Friday Wrap Up

There are a few items I'd like to touch on so it's a bit of pot luck!

If you didn't see this article on home equity and the changing rules in the Washington Post, you should take a look. Banks are changing the rules, even on existing home equity lines of credit. If you have a home equity line of credit and haven't heard from your bank yet, here's a heads up. (My two cents: taking money out of home equity and paying 8% interest and putting it in the bank at maybe 3% interest is a BAD, BAD move!)

The homestead property tax exemption that was being debated in the Virginia legislature has gone down to defeat. Lobbying by business interests who were convinced that businesses would have to pick up the slack in revenues for the localities killed it. For those of you looking for a little property tax relief, it's not coming via this vehicle. More on property taxes next week.

Flor is a company I've been wanting to spotlight here. I love their commitment to the environment, the fact that they have the lowest VOC output of any carpet product and the ability to recycle their products by sending them back to the company. Check out their very cool products!

Lastly, VAR (Virginia Association of REALTORS) is having a blog contest to coincide with March Madness. If you like this blog, please click this link:

Auctions Come to Our Area

Up until now we really haven't seen the large auction house auctions of many foreclosed homes all at once. They've been happening pretty regularly in places like Florida and California. But in this area we'd see a home here or there that was auctioned, but not much in the way of large groups of homes. That appears about to change.

Tranzon is a Richmond, Virginia company that operates real estate auctions in a large number of states. And on March 6th local homes and land start to show up in a bigger way. There's an auction in Fairfax that includes homes and land in both Fauquier and Culpeper counties. If the inventory situation gets a lot worse, expect to see more of these. If, on the other hand, there's a significant market improvement this spring and summer, this could be a relatively rare event.

Auctions can bring good bargains. But if you go in unprepared you can also find yourself carried away by the bidding frenzy. You'll need to come prepared to pay $10K cash on the spot if you are the winning bid on a property. You'll need to plan on closing within 30 days with no opportunity for home inspections and no contingencies.

You also need to know that there is normally a buyer's premium that's added to the winning bid price, probably around 10% to pay the auction house. Make sure you've budgeted for that.

Most auctions companies do pay commissions to agents. And, it makes sense to have an agent help you do the homework to determine what comparables have sold for and what the property's potential is. Also note that in many cases, there are dates ahead of the auction when you can look at the property and get an better idea of what you'd be buying.

It's a different way to buy a house, but there can be advantages. Personally, I have to say I hope we're not going to see a lot of these events in 2008!

We Wrote An Offer. Now What?

Since buyers seem to be coming out of the woodwork these last few weeks, it seems like a good time to talk about that important moment when you've found the right house, wrote a great offer and now wait in suspended animation for something to happen!

So, what, exactly happens after you wave your good-byes to the real estate agent and walk out of their office? Here's how things typically proceed in our area.

First of all, in addition to the offer, you'll have written a check made out to the broker who is representing you. That check is called an earnest money deposit. That check stays with your agent until you have a ratified contract. At that point it will get deposited in an escrow account where it will remain at settlement.

Now the agent will fax or e-mail the offer to the listing agent. Your agent will then follow up by phone to make sure tha that the offer arrived and to find out when the offer will be presented to the sellers.

Since the offer states that "time is of the essence" the offer should be presented as soon as reasonably possible. Within 24 hours is usually workable. There may be special circumstances, especially now, with so many sellers having already vacated their homes. And, in some instances the presenting of the offer will take place via phone, fax and/or e-mail.

The sellers will decide to either accept your offer, counter your offer, or reject your offer. Let's assume they may want to sleep on it, but typically, you should have an answer within 24 to 48 hours.

If they accept your offer, then you're going to begin the process of executing that contract, proceeding to loan application, inspections, etc.

If they counter your offer the ball is back in your court again and you need to decide how to respond. Again, remember that "time is of the essence". It makes sense to have thought through likely counter offers when you write the original offer so that you can be prepared to make some quick decisions.

If they reject your offer, in my opinion, in this market, they don't really want to sell their home and shouldn't have it on the market. No matter how bad an offer is right now, sensible sellers will counter it. It's hard to negotiate without an offer on the table! And, no offer means no sale!

If they reject your offer with absolutely no negotiation you should keep looking!

Ultimately, hopefully, you end up with a ratified contract. A contract is ratified when every party to the contract has agreed to every provision, including all changes. At that point all the "i's" are dotted and the "t's" are crossed.  It's now a legally binding document! Congratulations!

