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By Kim, March 22, 2009

Info from this week’s Mortgage Market Guide:

Last week, the Fed used their regularly scheduled meeting to make a blockbuster announcement.

Over the course of 2009, the Fed will purchase an additional $750 billion of mortgage-backed securities, as well as $300 billion in long-term Treasuries, primarily to help shore up the housing market and keep home loan rates low. On the announcement, bonds exploded higher, leaving bond prices within whiskers of the best levels ever.

How does this really impact home loan rates?

While the Fed’s actions may keep mortgage rates from moving higher, they may not cause them to move dramatically lower. The Fed’s actions create demand for mortgage-backed securities, which should help keep the ceiling on home loan rates from moving much higher in the foreseeable future. That’s good news for homebuyers who are seeing the bargains out there and understand that now is the time to act.

But – and this is very important – what actually happens to mortgage rates depends on which bond coupons the Fed purchases. If they purchase higher rate coupons – as they have done so far this year – their continued purchasing will likely keep a lid on rates, but not necessarily push them significantly lower. Additionally, due to many understaffed lenders and investors currently working at maximum capacity, we could once again see that improvements in pricing may not all be passed through to borrowers.

Another factor that could impact whether mortgage rates see significant improvement are concerns of future inflation brought on by all the recent aggressive moves by the Fed. While we know there is little inflation at the present time, chatter about future inflation could have a negative impact on home loan rates, or at least stifle any improvements.

Although the media is already spinning it differently, this is not a time to stay on the fence, hoping and waiting for lower rates. Home loan rates remain within inches of all-time historic lows, but may not necessarily move significantly lower, so waiting could be a risky move.

Also, an update on Mark-to-Market – the accounting rule which has had a devastating impact on the financial markets: The Financial Accounting Standards Board (FASB) agreed that it will propose to allow companies to use more “leeway” in applying the accounting rules they use to value their assets, and planned a final vote for April 2. If this rule change is approved, it could result in better first-quarter financial statements for companies that have been affected by this rule. Stocks have been moving higher lately in the hopes that Mark-to-Market will be fixed, and a resolution could help stocks further improve.

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, March 5, 2009

It’s a strange arrangement. Here I am, the agent for the buyer, receiving my compensation from a party who not only is not my client, but whose interests are (one would think) directly opposed to those of my client – the seller. They want the highest possible price, my client wants the lowest. They don’t want to spend money on repairs, my client wants the repairs made. The list goes on. The two sides are in agreement on one thing only – they want the transaction to happen. Yet it it almost universal for the seller to pay the buyer’s agent. Huh?

This seemingly oddball arrangement exists for a couple of reasons. First, the historical background: until the mid-1990s, real estate brokers and agents operated under subagency agreements, whereby brokers listed property, and offered cooperative commissions to other brokers bringing in buyers for the listed property. Under subagency, these cooperating brokers and agents were legally bound to represent the seller.

Despite this fact, most buyers thought “their” agent represented them, and acted accordingly, often to their detriment. By sharing how much they were willing to pay, when they had to buy, or how much they loved the home, they unwittingly provided the seller with useful negotiating information. Eventually the Federal Trade Commission put pressure on the states to have real estate agents disclose to consumers exactly whom they represent. Most states eventually adopted disclosure laws, and the industry adapted by creating buyer agency arrangements (similar to sellers’ listing agreements). But the existing commission arrangement remains in place – the seller still pays. Why?

The reason that sellers still pay the commission is because the main obstacle to buyers being able to buy is a lack of cash – cash for the down payment, cash for closing costs, cash for the move, cash for furnishings, and the list goes on. It takes a long time to save that money. Some people find it difficult; others find it impossible. Add the buyer’s agent commission, and the seller will have fewer buyers available.

The seller is receiving cash from the sale. If they pay the commission, more potential buyers are able to afford this property. The more potential buyers, the higher the likely sales price. The higher sales price provides the incentive for the sellers to pay the buyer’s agent in addition to paying their own.

