Buyer Avoidance

I'm fully booked this weekend showing properties to potential buyers.

Great news, right?

Here's the thing, out of all those buyers, not one of them wants to see anything in Fauquier, Culpeper, Rappahannock or Warren Counties.

Next week I'm going to do a very, very specific analysis between a few houses in comparable subdivisions in Fauquier, Prince William and Loudon counties. I think the price comparisons will be surprising to a lot of people.

Other Coming Attractions Next Week:

• Early Peek at August Numbers
• Poplar Springs Efforts to Go Green
• Re-inventing Warrenton

Have a wonderful Labor Day weekend!

Just Doin' My Job!

It's been a strange week.

I keep getting extreme gratitude from people for doing my job!

A woman thanked me for showing her a rental. The other agents she'd talked to hadn't wanted to show her what she wanted to see! And, she was unsure about renting vs. buying and they didn't want to have that conversation either, except to tell her it's a great time to buy.

I've gotten thanked repeatedly for returning phone calls and e-mails promptly.

I got thanked by a seller for letting him know I thought we should lower the price on his listing.

I got thanked by someone in our office for turning in paperwork properly filled out, in a timely fashion and in the right format.

In short, I'm being thanked repeatedly for just doing my job!

To which, I can only reply... thank you to all of my competition. Apparently you're all making me look good!

Bank Logic

As I continue to hit my head against the wall, the wall now known as banks, it's good to see it's not just me! Another blogger tells a story of the frustration out there.

And, in a related development, apparently an asset manager for a major bank was on a news program this week saying that the banks are deliberately slowing things down. This gentleman said that the purpose of doing this was to spread out the losses over time so that their numbers don't look as bad.

Well, it's the first rational explanation I've heard for the banks behavior. But I'd argue that it's only rational on its surfact. As soon as you begin to think about this a little more deeply you have to question that strategy.

Pricing will not, can not, recover until the foreclosure and short sale inventory gets cleared out. The longer that takes, the more prices fall. So, the properties that the bank moves to the back of their list will simply be worth a whole lot less, thus increasing their losses. Yes, they may be more spread out, but if the bottom line impact is worse, what have they gained?

Clearly I don't think like a banker!

Getting A Mortgage After Foreclosure

With more and more families locally going through foreclosures or short sales, the question is going to become, when can they get another mortgage?

Well, we finally have some guidelines from Fannie Mae, Freddie Mac, FHA and VA. Courtesy of Beth Goodwin at First County Mortgage, here's what they look like:

You can also reach Beth on her e-mail at beth.goodwin@firstcountymortgage.com

Buyers: Get Your Money!

I've got a lot more information for those of you who are either contemplating buying your first house, or who recently bought one. This tax credit is retroactive back to April 9th of this year!

If you've got additional questions on any of this, please get in touch!

• The amount of the federal tax credit is for 10% of the cost of the home, up to a maximum credit of $7,500. In essence, this is an interest-free loan that enables consumers to receive a tax credit on a dollar-for-dollar basis on their personal income tax return in the calendar year following the year of closing on their home. They begin paying the tax credit back the year after that and make equal installments during the next 15 years. If the homeowner sells the home at any point during the 15-year payback period, then the remaining amount is recaptured, unless they sell the home at a loss, at which point the balance is forgiven.
  • e.g., If a home costs $65,000, the allowable credit would be $6,500. If a home costs $120,000, then the allowable credit would be $7,500.
• Eligibility is for first-time homebuyers only. In this case, a first-time homebuyer is defined as an individual who has not owned a primary home at any time during the past three years, but who may have done so previously. Although certain income limits do apply, the amount of the credit is the same for all taxpayers, married or single.
• Individuals whose Form 1040 filing status is single (or head of household) are eligible for the tax credit if their income is no more than $75,000. Individuals who file a joint return may have no more than $150,000 in income.
• Individuals with incomes between $75,001 and $94,999 (single) or $150,001 and $169,999 (joint returns) are eligible for a partial tax credit.
• Individuals with incomes greater than $95,000 (single) or $170,000 (joint return) are not eligible for this tax credit.
• The federal income credit can be claimed on one’s individual or joint tax return for the purchase of any single-family home between April 9, 2008 through July 1, 2009. Individuals should consult a professional tax advisor for exact tax calculations.
  • e.g., If an individual’s actual tax liability was $5,000, then after the tax credit is applied the purchaser would receive a total refund of $2,500. The refundable amount is the difference between the $7,500 tax credit and the amount of one’s tax liability.
  • e.g., If an individual’s actual tax refund was $2,000, then after the tax credit is applied the purchaser would receive a total refund of $9,500.
• This tax credit is required to be repaid without interest in equal installments of 6.67% of the total credit each year for 15 years beginning the year after the tax credit is claimed.
  • e.g., If a homebuyer claims the $7,500 credit in 2009 on their federal income tax return for a closing that occurred in 2008, then the credit is received in 2009, so repayment begins in 2010 with an annual repayment amount of approximately $500 a year.

