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By Kim, May 12, 2010

Here are the April 2010 home sales activity for Northern Virginia – including Fairfax and Arlington counties, the cities of Alexandria, Fairfax and Falls Church and the towns of Vienna, Herndon and Clifton:

A total of 1,793 homes sold, 16% more than April 2009 home sales of 1,544 and the 21stth consecutive month of higher year-over-year sales. And for the 25th straight month, the number of pending home sales increased over the same period as the year before – 12% this month.

Active listings increased only sightly from last year, with 8,327 active listings in April, compared with 8,234 homes available in April 2009. The  “inventory,” as we real estate people refer to homes available for sale, is less than five months’ worth of homes. The industry generally considers anything under six months’ inventory to represent a “sellers’ market,” although I think it’s more balanced.

The average days on market (DOM) for homes in decreased to 45 days, compared with 85 days a year ago. More importantly for most sellers, more than 70% of homes sold went under contract in less than 30 days.

The average sales price in April rose by 12% from last year, to $455,686, while the median price rose 9% to $390,000. The year-to-date increase in average prices is on the order of 12%.

Now that the federal tax rebate programs have ended, let’s see where the market goes in May and June, usually the prime time for home sales. I would expect actual sales (closings) to go up, but I have no idea what will happen with pending sales. Will buyers keep on coming?

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By Kim, February 15, 2010

I’ve been stewing over this post for a few weeks now, and I’ve given it a little extra time to cook before committing it to the Interwebs. But now it’s done, so let’s serve it up:

Wouldn’t it be wonderful if we could all be proud of all our colleagues and our professions? I have met, during my relatively short real estate career, a large number of agents and brokers whose knowledge and abilities I admire. Yet I am dissatisfied with the impression of the profession that I get from too frequent encounters with agents of lower quality. Oh, let’s not bandy words—I am fed up with lying, non-compliant, incompetent, discourteous, unprofessional and unethical agents, and the “supervising” brokers who condone them. I’m furious about paying nearly $700 a year for access to our regional MLS database—MRIS—that is seemingly incapable of enforcing its own data entry rules, permits errors and omissions by the truckload when simple edits could prevent them, and doesn’t force correction of errors and omissions even when they are specifically pointed out to their so-called “compliance” department.

Cases in point, from merely the last month of funsies:

(1) Lying agents: She ignores my calls and emails asking for the basic information that I need to present a good offer on her short sale listing. I finally write the offer as best as I can, and send it to both of her email addresses, and fax it to her office, requesting acknowledgement. Two days later (Wednesday) I call (and she actually answers the phone!) and she acknowledges that the offer was received and will be “presented with other offers on Friday.” The very next day (Thursday!) the property’s status is changed to Under Contract. Huh? I ask her broker to investigate whether my offer was presented—no response. A week later I repeat my request, and receive only a belated call from the agent to tell me another offer was accepted. No sh*t, Sherlock.

(2) Non-compliant agents: Our MLS rules require that when an offer is accepted in writing, the property must be updated in the system to reflect that fact. It cannot be kept in ACTIVE status. I notified an agent two days after we had a ratified agreement that he had to change the status, and he refused “because my client doesn’t want me to change the status. He wants more offers.” So I reported it to the MLS, and even sent them a copy of the ratified contract. Did anything change? No. I’ll bet he won’t get fined, either. This agent’s supervising broker is . . . himself.

(3) Incompetent agents: In Virginia, there is a legal requirement that the seller “disclose” certain things about the property on a specific form promulgated by the Real Estate Board. It’s rather silly, because in fact there is really very little that has to be disclosed under the law, but the form is nonetheless required. Three times in the past month, I have had my buyers’ offers accepted by the sellers without the sellers providing the form either before or after acceptance. I haven’t said anything, of course, because right up until settlement occurs, my buyers can get out of the contracts scot-free by simply giving notice that they never received the form, no matter what contingencies may or may not exist. D’oh!

