Painfully Funny

This YouTube video has enough truth to be painful whether you're a buyer, seller, real estate agent, lender or even a taxpayer. And if you're waiting on a loan modification, you may want to self-medicate before watching!

Who Ya Gonna Call?

We had a shock recently when a home in our neighborhood here in Amissville went up for sale as a foreclosure. It's not all that common around here and the price was jaw-droppingly low.

Given that we have almost identically sized acreages I needed to know more. Was the number I carry around in my head on what our home is worth way off?

So, I went to take a look.

The moral of this story is, you should do the same thing. Clients worry that they're bothering their real estate agent if they ask to go see a house for sale in the neighborhood. Trust me, if your agent's worth a dime they're going to be happy to get that call. Some day you may want to sell your home and the more educated you are about the local market the easier those conversations are going to be for your agent.

I'd argue all of my clients ought to be calling me at least once a year to see something for sale in the neighborhood.

And, how did it work out for us? The house has no central air and needs lots of work. I don't think that number in my head is wildly crazy. And, apparently the market thinks that house was priced pretty competitively as well since there were multiple offers almost immediately.

I'm feeling a lot calmer now!

Breaking Up Government

There was a fascinating editorial in the Washington Post this last weekend suggesting that we should be moving big bunches of the the federal government out of the greater Washington DC area.

This is not a plan that's likely to be well received in this area. It will do nothing for our local economy. Demand for real estate surely goes down if this were to occur. (A VERY high percentage of my clients make their living in ways either directly or indirectly related to the federal government.)

But my hunch is that it may be the right thing for the country as a whole.

Let's move a whole bunch of government jobs to places with horrendous unemployement; think Ohio or Michigan.

Is it even possible any more for a large group of people to come together and decide to make a sacrifice for the greater good of the country?

What if the people in this region demanded that this be done? How would it change the attitude of people in the rest of this country towards those boogeymen "Government" and "Washington"?

Worth a try?

Flooring From Wine Barrels

I do a lot of reading about new green products for the home. The greenest thing (other than not replacing things) is usually something recycled.

I came across the Fontenay company this week. They recycle wine barrels for use in flooring. Give all the wineries in this area, that seems like a great fit for homes in Virginia's wine country.

They've also got some cool furniture made out of wine barrels.

Foreclosure Prevention Efforts Fail

Elizabeth Warren testified in front of a Congressional Committee today about the government's efforts to stem the flow of foreclosures. She may not have been quite this blunt but the gist of her testimony was that those efforts have failed. And, as far as I can determine they've failed on almost every front, every corner of this country. Virginia set up a state commission to work on foreclosure prevention. I'm sure all of those people were well-intentioned. I'm sure they tried really hard. But I don't believe you could point to any evidence that they had a significant impact.

Here are some of the measurements by which the federal plan has failed:

• Expected to help up to 4 million homeowners.
• Only 347,000 homeowners received permanent modifications.
• Less than 1/2 of 1% of the money allocated for the program has been spent.
• Real estate market remains depressed in much of the US, hurting the overall economic recovery.

Unlike others, I don't believe that this result was inevitable. Elizabeth Warren talked about some very specific reasons this hasn't worked. One of those is that the program never really had a good plan to deal with homeowners who owe more than their home is worth. The HAMP program is meant to help people in financial difficulty stay in their homes. But a lot of those people are upside down on their mortgages. If you don't address that part of the problem, the program is likely doomed to failure.

The congressional testimony didn't mention another reason I believe HAMP has failed. Every program the government has offered has made bank participation completely voluntary. The government offered financial incentives, yes. Those incentives might work well if the homeowner is not upside down on the mortgage. But if you owe $400K on the house, it's now worth $200K, no small financial incentives will get the bank to take that hit and adjust the entire loan amount.

The result is that the real estate industry across the country is still not in good shape. It's one of many factors impacting this recovery; slowing it down.

