Lehigh Valley Real Estate Blog, Home Buying & Selling Information

Deposit Money Needed When Buying a Home

The deposit money (often called Escrow) needed to aquire a home can vary drastically from sale to sale.

For a resale home, the deposit amount can be anything the seller is willing to take. I've seen offers accepted with only a $500.00 deposit and others where the seller wanted to see $10,000. For new construction, it is typically 10% but can sometimes be as low as 5%.

The Escrow money is a negotiating point on an Agreement of Sale but it is not a strong point with respect to getting a seller to accept a much lower price. To fully understand this, we need to look at what the deposit represents to the seller and the buyer.

Let's take a hypothetical situation. A buyer is interested in a house and makes an offer with a $500.00 deposit. The seller accepts the offer. A week later, the buyer passes a house for sale and decides he likes this house better than the one he has an offer on. As a result, the buyer decides to walk on the first house and purchase the 2nd.

At this point, if the contract was written in the buyers favor (deposit money is kept but sellers can't sue), the buyer can walk out on the contract with only a lose of his $500.00.

From the sellers point of view, they have removed their house from the market at a minimal lose for the buyer. If the buyer changes their mind or is not willing to negotiate inspection results or other contract criteria the risk to the buyer is $500.00 to walk away from the deal. From the Sellers point of view, this can be considered a very weak contract.

As a result, sellers wish to see higher deposit amounts to verify that the buyer is in it for the long haul and will not walk on the deal at the slightest hesitation.

From a buyers point of view, the same mind thought occurs. The buyer would prefer to put down a small deposit in case they change their mind.

A common occurence with the Agreement of Sale is for the buyer to put down a small deposit to initiate the contract. Then follow it up with a larger deposit within 15 days. Since property inspections are usually done within 15 days of the signing of the contract, the risk to the buyer is minimal until after the inspections. 

The bottom line is although the deposit amount is crucial in getting an offer accepted it doesn't have a lot of negotiating power. The seller can elect to accept the offer with a contingency to continue marketing the house until all other contingencies are removed (property inspection, mortgage).

Pocono's One Step Closer To Rail Line

A recent study concluded that a Rail Line from New York to the Pennsylvania Pocono Mountains will not have any environmental affect. This was an important step in getting the Green Light to go forward with the project. It was the last step involved in getting an approval from the Federal Transit Administration to see if they would help fund the $550 million dollar project.

Although this really isn't Lehigh Valley news, I do consider it important that the Pocono's is one step closer to having a Rail Line. A rail line from Lehigh Valley into NY has been rumored for years. The Pocono's may lead the way but hopefully that will get things moving in the valley to provide the same service.

Bethlehem Township - More New Homes

The planned Bethlehem Township new housing development, on the land adjacent to Farmersville Road between Freemansburg Avenue and the Lehigh River, is going forward with a request for a zoning change.

Approximately, a quarter of the 162 acres is zoned agricultural while the rest is zoned medium density. If the agricultural zoning is changed, it will allow Ashley Development Corporation to build 552 new homes in the township.

The breakup of homes will be 181 single-family homes, 151 townhouses and 220 stacked townhouses.

The Bethlehem Township Planning Commission rejected one of Ashley's earlier plans with hopes that a plan will be submitted that contains a more traditional neighborhood with 43 acres set aside for pocket parks, athletic fields, and play lots.

The new plans should be submitted to the township sometime in February.

Interest Rates - Are They That Bad?

During the past year, Interest Rates have drawn a lot of media coverage. Have they gone up? Yes. Are rates higher now then they were in 2004. Definitely. Are they really that high right now? It depends on your perspective.

The federal government, in an attempt to control inflation, started consecutively raising the long and short term interest rates until in May of 2006, the typical 30 year conventional mortgage had reached a high of approximately 7% (from the past few years).

Lehigh Valley home buyers had gotten used to the 4-5% interest rates and all of a sudden the rates seemed to go through the roof. During the intitial splurge in the market in the early 2000's, I refinanced my house at an interest rate of 6%. I was very happy with this rate.

Now, years later, I have seen the rates hit an all-time low and then rebound but for the most part stay in the 6% range. The chart below, provided by Prosperity Mortgage, shows the interest rate history over more than 25 years of home loans. Going into the spring is the interest rate going to go up or down? That is a big unknown!

Hellertown - Zoning for Adult Businesses

A recent prostitution arrest at a Hellertown business has the borough reviewing the zoning policy for adult businesses.

Current law states that all municipalities must provide zoning for ALL types of business.

The zoning that Hellertown has in place allows for Adult Businesses only in shopping centers. At this time, there are no such businesses. The borough council is considering changing the zoning to allow Adult Businesses in the highway commercial zoning areas. These areas are currently located on the north and south end of route 412.

I saw a similar circumstance in Bethlehem Township about a year ago. The council was worried that a developer would attempt to build a casino in the township. Since the law states that zoning for all types of businesses must be provided, the council wanted to designate an area of the township as being zoned for a casino. That way if a casino was ever built at least they would have some say in where it could be built.

More Statistics About Lehigh Valley Home Sales

With a particular client in mind and the continuous news about the negative real estate market, I decided to delve further into some of the Lehigh Valley home sale statistics to determine if home prices are increasing or decreasing.

For this exercise, a specific type of house within a specific geographical area was the criteria.