(4) Discourteous agents: I’d been eyeing a listing for a few weeks that was a little higher than my clients wanted to go, but was in a neighborhood they like. Finally I convinced them to take a look, and after checking the MLS that morning to make sure it was ACTIVE, I met them there. The lockbox the listing noted was to be on the house was not, and I couldn’t reach the agent or the alternate agent on the phone, so I left a message on voicemail. An hour later the agent called back—she was in a listing appointment with the alternate agent—and explained that they have had a problem with lost keys. She gave me the combination to another lockbox, and I told her that I will be taking my clients back that afternoon. I asked if there are any offers, and she said they were “working with” one. Later that day we returned to the property and were surprised to find a home inspection going on. The buyer’s agent showed me a contract that was ratified several days before. When I got home I checked the MLS again, and the listing agent had updated the listing to CONTRACT 30 minutes after I spoke with her. She couldn’t call me? I complained to her supervising broker, but he’s her alternate agent—and husband. No apology; in fact, no response at all.

(5) Unprofessional agents: Anyone with access to the internet can confirm the widespread lack of professionalism simply by looking at any one of dozens of websites that access the MLS. Observe the numerous listings with no photos, out of focus photos, oddly tilted photos, and photos that clearly lack any sense of good judgment; or if you like a good chuckle, consider the rampant misspellings, typos, inaccuracies and omissions. No tax record on a 30-year-old property? No list of conveying appliances? No directions? If there’s no basement, are those just decorative windows peeking out under the first floor? Are any supervising brokers awake out there? How can any agent claim to be earning a commission with such inexcusably crappy “marketing?”

(6) Unethical agents: My client offered $301,000 on a $260,000 listing but, “Sorry, my clients accepted another offer.” Later I see the final sale show up—same FHA loan, but the net sales price was $264,000—$37,000 less! Gee, what could possibly have convinced the sellers to take such a low offer instead of ours? Why, imagine that—the selling agent was the listing agent, too! What a coincidence! That, folks, is what we call a “double-dip,” where the listing agent gets double commission, and I would say it’s pretty likely that my client’s offer was not presented at all. This agent’s supervising broker is . . . herself.

We have a laudable code of ethics, and ethical grievances can be filed with the local Realtors association, of course, but the burden of proof is rightly on the accuser. Unfortunately, much of the documentation one would need to make a case is usually in the hands of the accused, and there is no such thing as a subpoena in grievance proceedings. So, except in the most obvious and egregious cases, the best one can do is keep a (hopefully short) sh*tlist of brokers and agents with whom one avoids doing business, if possible. And believe me, I have one.

Now that I’ve had my rant, I guess it’s time for me to consider applying to serve on the local or state boards so that I can follow the same advice I give to my clients about their HOAs: if you want to have a good organization, get involved with it.

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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?

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By Kim, November 5, 2009

Congress just passed – and President Obama is expected to sign immediately – the tax credit extension and expansion to higher income levels, and further enhanced the credit by allowing a credit of up to $6,500 to buyers who have owned a home for 5 of the past 8 years. Here is a chart reflecting the old and extended/enhanced provisions:

The National Association of Realtors also provided the following Q and A about the extended and enhanced tax credit:

Q.  Existing homeowner credit:  Must the new house cost more than the old house?
A.  No.   Thus, for example, individuals who move from a high cost area to a lower cost area who meet all eligibility requirements will qualify for the $6500 credit.

Q.  I am an existing homeowner.  On October 25, 2009, I signed a contract to purchase a new home.  I have lived in my current  home for more than 5 consecutive years and am within the new income limits.  I will go to settlement on November 20.  If President Obama has signed the bill by the time I go to settlement, will I qualify for the new $6500 tax credit?
A.  Yes.  The existing homeowner credit goes into effect for purchases after the date of enactment (when the bill is signed).   There is no reference to the date of contract for the new credit. The provision looks solely to the date of purchase, which is generally the date of settlement.

