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By Kim, July 8, 2010

There was a Dilbert cartoon a few days ago that was so good I decided to grab the punchline panel and write a post around it. So here it is.

Contracts can be dangerous things. Now, most people don’t deal with contracts on a regular basis, and for those who do – like lawyers – it’s usually their employer’s or client’s money on the line, and it’s their business. In my business, I have to work with contracts for residential real estate every day, but go beyond that and I’m stretching my legal abilities. Not to mention the matter of practicing law without a license, which the state allows me to do in a very, very limited way.

Often one of the greatest challenges even the best Realtors face is managing the transaction once a contract is achieved. Most buyers and sellers have no idea how much work is involved in getting from there to an actual closing. It is difficult to juggle the demands of gathering the necessary documents, maintaining communication with your client and managing the other parties. The 10-page DC area contract is just the beginning. There’s a 6-page addendum for Virginia, plus multiple disclosures and optional addenda on top of that. This creates an unbelievable amount of paperwork to maintain, deadlines to track and requirements to be met. Additionally, licensing requirements make it way too easy for the less-than-professional person to be an agent, further increasing the challenges.

I tell people that every time something goes awry with a contract in Northern Virginia, we get another form, or at least another paragraph in an existing form. Most of my contracts are at least 25 pages of stultifying fine print, a lot of which simply serves as CYA material. Occasionally, however, there occurs a situation proving the importance of knowing exactly what’s in there.

Case in point: I have been working with some very nice people who want to buy a home, but need to sell their own home. According to their lender, they could qualify to carry both mortgages – to which they say, “Sure, but we like to have food with our meals.” They contracted to buy a new home, but because the owners wouldn’t agree to it, they did not include a contingency requiring that they sell their own home. They did, however, include home inspection, appraisal, and financing contingencies, and the state of Virginia requires a contingency for reviewing homeowner association (HOA) rules and finances (that’s important, as it turns out).

They quickly put their home on the market and we (they, me, and the other agent) thought it was so nice we would surely get an offer right away. Two weeks went by with a total of 5 visitors. My clients are getting more nervous by the day, and our contingencies are running out – home inspection’s done, the financing is not a problem, and the appraisal is not within our control. But wait – the HOA packet has not appeared!

The seller’s agent (of 30 years’ experience) was going to drop off the packet on June 16, but for some reason she was delayed or forgot. We received it on June 24 instead, thus giving us until 9 PM on June 27 to back out. On June 25 we received a too-low offer and tried to counter it, but the prospective buyers refused to respond within 48 hours to the counter. The sellers refuse to give my buyers a home sale contingency at this point – perhaps they thought we were bluffing? So, given the constraints, my clients had to use the HOA contingency, inadvertently extended by their seller’s agent, to back out of a contract for a home they dearly wanted. I’d warned the other agent about it, and gave her two days’ notice that we were looking for alternatives, but she still claimed to be “shocked” that we used the HOA contingency to back out when there was nothing wrong with the HOA. Her sellers were upset too, of course – but after the warning we gave them and the opportunity they had to hang on to the contract, I couldn’t be very sympathetic. They had to put their home back on the market, with a month less to sell before they move, not to mention all the negotiations and inspections they would have to put up with all over again.

Fortunately for all concerned, my sellers did get a contract they could work with, and they did come to agreement on a new contract with their sellers (at the same terms), so we made it through that mess unscathed except for deep psychological scars. But it was a very near thing.

In contracts there are some things we can’t control, but we must pay attention to those things we can.

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By Kim, June 24, 2010

It s All Done – Just Unpack!

