The ABC’s of Foreclosures, Short Sales and REOs – Definitions and Terminology – PART I

These days there seems to be a lot of talk about real estate foreclosures.  In fact, in the year 2008 approximately 2,000,000 (that’s TWO MILLION) ARMs (Adjustable Rate Mortgages) will adjust…  pretty staggering, isn’t it?  And as they adjust, there will be some that simply cannot make the payments.  For a multitude of reasons, people find themselves in this situation every day. 

I am going to focus most of this week’s blog topics around foreclosures, short sales, being a seller, being a buyer, risks, pitfalls, upsides (if I can find any) and general information that is pertinent.

Today, let’s look at foreclosure.  Foreclosure is a process the mortgage holder begins when payments are not made in a timely fashion.  When you sat at the settlement table and signed documents, one of them outlined where, when, how much and to whom payments would be made.  It also went on to detail what would happen if you failed to make payments on time.  Generally there is a curative period, in which all that is necessary is that you simply bring the payments current.  Generally with only 1 missed payment, a homeowner is considered to be in default and they are sent a letter notifying them of the situation and the curative period begins.  With the 2nd missed payment, a more urgent letter is sent by the mortgage holder and usually it’s at this time that the matter is turned over internally to the collections department.  The lender cannot begin the actual foreclosure process until the stated curative period has passed.

Once it has passed, a “Notice of Default” is given to the homeowner letting them know that the note (mortgage) is now due and payable in FULL – so no longer do they need to merely bring the payments current – they need to repay the entire loan.  Also, once this notice has been given to the homeowner, immediate power transfers to the trustee – or mortgage holder.  Typically foreclosure sales occur within 3–6 months of the Notice being delivered.  That’s QUICK!

So what exactly happens with a foreclosure sale?  It is advertised in the newspaper and sold at auction typically on the courthouse steps.  There are certain terms that are not negotiable (such as necessary down payment and confirmed ability to complete the transaction in a fairly quick timeframe); the property is sold in as-is condition, and most often, sight-unseen.  There is no “Regional Sales Contract” and very few, if any, protections for the buyer.  In fact, there may be outstanding tax liens on the property that the buyer may or may  not be aware of.  Pretty scary! 

Generally foreclosure sales are purchased by investors, not someone looking for a home.  It’s a tough process – not one I would want to represent a buyer for!

There are a lot of “listings” today in the MLS for what we refer to as or think of as foreclosures – but in fact, those are short sales and THAT will be our topic for tomorrow.

If you’d like more information, want to chat or are looking to sell your home and/or buy a new one – please give me a call.   All indications are that interest rates have stabilized on a slight down-tick, inventory is plentiful, sellers are negotiating (they’re not giving their homes away for free, but there are fair prices to be paid and fair deals to be made) so pick up the phone and give me a call anytime!

Again, stay tuned for Part II tomorrow where we’ll wrap up definitions before heading into the reasons why or why not you might be interested in participating in one of these types of sales.

Happy Monday!

Jennifer

Tags: foreclosure+sale, real+estate+foreclosure

The new “symbol” of Arlington County

O-K, we’ve all seen them – flying proudly in our neighbor’s, friend’s or perhaps our very own homes.  We have jokingly referred to them as the new Arlington County Flag, although I didn’t want to upset anyone by putting that in my title. 

Have you guessed yet?  Of course, you need a few more clues – it’s red and about 8 1/2 x 11 in size – although the red quickly fades to white…  any guessers yet?  Yep, you got it, it’s the Building Permit.

Last week when I was driving around I decided to stop and take a photo every time I saw one in a window.  Well, that only lasted for about 15 minutes – after almost causing several accidents, I realized it’s futile – they are EVERYWHERE.  I tried to get some statistics about the number of building permits issued, the penetration rates (e.g., 1 home out of every 8 has been issued a building permit in the last 12 months) but alas, no such information is published, at least not that I can find.

But here’s a bit of what I saw:

I could amass hundreds of these photos, but you sort of get the drift!

If you are thinking of doing some work on your home, or just want to fit in with the new symbol of Arlington you should look someday about all of the instances that permits are required in Arlington County.  You might be surprised!  I was!

Happy Friday

Jennifer Klaussen – photo journalist extraordinaire (ha ha ha ha ha)

Tags: friday+fun, arlington+county+building+permits

Neighborhood Focus – Westover

I’ve decided to add a new feature to my blogworld – Neighborhood Focus.  This week, to kick it off, I’ll be taking a closer look at Westover, a charming neighborhood in North Arlington that gives the feel of yesteryear.

Washington Boulevard is the “Main Street” if you will, of Westover.  Traffic slows when you enter into the 2–3 block stretch resembling days gone by.  It’s an area of local shops, small-town feel, and everything you need – from the post office, the grocery, a few colorful restaurants, a barber, drug store, hardware store, coffee shop, library…  what else could you need?

Here is a look down one of the sidewalks of Westover Village.  You can see the barber shop and Scoop Beauregards – one of my personal favorite ice cream parlors in the entire area!

