June 20, 2023

Splitting up

The summer season is just about in full swing but sales are still down significantly. When compared to pre-pandemic times, it was common to have about 4x the number of homes on the market this time of the year. The year-over-year median purchase prices have increased by 17% but sales would certainly be higher if our market had more inventory.

This month's article might interest you if you're considering subdividing your current property, evaluating lots to subdivide, or just curious about how developers in our market subdivide land for new developments.

Since there's a lot of new construction in our market, buyers often ask how the subdivision process works. Why would someone want to subdivide land?

Breaking up a parcel is a practical way to create value. Provided there's a market, you can make a worthwhile return. You also may want to develop the land, e.g., build homes or commercial space, to generate a short-term return or passive cashflow.

Here's a quick overview of the flow of events and things to watch for:

• Outline your objective and plan — get started early and plan accordingly, as the process can take as much as a year.

• Conduct a feasibility study:

- Ensure there is a market or demand for the location and type of lot you're offering.
- Determine how much the lots will sell for, likely time on the market, and approximate costs of subdividing in your town.
- Evaluate development costs and timeline.
- Check the availability of utilities — present, planned, proposed, and possible.
- See what improvements will be required by planning authorities.
- Consult an attorney to discuss any legal implications.
- Work with a title company to research the deed and tax records; ensure there are no easements or encumbrances that could adversely affect the marketability of the title.

• Hire a surveyor to mark the property's boundaries and prepare a plat map.

• Submit application and plan, attend the open or closed hearing, and get approval or denial.

• If denied, determine the cause and then reapply. Most issues are simple to resolve when you conduct due diligence in advance.

That's the high-level view. If you have land or are considering purchasing land as an investment, connect with me to learn more about the process. -Henry

May 26, 2023

Market Review: Q1 2023

Knowing how the real estate market has performed over time can be a valuable tool in making informed decisions. The complete Q1 market reports for Coastal Delaware are now available for more insight into the factors driving current sales trends throughout our region. Our has remained firm despite softening in other parts of the nation. We experienced a decrease in total properties sold year-over-year, while the benchmark median price and average price continued to increase, primarily due to limited inventory.

The stats from the first quarter of 2023 indicate a slight decline in the overall number of closed sales while average sale prices continue to increase in response to rising demand for coastal homes. Referring to the Market Data by Price chart below, homes in all segments are selling near, or even above asking price.


My primary goal is to be your local market expert on property values, trends, and forecasts, along with providing exemplary client service. If you are considering a sale or making a move in the near future, I would be happy to assist in any way.-Henry

April 24, 2023

Only situations

My wife and I recently took our children to the Caribbeans and our fantastic tour guide said something that I hope our kids never forget: "We have no problems, mon. Just situations, and we take care of them before they become problems."

In 2002, I started my real estate career in the commercial office brokerage sector. The terms of each transaction were unique and often complex. Each deal required a high level of sophistication and typically involved separate attorneys negotiating each aspect of an agreement before terms were finalized.

Comparatively, residential real estate transactions are straightforward, and our state contracts are usually negotiated without an attorney. We strive to create a smooth process throughout, but situations inevitably arise. Navigating and providing creative solutions is essential to achieve a successful outcome.

Here are some of the top situations we see:

Hidden/Latent Defects

After the close of the transaction, buyers may find damage that wasn't previously visible: mold, foundation issues, termites, plumbing — the list goes on… Who's responsible? It can be tough to determine and costly to remediate.


• Sellers: Get your own appraisal and inspection (including for pests) to know the property's condition and minimize your liability. Always disclose known defects — no matter how minor.

• Buyers: Before submitting the offer or reaching the closing table (prior to the contingency period expires), hire an appraiser and/or inspector you trust.

Breach of Contract

Sometimes it's inevitable that one of the parties in the purchase agreement will need to breach the contract. Though it's generally done so with careful consideration and good intentions, both parties need to be prepared for the consequences and take steps to avoid the situation in the first place.


• Ensure the agreement includes everything you want and contingencies to protect your interests (your Realtor will guide you here).

• Be prepared to lose your deposit if you're the buyer or to return the deposit as a seller.

• Communicate openly with the other party and your Realtor and address issues as soon as they arise.

Title Issues

It can happen that the seller isn't aware of encumbrances (loans, liens, or other deed claims) against the property, throwing a sizeable wrench into the gears at or after closing. These can be discovered before closing (preferred) or after (the buyer and lender could be liable).


• Sellers: Pay for a comprehensive title search before listing the property.

