Worth Your Time

Here are a couple of items you ought to take a look at.

My friend, Jim Duncan says it so well, I can't improve on it. Sellers should read this.

If you're a first time home buyer and are excited about the new tax credit just passed by Congress, there's a web site designed to give you all the answers on this program and how to take advantage of it. This site is provided by the National Association of Home Builders. The tax credit is different than what was originally proposed so it's worth taking a look at the details.

In fact, I got it wrong on my earlier blog on this bill. I hadn't seen the final details. The tax credit now applies to any home you buy, as long as it's your primary residence! Exciting news!

Lake Whippoorwill Update

Lake Whippoorwill is a subdivision on the DC side of Warrenton, just off of 605. The tax records show 122 homes in this community. The homes here are mostly colonials, generally on lots between 1 and 2 acres.

Stopping Foreclosures

There are some interesting things happening around the country in an effort to stop foreclosures.

The New York Times details the story of an Atlanta woman and her successful battle to save her home.

The Wall Street Journal takes a wider look at judicial activism in the foreclosure arena.

And, San Diego has decided it wants to become a foreclosure sanctuary.

One thing everyone should get from these articles, if you're facing foreclosure and want to save your home, talk to an attorney! You may have more options than you think.

Stinky!

More and more often these days I walk into a house and the first impression is.....

OMG! Phew! What is that awful smell?!

Now, to be fair, most of these homes are vacant. (Over 3/4 of the homes I show these days are vacant!) And, a closed up vacant house will always start to smell, over time.

Some of the smells I regularly encounter:

• Mildew
• Mold
• Pet urine
• Cigarette smoke
• Dead, rotting animals

There are plenty of others, many of them not easily identified.

If you're a homeowner, selling a vacant home, either you or your agent should be checking from time to time to see if the home has acquired any unfortunate odors.

Keep the air conditioning running! I know you're not living there and hate paying the bills, but, believe me, what you'll net in a better offer is more than you'll lose on paying those bills.

If there are some stubborn odors, take steps to remedy them. Get rid of drapes, have carpets professionally cleaned, consider getting an air purifier.

By the way, adding really smelly air fresheners is not the same as taking care of the problem!

Remember, the sense of smell is powerful and has a major influence on our emotions. No one falls in love with a stinky house! Even if they still buy it, the price went down the minute they opened the door and smelled the place!

If you're considering putting your house on the market, consider having a friend or neighbor give you an honest assessment of what they smell when they first walk in the house. This can be a delicate area so make sure they know they have your permission to be brutally honest!

And, if your agent tells you there's an odor problem that needs to be dealt with, don't waste any time in dealing with it. There's a house down the street that smells just fine and is also for sale!

Housing Bill

Next week the President is likely to sign into law the most far-reaching housing bill any of us have seen in at least a generation. Now that the details seem to have been worked out, it's time to talk about what this means.

First, you should know that almost no one really likes this bill. But even those who don't will generally admit they think it's a necessary evil.

Strangely enough the piece of the bill likely to have the biggest long term impact is the last minute addition thrown in to address what's happened at Fannie Mae and Freddie Mac. In the short term, this is a good thing. If you think the local real estate market is tough now, a Fannie Mae/Freddie Mac collapse would have put us into a tailspin with very dire broad economic consequences. In the long term, this is probably not a good thing. It's a band-aid and doesn't ensure there's any reason for either of these institutions to behave more responsibly in the future. And, there's certainly no sign anyone will be held accountable!

The pieces of this bill that are designed to immediately impact the housing market seem unlikely, in my mind to have much real impact.

The first piece I'll focus on is the provision that is supposed to encourage lenders to renegotiate mortgages for troubled homeowners. So, let's say you bought one of those new homes in Culpeper a couple of years ago. You paid $400,000 (with 100% financing) and now the thing is worth $200,000. This bill suggests that the bank provide you a new mortgage at 90% of the current value of the home. In this case, it would be $180,000. The rest of the debt would be forgiven. The bank has just eaten a $220,000 loss. In addition, they will pay an additional 3% fee to FHA which will then guarantee the mortgage.

The supposed payoff for the lender is twofold. First of all, they don't end up with a foreclosed home on their hands. Foreclosed homes are a money drain for any institution. They're expensive to maintain and the cost of selling them is something banks hate. The other payoff for the lender is that the mortgage is now guaranteed and they know they won't lose their shirt on what's left.