Local Farmers Markets

As you're making plans for your weekend, don't forget to stop by one of the local farmers markets. Here's a list of some that I've been frequenting:

Nokesville Farmer's Market - I just discovered this one but already love it. Hours are 8 to noon on Saturdays. They take "local" seriously at this one. All vendors are from Prince William or Fauquier Counties.

Warrenton Farmer's Market - Great excuse to get into old town Warrenton. This is their 33rd year. See them downtown Saturday's from 7 a.m. to noon or on Wednesdays out on Lee Hwy from 7 a.m. until 1.

Culpeper Farmer's Market - At the corner of Main and Commerce every Saturday from 7:30 to noon. I've been very impressed by the great selection of heirloom vegetables here!

Clevenger's Corner Farmers Market - This is the newest addition having just opened last Friday. This is at the intersection of 211 and 229 in Amissville. They're open Fridays and Sundays from 4-7 p.m. for all you non-morning people!

And...I hear there will be a new one in Sperryville any day now! More to come on that.

If you've got others you'd like to see mentioned here, jump into the comments and let everyone know!

No Foot Traffic for Toll, or Anyone Else

I always enjoy hearing Robert Toll, CEO of Toll Brothers, on his quarterly conference calls. He's always refreshingly honest and will undoubtedly make me laugh out loud at some point during the call. And the one this week was no exception.

"With respect to traffic, it’s still dismal. Traffic is -- it’s consistent, however. It has not gotten any worse for the last three quarters, so we feel as though we’ve stabilized but I don’t want to give you the indication that that makes us feel good. It’s as though we walked into the tar pits, sunk up to our nose, our feet are touching a ledge and we are not going down any further but that sure doesn’t make us feel that comfortable...But we are heartened that at least we are able to spook up the traffic. That indicates that there are buyers out there waiting to be nudged. It will take a general turn in confidence for the big nudge to occur but sooner or later, it will occur."

 He's hit the nail on the head as far as traffic goes. Here's a chart that illustrates this at a local level for Prince William County:

There is still a huge gap between where inventory is and the number of sales. And this is after a huge jump in sales in Prince William recently. If you look at nearby counties the discrepancy is often even more jarring.

Unfortunately, there aren't any charts that give us foot traffic statistics. But this clearly illustrates the dilemna for the market. Excess supply in a free market economy inevitably pushes down prices. As long as this gap is as large as it is currently, there's no sign of a bottom from a price perspective.

It's a good thing Robert Toll has a good sense of humor!

Buyer's Window

Buyers for years now have been taking advantage of downpayment assistance programs such as Nehemiah. These programs help provide up to 6% in funds that go towards the downpayment on a home purchase. These are classified as a gift and these programs can be used with FHA mortgages.

But the default rates on mortgages going through these programs has been much higher than that for other loans. So, beginning October 1st these programs will essentially cease to exist.

But for the next few weeks there is a window of opportunity here. If you're a buyer looking for help with a downpayment and don't have family or other assets to tap, look into this program. But do it now! There must be a case number assigned by the end of September in order for you to take advantage of these programs.

The other current buyer benefit that's out there now is a current quirk with VA loans. While the guidelines providing the loan limits on jumbo loans have come out, the interest rates have not. So currently those jumbo mortgages are being financed at the same interest rate as, say a mortgage on a $350K house. This is only with VA loans and this will disappear quickly. So, if you're eligible for a VA loan and know that the home you want to buy will put you in the Jumbo market I'd move quickly on this one.

Videos and Reverse Sprawl

I'm tied up in class today but found a couple of interesting things to share with you.

This is the first in a series of stories by the Albany Times Union newspaper exploring the changes occurring in how people live both because of rising energy prices and the increasing numbers of senior baby boomers. While the towns and cities they refer to may be in NY, this is a story that's being repeated around the country.

Saturday's Washington Post's real estate section contained an interesting story about consumers finding real estate agents online through social media sites and things like blogs. How well do you feel you can get to know an agent (or anyone else) through a blog?

And, lastly, I've begun experimenting with the use of true video (as opposed to "virtual tours") on my listings. I've just posted the first one on YouTube and would welcome your feedback, not just on what you think of this video, but whether you see this as significantly better for buyers than a typical slide show.

Green Olympics?

While I think there's plenty of room to argue about how "green" these Olympics really are given the treatment of Beijing's recyclers there is some amazing architecture here.

If you're interested at all in green building you'll enjoy Jetson Green's look at the buildings China has created for the Olympics.