• Buyers: Conduct a title search with a reputable company. Get title insurance to protect yourself from third-party claims that may arise in the future. Lenders generally require this. Make sure to get coverage if you're paying all cash or buying a property out of probate or that's been inherited.

Financing Challenges

What if the buyer can't qualify? The situation can become tenuous and the transaction may fall through if it's close to closing. This is a common situation and best addressed in advance:


• Sellers and buyers: Require or obtain a pre-qualification and proof of funds before accepting/submitting an offer. Ensure the buyer is aware of how interest rate increases may affect affordability and approval potential.

There are plenty more situations that would take too long to delve into here. If you're considering buying or selling, reach out to me to discuss potential issues that might come up in the transaction.

After working through hundreds of successful closings, my team knows what warning signs to watch for before and during escrow. -Henry

Posted in Business News
April 3, 2023

Appraisal strategies

If you're evaluating real estate in a trust, refinancing, considering a sale, or need to know the value of your home for other purposes, an appraisal is in your future.

To ensure the appraisal goes smoothly and your property is valued fairly, you'll want to do a bit of preparation.

Depending on the situation and your level of motivation, the amount of work it will take to get ready for the valuation will vary, but it's better to exercise what control you can over the process to obtain the best outcome.

Here are a few strategies to consider:

• Provide the appraiser with comps but be respectful. Identifying properties that are 'comparable' to yours in terms of condition, location, and amenities will help you asses the value.

• Simply note the address and share it with the appraiser. The less you push, the better. The appraiser may or may not consider your suggested comps, but it can help. It may also allow you to highlight some of the features and improvements of your property and how they support a strong valuation.

• Valuing homes isn't a glamorous position, so make the appraiser's job easier by cleaning up clutter and making it convenient to access every room and take measurements. Aggravating your appraiser won't help your case, and they may not be as generous with their valuation, particularly if they're distracted or impeded during the process.

Is it necessary to invest money in repairs and upgrades?

If you have the resources and time, and it fits the situation, making improvements will increase value. However, ensure the repairs and upgrades you pursue carry the greatest perceived (and actual) value in the local market. Ironically, the appraiser is the most qualified person to make that determination, so it may be beneficial to consult one before putting in any money.

On a related note, don't bother with 'lipstick' improvements. While helpful for buyer viewings, quick cosmetic improvements are generally transparent to a keen appraiser and won't substantively affect value. The best thing to do is clean up and be open about the home's condition.

Every appraiser has their perspective on the market and strength in a particular region. If you have the option of selecting the appraiser, look for one that specializes in your property type and lives in or focuses their work in your community. Every area has unique demand factors, property features, and buyer trends that the appraiser needs to understand and have experience with to value your home accurately.

If the appraiser is assigned by an appraisal management company or other organization and they're traveling from out of the area, you're entitled to inquire regarding their expertise and, if appropriate, dispute their selection.

My team and I can provide more insights on the appraisal process and getting prepared. We're also here to help you estimate the value of your home and find suitable comparables. -Henry

March 27, 2023

Build or buy?

With high inflation (though it's cooled a bit) and rising interest rates, the cost to buy or build a home is an issue of concern. Let's explore the comparative cost and advantages of building a custom home vs. buying a pre-built, conventional or modular build.

A study by NAHB (National Association of Home Builders) found the cost to build a home in the median-value range is $34K greater than buying a pre-built home (Houzeo).

However, a recent StorageCafe (Yardi) study reported that the cost to build a new single-family, median-value home in Delaware is on average, $96K less than to buy, making it the 6th most cost-effective state for homebuilding.

Generally, developers have a cost efficiency due to the scale of their operations. Though this isn't always the case, as the research above suggests. Developers have the leverage to buy everything involved in large quantities or at wholesale value. Whereas, if you're building a house, you may have to pay more for many aspects of the project, including:

• Architectural and engineering fees.
• Land acquisition.
• Permitting and surveying.
• Construction labor and management.
• Materials.

Luxury home construction typically ranges between $400 to $600 per square foot. Of the total development costs, you can generally expect to pay about 30-60% for labor, 40-50% for materials, and ~10% for design, permitting, and other soft costs. On top of that, it's a good idea to reserve a 20% cushion to cover unexpected expenses.

Another thing to consider is time. If you're looking for a first-time or replacement primary residence or moving from out of state, time may be of the essence. Depending on the size of the home and labor availability, it could take 6-12 months or more to complete the build. If you need to move quickly, buying a pre-built home is likely the best option, costs aside.