Q.  I am a first-time homebuyer but was not within the prior income limits at the time I entered into my contract to purchase on October 30, 2009.  I will be covered, however, by the new income limits.  If the new rules have been signed into law by the time I go to settlement, will I be eligible for a credit?
A.  Yes.  The new income limitations go into effect as soon as the President has signed the bill. The income limit and other eligibility rules will look to your status as of the date of purchase, which is the settlement date.  So if the new rules have been signed when you go to settlement, you should be eligible for the credit (or a portion of the credit if you’re within the phase-out range).

Q.  I am an eligible existing homeowner.  I have a fair amount of equity in my home.  I have found a home with a non-negotiable price of $825,000.  Will I be able to use any of the $6500 tax credit?
A.  No.  The $800,000 cap on the cost of the purchased home is firm at $800,000.  Any amount above $800,000 makes the home ineligible for any portion of the credit.  The $800,000 is an absolute ceiling.

Q. I owned my home for 10 years, but sold it two years ago year and have been renting since.  If I purchase a home, will I be eligible for the $6500 tax credit if I meet all the other eligibility tests?
A.  Yes.  Because you lived in the home for more than 5 consecutive years of the previous 8, you will qualify for the $6500 credit.  For example, Say John and his wife bought a home in 2000 and lived there until 2008 when he got a divorce. Whether John has been renting or bought in the interim, he WOULD INDEED be  eligible for the credit because he owned a home and occupied it as his principal residence for 5 consecutive years out of the last 8 years. The keyword here is “consecutive.” As long as he lived in that house for 5 years straight, what he did since 3 years doesn’t impact eligibility.

Q.  I am an eligible first-time homebuyer.  I entered into a contract to purchase on November 1, 2009.  Do I have to go to closing before December 1?  How does the extension date affect me?
A.  You do not have to close before December 1.  Once the legislation has been signed, it will be as if the Nov 30 date had never existed.  Therefore, so long as the contract settles before April 30 (or July 1, worst case), the purchaser will be eligible for the credit.

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By Kim, October 21, 2009

. . . by ripping off in almost it’s entirety today’s post from Young House Love, which Sherry Petersik in turn got most of from “Evan the all-knowing homemade cleaner guy:”

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Clean Up Your Act: All Natural Homemade Cleaners

And now we’ll continue the cleaning chit-chat with this handy little homemade cleaner breakdown. When we talked about getting even greener and experimenting with homemade cleaners in year three of YHL, an expert in that very area offered up a few of his favorite formulas. And we jumped at the chance to learn how all natural and totally eco-friendly cleaning materials are easy and effective- and sometimes way cheaper than paying for the more toxic stuff that can hurt pets, kids, people in general and the planet at large. Here’s what Evan the all-knowing homemade cleaner guy passed along:

This has become an obsession for me. If you think of your home as a sanctuary you want it to be not only beautiful but safe for your health! Store bought chemicals and cleansers can not only be toxic, poisonous or cause other averse health effects (no wonder they have all those warnings and skull & crossbone images on them) but they can also be expensive, completely unregulated, bad for the environment and full of excess packaging that ends up in landfills every day. They often come with big bold warnings that say things like “danger”, “caution”, “corrosive”, “irritant”, and even “chronic health hazard” which by definition can mean anything from “chemicals that destroy tissue” (corrosive) to “causes sterility and birth defects” (chronic health hazard). And even those that just say “danger” or “caution” can be attached to warnings that say “may be fatal or cause blindness if swallowed” or “highly toxic, flammable, poisonous and corrosive.”

Well Evan, when you put it that way, the toxic store bought cleaners bearing those labels (which can commonly be found on everything from basic toilet bowl cleaners to oven and drain solutions) sound pretty terrible. Tell us more.

By contrast, some non-toxic and all natural ingredients like baking soda and vinegar are not only not corrosive, poisonous, or hazardous to your health in any way, they’re actually completely safe if ingested (after all they’re found in the kitchen and they’re 100% edible!).