Elizabeth Warren said Treasury (who administers HAMP) has now lost the opportunity to get in front of the foreclosure crisis. I suspect that was lost a few years earlier when Ben Bernanke decided the real estate market didn't need any federal help to stabilize.

Not My Problem

A lot of sellers are coming to the settlement table these days owing money. It's got to be a bitter pill to swallow. You own a home for years and instead of gaining in value, you have to pay money to get the thing sold and move on.

But last week I ran into a new situation. Sellers came to the settlement table apparently unaware that they were going to have to pay money to sell their house in Manassas. My buyer clients and I found out when I got a phone call from the listing agent asking us for money so that they could close.

There is no reason that I can think of that any seller should not know, long before they get to the settlement table that A) they will need to bring cash and B) roughly how much cash they will need.

There were two reasons I was given as to why it happened in this instance:

1) The sellers had no idea that the costs of the repairs that were required as part of the contract would be so expensive.

Reality Check: The sellers had estimates from the workmen over a month prior to settlement. They agreed to those estimates before any work was done.

2) They couldn't have known how much the loan payoff amount would be.

Reality Check: Actually they could have known that number at any time. Almost all lenders now have an automated system where you call, give them a date of settlement and they tell you how much your payoff will be. If they couldn't get that info themselves, they had a settlement company that certainly could have easily gotten this for them.

In the end, the sellers and their agent found a way to come up with the money and get the deal done. Neither my buyers nor I were out of pocket any money.

If you're selling your home, make sure that once you have a ratified contract (if not before) you have an estimated cost of settlement from your real estate agent that gives you an idea of what you will take away from settlement OR how much cash you'll have to bring!

Kickbacks Are Illegal

There has been some funny business going on around home warranties in the real estate industry. OK, maybe it's not just home warranties. Sometimes stopping kickbacks seems a lot like a Whack-A-Mole game. Eliminate it here, it pops up over there. Some people just don't get this whole "spirit of the law" thing.

So, here's how I've seen it work. A certain home warranty company makes an arrangement with a certain real estate broker. For every warranty that is sold the agent gets a fee, let's say $35.

Is $35 enough to change the behavior of a real estate agent? I'd surely hope not. But these are desperate economic times for some and who knows. More importantly, in my eyes, this is definitely providing the appearance of impropriety. For that reason alone it's a bad idea.

Last week HUD agreed and said:

A payment by an HWC for marketing services performed by real estate brokers or agents on behalf of the HWC that are directed to particular homebuyers or sellers is an illegal kickback for a referral under section 8

This is great news for the industry. No one was making a fortune off these kickbacks. It certainly wasn't worth it in terms of the damage to our reputation.

The Disappearing Tax Credit

The tax credit deadline is upon us. The $8000 tax credit for first time home buyers is only good if you can get to settlement by June 30th. There was legislation pending in Congress to extend this, but in the end, it died. It looks like that June 30th deadline is a hard and fast one.

There's been a whole lot of hollerin' about this in the real estate world in the last week. I remain unsympathetic.

One agent wrote that his client was being put in a position that he would have to withdraw from the contract. Nonsense! Everyone knew what the deadline was going in. Everyone knew, or should have known, that the odds of getting a short sale to close by June 30th were pretty awful.

If the only reason someone was buying that house was for the $8000 tax credit, that's a pretty poor reason for making a home buying decision. What are they going to do, wait for the next real estate crash to see if they can get one then???

All the moaning and rending of garments now seems a little suspect to me.

I've been a little cynical about the long term effects of the tax credit anyway. I'm not all that sorry to see the end of the whole thing.

Where We're Going

We're a restless bunch in this country. If you want to see where we're coming from and going to, Forbes just published this great map using IRS data.

It let's you look at a specific county and see where people are coming from and moving to in that county. It's a fun map and I'm going to spend a lot of time playing with this one.