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$465,000 Single Family Home For Sale Main Features 5 Bedrooms 3 Bathrooms Interior: 2904 sqft Lot: 15,047 sqft Location 7016 Galgate Drive Springfield, VA 22152 To get updates on open home dates and other property events, please click the “Like” button below:

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Kim Hannemann Samson Properties (703) 861-9234 Kim.Hannemann@gmail.com http://www.KimHannemann.com Listed by: Samson Properties

Our recent listings It’s All Done – Just Unpack! Home Sweet Home! Subscribe to our listing feed

See more Springfield, VA real estate for sale

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By Kim, June 18, 2010

A “reverse mortgage” allows you to trade equity in your home for cash, access to cash through an equity line of credit, or a monthly income, that you never have to pay back. You can use your current home or buy a new home or even a vacation home using a reverse mortgage.

Got your attention?

The catch—you have to be 62 or older. But hang on, kids, there are potential advantages for you too, if you’re on the good side of, ahem, those “mature individuals distinguished by their vast experience.”

Reverse mortgages, or as FHA calls them, Home Equity Conversion Mortgages (HECM), have been available for seniors for many years. The basic deal was that they use the equity in their primary residence as a source of cash, they can live in the home as long as they want without paying anything back, and the mortgage is paid off when the home is sold, with the owners or the estate getting the difference. If there isn’t enough money from the sale for the payoff, FHA eats the difference, not the estate or heirs.

Now comes the HECM for Purchase Program. The FHA developed the program because it saw that seniors were selling their homes, buying smaller, more affordable homes and then taking out reverse mortgages on the new properties. That meant they were paying closing costs twice—first on the purchase closing, and a mortgage if they needed one, and then again when they switched to a reverse mortgage. But the new program allows seniors to buy a home directly with a reverse mortgage—paying closing costs only once. A sale of an existing home is not necessary and is not part of the transaction.

The program allows seniors to use a reverse mortgage to buy a home or a small multifamily residence, and allows them to convert some of the equity in their existing home to cash. They never have to make a single payment. Instead, they can collect monthly payments out of the equity on a tax-free basis as long as the home serves as their principal residence. If they do not sell their previous home, they could get additional income out of renting that property. Under the plan, you can choose to take the money either in monthly payments, as a lump sum, a combination of the two or even in a line of credit that you can access whenever you need cash.

This year, seniors can access up to $625,500. In 2011, unless Congress changes its mind, the amount reverts to $417,000. Most reverse mortgages range from 35 percent to 55 percent of the home’s equity.

You must agree to pay your taxes and make any necessary home repairs. No credit check or income verification is required. To qualify for the reverse mortgage, a senior, age 62 or older, must:

• Agree to live in the reverse-mortgaged house as a primary residence.
• Own the home outright or have enough equity to pay off any existing mortgages and equity lines with the proceeds from the reverse mortgage. Those with more equity may be able to access even more cash.
• Not be delinquent on any federal debt.
• Participate in a consumer information session given by an HUD-approved counseling agency or HECM counselor.

Generally, three factors will affect the amount you can borrow:

• The value of your equity (the higher the better).
• Your age (the older the better).
• Interest rates (the lower the better).

Here are some hypothetical examples of how it can work:

1. Problem—you want to buy a new one-level home for $450,000 with no mortgage payment. You cans sell your colonial in Springfield with net proceeds of $300,000. Solution—you take out a reverse mortgage on the new home for $275,000, paying $150,000 of your cash for the balance. Instead of a $150,000 mortgage to pay, and no cash, you have $150,000 in cash left to invest, and no mortgage payment!
2. Problem—you own your Springfield home worth $500,000 and want to keep it as your principal residence. You have no mortgage, or a small one. You would like to buy a $300,000 vacation condo in Ocean City, but on your teeny retirement income you can’t afford a regular mortgage on either the condo or your main home. Solution—you take out a reverse mortgage on your main home for $250,000, paying $50,000 cash from other sources for the balance. You just bought your vacation condo for $50,000, and no mortgage payment!
3. Problem—you want to keep your current home, but it needs remodeling and updating to fit your changing needs. Solution—use your equity to take out a reverse mortgage for remodeling. No mortgage payments.
4. Kids, pay attention here! Problem—you want to help your son and his family buy a new home. You could take some cash out of the equity in your own home—but you can’t afford the additional mortgage payments. Solution—use your equity to take out a reverse mortgage to gift their down payment.