Since this program is entirely voluntary, is that enough incentive given the size of some of these losses? Obviously, I don't know. But I wonder if we'll see the most impact on those communities that weren't that badly hit, where the losses that the banks eat will be smaller. If your a bank, maybe this program makes sense where the original home price was $400K and the current value is $370K. So, help may go to those places that need it least!

The other piece I'll talk about today is the $8000 7500 credit for the first time home buyers who buy foreclosed homes any primary residence. Overall, this is a good thing. It's certainly a nice bonus if you're a first time home buyer! And, we certainly need to move those foreclosed homes out of inventory faster.

But if you're Joe Seller, trying to sell your home and the home next door is a foreclosure, buyers have an awfully big incentive to buy that home rather than yours.

If you've got opinions on these parts of this bill, or on other provisions, chime in. Is this, on balance, good or bad? Will it do any good for our local markets?

Reinventing Our Communities

Warrenton and Culpeper have, for some time now, been considered bedroom communities. Basically the people who have been moving here were commuting to someplace far away to work each day and coming home to sleep.

As more and more families couldn't afford homes closer to their jobs, they came looking out this way. Often they put up with miserable commutes in order to get that new house for their family.

This was part of what fueled the boom in real estate in our communities. And, the end of that flock of commuters moving here has had much to do with the real estate bust, at a local level.

Even with the recent decline in the price of oil, a real long-term reduction in gas prices now seems unlikely. And, as long as gas is at or above $4/gallon, those commuters are probably not coming back.

So, what's next? Who is going to buy these homes?

It seems clear to me that both Warrenton and Culpeper are going to need to reinvent themselves. Whatever we're going to be in the future, it's probably not what we've been in the past.

It's probably unrealistic to think that we're going to bulldoze all those new subdivisions and go back to the sleepy small towns that we once were.

It's equally unrealistic to believe that the commuters are coming back and that we can thrive as a bedroom community.

So, who do we want to be? Clearly we're going to need to attract businesses that pay high enough wages that families can afford to buy homes. What kind of businesses do we want to attract? What's a good fit with who we are today, our history and who we want to be in the future?

I'm not sure our local governments have yet figured out that we need to re-imagine ourselves as something different. Although I see signs of hope in each community.

Warrenton is talking about turning trash into energy. Might this be the start of becoming a green city and a push to attract green industry?

Culpeper is building new condos downtown next to the train depot where they hope to soon have another train headed into DC. This could be the start of the new Culpeper.

These are clearly seeds of something new. Now let's start public discussion and brainstorming around this challenge and potential solutions. It's going to take years to figure this all out and to begin to make these changes. Let's get started now!

Feeding Fauquier's Hungry

Month	# of Families	Individuals	Under 18	Over 65
07/04	127	363	142	47
07/05	108	253	64	66
07/06	117	323	104	70
07/07	119	341	126	73

Culpeper Star Exponent Article

The Culpeper Star Exponent carried an update on the local housing market yesterday. If you've been regularly reading this blog you won't be surprised by most of what you read there! Wish they'd made the reference to this blog a hot link!

People charging money to "help" distressed homeowners with short sale and/or foreclosure information scum! This article over the weekend in the Washington Post talks about this racket.

Why I want to be the Rickie Lee Jones of real estate blogging!

Looking Deeper at Culpeper June Sales

The Culpeper numbers showed a healthy jump in sales year over year. I've been wondering what made up those numbers and so decided to do some additional analysis.

38 out of those 57 sales were foreclosures. That's two thirds of those sales.

While an increase in sales and a decrease in inventory always qualifies as good news, this probably doesn't warrant throwing a party to celebrate the end of the real estate downturn.

What this means is that two thirds of those homes sold at very steeply discounted prices. Here are a couple of examples:

This home was purchased brand new in October of 2005 for $345,000. It sold in June as a foreclosure for $149,000.

This home was purchased new in November of 2006 for $448,000. It sold in June as a foreclosure for $230,100.

Those are discounts of 57% and 48%. I analyzed 10 of these foreclosure sales. The average discount from the original sales price was 48.8%.

