In the last week I’ve spent a lot of time helping unravel the myths about dealing with short sales, foreclosures and bank owned properties – as a result, here are the top 7 reasons why, as a buyer, you may want to steer clear:

1.  Competitive Pricing…  In this soft market, short sales are not always priced competitively – sometimes equal to or higher than other similar available properties

2.  The Bank calls the Shots…  as it relates to the terms of the contracts; they can (and most often do) override certain terms of our Regional Sales Contract and can change terms mid-stream

3.  Property sold as-is…  meaning there are generally no home inspection repairs or credits allowed; NOR will any walk-through items be repaired; WYSIWYG

4.  The Bank holds the $$…  generally in a transaction, the brokerage representing the buyer holds the earnest money deposit.   However, in these cases, they will generally ask that the seller (or BANK) hold the money – not a great scenario in my book…

5.  Delays?  Unexpected and unexplained delays are common.  Even settlement dates can come and go without any communication on status – I’ve even heard of delays up to 30–60 days…  even when everyone is ready at the settlement table – loan funded and everything ready to go.

6.  Closing Costs?  Forget it…  very few short sale situations will agree to chip in to cover any buyer closing costs…

and…..

7.  HOA/Condo violations or delinquencies?  Sometimes the seller is unwilling to remedy and this leaves an enormous exposure for the buyer.

I know I’ve painted a pretty gloom and doom picture – but the message is clear – if you can stay away, at least for now, the climate is not friendly for buyers who want to purchase these properties.  I’m hopeful that as more flood the market, the banks will ease up and realize that they don’t want to be property owners, or property managers – just sell them and be pleasant!

Tread carefully!

Happy Wednesday

Jennifer

Good morning, readers!  Today, I’m pleased to present you with an article written by an exceptional local lender with JP Morgan Chase Home Finance, Doug Enger, Area Manager.  I’ve worked closely with Doug over the years, and recently our conversations have been a lot about “how did we get here?”  So I asked Doug if he wouldn’t mind sharing his insight on that very topic and below is what he has to say.

Enjoy!

Jennifer

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The current press on the mortgage industry probably does not affect you…  Most of the press today is talking gloom and doom about the potential to get financing for your first or next home purchase – the fact is that most of the changes underway are impacting less than 20% of potential buyers. 

To understand where the industry is currently, you must understand how we got here.  Average home prices over the first half of this decade increased at a rate of almost 20% a year, doubling the cost of homes purchased just five years before.  During this same time period, real income for most consumers remained relatively flat.   The difference between the rapidly increasing cost of homes and stagnant growth in income resulted in reduced purchasing power.

The mortgage industry responded to these changes by creating new mortgage programs and options that allowed more buyers to afford these higher prices.  These options started with interest only mortgages which reduced monthly mortgage payments, by allowing customers to just pay interest on their loans and delay principle payments for up to 10 or 15 years.  The risk was that if you did not pay principle, you would still owe the amount you originally borrowed after 10 or 15 years.  The benefit was that you could use the appreciation in the home to build equity over that same period of time.

What went wrong was the industry tried to go further to bridge the gap in purchasing power by developing exotic adjustable rate mortgage programs that had negative amortization – where your payment is not enough to cover the monthly interest and the amount not covered is added onto the principle balance of the mortgage.  These customers now owe more than they originally borrowed. 

Additionally, sub-prime financing started approving loans for clients with lower credit scores and allowed many more people to get loans based on “stated income” that may or may not have been completely accurate.

The result, many people started buying homes predicated on future income and house values which many thought would continue to increase at a rapid pace. 

These hybrid loans were provided to less than 20% of the total purchasing market.  These loans did not perform well and thus created all of the negative press that you now see on the news on a daily basis.

Consumers still have access to all of the other traditional loan programs that have always been available historically.  If you are qualified with good credit – You will get a loan approved today and you can buy.  Now that many buyers are sitting on the fence because of all the negative press you may never find a better time to be a buyer.  Interest rates will not stay low forever.  If you are waiting for prices to drop, you will most certainly miss the bottom of the market, and, when you realize that you missed the bottom you may find that interest rates have gone up and you will have lost much more purchasing power than what you gained in the price reductions on homes.

Evaluate your personal options today by working directly with a lender who can review your individual circumstances and base your decision to buy on the real facts and not the current press.  Information is power!

Tags: mortgage+industry+update, northern+virginia+real+estate

Pricing….

Not a scarier word has ever been spoken.  In this market, whether you’re a seller or a buyer, pricing is the key.  Is this house/condo overpriced?  Is it priced right?  Or better yet, is it “priced to sell?”  Are comps valuable?  Do statistics tell us anything? 