This shopping center is flanked by 2 very clever restaurants:  The Lost Dog Cafe and the Stray Cat Cafe!  I can personally vouch for the garlic-y white pizzas and wide array of beer/ale served at the Lost Dog!  It’s definitely something to experience.

It’s a quaint part of Arlington that offers a variety of housing options some even affordable!   Also, it lies within walking distance to the East Falls Church metro – making it a commuter’s dream.

So if you’re considering a move to Arlington, or even just like exploring new places – consider slowing down and experiencing Westover!  You won’t regret it.

Happy Thursday

Jennifer

Tags: Arlington+Westover, arlington+virginia

Going Green in Arlington County

I’m sure you’ve heard all about the “green movement” – as it relates to the housing industry, it involves updating processes and materials to build (or renovate) a more environmentally friendly home.  Arlington County has created a program called the Green Home Choice Program.  The program deals with everything from minimizing the amount and types of construction waste, to eco-friendly products and energy efficient (Energy Star) systems.  Having an energy efficient home can not only save you money each month on your energy bills, but also save in the long term on the use of natural resources, like water and gas.  Green homes can also help reduce the allergens and pollutants sometimes found in building materials.

One of the great side benefits of participating in this program is that the “green home” builder moves to the front of the permit approval line often saving measurable time in the building process. 

In order to qualify as a certified builder in the Green Home Choice Program, an application is required through the county outlining the project intent – a special inspector will then be assigned who will keep a scorecard for the project to ensure that the project remains in the acceptable scores for the program.  Arlington County maintains a great list of resources for green home architects, builders and suppliers.

In the end, going green is kind to our environment, saves the homeowner money each month AND might even be completed a little more quickly with the help of Arlington County!  So if you’re considering going green, check out the benefits and go for it!

Happy Wednesday

Jennifer

Tags: green+home+building, green+home+choice+program

Uptick during the Dog Days? August Sales figures for Arlington County are in!

I’m coming to you today to report that the world is most certainly NOT coming to an end!  Real Estate sales held steady during the month of August around Arlington, Virginia – I would say even strengthened in some ways. 

One particularly encouraging aspect of the numbers shows that “days on market” might actually be shrinking.  We’ve been saying all along that as sellers become more aware of the market conditions, and more willing to price their homes correctly, with the advice of an expert agent (like myself) their homes will still sell, and some, I’m hearing, with multiple offers.  But it has to look good and be priced right – that combination is like a ONE-TWO punch!  And it’s absolutely necessary for a speedy, smooth transaction.

Here’s how the numbers look August of this year compared with last August:

Aug-07			This year			Previous Year
	Act	U/C	Sold Units	Avg DOM	ASP	Sold Units	Avg DOM	ASP
Condos	387	167	113	41	424K	184	59	398K
SFH	337	83	85	49	829K	85	59	766K
SFH 22207	97	37	36	42	996K	35	75	834K

I see shorter Days on Market across the board – just for August – year-to-date homes are still taking longer to sell this year than last.  Here’s how it looks year-to-date:

Jan 1 – Aug 31 — 2006 – 2007 comparison
	Units Sold	ASP	DOM
Condo
‘07	1166	405K	55
‘06	1054	399K	52
SFH
‘07	745	813K	75
‘06	741	804K	48
SFH 22207
‘07	295	973K	76
‘06	268	910K	56

Look at the condo market!!  We’ve sold more units in 2007, for a higher average selling price in *almost* the same length of time – condo market bust?  I don’t think so!  Even in the single family home market, almost the same track record as far as units sold, a little higher value this year, but longer on the market – and this is mirrored when just looking at the 22207 zip code.

Here’s another interesting piece of information I’ve begun tracking for you:  absorption rates.  For Arlington, they look pretty good…

Condo:                    2.31

SFH:                       4.06

22207 SFH:              2.62

The absorption rate is basically how long it would take to sell through the current inventory.  Many parts around the country are seeing double digit absorption rates.  What does this mean?  Basically there is a little over 4 months worth of inventory in the single family home market in Arlington County – only about 2 1/2 months of condos…  I’ll continue to monitor these rates for you. 

As always if you’d like to have a conversation more specific to your neighborhood, county, zip code, etc… please don’t hesitate to contact me.  The numbers are very telling and it’s good to look at them before believing all the hype you read in the papers!  Real estate is a LOCAL animal!  Sometimes neighborhood by neighborhood.

Happy Tuesday – hope everyone had a wonderful Labor Day and a most excellent first day back to school!

Jennifer

Tags: august+home+sales+arlington

Mortgage Update – HOW DID WE GET HERE???

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

____________________________________________________________

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

Friday Fun goes Back to School

Well, today was the very last week-day of summer vacation.  Arlington and Fairfax County students head back to school on Tuesday after Labor Day.  I thought I’d show you some of the schools that I’ve passed by over the last few days:

Tuckahoe Elementary School

Nottingham Elementary School

Taylor Elementary School

Jamestown Elementary School

Swanson Middle School

Williamsburg Middle School

Yorktown High School

Of course there are MANY wonderful schools in our region – we’re so fortunate to have some of the best public school options in the country!