Hopefully in four years the world has changed so much the descriptor "green" has become meaningless because every building is built with those concepts as an integral part of the design!

Buyers Never Say...

I wish I'd bought a house on a busier street.

I wish I hadn't wasted my money on a home inspection.

I wish my commute was a little longer.

It was such a waste of time test driving the commute ahead of time.

I'm so glad I didn't worry about resale when I bought this house.

I so wish I'd bought more house than I could afford.

Using the seller's agent and having no representation was definitely a good move.

I'd just as soon not see photos on listings on the internet.

I wish I hadn't saved up so much money for the down payment.

I love that heavy metal rock band that practices in the garage next door.

July Number and More Good News

I love good news and, fortunately, there's plenty available in this month's real estate statistics. The trends, across the board, are up! And, not only that, but if you look at trends over the last six months you see a longer term upward trend that seems to be developing.

Take a look at Culpeper County for example:

Month                   # Listings           New Listings       New Contracts    Solds 

This is great news! The most important thing here is the continued downward trend of inventory. Solds are generally trending upwards, although not quite as strongly. But it's a good news story.

Fauquier is also looking good:

02/08	730	153	44	32
03/08	734	140	56	35
04/08	764	168	68	47
05/08	764	145	79	49
06/08	753	128	61	67
07/08	745	141	68	117

In Fauquier the decrease in inventory is less convincing. But the steady increase in sales is helping to make up for that. If it continues we'll ultimately see a decrease on the inventory side as well.

Now the caveat, of course!

We are at the end of the summer, the busiest home buying period. We may very well begin to see the inventory numbers begin to rise again after August and see sales numbers fall.

Prices are nowhere near stabilizing.

But in a year of nothing but doom and gloom, there's a little good news here!

Cutting Your Losses

Robert Bruner, the Dean of Darden School of Business at UVA has a blog that I often find interesting. His latest entry is based on a quote by the famed investor Bernard Baruch "If you have made a mistake, cut your losses as quickly as possible."

He talks about the difficulties of doing that in the business world, specifically using the AOL/Time Warner merger as an example. But one of the points he makes about why it's so difficult seems applicable in real estate as well.

He talks about "sunk cost" thinking. In other words, a seller says "I bought this place for $400,000. I'm not selling it for less than that."

The problem becomes that if you really do need to sell there's no guarantee you can hold out long enough for prices to go back up, or even to stabilize. If you're a seller who's moved on and you're paying two mortgages, how long can you continue doing that?

If you refuse to lower the price or let an offer get away for $10,000 difference, what happens when it's still on the market six months from now and you've paid that much more out in mortgage payments and prices have continued to fall?

Sometimes, cutting your losses is the best advice, in business and in real estate!

Home Warranties More Important

Given that the bulk of sales in our area are either short sales or foreclosures, home warranties are becoming increasingly important.

Most short sales and foreclosures are sold "as is" meaning that the owner is not willing to repair any defects in the property. So, if the refrigerator doesn't work, too bad.

These are the properties buyers are snapping up and they're getting excellent deals. But it's a higher risk transaction and home warranties are one way to take away a little bit of that risk.

There are a couple of things to keep in mind if the seller is buying the home warranty, an increasingly common occurrence in this market.

Home warranties typically have basic coverage with options available for additional coverage. The additional coverage can cover things such as the roof, well and septic, swimming pools, etc. Depending on the property you're buying, it may make sense to consider purchasing the additional coverage yourself.

If the seller buys the basic coverage, most companies will allow the buyer 30 days to add additional coverage. Note that this is not meant to allow you to find problems and then buy insurance retroactively to cover them! So, the best way to do this is really at the settlement table.

When you're buying foreclosures or short sales, you should really have a home inspection before making an offer. But if you don't, a home warranty can be a very good investment!

For more information, check out my previous blog post on this subject.

Apologies

The last two years have been miserable ones in this industry. And, the human toll has been awful. When faced with the overwhelming pain, fear, anger and misery it is human nature to want to pull away.

I was reminded today of how this is impacting both real estate agents and the clients we serve. The story was about a soldier coming back from deployment over seas, living in a hotel room with his family, trying desperately to get a happy ending for all of them. They were buying a foreclosure and, as usual, the process seemed never ending.

People under stress can react with anger and rudeness. Clients under stress often take that stress out on agents. The agents, out of self-preservation often pull back, even hide. Over time, given enough stress, even good agents can find themselves trying to avoid client contact. Who needs more stress, especially when you have so little power sometimes to make things better?

But being there for our clients, really listening, telling them the truth, good or bad and sometimes just telling them we have nothing to tell them is what needs doing right now.

So, for all the clients for whom I haven't been a good enough listener, for those whose pain I avoided in order to spare myself, I apologize. I'm going to take better care of me so I can take better care of you!