One added cost to a reverse mortgage is an extra insurance premium, usually more than a conventional mortgage, which has to be paid by the homeowner to insure the lender against the possibility the homeowner lives longer than anticipated. The insurance guarantees you will never pay more than a stated amount despite increased borrowing costs over time. You can finance this premium into the mortgage itself.

Interest rates on reverse mortgages today are similar to conventional mortgages. Fixed rates I’ve seen quoted by Wells Fargo recently are 5.4% fixed, or 2.5% adjustable (monthly adjustment tied to LIBOR). Of course, since you aren’t paying it, how much can it matter?

Here is the link to the HUD/FHA site for all the straight info.

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By Kim, June 18, 2010

This report covers Alexandria, Arlington, Fairfax County and the towns within.

A total of 1,957 homes sold in May 2010, an increase of almost 9% from May 2009 home sales of 1,803.

Active listings decreased by about 4% from last year, with 7,710 active listings in May, compared with 8,050 homes available in May 2009. The average days on market (DOM) (for sold homes) decreased by 47% to 40 days, compared with 76 days in May 2009.

Sales prices rose by about 6% compared with last year. The average sales price this May was $460,828, compared with last May’s average of $433,257.? ?The median sales price – usually a more accurate indicator – was $404,000, which is an increase of almost 8% compared with May 2009’s median price of $375,000.

The number of pending home sales decreased by 28% with 1,901 sales pending compared to 2,637 in May 2009. This was an expected result of contract signings pulled into April by the tax credits, which expired April 30.

My take on the market in the area is that it’s still strong, driven by the ridiculously low interest rates (under 5% fixed, and 3.5% for 5/1 ARMs) which look to be with us for at least the next couple of months as signs of inflation remain low. If you’re on the fence about buying, I’d say it’s time to jump.

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By Kim, May 13, 2010

One last, long excerpt from Dave Barry’s Homes and Other Black Holes ©1988. Illustrations by Jeff MacNelly.

No matter how perfect your new home seems when you first move in, you’ll gradually discover various shortcomings about it that get on your nerves, and ultimately you’ll come to hate it. This usually takes about two weeks. From that point on, you’ll be thinking about Trading Up.

Trading Up is the basic maneuver in real estate, dating back several million years to the prehistoric Catalytic Era. In those days, a typical couple would have to start out living in a small cave, but each day they’d go out and hunt for pretty stones, which they’d put in a pile, called Equity, in the center of their cave. When the Equity was big enough, they’d move to a larger cave, where they’d repeat the process and move to a still larger one, and so on until they moved into their Dream Cave, which was occupied by a saber-toothed tiger, or carnivorous humongous (literally, “huge payments”), which ate them. This is essentially the system we use today.

Before you can buy a new house, of course, you need to sell the one you’re in now.

The Best Way To Sell A House

The best way to sell a house is to walk down a city street and have a construction worker who is eating a sandwich fifty-five stories above you accidentally drop his lunch box so that it lands on your head in such a way that you are not seriously injured, but you do lapse into a coma, and you wake up four months later and the nurse says, “While you were in a coma, your house was sold.” This is also the best way to move, have a baby, and attend the opera. But things are rarely this easy. Usually you have to put quite a bit of effort into selling your house, starting with asking yourself the question

Do You Need A Real Estate Broker?

I touched upon this subject back in an earlier chapter, but I am quite frankly too lazy to go back and read what I said. Probably I said that there are pros and cons, because there almost always are, unless you’re talking about hemorrhoidal tissue.

On the one hand, if you sell your home yourself, you avoid paying a large commission*; but on the other hand, you have to deal with people calling you up and coming around to your house all hours of the day and night, pestering you and giving you no peace. I’m not talking about potential buyers. I’m talking about real estate brokers, trying to get your listing. The only way to get them to go away is to sign a contract with them. Then you’ll never see them again.