If your the guy who lives next door and you want to sell your home, how do you compete? Most homeowners can't or won't sell their home for half of what they bought it.

So, yes, it's good news that more homes are selling and inventory is shrinking. If they sell all the foreclosures, there's less downward pressure on pricing.

But right now, if you have to sell, be prepared to price your home very, very aggressively. The competition is based on price and it's vicious!

One quick note, I'll be in the Wildwood Forest subdivision in Amissville this Saturday afternoon from 1 to 3 p.m. If you've got a question on the real estate market in general, your home in particular or just want me to look into my crystal ball, let me know. I'm bringing free cloth shopping bags for everyone I talk to. Give me a call at 540-270-2742 if you'd like to chat while I'm in the neighborhood!

Green Drinks Warrenton

Earlier this week I attended the monthly meeting of Green Drinks Warrenton.

Green Drinks is an international organization designed to connect people involved in environmental causes. These monthly get togethers happen all over the world. And, now they're right here in Warrenton.

Deborah Williamson started the group after a friend from Maryland invited her to one there. She got excited about the concept and went online to find one nearer Warrenton. Unfortunately, the closest one she could find was in DC.

She attended a gathering there, but knew she didn't want to travel into DC all the time. So, she did the only sensible thing and decided to start one here.

The initial event took place in May and was very well attended. Warrenton's mayor, George Fitch, attended to tell us all about the plans for turning our trash into energy.

At this week's Green Drinks we had representatives from Brumfield Elementary School's PTO. They're working on an initiative to not only make Brumfield more green, but eventually, they hope, the entire school system. They're plans involve a lot of wonderful learning opportunities for the students. And, a splinter group from Green Drinks will be joining them to help.

Green Drinks is a great place to meet other like-minded people. It's a great place to kick around ideas. I throw out my wildest ideas for making Warrenton a greener place and find enthusiastic support for them! And, it's also a lot of fun!

As the group grows and matures I look for them to make a lot of very positive changes in our community.

If you'd like to come to the next meeting and check it out, you can contact Deborah directly to get on the mailing list. Her e-mail is gallentina@aol.com

Maybe More Banks Should Go Belly Up?

IndyMac was seized by federal regulators last weekend. They've just announced that they're stopping foreclosure on all their mortgages. This article in the Wall Street Journal details the takeover and this freeze.

Maybe we should be rooting for more banks to fail! If foreclosures fell significantly I suspect we'd see stabilization of home prices much more quickly.

If you're in trouble on your mortgage, start rooting for your bank to fail!

Fannie and Freddie

The bigger they are the harder they fall.

That statement definitely applies to Fannie Mae and Freddie Mac.  Unless you've been under a rock the last week, you've heard about the trouble they're in.

Fannie and Freddie are a big part of why your local bank can offer mortgages. The bank loans you the money to buy your house. But it's going to be a long, long time before they get that back. And, it doesn't take too many mortgage loans before they're out of money to loans. So Fannie and Freddie buy mortgages from your bank. Your bank then has money to make another loan. This keeps a lot more money available for buying houses. It also keeps mortgage rates lower.

I don't think anyone feels good about the steps the government is taking to shore up these two behemoths. This is not how the free market is supposed to work.

But Fannie and Freddie have never really been pure capitalism at work. They are an odd blend of a corporation and the government entity.

Something had to be done now to keep the real estate and financial markets from further imploding. But I think there needs to be a short term strategy, meant to keep the markets calm and functioning and a longer term strategy that looks at the functions performed by these two entities and how those functions are best performed.

My belief is that if Freddie & Fannie weren't allowed to buy any more mortgages, eventually, another entity (and hopefully 3 or 4) would be created to fill that void. So, long term, how do you begin to ease Fannie & Freddie out of the business or at least into a smaller role.

The biggest problem here may be the shareholders of these two corporations. But, given what their stock prices are doing, it shouldn't be long before they are easy pickings for an enterprise that's truly commercial.

Now, does the political will and the creativity exist to envision something different than our current mess?

June Numbers

The official June numbers have been released for this area of Virginia. Let's take a look, by county, at what they have to tell us.