The one thing I notice after looking at this for a little while is that most of the movement is very local, within Virginia. You don't see huge migrations in Fauquier, Culpeper or Rappahannock either from or to other states. Now look at Prince William or any of the more traditionally "northern Virginia" counties. Lots of movement both from and to many other states.

Now think about the real estate implications. Generally, looking at this map you'd expect to see more turnover in inventory in Prince William than in Culpeper, Fauquier or Rappahannock. And, you'd be right!

Switching to Rappahannock Electric

Our electricity provider switched June 1st, from Allegheny Power to Rappahannock Electric Cooperative. We live in Amissville, but this is happening to quite a few people in these parts.

If you're one of those people you should have received a notice from Rappahannock Electric by now. If the cooperative structure is new to you, here's what REC says on their website:

So, this is going to be a little different. You'll likely not notice much difference in rates, initially. At least according to REC's web site. But their rates are higher than those of Allegheny. And, eventually we will all be moved up to those higher rates. That might make this an excellent time to look at ways to increase your energy efficiency before those higher bills hit. (And while there are tax incentives to use!)

You should also have received a package from Rappahannock Electric in the mail this week that includes an application for membership. I don't know about you, but that's definitely new to me. Their web site says that your electricity will NOT be turned off if you do not complete the application. They'd like you to, but it is not a requirement.

I had no complaints with Allegheny, but have no reason to oppose the switch to Rappahannock either. Come the next big ice/snow storm we'll all have a better idea of how good they are. Let's hope it's a long, long time before we know!

Cooperatives are local, customer-owned, democratically controlled, not-for-profit utilities. Cooperatives exist for only one reason – to serve. Anyone who receives service from the cooperative becomes a member and has an ownership interest in the cooperative. At the end of each fiscal year after all expenses are paid, any excess revenue is assigned to the members based on their patronage with the cooperative. As financial conditions allow, a portion of those assignments are retired and returned directly to the members.

Panera Doing Good

I'm a big fan of patronizing your local businesses rather than chains. But occasionally a chain does something that warrants giving them some of my business as well.

You may want to stop buy Panera Bread this week. They just opened a new store where patrons are invited to pay what they can or what they want.

The motto hung in the restaurant says: "Take what you need. Leave your fair share."

I've heard about other tests of this theory. I hope it works. I hope Panera opens lots more of these and that it helps hungry people get fed!

Dates Matter, Kind of

There is a clause in the real estate contract that says "Time is of the essence". It means that dates and deadlines in a real estate contract are important and are to be treated as such.

So, what happens when reality conflicts with the contract?

Let's take a current transaction as an example. And, by the way, it's a pretty ordinary situation.

It's a short sale with Bank of America holding the lien on the property. They have insisted that the contract contains language saying that once they get around to taking their time and approving the deal, it must go to settlement within 30 days.

With the changes in lending in the last 24 months, increased paperwork and scrutiny on loans, very few are settling in 30 days any more. Bank of America is, a mortgage company and surely knows this.

So, what will happen when/if we finally got BOA approval and ask the lender for the buyer's to rush to meet that 30 day commitment?

Everyone will try really hard, it will likely take slightly more than 30 days. And, in the end, BOA will not walk away from a deal in hand because it's a couple of days late.

One thing to watch for is contract language that would allow BOA to charge per diem late fees for every day beyond 30 days it takes to get to settlement. But I'm seeing this less these days and haven't had one enforced against a buyer client yet.

Dates do matter, but putting time frames you know to be highly unlikely to be met seems senseless. The bottom line message BOA is trying to send is that "time is of the essence".  Guess they didn't read the contract and notice it already says that!

Where to Retire

Baby boomers are starting to think about retiring. (They don't have enough money to actually retire!)

And early evidence shows that how and where they will retire is different than the preceding generation.

Baby boomers are apparently not dreaming of golf communities in Florida or Arizona.

By and large, baby boomers are hoping to retire right where they are. They may downsize. They may move closer to the city and mass transit so they can get rid of their cars. It seems the suburbs were OK for raising kids but not where they see themselves going forward.