• Baking Soda is a great naturally abrasive ingredient with mild alkaline properties, it’s also a natural deodorizer and stain remover, and it rinses easily, is completely non-toxic (no more dangers for kids and pets licking surfaces that you’ve cleaned) and it’s extremely affordable (you can grab a 12lb bag at Costco for next to nothing).
• Vinegar is an all natural and mild acid, it’s also a known disinfectant that can remove stains, sanitize, and it’s also completely non-toxic and inexpensive (you can also grab a giant jug of it at Costco for an extremely reasonable price). It should be noted that it shouldn’t be used on stone surfaces or acetate fabrics but there are many other natural cleaning methods that work for those surfaces.
• Hydrogen Peroxide is also non-toxic (learn more about it and it’s many uses here) and is known to be a natural bleaching agent with disinfectant and stain removing properties. It’s also extremely inexpensive (just $1 for three bottles at Walgreen’s).
  
• All Natural Tea Tree Oil And Grapefruit Oil (which have known antibacterial properties) And Lemon Juice (which naturally cuts grease and leaves a totally fresh scent) are also extremely helpful to have in your all-natural cleaning arsenal.
• Liquid Castile Soap (like Dr. Bronner’s, sold at Target, Trader Joe’s, etc) is a vegetable based soap as opposed to a petroleum based one, which makes it completely non-toxic so it can be used on your face and body but will also work well when it comes to cleaning your home. It’s not quite as inexpensive as baking soda or vinegar, but a large 32 oz container is just $8.99 at Trader Joe’s.

But how do you put them all together? Here are some of Evan’s favorite all-natural homemade cleaning formulas:

Surface Spray:

• 16 oz spray bottle
• 2 tsp. borax
• ¼ tsp. liquid castile soap (like Dr. Bronner’s)
  
• hot water

All Purpose Liquid Cleaner:

• 1 gal. hot water
• 1 tbsp. baking soda
• 2 tbsp. liquid soap (like Dr. Bronner’s)

All Purpose Abrasive Cleaner:

• liquid soap (like Dr. Bronner’s)
• 2 tbsp. baking soda
  

Mix to make a foamy paste.

Refrigerator Cleaner:

• 2 tbs. baking soda in 1 qt warm water

Wipe down inside and out and rinse with a clean wet cloth.

Oven Cleaner:

• Dampen with water
• Sprinkle liberally with baking soda
  

Leave 20 minutes, then scrub until clean.

Microwave Cleaner:

• ½ c. vinegar
• 2 c. water
  

Combine in microwave safe bowl, heat on high for 3-4 minutes, remove bowl and wipe down inside of microwave.

Dishwasher Detergent:

• 2 c. borax
• 2 c. baking soda
• 4 little packages of unsweetened lemon Kool-Aid (or generic)

Mix together and store. You can substitute ½ c. of citric acid for the Kool-Aid but it’s harder to find.

Gorgeously Green All-Purpose Spray:

• 32-ounce plastic spray bottle
• 2 cups water
• 1/2 cup distilled white vinegar
• 1 teaspoon pure castile soap (peppermint)
• 3/4 cup hydrogen peroxide
• 20 drops tea tree oil
• 20 drops of lavender essential oil

Fruit and Vegetable Wash:

• 1 cup water
• 1 cup white vinegar
• 1 tbsp. baking soda
• 20 drops grapefruit seed extract

Spray on produce, rinse after 5 minutes.

Fruit and Vegetable Wash #2:

• 1 cup water
• 1 tbsp. lemon juice
• 1 tbsp. baking soda

Spray on produce, wipe after 5 minutes.

Drain Cleaner:

• 1 c. baking soda first
• 1 c. white vinegar second
• 1 gallon boiling water

Allow to foam for 5 minutes before adding water.

Window, Glass and Chrome Cleaner:

• 5 parts water to 1 part white vinegar, OR
• 1 c. water, 1 c. vinegar, ½ tsp. castile soap (like Dr. Bronner’s)

Toilet Bowl Cleaners:

• Liquid castile soap (like Dr. Bronner’s)
  
• Baking soda or borax

Scrub with a toilet brush.