Criteria used:

Areas: Bethlehem Township, Palmer Township, Forks Township, Nazareth, Lower Nazareth

Square Footage: 1300 - 1800
Number of Bedrooms: 3 or more
Number of Bathrooms: 2 or more
Year Built: 1990 - 2006
Home Type: Detached (any type: ranch, colonial, bilevel...etc)

	Units Sold	Avg DOM	3 Bedroom	4 Bedroom	Minimum	Maximum	Average	Median
2006	43	57	$285,167	$345,411	$245,000	$440,000	$303,380	$290,000
2005	49	37	$260,328	$291,498	$159,000	$408,000	$268,598	$265,000
2004	48	41	$248,562	$114,000	$115,500	$351,000	$240,457	$235,950

In the above situation, the data cleary indicates that even with the real estate market slowdown in 2006 home prices in Lehigh Valley continued to increase.

Now, let's look at Ranch homes only (keeping all other criteria the same):

	Units Sold	Avg DOM	3 Bedroom	4 Bedroom	Minimum	Maximum	Average	Median
2006	6	15	$298,233		$275,000	$335,000	$298,233	$290,500
2005	7	29	$268,333	$268,500	$214,000	$320,000	$268,357	$265,000
2004	7	31	$236,360	$277,950	$210,000	$286,000	$248,243	$255,000

Let's continue looking at Ranch homes but drop the age criteria to look at all ranches regardless of the year they were built. Some of these ranches are in move-in condition and others need major upgrading.

	Units Sold	Avg DOM	3 Bedroom	4 Bedroom	Minimum	Maximum	Average	Median
2006	45	40	$252,676	$265,763	$180,100	$335,000	$253,839	$255,000
2005	51	31	$243,777	$241,480	$175,000	$320,000	$243,576	$242,000
2004	49	24	$206,606	$216,100	$136,000	$286,000	$206,856	$204,500

Information provided by Rappatoni MLS and deemed reliable but not guaranteed for the date range of 01/01/04 through 12/31/06.  It does not reflect future sales, or currently listed homes.

Overall, the above statistics show that for this particular house and location the prices have gone up each year regardless of the "negative" market being broadcast by the media.

St. Lukes Hospital Coming to Bethlehem Township!

After a few years of debate between the City of Bethlehem and Bethlehem Township, it looks like the dispute may be finally resolved and the path cleared for development of the St. Luke's Hospital campus along the route 33 corridor.

The dispute involved sewerage capacity. Bethlehem Township sewerage is provided by the city of Bethlehem. The city has been clamping down on building permits because of increasing sewerage capacity concerns and all of the recent new development permits in the township have had to deal with handling this issue. As a result, everything needs to be approved by the City of Bethlehem AND Bethlehem Township. It has slowed down new development in the township but in no way has it stopped it.

On Monday night, the Bethlehem Township commissioners approved an agreement with the City of Bethlehem. As part of the agreement, the needed sewerage capacity would be provided if the water was also purchased from the city. The proposed development area is currently serviced by Easton Suburban Water Authority so the agreement contained plans to modify infrastructure to allow the city to provide the water.

The Lehigh Valley Hospital campus, located on the western side of the valley, is very large. If all phases of St. Lukes are built, the proposed facility is rumored to be the largest medical facility in Lehigh Valley. The campus will be 202-acres and the first phase will involve 125 million in construction.

Plainfield Township Says No to Wal-Mart!

For now, Wal-Mart won't be coming to the Slate Belt. After much opposition, the NY developer pulled the plug on the 475,000-square-foot shopping center that would have been home to Wal-Mart and Lowe's Home Improvement Center.

The planned development area is located in Plainfield Township near the Grand Central Sanitary Landfill and is zoned for commercial and industrial use. The opposition to Wal-Mart came from concerned citizens as well as Northampton County officials. The shopping center would drastically increase traffic and only provide low paying jobs.

This is the first time I've seen Wal-Mart get beat but then again the buildings aren't up yet.

Last Cornfield in Hanover Township Lehigh Valley

The last cornfield in Hanover Township, in the Lehigh Valley, will remain a while longer. Plans to turn the cornfield into 204 age restricted homes (55+) were turned down as the township Planning Commission voted down a change in zoning to the 68 acre parcel.

The parcel is located next to the Monocacy Creek and the St. Francis Center for Renewal. The current zoning allows for one house per acre. The developer is attempting to get the zoning changed to allow for 3 homes per acre.

Although the general concensus is that more homes for sale are needed in Hanover Township, the Planning Commission voted down the zoning change 4 to 1 with major concerns being an increase in housing density, from the current zoning, as well as an increase in traffic and water runoff into the Monocacy Creek.

Is the Lehigh Valley Real Estate Market Picking Up?

This past weekend may be a sign that home buyer activity in Lehigh Valley real estate may be increasing. On Sunday, I was at an open house in Nazareth for a $730,000 house and I had 8 visitors come into the house. A colleague of mine was at a house listed in Allentown for $190,000 and had 15 visitors.

Since the new year, a local builder has received 5 deposits on new houses in the $600,000 price range.

Is it the unusually warm weather in the Lehigh Valley that had so many potential home buyers out looking on an early January day with a huge football game later in the day? Is it the news that interest rates are low and a large portion of the Lehigh Valley home market is still increasing in value that caused all the activity at the open houses?

Could it be that home buyers think they can get a great deal since the supply of houses is larger than the demand?  I've heard about some ridiculous offers lately. Home Buyers offering $100,000 less than the asking price? This may work on 1 million dollar homes but not on $200,000 to $400,000 houses.

Are there some good deals out there? Definitely. Are some of the houses over-priced? Definitely. Are some of the new construction builders offering nice incentives and price decreases? Definitely.

The doom and gloom news about the housing market usually applies to the complete country and doesn't typically break it down into individual areas. The Lehigh Valley real estate market has suffered but I don't believe it has suffered as much as some believe.

Overall, prices still seem to be increasing but at a much slower rate. I guess the real unknown over the next few months is the weather and how much of an impact it may have on "spring" sales.