For time- and cost-efficiency, modular homes are a viable option to look at. As the components of the structure are already pre-designed and factory built, the manufacturer can pass on the savings afforded by the scale/volume of their operations. Once the foundation is laid, the home can be assembled in a short amount of time.

Yet another alternative is buying an existing home that needs improvements and renovating it. While your design options might be a little more limited than spec (custom) building, renovating can take less time, consume fewer materials (supporting sustainability), and cost less to finish.

Additionally, some loan programs allow you to roll these costs into the purchase with favorable terms and interest rates compared to construction financing. Another benefit is that local and federal tax incentives could be available for green renovations and historic reuse.

There are advantages of buying pre-built or customized homes from a new home builder. If the house isn't already in existing inventory, new home builders can typically put together your house with your preferred options in less time than it takes to spec build a home. Builders often offer price breaks, financing incentives, and free upgrades depending on demand factors. With interest rates on the rise, there may be opportunity to negotiate favorable terms and pricing.

All these strategies are feasible, and the best approach is unique to the home buyer's needs, preferences, and goals. My team and I have experience with each option and will guide you toward the right fit and give you an idea of relative cost and time requirements. Reach out to me for an informal consultation.

View our active listings below. I'm available if you have any questions or wish to schedule a meeting. -Henry

March 21, 2023

Title fraud

A growing issue in our market that owners and buyers should be aware of is title fraud (also called title/deed theft). It's not extremely common, but it does happen and can be devastating when it does.

The crime occurs when a fraudster steals your personal information and uses it to file a fraudulent/forged purchase agreement and deed, transferring your property into their name. They may then resell the property, rent it out, or take out financing against it.

Who's most at risk?

Owners that have non-owner occupied residences, such as long-vacant homes or vacation rentals, with low or no debt on the asset are the most likely victims of title fraud. When the owner isn't attending to a property and related mail, scam artists can steal their property months or years before they find out.

Once this happens, getting your property back if you're the owner or reclaiming your deposit/purchase funds if you're the buyer can be legally challenging and costly.

There are a few sensible things to do to protect yourself from title fraud as an owner or buyer. The first is purchasing an 'enhanced' title insurance policy that will guard you against loss in the event of an unauthorized transfer.

The next thing to do is request that the county recorder or register of deeds put an alert on your deed to notify you if a transfer is requested. Additionally, ensure mail is monitored, and keep an eye on your credit report for any unusual information, inquiries, or loans.

Finally, be wary when buying a house that's been vacant for an extended period and where the deal is too good to be true.

One more thing: Always work with a Realtor. We adhere to a code of ethics, have the experience to spot suspicious activity in a transaction, and will make sure your interests are fully protected. -Henry

March 13, 2023

Forced appreciation

As we observe what has been a shifting market here at the beach for the last few months, the outlook for buyers is starting to tilt in their favor. However, there are still pockets of high demand areas and our market has historically been less sensitive to interest rate volatility. Furthermore, real estate continues to be an excellent hedge against inflation.

I'd like to follow up on our previous article about appraisals by digging into 'forced appreciation.'

It's one of the tools investors use to boost the value of a property without waiting for the market and natural appreciation to increase appraised value.

The principal way this works for income-generating (i.e., rental properties — both commercial and residential) is by increasing the net operating income (NOI). NOI is one of the figures used to calculate the market value of a property according to the prevailing capitalization rate (investors' expected rate of return given risk).

How do we increase NOI? Here are a few popular and effective strategies leveraged by investors:

● Bring rent/lease rates up to market.
● Reduce management and operational expenses.
● Renovate/reposition to increase appeal and demand.
● Create additional cash flow streams (ancillary revenue).

Depending on the type of property and the investor's budget, some combination of these strategies will work to increase value under nearly any market conditions. These are particularly effective when the market is stagnating or in recession, and investors can't rely on economic growth to drive value. Such is the case currently with the Fed tamping down on inflation through monetary policy.

Fortunately, some of these strategies work well for non-rental properties as well, though value creation is based on comparable value rather than income. To render a valuation in this case, appraisers use the substitution method to compare the perceived and statistically extrapolated value of the individual and combined features/qualities of your home to similar on-market and recently sold properties in your community.

While income driving strategies do not apply here, making your home more energy efficient attracts potential buyers and promises lower ownership and operating costs. Additionally, all buyers appreciate properties in top condition with excellent curb appeal and amenities. You have the power to control the value of your home — much more so than other types of passive assets, such as securities.