[* Kim's note:  I cannot let this go unchallenged. A good broker (agent) earns every cent of his commission by getting the best price, avoiding contractual issues, and/or assisting with all sorts of problems along the way to closing.]

Ha ha! Just kidding, of course. In the interest of fairness and decency and, above all, not receiving thousands of concerned letter bombs from the large and powerful real estate industry, let me state that I am sure that virtually all brokers out there are honest and highly competent professionals of the type regularly shown on TV wearing geek-style blazers. And even if it turns out that they’re not, I strongly advise you to use a broker, for the same reason that I’d advise you to pay somebody else to repair your automobile transmission, namely: No matter how incompetent or overpaid this person is, he or she can’t possibly screw things up as badly as you would if you did it yourself.

[Kim's note:  That's better.]

Before you sign a listing contract, you should talk to several brokers, to find out what they think your house is worth. What you want to be on the alert for here is a practice called “highballing,” which is when an unscrupulous broker deliberately overestimates the value of your house, just to get the listing:

BROKER:  Mr. and Mrs. Jones, based on thoroughly walking around your living room here, I would estimate that the market value of your house is a billion gazillion dollars.

YOU (suspiciously):  Wait a minute. Our name isn’t Jones.

BROKER:  Don’t worry about that. This is just a pretend dialogue in a humor book.

Once you’ve selected a broker, you’ll be asked to sign a standard contract, which will read as follows:

Standard Real Estate Listing Agreement

1. The BROKER gets FIVE PERCENT.
2. Even if the BROKER doesn’t do SQUAT.
3. Even if the BROKER is off somewhere like MAUI, drinking EXOTIC TROPICAL DRINKS with names like KAMIKAZE KAHLUA when a WILLING BUYER, acting totally on his OWN, appears on the SELLER’S doorstep carrying a SUITCASE full of CASH MONEY, the BROKER still gets FIVE PERCENT.
4. In return, the SELLER gets to bitch about the BROKER at social occasions.
5. “My damned BROKER couldn’t sell mascara to TAMMY FAYE BAKKER*,” is the kind of snide comment the SELLER is allowed to make.
6. But the BROKER still gets FIVE PERCENT.

[* Tammy Faye Bakker on Wikipedia]

How Much Should You Ask For Your House?

This is a very difficult question, but top real estate experts from all over the world agree that you should ask $127,500 and ultimately settle for $119,250. Also you should throw in the outdoor gas barbecue system with the charcoal-roasted spiders permanently bonded to the grill.

Getting Your House Ready to Show

Once you’ve signed up with a broker and have decided on an asking price, you need to fix your house up so it looks as though clean and tasteful grownups live there, instead of ourselves. Take a hard look at your house and furnishings, and ask yourself how they’ll appear to prospective buyers. Chances are that with a minimum of time and effort, you can make a number of dramatically superficial improvements. For example, suppose you have an ugly old sofa in the living room with a leg missing from one corner, which you’ve propped up with a copy of The Sex Lusters, by Harold Robbins. You’ll make a far better impression with an acknowledged classic such as Moby Dick, by Jackie Collins. You can also make a big improvement in the appearance of dirty, crayon-marked walls by buying a can of flat white latex paint and using it to stand on while you install a lower-wattage light bulb. And of course, it’s always a good idea to nail all your bathroom doors shut.

The overall effect you’re trying to create with these “homey” little touches is that your house is a warm, welcoming, and—above all—real kind of place, similar to the set of a 1962 situation comedy. You may want to create the impression that, at any moment, Ricky Ricardo might come bursting through the front door and get a great big welcome-home kiss from Mary Tyler Moore.

But the most important ingredient in the home-selling equation is you, the homeowner, because only you have a really inmate, detailed knowledge of the house; only you, who have lived there, know all the interesting little idiosyncrasies it has—all the special features and hidden secrets that make you want to dump it lie a grocery bag full of armpit hair. Your job is to help your broker make sure that prospective buyers view these things in the proper light.