There are so many items of intangible value — neighborhood — washer/dryer in-unit — access to public transportation — charm, that’s a doozy.  How much value can be placed on any one of these factors?  The reality is, nobody knows.

The market dictates the price.  PERIOD.  Not the seller, not the listing agent.  What sets the price is what the market will bear for that particular property.  Some will tell you that if priced right a property should sell right away.  Sometimes that’s true.  But sometimes, especially in this market, a buyer is hesitant to write an offer early on for fear that there will be no negotiating…  and sometimes that’s true and sometimes it’s not.  Some agents will say that the property was priced appropriately, but they’re wrong.  And the market changes…  We all make mistakes. 

The bottom line is this:  if you’re a seller, you need to choose a price that’s reasonable, reflects accurately the market conditions and then you need to listen.  If feedback says it’s too high – consider a price drop.  If feedback says too cluttered – de-clutter.  You get the point.  Do what you have to do (even if it’s uncomfortable) to be as competitive as you can be.

As a buyer, you need to look at the properties that are in your budget and compare them dollar for dollar, feature for feature to decide which one is right for you.  Then yes, you can (and should) look at the comparables to be sure you’re not over-paying for a home, but you should just press on and take it seriously.  Don’t just bottom-feed.  Not every property is 10% overpriced!  Not every property fits the statistics – they say “average” for a reason! 

It’s a tough topic to navigate through – but rely on a good agent and your gut and it becomes a little easier to swallow.

Happy Monday

Jennifer Klaussen

Believe it or not, as I have said in recent posts – the market is still a good solid market in Arlington.  Here is a look at some recent statistics. 

First here is a chart showing the May numbers as they compare with last year.  We’ve sold more condos and more single family homes than during the same month last year – our average days on market are higher, which means more inventory and our average sales prices are either steady or slightly lower.  Again,though, I’ve mentioned before that it’s tough to look at just 1 month because there may have been a $6M property that changed hands drastically affecting the average selling prices.

So below – we’ll look at the year so far at a glance as it compared with last year to date:

You can see from this chart that we’ve sold more units of both condos and singe family homes YTD as it compared with 2006…  Averages are a little higher in the condo market, a little lower in the overall single family market, but a little higher in 22207 specifically.  Again, longer days on market reflects more choices. 

The numbers don’t lie, folks.  For those of you that think our market has been declining for the past year or two, look at the numbers.  Overall I know Fairfax County and Loudoun County sales don’t look this good, but if you’re in Arlington – no time like the present!!

Hope you’re encouraged by the numbers, as I am.  If you’d like to discuss jumping into either side of the market, whether you’re a buyer or seller, give me a call to discuss the prospects!

Happy Thursday!  It’s a gorgeous day out there – hope you’re enjoying it!

Jennifer

PS  All data has been collected from MRIS and is thought to be accurate to the best of my knowledge.

Hello there — Yes, I’ve been MIA for a few days…  it’s called buried in work and taking care of clients first.  That’s a good thing, right?

Yesterday I received an email from MRIS (Metropolitan Regional Information Systems, Inc — our MLS company) indicating the availability of some new reports – I found two of them quite interesting.

This one discusses a recent perspective on the sub prime “mess” as he refers to it — written by NAR chief economist David Lereah.

This one offers a local twist on the housing forecast as it relates to other economic indicators.  It’s GREAT local information -but remember, even when looking at the “MRIS Region” – that includes the entire DC Metro area – our housing markets are still very localized as discussed in an earlier post re: the pace of the Arlington housing market – at least for April, 2007.

I’m off and running.  Enjoy the beautiful day ahead of us!

Happy Wednesday!

Jennifer

One of the necessary things to plan for when making a real estate purchase is insurance.  But what do you need?  Well, I’m not an insurance agent (read: insurance expert), but I can tell you from a property ownership perspective the minimums that you should have… read on.

When purchasing a condominium, the association carries a master insurance policy on the entire building structure.  This is one of the costs that your condo fee covers.  However, you’re not off the hook.  You should have insurance to cover your personal belongings, as well as personal liability, so if anyone ever injures themselves on your property, you’re covered. 

When purchasing any other type of property with fee simple ownership (when you own the ground and air above – exterior walls, fireplaces, roofs, etc…) then you need a full featured home-owners policy covering the structure, contents, liability, etc.  There are specialty riders as well.  For example, here in Northern Virginia, we don’t worry too much about earthquake policies and not too many properties are affected by the 100 year flood plain (although there are some) and require special flood insurance. 

One of your first jobs once you have a ratified contract (remember, we’re in Northern Virginia) will be to contact an insurance agent or two, get quotes and make application for insurance. 