Settlement Companies & Foreclosures

Since foreclosures are such a big part of the market right now, I'm going to do a few posts on some of the issues that are likely to arise if you're buying a foreclosure.

Today I'm going to talk about settlement companies.

Once the bank has given you a verbal agreement that they've accepted your offer, you'll get an addendum (or, more likely, multiple!) One of the clauses you're going to see in that addendum concerns your choice of settlement agent.

The bank is going to want you to use their settlement attorney and there are several ways they may try to make this happen.

One is to incentivize you. The addendum will basically offer you some discount or deal if you use their settlement company. The most common one here is free title insurance. The problem with these incentives is that (as with new construction) you will very rarely actually save any money. Reports are now coming in about the padded fees for these settlement companies in order to make up for giving away the title insurance. In short, you'll be lucky if you save $50 and may actually end up paying more.

The other way a bank can try to get you to use their settlement agent is to simply say in the addendum that you, the buyer, are obligated to do so.

Let's make it clear right now, that you are not obligated and nothing a bank says in an addendum can make you obligated. A buyer in Virginia always has the right to choose their own settlement agent. And, a bank's attempt to get you to use their settlement agent without disclosing the financial relationship between them is a violation of Federal RESPA laws.

The problem becomes that many buyers desperately want the house and are afraid if they don't agree with the addendum without any changes their offer will still be rejected. I understand wanting the house. But it's my job as your agent to also make sure you're protected.

So, go ahead and sign the addendum and get the whole thing ratified. Then your real estate agent should write a notice, informing the seller (in this case, the bank) that you'll be using "X" settlement company instead.

Any clause in any contract forcing you to use their settlement agent is not enforceable. And, in all honesty, once they have a ratified contract in hand and the money is in sight, they're unlikely to balk.

By the way, the other reason you may not want to use the settlement company recommended by the bank is that the process is already slow enough! Since there are very few settlement companies working with these banks, most of them are completely overwhelmed. Good luck getting a settlement done in a timely fashion!

And, last, but not least, the settlement company is going to be doing the title search and make sure you really do own your house when you actually close. You want that done as thoroughly as possible by someone who cares about protecting your ownership interests. The bank's settlement agent would seem to have someone else's best interests at heart!

Patience!

It feels like we're all moving in slow motion these days in the real estate industry. Or maybe we're just wading through deep mud that's slowing us all down!

Or choose your own mental image here.

And, there's one segment of the real estate industry that's almost single handedly responsible for the slow down...lending institutions.

With foreclosure sales making up 2/3 of Culpeper sales last month and 1/2 of those in Fauquier, a lending institution is actually the seller in most of the sales happening these days. If you add in short sales, where the lender has to approve any deal you're definitely dealing with the vast majority of transactions.

Lenders are moving very slowly on these things. On one foreclosure sale I'm working on right now it took my buyer clients about three weeks to even get a response to their offer. And there are enough stories around this to fill up a blog!

But lenders aren't the only ones slowing up the process. Listing agents who handle foreclosures are typically specialists in this area. Foreclosures are about all they do. Lenders typically offer less compensation on each individual deal in exchange for providing large volumes of transactions. And, so you get agents who are completely overwhelmed by the number of listings they have, but can't afford or won't pay to get help.

I heard one story last week about a buyer's agent bypassing the listing agent when he wasn't getting anywhere and asking the settlement company to talk to the lender directly to get things done. A week after settlement had taken place the listing agent still claimed to be unable to get an answer from the bank on outstanding issues! (This agent was completely unaware the deal had already settled!) More likely the agent wasn't even trying to get an answer as the issue had fallen through the cracks.

Documenting everything I do, every conversation I have, every fax or e-mail I send and who I talk to have become even more important than usual.

If you're trying to buy in the midst of all this, be aware that you will need a lot of patience. You may very well get a good deal buying a foreclosure or short sale. But it may require that you have the ability to wait several months to get the deal closed and get into your new house. Keep that in mind as you search for your next home.

Me? I'm getting just a little tired of slogging through all this mud. But like everything else, it's cyclical and this too shall pass!

Bob and Carol and Ted and Alice

There's a new trend among local real estate agents. It's the sign that says simply:  

JULIE

There is, of course, a company name and phone number on this sign. But only a first name. Clearly, the agents using these signs are either convinced they're so famous that they're a household name or they're hoping to be.

If Cher ever decides to go into real estate, she can get by with putting just "Cher" on the sign. Same with Prince.

For the rest of you...

There are about 770 real estate agents in the local REALTOR association. I'm not the only Julie. You're probably not the only Bob or Carol or Ted or Alice. Get over yourself and put your whole name on the sign!

And, by the way, have you filed that "Doing Business As" form with DPOR allowing you to use just your first name in advertising?