This raises lots of interesting real estate questions. What does this do for FL and AZ? Surely it will make their recovery from the real estate slump much harder.

Access to train service into DC will be increasingly important to towns in the area hoping to keep their retirees. What else could places like Warrenton do to attract and keep retirees? (Who require fewer public services but contribute plenty of tax revenue)

Are the inner suburbs and DC ready for the influx of retirees?

What do you think? Where will you retire?

How To Absolutely, Positively Sell Your House

I lived in New Jersey for five years. Coming from the midwest I found the bluntness a little hard to get used to.

And this blog by Scott Friedman , a New Jersey real estate coach gets right to the point. More agents should be this blunt with their sellers.

If you price it right, it will sell. If you don't want to sell it for what the going market price is, don't put it on the market.

Prince William Wild Appreciation

I was listening to The Kojo Namdi Show this week as they discussed immigration and was shocked to hear Corey Stewart, the Prince William County Chairman of the Board of Supervisors say that home values in the county will increase 27% this year.

Am I shocked they're going to be up that much? No, if you look at current market statistics they already look to be up that much year over year, maybe even more. The data supports his statement.

I've written a lot of offers in Prince William County over the last few months. Every single property we wrote an offer on has multiple offers. One had 12 offers, 9 of them cash. So, no, it doesn't shock me that prices are up that much.

I am shocked a politician is that well informed about our market.

I also continue to worry about that kind of jump in price right now. Those were the kind of crazy price increases we saw before the whole market went kablooie (that's a technical term). I am having trouble believing that this is an indication of a healthy market.

What do you think? Too much, too soon? Will we crash and burn again or are these prices just the proof that the market over-corrected?

Virginia and Mortgage Fraud

Although mortgage fraud is growing more slowly these days, it's still growing. And, that's definitely the case here in Virginia. We're number 10 on the list in terms of the most mortgage fraud in the country.

Be very careful who you choose to use for your mortgage.

There are lots of bad people out there doing bad things.

There's a reason I recommend using local, reputable lenders.

You can find your mortgage deal on the internet if you want. But don't forget if your lender commits mortgage fraud, the Feds are going to be looking at you too!

The only good news here is that Maryland beat us. It's one time you don't want to be number one!

I Screwed Up

I'm sure it's not a surprise to anyone that I'm human and make mistakes. A real estate transaction requires an extraordinary attention to detail these days with the average contract paperwork running over 40 pages and managing relationships with home inspectors, pest control companies, lenders, title companies, and many more.

Last week I made a mistake on contract paperwork. It wasn't a small one. And I'll be beating myself up over it for awhile.

I'm not blogging about this in order to publicly flog myself. But to acknowledge that real estate agents, like all human beings, make mistakes all the time. It's not, whether, but when and the important thing is how they handle it when it happens.

The first rule is: tell your clients immediately. If your agent makes a mistake when writing the offer and you don't find out until settlement, that's a problem!

Next, obviously, it needs to be fixed, if that's possible.

Lastly, determine what remedies are available. Does the client need to withdraw an offer, find an out in the contract or amend it? If the client suffers economically because of the agent's mistake, I believe the agent should be making a list of what steps he or she can take to make things right.

I'm a firm believer that if handled correctly, even bad mistakes can result in a stronger, better working relationship.

I found this online and thought it appropriate.

 From "Decide to Say Sorry" By Jeanne Bliss:

“How you apologize is your humanity litmus test. Let’s face it, at some point; your business will suffer a failure that disappoints customers. How your company reacts, explains, removes the pain, and takes accountability for actions signals how you think about customers, and the collective heart of your organization. Grace and wisdom guide decisions of beloved companies toward accepting responsibility and resolving the situation when the chips are down—not accusations and skirting accountability. Repairing the emotional connections well is a hallmark of companies we love. It makes us love them even more.”