What's Happening With Home Prices?

I've been pretty dismissive of much that comes from NAR's chief economist's office. While Lawrence Yun is certainly been much more realistic than his predecessor, he's still too often been a cheerleader rather than an unbiased source for information. It's understandable given who signs his paychecks!

But his latest analysis of what's going on nationwide with home prices is very educational and, I think, gets it mostly right.

Locally, prices continue to decline. But given the sudden increase of activity in the last couple of weeks, I suspect there's some chance we may be getting close to a floor in some areas. (Probably not Culpeper!)

Lakeview

Time to take a closer look at one of those really hard hit Culpeper subdivisions, Lakeview.

Construction in Lakeview started about six years ago and is just about finishing now. In this market that pretty much guarantees that anyone who about in the first few years has seen the value of their homes decline substantially.

The completed subdivision is supposed to have approximately 600 homes, a combination of single family homes and townhomes.

There are currently 45 homes listed for sale in Lakeview. Of those 9 are new construction. Thirty three of those homes are vacant. 17 are foreclosures. 7 have been disclosed as short sales. Although disclosing this in the listing is a requirement, it doesn't always happen. So there may be additional short sales that aren't clearly flagged.

The cheapest townhouse here is $188,500. The cheapest detached home is $216,000. The most expensive townhouse is $239,000. The most expensive detached home is $399,000.

The good news is that 34 homes sold in this community in the last year. So things are selling. The bad news is probably best shown in the most recent sale, one that closed just this week.

A brick detached home with a side-loading two car garage, 3 bedrooms, 2.5 baths and a full, unfinished basement sold for a net of $222,450.

Considering that there are townhouses listed for considerably more than that at the moment, prices still have a ways to fall here. Even the nicest homes in this subdivision will have trouble commanding prices close to $400,000 given these kind of comparables in the neighborhood. And, if you should get lucky enough to get that kind of offer, I wouldn't count on getting an appraisal that comes in at or above purchase price.

Culpeper remains one of the hardest hit areas, even more so in newer subdivisions such as Lakeview. But if you're bargain hunting, this is a promising place to look!

NAHB and Political Money

I heard a story on Marketplace last week about the National Association of Home Builders.

Apparently, they've decided to withholding donating any money to political candidates this year because they believe that Washington has not done enough to take care of the housing crisis.

I applaud their actions while completely disagreeing with their rationale.

Here's hoping every PAC feels the same way and stops donating!

Don't let anyone kid you, PACs donate money in the hopes of influencing policy. Anyone who tells you otherwise is also likely to try and sell you the Brooklyn Bridge. And, if you look at the history of how politicians vote, it's pretty rare to see one vote against the interests of those who have donated large amounts to their campaign.

As far as NAHB's belief that the government has not done enough to help them, I'd be interested in seeing their proposals for what the government should be doing on their behalf.

I believe the government has a role to play in this crisis. I believe they need to make sure that the credit markets stay liquid. I believe it's in everyone's best interests for them to try and help families stay in their homes, so long as they can truly afford them. But I don't see bailing out individual businesses as either desirable or necessary in the current climate.

If the government does what it can on the above two items, if it works to put a floor under the real estate market, the builders, like everyone else in the industry will recover over time.

So, NAHB, please do keep your money, and not only this year! Now if only we can convince some of the other PACs to do the same!

Days on Market Change

Effective today the methodology for determining how many days a property has been for sale is changing in the local Multiple Listing Service.

The indicator that is changing is something known as Days on Market Property and basically tells you how long the property has been listed for sale, Even if the sellers have changed agents or changed something about the listing, it still shows you the cumulative days on the market.

The rule has been that in order for that number to reset to zero, the property must be off the market for 180 days, essentially six months. If it is relisted after that time the counter starts again at zero. If it's relisted before that 180 days, the counter picks up where it left off. So, if you had your house for sale for 100 days, then took it off the market for two months to make some renovations and relisted it, on the first day it's back on the market it shows it's been listed for 101 days.

The new policy decreases that waiting time from 180 days to 90 days.

The rationale is that the market has changed, houses turn over more often and that the 180 days didn't accurately reflect the market. At least that's the story from the MLS.

In actuality it's motivated by unhappy sellers and their unhappy agents. Let's face it, a house that looks like it's brand new on the market is going to get more attention than a house that's already been listed for four months, or two years! And, when an offer is written, how long it's been for sale is one factor a buyer may want to consider in their offer.