There are “exclusive buyer agents” who accept their payment only from their buyer client and refuse the seller’s offer. They argue that the only way for a buyer to be certain to avoid any conflict of interest is to avoid firms that both list and sell homes, and to compensate their own agent. In practice, I have never been tempted to change my buyer representation perspective regardless of the offered compensation. I disclose to my buyer clients the compensation offered on every property, and have on occasion used higher compensation levels to assist my clients in the purchase.

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, February 21, 2009

Excerpt from one of my favorite Real Estate bloggers, Kris Berg in San Diego:

We are finding ourselves spending a whole lot of time explaining lender pricing methods to buyers. This week we saw another bank-owned listing priced a full 20% below one active listing and two in escrow – all identical homes within two blocks of the perpetrator. Now, one can argue this is a brilliant strategy for ensuring a speedy-quick sale, and one might even argue that the price will tend to float toward something more in line with true values. Both arguments are valid, but is blatant and gross under-pricing moving toward an ethical gray area? And, what about an agent’s fiduciary responsibilities? Lenders are clients, if not people, too, and pricing a property using a dreidel could be considered negligent. Finally, there is the confusion among buyers that this causes.

Pretend prices – This is what the prices we see attached to many of the foreclosure homes on the market actually are. Most of these homes are knee-deep in offers numbering double-digits before the sun goes down on the first day of showings. Unfortunately, this is a difficult concept to explain to buyers. “Yes, the home is priced exactly at the amount for which you are approved and, no, you cannot buy it.” This is a bitter, even seemingly incredulous message to swallow, and so often a buyer will need to go through the exercise once or twice before they take my word for it.

There is a bigger issue  . . . the one of uber-low pretend prices becoming a popular “lead generation” tool for the agents representing the listings. In a world where buyers are doing their own searches, a too-good-to-be-true carrot can sure make that phone ring. And it leaves the rest of us who use real numbers with a lot of explaining to do.

Read the whole post at the San Diego Home Blog  - Kris’s writing is pretty good, by the way.

This is happening here too. Buyers call me excitedly about a home they have seen in their real-estate-search-engine-of-choice, supposedly in their price range – “Wow! Can we go see this one NOW???” Sure. If you can get past the hordes of other buyers waving offers. You can make an offer, too . . . and let me show you the “escalation clause” addendum, because you are going to need it.

No such thing as a free lunch.

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

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By Kim, February 10, 2009

Looking at the January 2009 data for the housing market in Northern Virginia (Fairfax and Arlington Counties; Falls Church, Fairfax and Alexandria Cities), the year-over-year trends of the past several months are continuing – sales are up (+39%), active listings are down (-16%), pending sales are up (+23%) and sales prices continue to run 20-25% below those of a year ago, and -30% from two years ago. Average days on market is declining but is still in the 100 range (for sold homes).

The absorption rate has picked up from December’s 5-month figure – we have about 7.5 months of homes on the market now, in the low “buyer’s market” range – largely, I think, because a sizable number of sellers were waiting until after the holidays to put their homes on the market.

There is a lot of action in the sub-$300,000 detached home market. Here are some interesting numbers: 

Detached Homes for sale under $300,000:

• January 2008   =   55
• January 2009   =   436

Detached Homes sold under $300,000:

• January 2008   =   8
• January 2009   =   90

Here’s another interesting number:

Homes financed through FHA/VA:

• January 2008   =   39
• January 2009   =   328

So the government guaranteed the mortgages of over 33% of all homes sold in January 2009. In the entire year of 2006, FHA/VA loans totaled 253, or only 1% of sales in Northern Virginia. Wow.

The mortgage market has been volatile and will continue to be, though the federal government will do all it can to hold it down until the economic outlook improves. Rates are now in the 5.4% range for 30-year fixed. The chart from Bankrate.com shows the last 3 months’ rate movements in Virginia.

The government has a lot of things going on – from Congress to the Treasury to the Federal Reserve to Fannie Mae and Freddie Mac. So many are up in the air that it would be foolish to write about them today.