Tub And Tile Cleaner:

• Apply vinegar full-strength to a sponge and wipe
• Scour with baking soda

Soft Scrub for Fixtures:

• ½ c. baking soda
• Castile soap
• 10 drops of antibacterial essential oil (optional)

Add enough castile soap until you have a frosting like consistency. Scrub, then rinse with water.

Mildew/Germ Killer:

• 2 c. water
• 25 drops of tea tree oil
• 25 drops of lavender oil

Spray on tile and do not wipe off.

Mildew/Germ Killer 2:

• 16 oz spray bottle
• 1 part hydrogen peroxide
• 2 parts water

Spray, let sit. Rinse after 1 hour.

Wood Floor Cleaner:

• ¼ c. vinegar
• 1 gal. warm water

Mop or rag should be slightly damp for cleaning.

Linoleum Floor Cleaner:

• 1 c. vinegar
• 2 gal. warm water

Mop or rag can be fully wet for cleaning.

Carpet Stain Remover:

• 1 part borax
• 10 parts warm water

Combine in spray bottle. Spray on stain, wait 5 minutes, blot with clean rag.

Carpet Stain Remover:

• vinegar
• baking soda

Mix vinegar and baking soda into a paste. Gently work into stain with a toothbrush. Let dry then vacuum completely.

Carpet Deodorizer:

• Baking soda
• 10 drops of essential oil (optional)

Mix together then sprinkle generously on carpet, wait 15 minutes and vacuum.

All-Purpose Carpet Cleaner:

After vacuuming first,

• 1 c. white vinegar
• 3 c. boiling water

Blot mixture onto nap of rug with a wet rag, Dry and air thoroughly. Vacuum.

Air Freshener:

• 2 parts water
• 1 part rubbing alcohol
• Essential oil

Mix in spray bottle, don’t spray on silks or delicates. Experiment with how much oil to add, but start with 5 drops.

Air Freshener 2:

• 1 tsp. baking soda
• 1 tsp. vinegar or lemon juice
• 2 c. hot water

Mix in spray bottle, don’t spray on silks or delicates.

Dusting:

• Slightly dampened microfiber cloth

Furniture Polish:

• ½ tsp. olive oil
• ¼ c. vinegar or lemon juice

Mix in a glass jar. Dab a soft rag into the solution and wipe onto wood surfaces.

Scratches:

• 1 part lemon juice
• 1  part vegetable oil

Rub into the scratches and polish.

Rust Remover:

• Sprinkle area with salt
• Squeeze lime onto salt

Leave sit for 2-3 hours, then scrub w/ lime rind.

Metal Polish (copper and brass):

• 2 tbsp. salt

Add vinegar until you make a paste. Rub on metal with a clean rag. Wipe clean.

Powdered Laundry Detergent:

• 1 c. grated Fels Naptha soap
• ½ c. washing soda
• ½ c. borax

For light load, use 1 tablespoon. For heavy or soiled load, use 2 tablespoons.

Liquid Laundry Detergent:

• 3 pints water
• 1/3 bar Fels Naptha soap, grated
• ½ c. washing soda
• ½ c. borax
• 2 gallon bucket
• 1 quart hot water

Mix soap in saucepan with 3 pints of water. Heat on low until dissolved. Stir in soda and borax until thickened. Remove from heat. Add 1 quart hot water to bucket, then soap mixture, mix well. Fill rest of bucket with hot water, mix and let sit for 24 hours. Use ½ c. per laundry load.

Laundry Pre-treatment:

• ½ c. ammonia
• ½ c. white vinegar
• ¼ c. baking soda
• 2 tbsp. liquid soap or laundry detergent
• 2 quarts water

Mix in spray bottle. Spray spot.

Laundry Pre-treatment 2:

• 1 tsp. liquid laundry detergent
• 2 tbsp. ammonia
• 1 pt. warm water

Mix in spray bottle. Spray spot, let sit for 20 minutes.