You’ll need to know such things as:

Wiring type

age of roof

# of layers on the roof (sometimes a new layer of shingles is nailed right onto the old layer)

distance to nearest fire hydrant

etc…

They will also run a C.L.U.E. report.  The C.L.U.E. report (Comprehensive Loss Underwriting Exchange) will provide a 5 year history of losses associated with an individual and his/her property.

Additionally, something many don’t realize, if you move to your new residence and have to leave a property vacant, communicating that to your insurance agent is very important.  Since it’s obviously vacant, you won’t need to continue to insure the contents, but you will need to carry at a minimum a basic fire policy AND a comprehensive liability policy.

The key to good insurance is communicating with your agent.  There are many great insurance companies out there – find one you’re comfortable with that offers competitive rates and you should be set.  As always, if you want to talk further, don’t hesitate to give me a call or email. 

Happy Friday!

Jennifer

Hello cyber friends.  Today, a sticky topic.  (and although we’re only going to address the Northern Virginia housing market here, I’m sure some of these concepts apply on a national level) You’ve had your house on the market for “enough” time and it’s not selling – no nibbles, no interest, no offers and you’re discouraged.  What do you do now? 

Folks, there are (generally speaking) only 3 factors to consider – you’ve heard them all before:  PRICE, CONDITION and LOCATION – but the greatest of all is PRICE!  For a price, you can overlook certain conditions; for a price, you can overlook drawbacks in the location.  There is a buyer out there for every property.  But not at any price.  Here are some important questions to ask yourself:

1) How long is the average time on market (DOM) for my neighborhood? Subdivision?  Condominium complex?  Am I still within that time period?  If you’re unclear – talk with your agent.

2) How much competition do I have?  Are there other homes in the neighborhood (or similar units in the building) currently on the market?  If so, how do you compare?  Do they have upgrades, a slightly better location and are priced lower?  If so, that’s pretty telling and a sign that you need to consider with your realtor.

3) Are you getting showings?  are you drawing in traffic?  There are many ways to do this:  MLS, yard sign, Open Houses, Advertising (print, online, etc).  If you’re getting traffic but no offers, I suggest you consider your price and/or really look at your home through objective eyes.  Perhaps you need to place some emphasis on staging?  If you’re not getting showings, you need to also look at marketing activities as well as price.  It’s too tough to see what’s scaring off those potential buyers without knowing more about your situation.

4) (and MOST important) Do you have the right agent?  You need to consider why you hired the agent you did in the first place.  Was it because they suggested to you the highest list price?  Or because they were willing to price it high on your request?  Or was it because of their name recognition in your community? 

The best agent for you will truly look at your property through the eyes of the prospective buyers and help set a realistic price point that will actually get your property sold in the least amount of time for the best possible price;  also, it should be representative of your location and condition.  But you have to be open to and willing to listen to their advice!  Don’t hire someone because you see dollar signs.  In your listing meeting, listen to what they’re telling you about the market conditions, what might need to be done to prepare your home for marketing and decide if it’s right for you.   Selling a house in this market can be tricky, but it is done every day with satisfied sellers and buyers due in large part to realistic expectations being set at the beginning.

So, the bottom line as sellers – there are only a few actionable ways for you to affect this process:

• Improve your condition
• Improve your price
• Improve your representation

Always here to chat if you’d like! oh, and Happy Wednesday!

Jennifer

Where’s Chicken Little?  Obviously out someplace interpreting the recent NAR report.  On the surface it sounds really depressing – “the worst drop in 19 years” — that’s a powerful statement.  There were several factors that have influenced this whole roller coaster of a first quarter… warmer January, frigid February, snowy March.  It wreaks havoc with the housing market.  Also, remember these are national statistics.  In areas hard hit by lending reform (the sub prime lending fall out), there are fewer buyers.  Combine these issues and you can see how it contributes to the lower than expected numbers.

Interestingly, the reported figures were for single-family homes – condo and co-op sales were flat.

Even with this report, estimates and market forecasts indicate a relatively flat year for housing.  Here locally, we experienced a 6% drop from March of 2006 and some areas even experienced an increase.  For all the reasons Northern Virginia is expected to stay strong (job growth, interest rates remaining favorable, etc) we’ve got no reason to believe that we’re in trouble.  Click here to read more specifics on the March 2007 housing trends for Northern Virginia.

If you’d like to talk further, please feel free to call or email me to discuss further.  No pith helmet required! 

Jennifer

Mortgages 101

One question I get asked a lot is “what are rates these days.”  And the answer is, drumroll please….. “well, that depends!”  You know, back in the old days, real estate finance was fairly simple.  You had to save up a nice down payment of 20% and there was 1 program (an 80% first trust loan) and a rate.  That’s it – simple – so simple that the real estate agents used to qualify the consumers!  Yep – you met with your Realtor, filled out an information sheet, then he or she would qualify you and after writing a contract, THEN you would head off to find a lender.

