The Truth Behind Limited Service Brokerages – What Everyone Should Know Before Signing on the Dotted Line

There are a few very important choices sellers face when contemplating putting their home on the market.  The first thing they must decide is what type of representation or assistance they are looking for.  There are a lot of sellers out there who believe that selling real estate is nothing more than sticking a sign in the ground, and waiting for a buyer to come along.  Oh, and many of those sellers really don’t have a good grasp on what their home should sell for, market conditions, etc… 

Many of these sellers will choose what is now defined as “Limited Service Agency” — those brokerages who, for a very low flat fee, will place your home in the MLS.  That’s it.  They’ve been around a long time but the Commonwealth of Virginia has just taken it upon themselves to actually define the duties (or lack thereof) of someone acting in a limited service capacity, as a way to protect consumers…. did you get that?  “p-r-o-t-e-c-t” consumers.  The Powers That Be feel that consumers need protection from Limited Service Agencies and are now requiring disclosure to be sure that there is a mutual understanding of what they will and won’t do as a duty to the seller.

What won’t they do?

NO Marketing…  this means no signs, no pictures, no brochures, no online presence, no open houses, no exposure to other agents through a brokers only open house…  WOW…

NO Negotiating… they won’t receive contracts, won’t negotiate contracts, won’t facilitate the back and forth of contracts, won’t help you understand what’s customary in our contracts – it’s all up to you Mr. or Ms. Seller.

NO Assistance…  hmmm, no help with price setting, no help keeping contract deadlines, no help with settlement, no help with coordinating or attending inspections, appraisers, etc…, no help with anything.

 

What WILL they do?  Or, I should say, what are they obligated to do?

they WILL put your listing in the MLS

they WILL provide necessary disclosures for you to fill out on your own

they WILL help you obtain your HOA/Condo documents as required by law

they MAY give you a lockbox to use for a fee or deposit

I just recently saw a home in my neighborhood that happened to be listed by an out of area Limited Service Agency – it’s in a hot area, sat on the market for over 90 days and sold for $100K less than the asking price and it wasn’t overpriced to begin with.  I bet that seller wishes they had hired a full service brokerage (with a fantastic agent such as myself <grin>) to represent them in the sale of their home.

I’m sure this style of brokerage probably works for some people – but be sure that it’s worth the price before you sign on the dotted line!  Give me a chance to tell you how to at least have a fighting chance to get your home properly marketed and sold in this slower market.

I look forward to hearing from you!

Happy Monday – it’s a glorious day out there — enjoy it!

Jennifer

Tags: Limited+Service+Agency, Full+Service+Agency

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The 7 Truths You May Not Know About Buying a Short Sale Property

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

Tags: short+sales, buying+short+sales

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

Here we are – Short Sales!

SHORT SALES

A short sale occurs when the seller owes more on the property than it’s worth…  it’s that simple.  But ah, yes, it does get more complicated from here.  One of two scenarios generally occur.

Scenario 1:  The seller may be willing and/or able to bring money to the table in order to complete the transaction.  If this occurs, this is not considered a “short sale” but sometimes you’ll hear this seller referred to as being upside-down on a transaction. 

Scenario 2:  The seller approaches the lender (s) to work out some sort of reduced payoff.  Sometimes they need to approach both their first trust and second trust lenders and they need to work together to come up with feasible options.  In this case, the lender becomes a 3rd party to the transaction and has to “approve” any terms or contracts that the seller agrees to.  

In a way, it seems unbelievable that a lender would be willing to just forgive debt incurred by the seller – but the alternative is that they take back the property and then they become property managers OR sellers themselves — and c’mon, folks, these guys are BANKERS.  So sometimes when looking at risk management, forgiving some amount debt is the brightest of the bank’s options. 

Please be aware that a short sale can be a lengthy and stressful process – especially for a buyer.  They now essentially have a 2^nd seller involved in the decision making process and believe me, the bank doesn’t take this role quite as seriously as the owner of the property does. 

There are all sorts of pitfalls involved in purchasing (and selling) these types of properties.  And they are getting more common every single day.  This will create another type of inventory overflow because a lot of agents and buyers will not sell (or attempt to sell) a property that has a 3rd party (bank) approval addendum.  There is so much risk involved – that’s tomorrow’s topic…

So for today – at least you’re up to date on the terminology – so when  you see a property listed as “bank owned” then you know it’s an REO.  When you see “3rd party/bank approval required” you can bet it’s a short sale.  We rarely actually see the foreclosures –

In any of these cases, it is imperative that you are working with a knowledgeable, prepared and responsible real estate agent who will put your best interests WAY ahead of making a sale.  These are risky and a lot of hard work – sometimes, in the end there’s a great deal – other times, not so much.  So proceed with caution!