Buyers are definitely the ones on the short end of this stick. The real estate agents who represent buyers can still get the information on how long the house has been for sale. But they're going to have to go that extra mile and do the research. Some of them simply won't bother. And, it becomes close to impossible for the consumer to get this information.

It seems like a short-sighted change that's been made for all the wrong reasons. Changing this kind of data point to deal with market fluctuations just doesn't seem smart. So, while they've no doubt made some sellers a little happier, I doubt they've done anyone any good in the long term.

Insulation

I heard a story on NPR this morning about landlords in New England who, in the face of high heating costs this winter, have elected to just stop paying for oil for their tenants. It's a terrible situation. But it did make me think that this time of year, the cold weather is a good reminder about the importance of insulation in our homes.

If you haven't added or upgraded your insulation in a long time, it's a good time to think about it. It can be one of the smartest investments you make in a home.

Insulation's effectiveness is measured with an indicator called "R Value". The R value measures the insulation's ability to resist heat traveling through it. Insulation is most useful in helping keep hit in your home during the winter months, but can also help reduce air condition bills in the summer.

Energy Star has a nice table that tells what the R value recommendation is by state and by type of heating system. For Virginia, if you're using gas/oil or heat pump they recommend R38. If you're using electric resistance, they recommend R49.

Insulation can break down and lose its effectiveness over time. So it makes sense to have a professional take a look and let you know what you have and what condition it's in.

Attic/ceiling insulation is where you should start. It's the most cost effective. Walls can be more problematic and we'll talk in more detail about that in another post.

Stay warm!

Vote!

Tomorrow is the Virginia presidential primary. Whatever your political persuasion, please take time to vote.

I was raised in a family that believed that voting was a responsibility. And, I still believe that!

So, please, go do your patriotic duty tomorrow!

And, yes, this is related to real estate. Whoever ends up in the White House will certainly still be dealing with fallout from the subprime debacle!

And, if you don't participate, don't be complaining to me about our government!

Back to topics more directly related to real estate tomorrow!

January Numbers

The January numbers are out and there's more good news to report. This is starting to feel and look like more than an anomaly. (Knock on wood!) But there are still danger signs as well. Let's talk about all of it.

Culpeper county continues to see inventories decline. Actually across the board we're seeing declines, but perhaps most significantly in Culpeper. This is the lowest we've seen inventory in a year. And, while closed sales were down in January, the number of contracts written more than doubled. A good sign going forward. Given how busy I am with both buyers and sellers the past couple of weeks, I believe we'll see an increase in contracts again in January.

Here's the bad news; new listing jumped back up. New listings in December were 91. New listings last month were 161. Year over year, we're holding steady. In January of '07 we saw 165 new listings. Expect that number to increase again in February. Again, my personal experience with new listings coming up would seem to confirm that.

In Fauquier we saw many of the same trends, but dialed down. Inventory decreased very slightly, from 703 to 699. Inventory still remains above where we were a year ago. As in Culpeper, sales were down, contracts were up. New listings jumped significantly. By the way, this is not unusual. Especially in a tough market, it makes a lot of sense to beat your competition to market. And the spring will likely see a flood of new inventory.

In Prince William all the above trends hold with no significant differences.

Warren County is clearly still struggling. Inventory is down only slightly. New listings increased almost threefold and while new contracts increased, it was not by much. 

Rappahannock County seems to be looking a little more anemic right now. But the volumes are so tiny in Rappahannock that you'd be in sane to try and determine trends from such scanty data. There were no new contracts written and only one sale last month. Inventory decreased very slightly and the number of new listings doubled from the month before.  It'll be interesting to see how the spring market unfolds here.

So, let's see what the increased activity I'm seeing now does to these numbers next month!

Friday Tidbits

There are lots of little bits of information so thought I'd do a blog post today that just hits a few different topics.

As part of the stimulus package that both the House & Senate have now passed the loan limits for Fannie Mae and Freddie Mac have been increased. This has the potential of helping stabilize the housing market since those with an ARM on a house worth more than $417,000 may now be able to refinance more easily. That may mean fewer forclosures which may mean less downward price pressure. See this CNBC article for more information.

The Virginia Housing Development Authority (VHDA) has been a great source of mortgages for first time home buyers in Virginia. Unfortunately, they're not immune to what's been going on in the credit markets. They've suspended some of their programs and they will now only loan up to 97% of the value of the home. This will definitely hurt first time home buyers in Virginia and the sellers who hope to sell to them.