All the more reason to subscribe to my blog!

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

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By Kim, February 10, 2009

Spring is on the way, and it will probably bring a fair amount of rain. Combine that with melting snow – assuming we get any – and we might start to think about drainage. Some of us cringe at the sight of rainfall, looking outside to see half of the yard engulfed in water. Others relish the fact that we live uphill from the neighbors or have handled the run-off with no problem in previous years. Regardless of which scenario in which you find yourself, drainage control is a major priority in every landscape.

Proper drainage control reduces or eliminates excess water in your landscape, which can help to protect your home from water damage and eliminate mosquitoes and other bugs that breed in the still water in your yard. There are several different options that can help to solve drainage problems. The difficult part for the homeowner is choosing the solution that will work best for their unique landscape. Here is a quick overview of several available options:

Dry Creekbed

POSITIVE GRADING
Positive grading uses the existing land contour or a manipulated version of existing contour to direct the water to a specific location. This is one of the most helpful solutions. However, manipulation of the site may require it to be accompanied by one of the other solution types.

CREEKBEDS AND SWALES
Creekbeds and swales are a more recent solution to correcting drainage problems. They’re filled with various-sized stones, and a few large boulders are added for additional aesthetics. Water is allowed to flow through creekbeds and swales, helping to control flooding and erosion.

PIPING

French Drain

Piping is typically used with downspouts or in “French drains” (also known as “freedom drains” during the W administration). This solution takes the water from a specific problem area and pushes it through a pipe to another location. At the new location, either positive grading takes over to disperse the water, or a collection area is developed to handle the water (see Sustainable Solutions).

Sustainable System

SUSTAINABLE SOLUTIONS
Sustainable solutions are the up-and-coming answer in drainage control. They reduce the flow of water to storm drains from homes and businesses. Typically, these solutions work well in locations where water can be collected (and sometimes filtered) to be used for additional purposes throughout the landscape. Sustainable solutions not only reduce or eliminate excess water in your yard, but also benefit the environment by preventing pollutants from entering our watersheds.

Remember, each landscape is unique and may require a different solution or a combination of solutions to properly correct drainage problems.

Many thanks to Jeff Findley, our Landscape Designer from Professional Grounds

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

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By Kim, January 27, 2009

The first question a potential home seller has is undoubtedly, “What’s my home worth?”

A real estate professional will establish the likely selling price by doing a comparative market analysis (CMA) – comparing your home to others like it that have sold recently. We would include market conditions, such as the inventory of homes for sale and the ease of purchase (interest rates, mortgage availability).

Ideally, your agent will be looking for homes

• of similar size;
• in similar condition;
• in the same or a nearby neighborhood; and
• sold in the past three months.

In a large subdivision or condo complex with many recent sales, this can be fairly easy. If your home is very similar to several recently closed sales, except for the level of improvements, adjustments can be made for the various differences.

It is more difficult to establish market value when there are few or no comparable sales (“comps”). Sometimes your home is unique compared with nearby homes sold recently. In this situation establishing a reasonable market value will also be a matter of adjustments, but the adjustments will be trickier.

The most important factor is location, so up to a point we would tend to favor closer homes over more recent sales from a distance. On the other hand, if we can locate several recent sales of similar model homes by the same builder in a distant neighborhood, we can adjust for location.

Adjustments may be made for the home’s “fit” in the neighborhood. A home that “sticks out like a sore thumb” – either too fancy or too big compared to nearby homes, or relatively small or unimproved relative to the neighborhood – will require more up or down adjustment. If the comps are in a more highly sought after school district than your home – or vice versa – it will be necessary to adjust for the schools.

Occasionally we might try multiple approaches. For instance, in addition to pricing recent sales of similar homes from other neighborhoods,  we can also research sales in your neighborhood from previous years and then adjust for what has occurred in the local market since then. By establishing the value from several perspectives, a more accurate price range for your home will become clear.