Fabric Softener:

Add ½ – 1 c. vinegar to your softener dispenser

Bleach Alternative (Laundry):

• ¼ c. hydrogen peroxide

But wait, Evan has even more ideas to keep things green and clean around your casa:

Run your dishwasher late at night without a heat-dry setting and let things air dry overnight instead

Replace sponges with washable and reusable items like microfiber cloths and dishrags

Premix large batches of cleaning formulas so they’re always on hand and you’re never tempted to buy store stuff again

Set your washer to cold/cold for the most eco laundry you can get

Have people take off their shoes when they enter the house and wipe down the shower after each use (these preventative methods will really keep the house cleaner and cut down on your work)

And just because he’s such a pro, Evan even included his resources so you can learn more or see where he got his facts. Gotta love a guy who’s so thorough AND considerate: Consumer Reports, Nat’l Geographic, The Green Guide, Do It Green, Frugal Living, The Vinegar Institute, EarthEasy, Coyne and Kutzen “The Urban Homestead.”

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There, now I can feel better about not having tossed up any “green” posts to date. And as for Young House Love, read all about how their purchase of an old brick rancher in Richmond turned into Sherry’s full-time design/how-to/makeover job (plus part-time for John, a TJHSST grad) and got them featured month after month, it seems, in various home and design media. And their little dog, too . . .

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By Kim, October 10, 2009

In the Humor-We-Wish-But-All-Too-Common category, from Kris and Steve Berg at San Diego Castles:

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By Kim, July 25, 2009

Another piece on buyer’s agents from Greg Swann:

Are home-buyers best served by the vigilant efforts of an experienced buyer’s agent? Consider a transaction we have in play right now.

The buyers are a young couple, about to be married. They have about $10,000 in cash. With a conventional loan, they could put 20% down on a dismal starter home. Or, with Private Mortgage Insurance, they could put 10% down on a nicer home.

But with an FHA loan, $10,000 is 3.5% down on a $285,000 home. We can argue the wisdom of making so small a down payment, but the FHA loan program is the path to homeownership for millions of Americans. And $285,000 is too much house for our buyers. They found a nice lender-owned two-story home in the suburbs selling for $169,000. The down payment on that home would be $5,915. But the closing costs would probably run to another $5,000 — which comes to more money than they have.

They qualify for the $8,000 first-time home-buyer tax credit, but they won’t get that until they file their tax return. They also qualify for a state-funded grant program that will contribute up to 22% of the purchase price — but which can’t be used for the down payment or the closing costs.

Here’s the deal we put together. We offered $175,000, $6,000 over list price. In exchange, we asked the seller to contribute 4% of the full purchase price [$7,000 — FHA allows up to 6%] to defray the buyer’s closing costs. The down payment will be $6,125, leaving the buyers $3,875 in cash to pay for the endless expenses of moving into a new home.

And there will be about $2,000 left over after the closing costs are paid. This will be used to buy down the interest rate. The buyers will end up with just over 25% equity in the property for a cash outlay of $6,125 — all at a very low monthly payment. And they’ll still have their $8,000 tax credit to look forward to.

This is the kind of outcome a skilled buyer’s agent can achieve.

Right again, Greg. There are so many ways a knowledgeable agent can help you get a better deal, that is right for you, even when you pay full price or more.

Kim Hannemann, Samson Properties

If you would like to discuss real estate questions, sell or buy a home in Northern Virginia – including Alexandria, Annandale, Arlington, Burke, Centreville, Chantilly, Clifton, Fairfax, Fairfax Station, Falls Church, Kingstowne, Lorton, McLean, Reston, Springfield, or Vienna – contact Kim today.

4.5% Listings with First-Class Service — Cash Back to My Buyers!

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By Kim, July 14, 2009

From the Fairfax Times today:

A complete overhaul of the Springfield Mall and surrounding areas gained final approval July 13.

The Fairfax County Board of Supervisors unanimously approved turning the 34-year-old mall property into a more urban-style town center that the community hopes will once again make central Springfield a destination.

“Springfield Mall needed a complete transformation,” said Supervisor Jeff McKay (D-Lee). “We wanted a regional mall on par with other regional malls in the area that we could be proud of.”