You've heard the old adage "work like you don't need the money". These days it's a tough one, but I'm proud to say I've run into a lot of my fellow real estate agents lately who are living this. (Trust me, most of them DO need the money!) These are the days I'm proud to say I'm a REALTOR.

The VA Senate finance committee approved SB768 on Wednesday. This reduces the cash proffers that builders must give to communities for roads, schools, hospitals etc. that are needed to support new development. This is an incredibly bad idea. Theoretically the idea is to reduce the cost of homeownership.  In reality it will force many communities to halt new development. This deserves its own blog post and I'll get to that down the road.

Happy Friday!

Video, Photographs and Listings

I've been wrestling with the question lately about how to use the visual tools available to advertise listings.

First of all, there's absolutely no question that high quality photographs are essential to marketing a listing. The National Association of REALTORS (NAR) own numbers show that listings with six or more photos are viewed 299% more often than those with fewer. That's a very significant number! Which makes you wonder why another study by NAR shows that only 23% of its members own a digital camera! But I digress!

And, don't underestimate the importance of the quality of those photographs. I'm always amazed when I see photos of cluttered countertops and piles of dirty clothes in the middle of the floor! Most of us have heard for years about the importance of curb appeal. It's been important because it was the first impression the potential buyer had of your home. But now that first impression is online. Curb appeal now applies to the whole house!

Virtual tours have become important, although I suspect that, like me, most buyers find it easier to just look at a large number of photos without all the pretty music and panning back and forth!

Now we're starting to see some videos incorporated into some listings. To be honest, what passes for videos is, for the most part, nothing more than a slide show narrated by the agent with maybe a few seconds showing the agent talking. Again, really what you're getting are just photographs of the home but in a format suitable for putting on YouTube.

It's too early for there to be any hard numbers on the effectiveness of this form of advertising. But I am wondering if buyers find it any more useful than a large number of high quality still photographs.

So...I'm asking for your input. What's your preference? Do you want a YouTube movie with a series of narrated slides? Are still photographs just as effective? More effective? If you're a buyer, what works for you?

Thanks for helping me figure this out!

Signs of Light?

One of the blog posts I ran across today is very interesting. The bottom line is that mortgage applications have steadily risen in the last six months and that there's some reason for hope in this.

Now, first of all you should know that the vast majority of those applications were to refinance. Very few of them were to purchase a home. However, many of them were people refinancing out of ARMs. To the extent that homeowners are able to do that, we are likely to see fewer foreclosures and short sales going forward.

In my opinion, there is nothing more likely to put a bottom on this market than an end to the flood of foreclosures.

This would suggest that 2008's market might be a little more vigorous than we thought. And I'm certainly seeing more activity on lower priced listings in Fauquier county. That hasn't spread as much to some of the surrounding counties; not yet anyway.

I've got my fingers crossed that these numbers continue through the year. A little good news in the depth of winter is always a welcome thing!

Settlement Dates

I've been asked several questions lately about what the normal length of time for a settlement is. It seemed like a good premise for a blog post.

The average time in this area between a ratified contract and a settlement is 30 days. In reality, banks and settlement companies rarely need this much time any more to get everything done. The shortest time I've seen for a settlement where there's a mortgage is 8 days. I've seen a cash deal done within 24 hours.

The lender is generally the one who needs that long to get everything pulled together. In most cases there's an appraisal that needs to get done and everything has to go through underwriting.

From a negotiations stand point, most sellers want the earliest possible settlement date. Even if you need to stay in the house a little longer, it's a good idea to get the deal done and get the money in your pocket. Every day settlement hasn't yet happened is a day that the buyer could change their mind. If you're a seller and you want to stay longer, my advice is almost always to rent from the new owners for a few days.

From the buyer's perspective there's no easy answer to what they're looking for in terms of settlement date. Some have already sold a house and need a place to live ASAP. Some are trying to schedule around things like the arrival of a new baby. Once and awhile you'll have first time home buyers who need to wait until their lease is up.

The settlement date is one part of the larger negotiation of the contract. Since the seller usually wants an early settlement date, the buyer may need to be prepared to compromise on something else in order to move it back.

With the settlement date or any other element in the contract, generally both sides can find a way to make it work if they want to. It helps to keep your eye on the big picture!