Finally, when a property sells, it’s not just about the price. There are other factors that influence what a buyer will pay and how much a seller will accept:

For example, terms such as these might induce a seller to take less money:

• an all-cash offer (no mortgage contingency to worry about);
• an as-is offer (no concern about repairs);
• a fast closing or a longer closing, depending on what the seller prefers; or
• a free rent back, to allow the seller time to complete his move at a more leisurely pace.

And these terms might make the seller demand more money:

• seller financing all or part of the purchase price;
• seller paying for closing costs; or
• offer contingent on sale of buyer’s home.

If you would like to know the likely market value of your home, please contact me. I’ll be happy to help you evaluate your property’s value.

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

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By Kim, January 27, 2009

Working with prospective home buyers, I often find that early in the process they are inclined to suggest an offer price based on the listed price – as though they should always offer X% or $XXX less than the list price.

I can understand why they would make that assumption, if they’ve been looking at market averages or listening to people who do.

But basing your offer on the list price is a big mistake. Some are ridiculously high. Some are tantalizingly low. And until I do a Comparable Market Analysis (CMA) – investigating the sales price and terms of recently sold similar homes in the area – I can’t know if the asking price is anywhere near market value.

Some agents might toss out a number when you ask them while touring the home. They would not be the best agents.

Here’s an example:  A home is listed for $399,000. You love it, but you firmly believe that you should offer 10% under list, and your offer of $360,000 is accepted! Wow, you’re a great negotiator . . . until you find out that similar homes sell for about $345,000.

Example 2:  A home is listed for $399,000. You love it, but you you firmly believe that you should offer 10% under list, and your offer of $360,000 is rejected without a counteroffer. Someone else got your dream home! THEN you do your homework, and learn that similar homes sell for $425,000 and the asking price was intended to attract multiple offers, or even ignite a bidding frenzy.

I will not give my opinion on price until I do my research. In the first example, if you know the likely sales price of a home is $345,000, and it is listed for $399,000, your agent might suggest an offer of say $325,000 with other terms that might pique the interest the seller – and you’d be pleased to get the home for $335,000.

In the second scenario, if the house you love is listed at $399,000, but research reveals that similar homes typically sell for $425,000, your agent can help you construct a winning bid. If yours is the accepted offer at $415,000, you did great!

It’s all about doing your homework. When negotiating, you can’t really know where to begin until you know the market value of the home.

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

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By Kim, January 14, 2009

It just needs a little TLC, right? If you’re willing to put in some elbow grease, buying a fixer-upper can be worthwhile. And there are plenty of them around, given the foreclosure epidemic. But there’s a substantial commitment of time and effort, and long periods of time when you will be living in chaos and sawdust. If you’re still up for the challenge, it can be a rewarding experience.

1. Be prepared for an extensive search. Many fixer-uppers–particularly those in especially bad shape–don’t command much attention, so you may have to hunt around.
2. Keep in mind that “location, location, location” is always the mantra of real estate purchases. Steer away from properties in areas that are looking rundown in general. Is the asking price of that fixer-upper favorable, compared with the prices of other homes in the neighborhood? Make sure the fixer-upper is in an area of reasonably solid house values. That way, your house will be worth even more when your repairs are completed, rather than less because of worsening market conditions in the neighborhood. Try to meet some of the neighbors who might give you some information on what’s been going on in their block.
3. Look for the words “fixer-upper,” “needs TLC,” “handyman special” or “diamond in the rough” in your ad or MLS searches. If it’s a foreclosure, you can generally expect it to be.
4. Review local listings of foreclosed properties. When banks have to take ownership of a property, they’re generally very motivated to hand it off quickly. Contact a good real estate agent to ask about possibilities and to get your own representation.
5. Watch for properties that need mostly cosmetic improvements. Houses that could use new paint, flooring and/or appliances offer the fastest potential turnaround. Bigger problems such as bad roofs or faulty foundations are often prohibitively expensive and beyond the capabilities of most weekend warriors.
6. If you find an appealing property with seemingly reasonable repair needs, confirm. Have the home professionally inspected. Specify that the final sale is contingent on a satisfactory complete inspection.
7. Accompany the inspector when he or she goes through the house for a blow-by-blow account. You may also need to get additional inspections of particular important systems, such as HVAC and well/septic.
8. Get a formal appraisal ($200 to $400) of the home’s value and have your agent work up comparables. If possible, have the appraiser estimate how much the home should sell for after it is restored to good condition.
9. Get several bids from contractors of how much it will cost to fix what needs to be fixed. Be sure to check zoning requirements and include permit fees. A rule of thumb would be that the home’s value should increase at least twice as much as you spend on improvements. Calculate the potential value of the house after renovations and be sure that it isn’t higher than comparable houses on the block. Be realistic about repair costs.
10. Look for a mortgage that includes funds for home renovation, such as the Federal Housing Authority 203(k) program.