As always if you’d like to discuss something further or would like to chat about selling or purchasing real estate, I’d be delighted to hear from you!

Happy Thursday

Jennifer

Tags: short+sales, northern+virginia+real+estate

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

So, I’m sure I intrigued a lot of you yesterday with this fun topic!  Frankly I was a little worn out, but decided to have another go of it today. 

REO

REO stands for “Real Estate Owned” and is the term used when the bank (lender) now owns the real property and is selling it.  It’s happens when there are no bidders at foreclosure OR if the bids are too low – the bank will have a representative present at the foreclosure auction to prevent a sale from occurring at a price lower than they are willing to accept. 

So, when looking at a listing that is REO, it simply means the bank owns it… the bank IS the seller.  The good news is that they will clear up any title problems remaining from the foreclosure.   The bad news is that the property will still be sold in as-is condition; and there will be an addendum to the Regional Sales Contract that will override some of the provisions therein.  Interestingly, they are also exempt from providing the residential property disclosure.  However, as we see the market continue to soften, some REO lenders are becoming more open to negotiation on the terms of home inspection items/repairs – this is good news.

I was going to go into short sales today, but I think that’s best left for tomorrow.  I couldn’t let today pass without a mention of the day – September 11th.  A day that will always stand out in our hearts and memories with shock, horror and disbelief that such a horrible atrocity could be carried out on US soil.  I’ll never forget that day and hope that we never see another day like that – EVER. 

Happy Tuesday

Jennifer

Tags: REO, foreclosure, short+sales

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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

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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

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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

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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

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Pretty in Pictures?

We’ve all experienced it, right?  We’re searching through the MLS (or wherever you search to find listings – like maybe www.klaussenrealestate.com?  ), and “AH-HA!”  a new listing in the EXACT location in the EXACT price range you’ve been searching for right?  We excitedly click on the listing to see it and…  WHAT???  NO PICTURES???  What Gives?  Don’t you hate it?  What’s the first thought that goes through your mind?  “What’s wrong with this property?”  right?

As agents, my colleagues and I have discussed this many times.  I believe that with no photos, it almost seems that there is something to hide.  What?  No pictures of the kitchen?  It must be hideous!  What?  Rather than a picture of the front of the property, you get a glorious photo of the view taken off of the balcony?  Must be a dog-ugly building, right?  We are so quick to form opinions EVEN in the absence of information.

So what’s better?  Doing a photo essay showing the good, the bad and the ugly and facing it head on?  Or is it better to just omit all images at all and hope that it won’t deter a potentially interested buyer? 

One particular challenge we face is the dreaded vacant property syndrome.  It’s dreadful to see photo after photo of the corners of empty bedrooms!  I have a vacant listing right now – but in my photos I have tried to include angles that would show off some of the features of the house – the open, new, updated kitchen – the openness of the first floor from the living room through the kitchen – bay window in the eating area, luxury soaking tub, etc…  But the point is I still have a few pictures out there showing the property. 

My conclusion is that photos are better attractors and lack thereof may quickly deter a prospect.  In this market, I don’t think we can afford to deter ANYONE.

Happy Monday

Jennifer 

PS  Did you notice that my blog contains no photos today?  Curious, huh?

 

Tags: pictures+in+house+listings, pictures+in+real+estate

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Condo Fees – The Good, The Bad and The Ugly

So you want to buy a condo?  Be sure, as you are assessing properties that you ask a lot of questions about the fees.  What they cover… are they unusually high?  or unusually low?  Is it in your budget?

Every condominium complex has a condo fee – generally speaking, the units in the buildings are assessed based on their individual part of the total – so larger units = higher fees; smaller units = smaller fees.  Fees usually cover items such as building maintenance, a master insurance policy, parking lot maintenance, some, if not all, of the utilities (MOST cover water, sewer and trash – some go on to cover gas, electric, heat, A/C, etc…), elevator maintenance, management, amenities (pool, tennis, party room, exercise facilities, etc) and more.  There are general rules of thumb that we use around here – older high-rises tend to have higher fees that usually cover all utilities.  Newer buildings tend to have lower fees.

When looking at the fee and how it fits into your budget there are a few things to keep in mind. 

• Does the fee off-set any costs that you would already incur – such as utilities, gym membership, pool/tennis access, parking?
• Are you unnecessarily paying for things you won’t use?
• What peace of mind will it bring you to know that you don’t have to care for a roof, a fence, a basement, exterior trim/maintenance, a garage, etc…

I’ve certainly been guilty of saying “be wary of high condo fees because it’s like flushing money down the toilet” but I can tell you that there are times when it’s worth every penny.  You just need to make a decision that works for you.

Happy Tuesday

Jennifer

Tags: condo+fee, arlington+real+estate

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