Unfortunately, brokers don’t always appreciate receiving help from sellers. In fact, most brokers won’t even want you hanging around when they show the house. They’ll let you know this by dropping little hints such as, “Please don’t hang around when I show the house,” and “If you hang around when I show the house, I will kill you.” The broker is concerned that if you’re always hovering in the background like some kind of desperate street person, the prospective buyers won’t feel free to speak their minds.

There is some basis for the broker’s concern. The last time we sold a house, whenever I was in the room, the prospective buyers would always describe everything as “interesting.”

“Hmmmm,” they’d say, looking at one of my Home Improvement Projects. “How interesting!” Meaning:  “I can’t wait to tell the people at my office about this!”

So on the one hand, you don’t want to make the buyers feel uncomfortable, but on the other hand, you want to be available to explain features of the home that the broker might not be familiar with. The solution is to hide in closets when prospective buyers come around.

PROSPECTIVE BUYER:  What is this greenish slime dripping from the ceiling everywhere and eating holes in the floor?

BROKER:  Well, it’s, um, er, it’s, ahh . . .

VOICE FROM CLOSET:  It’s nothing to worry about!

PROSPECTIVE BUYER (vastly relieved):  Whew! Because for a moment there, we were concerned!

Sooner or later, if you continue to engage in savvy sales techniques such as these, a buyer will become interested enough to make an offer on your house. The important thing, during these negotiations, is to remain calm. Do not become emotionally involved. Remember that even though you and the buyers are on “opposite sides of the fence,” the odds are that they are just regular everyday human beings like yourself, the only difference being that they’re trying to screw you out of all your worldly goods. So while on the one hand you want to be reasonable, in the sense of frowning thoughtfully at the buyers’ opening offer, you also want to be firm, in the sense of hurling it disdainfully to the floor and inviting friends and neighbors to help you spit on it.

Price is not the key issue in these negotiations. What you’ll do is get into serious, heavy duty negotiations over which side gets to keep various home accessories such as:

• Ugly light fixtures
• Dingy draperies, and above all,
• Minor grease-encrusted kitchen appliances that nobody really wants

These are the areas in which you want to be as petty as is humanly possible, in an effort to establish that you are a Tough Customer Who Will Not Be Taken Advantage Of. You want to stride in a forceful manner around your family room, cigar in hand, shouting instructions to your broker, such as:

“All right, they can have the Veg-O-Matic, but the sons of bitches are not gonna get the optional grape-peeling attachment!”

And:

“They want the ice cube trays?! Over MY DEAD BODY!!”

Using this aggressive approach, you should be able to retain possession of many of your prized home accessories, which will fetch you a handsome $1.85 when you hold your garage sale.

How You Will Feel After You Finally Sign The Agreement Of Sale

You’ll experience a feeling of almost unbelievable elation, even better than the way you felt the time Geraldo Rivera opened Al Capone’s vault on national TV and it was empty. This feeling will last for as long as seven tenths of a second, at which point you’ll remember the clause in the sales agreement, put there by some writhing little insect of a lawyer, that states:

The SELLER agrees that if, at ANY TIME prior to the actual sale of the house, SOMETHING BAD happens, like for example let’s say that on THE VERY MORNING OF THE SETTLEMENT, through NO FAULT OF THE SELLER, a TREE ROOT that for 127 years has been totally benign, suddenly, as if guided by DESTINY, decides to block the MAIN MUNICIPAL WASTEWATER LINE in front of the SELLER’S HOUSE, causing a veritable VOLCANO OF RAW SEWAGE to erupt right in the SELLER’S GUEST BATHROOM and quickly flow THROUGHOUT THE ENTIRE HOUSE while the SELLER is out at the SUPERMARKET picking up a bottle of WINDEX so as to put the last few finishing touches on the HOUSE so that it will be neat as a PIN for the NEW OWNERS, then HA HA the SELLER has to give the BUYER all his DEPOSIT MONEY back and the SELLER can now kiss the whole deal GOOD-BYE.