I also saw TONS of buses out this week.  I’m not sure if they’re practicing their routes or what, but they were EVERYWHERE!

A few other funny things happen – there are all of a sudden huge traffic snarls – time delays – but notice all of the smiles on the adults’ faces on Tuesday – you’ll see a lot of smiling little faces, too!

If you’ve got a little one – I hope you enjoyed the summer with them and that they have a successful first day back at school on Tuesday.

As always, if you came here looking for real estate wisdom, feel free to contact me directly or, just wait until next week when I’ve got a lot of great topics lined up for you!

Happy Friday

Jennifer

Tags: back+to+school+arlington+va

Median Income is on the rise in Fairfax County!

This week, the U.S. Census Bureau released estimates indicating that Fairfax County now has the highest median income in the country, edging just over $100K for 2006!  Fairfax County and Loudoun County are in a fierce competition for the richest county in the country – With the national median being $48,451, both Fairfax at $100,318 and Loudoun at $99,371 come in at more than double.

Neighboring counties are not doing poorly either with Arlington reporting in at $87,350, Prince William at $80,783 and Montgomery County at $87,624.

According to a demographer with the Brookings Institute, a Washington think tank, the region as a total ranks second only to the Silicon Valley.

In another report I read today published through our local real estate board, NVAR, even with our real estate market adjustment, affordable housing still remains a challenge.  In the coming months, as the market continues to stabilize, we are expecting real estate activity to make slow and steady gains!

If you’d like to talk further, as always, feel free to call me.  I’d be happy to talk with you about the sale of your home and/or the purchase of a new one!

Happy Thursday!

Jennifer

Tags: median+income+fairfax+county

Travelling

Hello!  For those who know me, I got out of Dodge last week (which rarely happens) and went someplace I’ve never been before.  First of all, I LOVE seeing new places – Here are a few clues:

It was a blast!  I was in Austin, Texas!  I will tell you, the next time I visit Austin, I hope it’s not in the summertime, but we had a wonderful time.  I was at a Keller Williams Agent conference and wow… what a wonderful company I work for!  I was so impressed with the quality of the information, the quality of the people, etc… 

Met some new friends:  Derek and Mariana Wagner from Colorado Springs, CO.

And some old friends… this happens to be me with my Dad, who’s a Team Leader for a Keller Williams Market Center in North Atlanta – why not keep things all in the family!

Anyway, I’m glad to be back to implement some of the wonderful things I learned in Austin.  Keller Williams ROCKS and I’m so proud to be a part of this amazing organization!

Happy Wednesday

Jennifer

Tags: Keller+Williams

I have a ratified contract… so what now?

I work with a lot of buyers.  With many of them, this is the first time experiencing the home buying process, so we spend a lot of time on terminology and what to expect.  Nobody likes surprises, especially when they are making probably their largest investment to date in their lives!  So let’s look at the process:

When a client writes an offer to purchase property, it’s just that… an offer.  It consists of an offer price, settlement date, specified financing, an earnest money deposit, what items are included (refrigerator, cooktop, window treatments, etc…), whether or not a home inspection will be performed and if the offer is contingent upon anything else (financing, 3rd party approval, the sale of another home, etc…), to name a few…  Once all parties have agreed to all terms, we have what we call a ratified contract and the clock starts ticking.

The #1, most important thing that needs to happen is to get started in earnest on securing your mortgage - this means choosing the right program, locking in an interest rate and moving forward with all necessary paperwork to assist your lender to prepare your loan.  As part of that process, they will also order the appraisal for your property, which has to be done within a specified time period that is written into the contract.

The home inspection will be scheduled at a time mutually convenient for the purchasers, the buyers agent and home inspector.  This can usually be scheduled within the first few days – by doing this on the earlier side, this will give you enough time to call for additional inspections if necessary. 

A termite inspection is also ordered to ensure the property doesn’t have any pre-existing termite damage or active infestation.  They usually also check for a number of other insects like carpenter bees, ants, etc… 

You will also need to contact your insurance agent fairly quickly to begin the process of obtaining homeowners insurance – assuming you’re not purchasing a condominium unit, in which case part of your fees go towards the master insurance policy of the structure.

Once the financing is secured, the home inspection has been done and sellers and buyers agree to whatever action needs to be taken to remedy any deficiencies, termite is done and appraisal, there’s not much to do but pack!  You will also want to be sure that you’ve contacted the appropriate utility companies to ensure that they are transferred into your name (s) as of the date of settlement.  Then, a day or two prior to settlement, a walkthrough will be scheduled to check that all systems are in normal working order as required by the contract, and that any agreed upon repairs have been completed. 

As your realtor, I handle MOST of these items for you, guiding you through the process at every turn.  It can be very pleasant and enjoyable and an exciting time all around.

If you’re contemplating making a purchase, whether it’s your first or tenth, I’d be delighted to talk with you further.

Happy Monday!

Jennifer 

 

Tags: home+buying+process