $1.3 million dollar home. It is why we see almost ten times more condos sold in Brookline each year. So, the real estate "volume" is tied up in the condo market here in Brookline. One thing that has changed since 2003 is many multi family homes that used to be rental apartments were purchased by budding "developers" who converted the apartments into condominiums. To be clear, an apartment is a unit in a building but a condo is a deeded living space within an association. So, for the five years that saw incredible growth in the housing market, these apartments started disappearing from the marketplace. Then, in 2004 three very large buildings that traditionally were rental apartment buildings converted to condominiums. First was the conversion of both 1450-1454 Beacon Street (The Warwick) and that was soon followed by 1600 Beacon Street (Washington on the Square). Later in 2004 20 Chapel Street (Longwood Towers) was also converted, removing in total more than 1000 rental apartments from the Brookline market. This sent rental supply plummeting and left renters with little choice but to use a very easy path to mortgages to buy these units as condos.

These events caused rents to increase (supply and demand) and actually most likely contributed to 2006 having a slightly weaker pricing in condo sales. Then, as we moved into the "bubble" talk of mid-2007 we saw many potential buyers start to investigate renting again. As the AP story indicates, many people see this as the "better" path in this market. The problem in Brookline is the rental inventory is still pretty dry. We cannot build any more rental apartments, so where are these renters going to go? All of a sudden the mortgage market isn't allowing the traditional "first time home buyer" to obtain financing as they could two years ago and now rents for a 2 bed apartment are hovering around $2000 a month (in many cases without parking). Enter what looks to be a brilliant stroke by big developers in The Fenway. These new buildings (Trilogy, etc...) might be where all of these people who bought the sub-$400,000 condos in Brookline in the past are going to move to.

This is something worth watching because as a result of the lending environment of the past these traditionally more "transient" homeowners will have less equity in their homes (if any) and will need to sell in the next year or two. Suddenly these homeowners might find themselves being landlords because they cannot afford to sell. The good news for them is if they can manage holding their property and renting it out, there still should be strong rental demand, but these new mega-buildings along Boylston St near Fenway Park will soften that market a little (all shiny and new). As I've been saying all along, the "core" of the Brookline homeowners should weather this market adjustment just fine. Those with 20%+ equity and strong buying power will not notice much of a change. It is this sub-$400,000 market that will most mirror what we're hearing from the rest of the country.

Lending Issues with New Condo Conversions

On Wednesday I made reference to changes within the lending industry that will not get much national media play but will be critical to North Brookline buyers. New condo conversions are any apartments buildings that are being occupied by individual owners for the first time. Typically lenders would waive their owner occupancy ratio limits for new conversions because it would be impossible for a new conversion to have any owner occupancy. For any buyer who was paying less than 20% down at closing the lenders were required only to do a "limited review" of the condominium.

From 2003-2007 properties like Cypress Lofts, Longwood Towers, The Warwick and Washington on the Square became popular with many people who did not necessarily want or have the ability to put 20% down. The appreciation rate was so steep that it made sense to put down as little as possible (in some cases $0 down) to grow your investment. With these limited reviews the first owners of a condo building (whether 4 units or 400) would get by without the viability of the overall project being questioned by the lender.

What's happening today is almost all lenders are calling for an immediate "full review" of the condominiums for any buyer who puts down less than the "standard" 20%. This will mean that everyone who buys early into the project will need to put down more money than the last buyers will to get loan approval. This also means that in some of our neighboring markets like Allston and Brighton buildings which have a high number of rented units will also be subject to these reviews. The only buildings that will be exempt are buildings in which the sale in question would put the owner occupancy at 50% or higher.

Who protects the renter?

Back when I was moving up to Boston I was working on a project to develop commercial property outside of Massachusetts and wanted to find a "day job" that meshed with those interests. I knew we were moving up here because my wife was going to be in a Ph.D. program in the Medical Area. We had one week in which she had to decide which program to accept and find suitable housing. I spent time on Craig's List searching for rental listings, and called with about 10 days notice to make appointments for the property I wanted to see. I also explained to the agents that we only had 48 hrs to find a place to live, and we absolutely had to have something rented before we left. Rental agent's dream, right?

Here's what the agent never told me: All rental agents are representing the landlord, and only the landlord. It didn't matter to them what I wanted, it only mattered to them what they were able to get for their client. It's funny that on the sales end of real estate transactions we have disclosure forms for everything. The very first time you sit down with an agent it is MANDATORY that you sign a disclosure form that explains the different forms of agency in Massachusetts. It's called the "Mandatory Agency Disclosure Form" and I can bet that more than 75% of you have never seen it before (that's an issue for another day). Yet, when you're looking to rent an apartment, nobody really takes the time to explain who they're representing, and what your options are. You find the place you like, do all of the shopping yourself, get to negotiating the lease, and you're working against the landlord and their agent. You don't have anyone on your side explaining to you what other similar units rented for, or what other options you should ask for (parking included, etc...) and paying the fee. The amazing part of it is landlords and their agents have been able to pull this scam on the public that the "customer" should pay the fee that the landlord negotiated with their agent. To clarify, the agent is working for the landlord, but you are paying for that work.

So, you go sign a lease, and you have a problem with something in the unit, you try to call the agent who "helped you" and you find out they really can't help you at all. You're not their client. It baffles me to no end that in a state so focused on tenants' rights there is nobody in the transaction that is allowed to represent the tenant. The more amusing thing is that while buyer representation is so common now in sales transactions, the rental agents who work side by side with the sales agents cannot fathom exclusively representing a tenant in their search. I hope this is something that changes soon, because rental agents are the first line of agents that consumers usually come in contact with. I decided I should become an agent because I saw how poorly I was treated in my search. I still remember the abysmal service a certain Newbury St. agent gave me, and she is my daily reminder of how I should strive to service my clients' needs. If I didn't get in the business my opinion of all agents would be awful, all because of that first rental agent.