The project includes upgrades to the mall itself, as well as construction of new offices, apartments, a hotel, movie theater and additional restaurants and shops. Mall owner Vornado has also promised to improve connections to the Franconia-Springfield Metro station for pedestrians, cyclists and buses; build a synthetic turf playing field; and contribute to area road and park improvements.

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By Kim, July 13, 2009

June 2009 home sales activity for Fairfax and Arlington counties, the cities of Alexandria, Fairfax and Falls Church and the towns of Vienna, Herndon and Clifton:

A total of 2,169 homes sold, 14.2% more than  June 2008 home sales of 1,900 and the 11th consecutive month of higher year-over-year sales.

Active listings decreased by 27 % from last year, with 7,617 active listings in June, compared with 10,440 homes available in June 2008.  The decrease in “inventory,” as we real estate people refer to homes for sale, is becoming somewhat alarming – that’s only 3 1/2 months of inventory.

The average days on market (DOM) for homes in decreased to 71 days, compared with 83 days in June 2008. However, more than half the homes sold in under 30 days.

The average sales price in June fell by 7% from June 2008, to $451,354, while the median price fell 6% to $392,367. These prices are, however, again higher than the preceding month.

And for the 15th straight month, the number of pending home sales increased 17% over the same period last year.

Kim Hannemann, Real Estate Consultant/Realtor®, Samson Properties

It’s Good To Have A Friend In The Business®

If you would like to discuss real estate questions, sell or buy a home in Northern Virginia – including Alexandria, Annandale, Arlington, Burke, Centreville, Chantilly, Clifton, Fairfax, Fairfax Station, Falls Church, Kingstowne, Lorton, McLean, Reston, Springfield, or Vienna – contact Kim today.

4.5% Listings with First-Class Service — Cash Back to My Buyers!

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By Kim, May 18, 2009

Saturday’s Washington Post Real Estate section featured an article by Ken Harney entitled, “New Appraisal Rules Come With Costs,” in which he posits the following scenarios:

• The real estate appraisal that used to cost you $325 now costs $450, even though the appraiser doing the work is getting only $175 or $200.
• Your appraisal-related charges may now be subject to add-on fees – such as $50 to $100 extra in “no show” penalties if you get stuck in traffic and miss your appointment with the appraiser, or an extra $50 to $150 if the property is worth more than $500,000.
• Your mortgage loan officer requires you to pay for the appraisal upfront with a credit or debit card, rather than including the fee with the usual lender origination costs at settlement. Your card may be charged more than the anticipated cost of the appraisal – leaving debit-card holders in a potential overdraft situation.
• The person conducting your appraisal may be new to the field – willing to work for a cut rate – and may not be as familiar with local value trends and pricing adjustments as an appraiser with more experience.
• If your mortgage application is denied by one lender, you could be forced to pay for a second full appraisal because the new lender may not accept the first one.

The “new appraisal rules,” which go by the name Home Valuation Code of Conduct, were imposed May 1 by Fannie Mae and Freddie Mac, and are intended to improve the accuracy of appraisals by eliminating pressure on appraisers from loan officers. The code pushes most large lenders to use third-party “appraisal management companies” that contract with networks of independent appraisers around the country who thus are not in direct contact with retail loan officers or mortgage brokers. The Code came about as a result of an agreement made between the Federal Housing Finance Agency and the New York State Attorney General. The intent of the agreement was made to enhance the independence of appraisers. The most relevant part of the code seems to be the following:

The lender or any third party specifically authorized by the lender (including, but not limited to, appraisal companies, appraisal management companies, and correspondent lenders) shall be responsible for selecting, retaining, and providing for payment of all compensation to the appraiser. The lender will not accept any appraisal report completed by an appraiser selected, retained, or compensated in any manner by any other third party (including mortgage brokers and real estate agents)

It used to be that a mortgage professional – whether working for a specific lender or as a broker – might have a “stable” of appraisers he or she could call on to provide services. Most of them just wanted a reliably thorough and competent job. However, and this is the reason for the new rules, some only wanted appraisers who were willing to find the right “comps” to hit a specific valuation necessary for the loan to go through. Under pressure to produce that number or perish, many appraisers buckled.