Wow have things changed!  Now, the lender is one of the very first things we usually like to get taken care of.  1) It helps you to understand what you can afford and 2) you can choose the program that best suits your plans.

Some of the more popular mortgage programs are:

z      The Classic 80% – fully amortized loan

z      The Classic with a twist – maybe an 80/10/10 or an 80/15/5 that involve a 2^nd trust or Home Equity Line of Credit

z      Interest Only

z      ARMS

Another twist now is that the interest rates are influenced by your credit score – the better the score, the lower the risk and therefore, the lower the rate.  Let’s look at some of these programs.

You’ve heard 1^st trust, 2^nd trust, 80/15/5 or 80/10/10… these terms get tossed around all the time – mainly these programs are determined by how much cash you have to put down at settlement.  Example:  If you’re looking to purchase a home for $400,000 by the old standards you would need to have $80,000 to put down and you would then finance 80% or $320,000.  If you don’t have $80K, you might look at an 80/10/10 which means your 1^st trust loan would be in the amount of $320,000 and you would have a 2^nd trust loan in the amount of $40,000 which would reduce your down payment to $40,000.  If you don’t have $40K, then you could either look at an 80/15/5 which would lower your down payment requirement to 5% – $20,000 – or you could even consider 100% financing which is an option today! 

Once you determine what your cash position is and how much you’d like to finance, then you would need to choose a program – do you want to pay down your loan amount each month?  That’s called a “fully amortized” loan – if you are more aggressive (and possibly a more disciplined investor) you might want to consider an interest only loan – NO principle is paid down, but the theory is that you can take that monthly savings and place it in your investment account.  In this scenario, you are relying on housing market appreciation to allow you to make a profit and move in years ahead.  It’s all about risk. 

You should also consider the length of time you plan to stay in your home.  If you’re looking at a 5-7 year investment, you might consider a 10 year ARM or Adjustable Rate Mortgage.  If you’re in shorter – there are 3 or 5 year ARMS. 

I hope this has given an introduction to the very complex mortgage industry – de-mystifying some terms – it’s always good to partner with a good lender that can help you navigate through this complex process, making it simple and straight forward.   I can help you find some great lenders if needed – I’m always here!

Jennifer

Internet Lenders – thoughts…

You’re searching the internet high and low for houses, looking at all of the great pictures, virtual tours, etc… Hasn’t technology come a long way? You’ve heard you need to apply for loan approval before starting your search in earnest and you’ve seen those commercials on TV with all of the lenders fighting over your business – you know what I’m talking about! All you have to do is go to the website and presto, the fighting over you begins. Well, ever heard the phrase “if it seems too good to be true….” Same goes here, in spades….

First of all, you need to know that here in Northern Virginia, YOU are responsible for showing up at the settlement table with your approved loan and money in hand. The lender you choose to work with (and consequently their resources such as the appraiser, underwriter, etc…) is in no way responsible for getting you to the settlement table. You are the one holding the bag at the end of the day.

Let me give you a practical example. You fill out some forms on the internet that “pre-qualifies” you to purchase a home for $650,000. So, with your letter in hand (oh, and it offers 3% closing cost assistance and no points and a free set of knives as well), you set out with your realtor to look at houses. You fall in love with a house priced at $640,000 and you think “I’ve got this made!” Well, you write a contract, not-contingent on financing, which has been accepted and woo hooo, you’re on your way.

Then, you get a few weeks into the process, within a few days of settlement, and you find out that your interest rate that you qualify for will put you over the limit to actually get loan approval for $640,000 – that you can only get $600,000 and will be paying a premium rate and oh, by the way, the 3% is only for those with 20% cash to put down and you were planning on financing 95% of the purchase. See where I’m heading? All of a sudden, you’re left with very few options but most importantly, if you don’t follow through with your contract, you stand to lose your earnest money deposit and find yourself in breach of your contract. How could this have been avoided? A quick call to a reputable local lender (or two) and you can begin the process. When hiring somebody local with a large direct lending firm, you have a real person that is now accountable to you who WANTS to see you succeed with your home purchase. Why? The main reason is that when you’re happy with their service then you’ll tell all your friends and everyone wins! It’s good business.So, talk with a few recommended lenders, tell them each the same information, even go so far as to fill out their applications. See who will offer you the best rate and terms for your particular situation and then stick it out with them. AND ALWAYS ALWAYS ALWAYS, no matter with whom you choose to work, get it in writing. I guarantee you won’t be sorry.

 Jennifer