So for the two months, or whatever, between the time you sign the contract and the time you actually close the deal, you’ll experience a condition that famed psychologist Sigmund Freud identified as Agreement of Sale Paranoia. You’ll be afraid to use the heating or air-conditioning systems; afraid to use the water faucets, turn on lights, or close doors firmly; afraid even to speak too loudly, for fear that you might set off some kind of sympathetic vibration that will cause the whole house to fall down. In short, you will become a crazy person. “YOU FOOL!” you’ll shriek, leaping out from behind your hedge and tackling the UPS man just as he’s about to ring your doorbell. “Are you trying to KILL US ALL?”

This is a natural reaction, but the truth is, you probably have nothing to worry about. The odds are that nothing bad will happen, and when you finally get to the Ritual Closing Ceremony, when you realize that the whole thing is going to work out after all, you’ll experience a feeling of relief, a feeling that will grow stronger and stronger until, moments before the sale is legally finalized, you are knocked to the floor by the shock wave from the gas main exploding directly underneath your house.

But you’re not gong to let a little thing like the total destruction of your house, seconds before you were about to sell it, get you down. No, you are made of sterner stuff than that; you are a Homeowner. You’re not a particularly bright one, given the fact that you bought this book, but nevertheless you are going to pick up the pieces of your life, as soon as they come down out of the sky, and get on with your life. Because you know that you’ll have plenty more homes to own before you finally shuffle off what we in the real estate profession call “this mortal coil” and go up to that Great Subdivision in the Sky. I’m willing to bet there will be nothing in your price range.

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By Kim, March 22, 2010

Buying, selling or just changing apartments? Here’s a great idea for when you have to move.

These specially printed box tapes, available from UHaul, clearly mark and color-code where your boxes are supposed to go, and can help you remember which boxes have the stuff you need as soon as you arrive.

They come in one- to four-bedroom kits, and rolls are also available in “Fragile”, “Open First” “Storage” and “Office” rolls.

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By Kim, January 21, 2010

The Federal Housing Administration (FHA) just announced a set of policy changes to strengthen the FHA’s capital reserves, which have declined to dangerous levels. FHA will take the following steps: increase the mortgage insurance premium (MIP); update the combination of FICO scores and down payments for new borrowers; reduce maximum seller concessions to 3%, from the currently allowed 6%; and implement measures to enhance enforcement of FHA policies on lenders.

The changes directly impacting home buyers and sellers using the FHA program include:

• The mortgage insurance premiums (MIP) will be increased to build up capital reserves.
  • The first step will be to raise the up-front MIP by 0.5% to 2.25% and request legislative authority to increase the maximum annual MIP that the FHA can charge. If this authority is granted, then the second step will be to shift some of the premium increase from the up-front MIP to the annual MIP. This shift will allow for the capital reserves to increase with less impact to the consumer, because the annual MIP is paid over the life of the loan instead of at the time of closing. The initial up-front increase will go into effect on April 5, 2010.

• Update the combination of FICO scores and down payments for new borrowers.
  • New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA’s 3.5% down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10%. This allows the FHA to better balance its risk and continue to provide access for those borrowers who have historically performed well. This change will be posted in the Federal Register in February and, after a notice and comment period, would go into effect in the early summer.

• Reduce allowable seller concessions from 6% to 3%
  • The current level exposes the FHA to excessive risk by creating incentives to inflate the appraised value of the home. Private lending standards have limited seller concessions to 3% for many years. This change will be posted in the Federal Register in February, and after a notice and comment period, would go into effect in the early summer.

The increased enforcement on FHA lenders includes, for example, publicly reporting lender performance rankings, enhanced monitoring of lender compliance with FHA guidelines and standards, and enhancing  the enforcement of indemnification provisions. This would require all approved lenders to assume liability for all of the loans that they originate and underwrite.