But are the new rules helpful or harmful to the more ethical mortgage lenders and brokers out there? Are they seeing big increases in appraisal costs? How about appraisal quality, now that they can’t choose one of their go-to guys? I asked several of the mortgage professionals I work with every day in Northern Virginia to give me their impressions about whether they find the scenarios suggested in Harney’s article to be happening here:.

We’ve actually been working under these rules for many years . . . All appraisals have been ordered through a 3rd party management company, and while we did have some communication with the appraiser (although not encouraged), we cannot any longer . . .

This is actually a good thing that is happening. Too many times appraisers have been bullied by agents, mortgage lenders and borrowers for not having the same opinion. This [code] will take that opportunity away. This does NOT mean that you can’t call the appraiser, still meet them at the home, etc . . . this is so that lenders cannot contact the appraisers directly – even for a status, as this is seen as undue pressure. These appraisers are professionally trained, educated and have to uphold ethical standards just like all of us; yet no one challenges our decisions like these people.

[The fees and time requirements] are the same, for now. I bet the appraisal costs will go up, and they should. The appraisers can’t live on a “cut” and they have been required to do so many more compliance checks etc . . [Turnaround times] are longer due to volume.

This won’t change the quality . . . if anything the quality will improve because the lenders and agents are now separated from any undue influence.

Jennifer Duplessis, Prosperity Mortgage

Interesting article and I am happy to say we have not had the issues mentioned. [Local] appraisers have only added $25.00 to their fees due to some additional addendums that required extra research. Appraisal fees have ranged from $350 to $375 and now are $375.00 to $400.00 for under $1 million sale price, and they have always charged more for above $1 million – that is not new. Yes, loan officers are no longer allowed to directly pick the appraiser – it is an automated random selection of a pool of known appraisers in our local area.

I think the worst [problem] is the extreme pressure the appraisers are [receiving from the lenders] to include the foreclosures and short sales when determining values. During the recession In the early 90’s foreclosures and short sales were considered distress sales and discarded as [comparable to a] homeowner selling their property. In my opinion, this change in [guideline] has escalated the erosion of home prices. They should have allowed for an adjustment upward on the distress sale, but they did not, they are requiring the appraisers to use them thus providing for lower and lower values – how unfair to the normal seller is that?

Shirley Jones, First Savings Mortgage

I haven't experienced any true horror stories yet, but the new system will definitely change things. I think the appraisers will feel empowered to bring in property values at whatever they feel the value is, regardless of what it may mean for the transaction. The old system had a conflict of interest where (I believe) appraisers didn't want to ruin too many deals with a low appraisals since they were hurting their referral sources (potentially their future income) by bringing in the low appraisal. This new system will potentially change that, which ultimately will be a good thing, but could be painful. I think that will be the biggest change. I believe we will see more low appraisals (meaning appraisal comes in below contract price).

In the past we could choose appraisers and go with ones that we felt were "good appraisers." We now have less of a say. It also adds a layer to the process which usually means more time. I do agree with what the article said about the costs of the appraisals being higher. Mortgage brokers definitely kept costs down with the old system. Appraisals have gone up by about $100 over the past year I believe. I haven't noticed a big difference in the quality of appraisal, but it is still early in the process.

Overall I don't love the new system but the old system definitely had it's flaws also. I'm not sure I would want to go back to the old system even if we could.

Kevin Haddon, Wells Fargo Home Mortgage

So on balance, it seems, in the Northern Virginia area the new rules are seen in an overall positive light by people who I believe to be in a position to know. Yes, costs my have increased slightly, and there may be a somewhat longer turnaround – especially as the system gets established – but I think the horror story scenarios drawn by critics are not reflected in the actuality. I do agree with Shirley's view about separating the distress sales from the normal sales – it's unreasonable, but it's not a part of the new rules, just a lender-imposed requirement. Appraisers should be able to reflect adjustments for condition, given the lousy condition of most foreclosures, but it's unlikely to fill the gaps.

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