Other Tips:

• Be patient. Unlike the folks on TV who make it sound as though renovations happen within a few weekends, fixer-uppers can take a long time to find and much longer to spruce up, particularly if you’re holding down a day job.
• Timing is often more important than the state of the house. If you sell during a hot market, price appreciation can help offset the cost of your improvements.
• Don’t be taken aback by properties that have been on the market for a long time. It’s not unusual for some fixer-uppers to be up for sale for a year or more, depending on market conditions.
• As a general rule, improvements that are invisible to the average home buyer or merely bring the home in line with expected minimum standards don’t add to the resale value. If you make the wrong improvements, such as enlarging a closet or converting two bedrooms into a master suite when you only had three bedrooms to begin with, you won’t see much, if any, return on your investment. Another potential pitfall is over-improving the home compared to other homes in the neighborhood.

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

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By Kim, January 14, 2009

If you are one of the fortunate folks who own a second home or rental property, and were planning to take fullest advantage of the capital gains tax exclusion on sale of your primary residence, the Housing Assistance Act of 2008 included a change that could impact your tax on the gains.

The existing law excludes $250,000 of the profit from taxation if you’re single, and $500,000 if you’re married, when you sell a primary residence you’ve lived in for at least two of the last five years. (Your primary residence is the place you live; the address you use on your drivers license; where you’re registered to vote, etc.) If, for example, you bought a property in Ocean City, rented it out for several years, and then moved into it as your primary residence for a couple of years, your free-of-tax profit when you sell it under the existing law would have included any increase in value during the whole time you owned it (up to the limits).

The new law modifies that rule – it limits your exclusion (your free-of-tax profit) to the time the home was your primary residence. You must prorate the total profit between the periods the property was not your primary residence, and the periods that it was.

Only the period after January 1, 2009 is relevant – the period it was not your primary residence before that date won’t be counted in determining the “non-residence” time. For example, if you bought a second home on January 1, 2007, rented or vacationed in it for three years, moved into it on January 1, 2010, then lived in it for 3 years until you sold it, you would have owned the home for 6 years, during which it was a rental or vacation home for 3 years, and your residence for 3 years. However, since only one of the rental years was after January 1, 2009, the numerator in your calculation would be one (the number of non-residence years after January 1, 2009), and your denominator would be 6 (the total number of years you owned the property). In other words, 1/6 of your gain would be taxable; if your total profit was $150,000, then $25,000 of that would be taxable. Under the previous law you would have been able to avoid tax on up to $250,000 ($500,000 if married).

The new law only applies where the period when the property was a rental or vacation home before it became your primary residence. It does not apply if it was your primary residence first, and then became a rental or vacation property. In this case, you could be out of the home for up to three years before you would lose the $250,000/$500,000 exclusion.

If you had been planning to move into your current rental or vacation property, you should consider doing it as soon as possible to minimize your eventual taxes.

I’m not a tax professional – consult yours to verify this and explain it further.

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

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By Kim, January 2, 2009

. . . or, ten ways to improve your chances to sell your home. A funny but oh-so-true description of steps all home sellers should take to ensure the fastest, most profitable sale.

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