New EPA Lead Based Paint Regulations

The EPA has issued new regulations around lead based paint that go into effect this week. From now on, in housing built prior to 1978 there are new requirements around renovations. If more than six square feet of an interior or 20 square feet of an exterior lead paint covered wall is disturbed by a repair, then steps to prevent the lead dust from becoming airborne and contaminating the home must be taken. Contractors working on renovations of homes built before 1978 will be required to have an EPA Certification on lead based paint.

What does that mean for you as a home buyer or seller? Based on what I'm hearing so far, any renovation to a home built before 1978 is likely to cost you more than it used to. Right now not many contractors have this certification and those that have it can charge a premium. The EPA's web site lists no contractors with the certification in either Warrenton or Culpeper. The closes contracors listed are in Nokesville, Broad Run and Manassas. That may change over time, but right now, it's suddenly gotten more expensive to renovate that 1960s rambler.

As a buyer, you should think about that additional potential cost when looking at homes built before 1978. And, if you're looking at these homes in the future you're going to want to make sure that any work that was done was done by a contractor with the required EPA certification.

There's a lot of "the sky is falling" blather right now about these new regulations. That tends to be the case with any new regulation in any industry. Time will likely make this all seem less onerous.

For now, you just need to be aware of the changing regulations.

Photos You Don't Want in the MLS

The #1 way buyers find a house to buy is the internet.

The #1 factor in a buyer choosing to look at your house is the photos.

Is this what you want representing your house?

 I get a little crazy when I see these photos. (By the way, every photo of this listing was atrocious!)

If you're interviewing a listing agent, ask to see photos of their current/most recent listings. Not just the front photo, but interior as well. Ask how many photos they'll upload. (Hint: if it's less than 10 and you have a single family home, ask why!)

March Local Market Numbers

It's been a few months since I've written about the overall market stats for the area. So, let's see what's changed.

We'll talk about Rappahannock first for a change. How does it compare to a year ago? 86 listings now compared to 76 then. 6 sales in March 2010 compared to 3 last year at the same time.

Note: Remember, real estate is seasonal and year over year numbers are a much smarter comparison than month to month.

The one Rappahannock statistic that jumps out is the number of new contracts in March. There were 8. That's the highest number of new contracts in one month since August, 2006.

Culpeper has 433 active listings compared to 464 last year at this time. While sales in other counties jumped in March after a couple of slow months, March still looks pretty flat in Culpeper. But the median sales price is up almost 10% year over year. That's 2 months in a row that have shown price increases. If you look over a longer time horizon, it's certainly easy to make the case that prices remain flat to slightly higher. The number of contracts ratified in March is down, year over year, but up significantly month over month. Last year at this time there was an increase in contracts from February to March. As always, I'm reluctant to speculate on what these tiny data points mean, other than to say, stay tuned.

Fauquier County also shows declining inventory, 516 now vs. 556 a year ago. Sales are 73 in March of 2010, a significant increase from the 43 in March of 2009. In fact, you can pick just about any metric you want in Fauquier, including price, and it's up. The absorption rate would indicate a very balanced market. That's slightly misleading since there's little inventory available at the lower price ranges.

Prince William County continues to be the place where the buyers are lining up to buy. As an example, a listing came on the market in Gainesville this morning and by this evening when I tried to take my clients to show it, I was turned away and told it was already under contract. Inventory has dropped year over year from 3079 a year ago to 2595 now. Sales have dropped though, from 750 a year ago to 559. I believe that has more to do with a lack of properties in the lower price ranges rather than a lack of interest by buyers. And inventory is coming on the market at a slower pace. Last year in March 1219 new properties were listed. In March 2010 only 964 properties came on the market. Prices reflect the shortage of inventory. Prices have been climbing in Prince William County for months now.

It's a great time to be a buyer in our area if you don't mind bidding wars and competing against cash offers! It's a great time to be a seller if you are not expecting prices at 2005 levels!