What does all this mean for homebuyers? Well, first off, if you don’t want to pay the higher mortgage insurance premium, buy before April 5! Check with your lender, but my understanding is you have to have a property identified before a FHA case number can be assigned, and that’s the critical action to beat the April 5 deadline. As for the FICO score minimum of 580 to get the 3.5% down payment, most FHA lenders already require scores of 600 to 620. And, allowable concessions from the seller being reduced to 3% really just reflects the realities of the Northern Virginia market – sellers are not going to accept such an offer, because they know that the appraisal will be too low to support the higher sales price they would have to get to compensate for it. And if you need a low down payment, you probably don’t have the cash to waive the appraisal.

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By Kim, January 21, 2010

In an effort to stabilize home values and improve conditions in communities where foreclosure activity is high, HUD and FHA announced a policy change that will expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties. This is great news for both buyers and sellers.

The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales (known as “flips“). This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities. FHA borrowers have often been shut out from buying affordable properties. This action will enable more buyers, and especially first-time buyers, to take advantage of this opportunity.

As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers. But with certain exceptions, FHA has prohibited insuring a mortgage on a home owned by the seller for less than 90 days. Often, and especially in Northern Virginia, these are homes acquired by investors through auctions, bank resales, or “short sales,” that have been upgraded and repaired with the intention of making the investors a profit on the resale.

FHA found that acquiring, rehabilitating and reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of the sellers/investors to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.

The waiver begins February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect FHA borrowers against predatory practices where non-rehabilitated properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:

• All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
• In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will only apply if the lender can document the improvements and repairs justifying the selling price.

Update – May 20, 2010:  The 20% rule noted above is being treated liberally, according to my lending sources. Rather than requiring the seller to “document the improvements and repairs justifying the selling price” with receipts, lenders are more simply requiring a second independent appraisal, also allowed under FHA rules.

Other details of this new policy are in the text of the waiver, available on HUD’s website.

This is likely to further increase the use of FHA over conventional mortgages with less than 20% down, because most lenders still have the “flip rule” on their own minimum down-payment programs.

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By Kim, January 21, 2010

1,349 homes sold in December 2009, an 11% decrease from December 2008 home sales of 1,510. I believe this was the result of two specific circumstances: (1) there was a huge push for buyers to complete their purchases by November 30 under the $8,000 tax credit act (which was extended at a very late date to the end of April 2010) and (2) the available homes for sale (“inventory”) is astonishingly low.

Active listings decreased by over 29% from last year, with 5,421 active listings as of December 31, compared with 7,688 homes available in December 2008. In fact, it’s the lowest end-December inventory we’ve seen since December 2004′s ridiculous 1,645. And I suspect, with the tax credit extended (and a new credit available for move-up buyers), we are going to see hot sales and low inventory numbers for the next 4 months at least. If interest rates (see historical chart) stay under 6%, buyers are going to be facing even more multiple-offer situations than we have now, which would be saying something.

The average days on market for homes in December 2009 decreased by 38% to 57 days, compared with 92 days a year ago. No surprise there. And 58% of homes sold in under 30 days.

Sales prices rose compared with last year. The average sales price in December increased by about 12% to $474,104, and the median price also rose in December to $385,000, an increase of 13% from last December’s $340,000.

I cannot emphasize this strongly enough – those who need or want to sell must get their homes ready and on the market no later than March.

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By Kim, December 14, 2009

Sales continued to be brisk in the Northern Virginia housing market in November. The problem is that inventory – the number of homes available to sell – continues to decline as sellers aren’t getting the word that it’s time. Inventory is down to less than 4 months’ worth of sales. I only can see it getting even shorter as we hit the holidays and cold months (brrrr!) – but will there be an explosion in March/April as the tax credits reach their inevitable end?