Another approach to consider if you have a vacant property on your hands, such as a second or vacation home by the beach that you don't use often or at all, is to convert it to a vacation rental. Reach out to us to receive a rental analysis to determine if your property has greater value potential as a short-term rental, long-term (conventional) rental, or a non-income generating property.

As always, I'm here to help you devise the best strategy based on your objectives and preferences. -Henry Jaffe

Feb. 28, 2023

Going off-market

I'd like to cast some light on the pros and cons of selling and buying off-market properties (i.e., homes not on the MLS — aka 'pocket listings'). It's been a hot topic as we're facilitating more off-market deals, particularly for sellers.

As rates rise and values stagnate, there's increasing opportunity for sellers, home buyers, and real estate investors to achieve their objectives through an off-market transaction.

So, why would you want to sell or buy off-market?

Let's take a brief look at both sides:

Selling off-market


• Privacy — no nosy neighbors or showings to strangers.
• Quick sale — potentially strong offering terms and pricing, including substantial cash, from buyers that want to avoid competition.
• Potential to sell direct to a principal and avoid the buy-side commission.
• Less prep required — sell 'as-is' and save time and money: avoid needing to make repairs, paint, modernize, stage, etc.
• If you're unsure it will sell quickly, you can start off-market to test demand and minimize the risk of a stale listing, i.e., high days on market (DOM) and consequently wary buyers.
• Opportunity to get a preview of what terms and concessions buyers are seeking.


• Smaller buyer pool and potentially lower price.
• You must be comfortable not knowing if you got the 'highest' possible value.


• Chart out your goals and motivations to ensure an off-market sale suits your situation and home.
• Work with a Realtor seasoned in off-market listings that has access to a pool of buyers with cash and knows how to handle this type of transaction.

Buying off-market


• Less competition for the property — opportunity to avoid a bidding war.


• Possibility of paying a premium to secure the property — make it worthwhile for the seller to keep it off the market.
• May have to accept the property as-is.


• Ensure you have a clear idea of your criteria (what you're looking for and need in a home or investment).
• Don't get caught up in a too-good-to-be-true opportunity — get it appraised and inspected.
• Work with an agent that is well-connected and has access to pocket listings.
• Be prepared to move quickly — have your financials and pre-approval/qualification ready, and bring as much cash as you're able.

Not sure which approach is the right fit for your goals and property?

Sit down with me over coffee, lunch, or over the phone to look at your situation and discuss how an off-market strategy could fit. -Henry

Feb. 20, 2023

Sotheby's 2023 Luxury Outlook Report

For a detailed review of the luxury market, we are pleased to introduce the Sotheby's International Realty 2023 Luxury Outlook report, which outlines the industry trends and happenings across high-end residential markets around the world. In this report, we highlight the trends that you can expect in the year ahead, from the projected flow of global wealth into the real estate market to luxury real estate in the metaverse: Read The Report Link

Feb. 20, 2023

Taxes when selling

I’d like to bring to your attention an important tax form required for sellers of homes in Delaware who are not residents of the state.

Though this isn’t an exciting topic, it’s relevant as many of our sellers live out of state and are non-residents that own beach houses as second homes or rental investments.

The form we’re talking about is Form 5403, and to keep it light, I’ll just give you the high-level facts and considerations you need to know:

• You need to file Form 5403 if you are not a resident of Delaware and are selling a non-primary residence.

• The form allows you to report gains on the sale of your investment property and pay taxes due.

• You’re essentially making an estimated tax payment at closing rather than deferring payment until the end of the year.

• While it’s mandatory, it saves you the hassle of paying a big lump sum at tax time.

• The form must be filed by the closing date. A penalty will be assessed if you don’t file Form 5304 and pay the associated tax.

• The form also applies if you own the property as an LLC or corporation.

• Your attorney will submit the tax payment after deducting the amount due from the proceeds.

• The tax rate on gains is 6.6% for individuals/spouses and 8.7% for corporations.

Note that Form 5403 doesn’t apply if you’re a resident of Delaware, if your entity isn’t subject to tax here, if it’s your primary residence, or if the property is in foreclosure. Consult your attorney or tax specialist for help in these instances.

Should you fill out the form yourself?

If you follow the instructions and have all the needed information and documentation, you could certainly figure it out; however, it’s least risky and most convenient to entrust this task to a professional.

It can be challenging to calculate the tax basis, and errors will result in costly penalties. Therefore, it’s prudent to retain a Delaware Certified Public Accountant or Delaware Tax Attorney.

Reach out to me for additional resources or referrals to qualified tax professionals.

Contact me anytime with questions.


Posted in Business News