First, Culpeper County. Compared to a year ago, inventory is down (732 now vs. 784 then). New contracts written have jumped (61 now vs. 47 then) and we see the same thing with solds (57 vs, 31). It's all good news! The only thing we see that isn't positive is that we're still adding new listings at a faster clip than I'd like. There were 130 new listings in June, compared to 113 a year ago. Still, when you look at year over year numbers, this is some of the best news we've seen in awhile.

Fauquier county presents a more mixed picture. The great news is Fauquier is inventory. A year ago we were looking at 865 homes on the market. Now we're down to 753. That's a 13% reduction in inventory. Good news! And the trend seems likely to continue. There were 128 new listings this month compared to 171 a year ago. The mixed part is the number of contracts and sales. There were 61 new contracts written this month compared to 65 a year ago. And 67 homes sold compared to 65 a year ago. Those aren't terrible numbers, but they're not telling as good a story as the other numbers.

Prince William County is where things are really hopping! This is the best news of any jurisidiction. And it follows the nationwide trend of this housing recovery happening closer to urban centers. Inventory is down from a year ago (5501 vs. 5703). But look at the contracts written and the number of solds! 987 new contracts were written in June. Compare that to last June when there were only 454. That's an increase of over 100%. And the solds tell a similar story. The numbers in June were 834 vs. 456 a year ago. The number of new listings is also decreasing 1448 now vs. 1539 in 2007. There's not a spec of bad news to be found in Prince William! Anecdotal evidence supports this. There are numerous examples of not only quick sales, but multiple offers on the most attractively priced properties.

Rappahannock remains in its own little world! Inventory is up from 79 to 85. New listings are almost identical to a year ago (17 now, 16 then). New contracts are down from 7 a year ago to 4 now.  Solds are exactly the same at 4. In other words things remain much the same in Rappahannock County.

This is the most positive report I've seen in a long time. There's no way to look at these numbers and not be optimistic.  I'm going to go out on a limb here and say that in Prince William County they may have seen the bottom. We won't know for sure until at least 6 months from now, but it's possible.

By the way, if you're a seller that doesn't mean you can raise your price! The properties priced CORRECTLY FOR THE MARKET are selling. There are still plenty of them sitting there!

Ben Stein Takes the Long View

It's always interesting to find someone who isn't caught up in the crowd and parroting whatever the conventional wisdom is. Ben Stein, I think, has it about right in this Yahoo column.

Ben says he's a buyer in this real estate market! (Although I'm betting a thoughtful, selective buyer!)

Maybe this will become the new conventional wisdom?!

Culpeper Train Gains Momentum

It's no secret that higher gas prices are one of the factors hurting our local housing market. Culpeper seems to "get" this in a way other local jurisdictions haven't yet.

They're hard at work at getting another Amtrak train. See this Culpeper Star Exponent article for more details. If you haven't gotten involved yet, this is worth your time! Sign the petition!

The Culpeper Rail Coalition, part of the larger Piedmont Rail Coalition is leading the local efforts. Opportunities to get involved are detailed on their web site.

Getting Into Your House

When I want to show a listing to a buyer, I use a lockbox to enter the house. Typically, in this area (Prince William, Fauquier, Culpeper, Rappahannock and Warren counties) that generally means an electronic lockbox that often looks like this:

To access this box and get the house key out, I use an electronic device that's been updated with a special code within the last 24 hours. It's an extra level of protection for the homeowner in case my "ekey" is stolen. Within 24 hours it's essentially worthless unless you know my passwords in order to get it updated.

The other advantage of this lockbox is that I know who has shown my listings. If something is missing, left unlocked, etc. I likely know who to track down to ask about the problem.

There have always been a few holdouts who still used combination (combo) lockboxes:

These boxes require only an alpha or numeric code in order to open them and access the key. If I know the combination I could, theoretically, give that information to someone else and that's all they'd need to access the keys to your home. It's a less secure method of access. The advantage in some agents' eyes is that if someone from outside our area wants to show the house, there's no problem if they don't use the same lockbox system used in this area.

With the large number of foreclosures in our area, we're seeing a big increase in the use of these combination lockboxes. Most banks will mandate that a combo box be used on their listings. I've had trouble coming up with a good reason for this. The only thing I can think of is that they want bank personnel to be able to access the property if necessary, without a real estate agent present.

I was troubled this week to learn that a local agent had mentioned that if he's unable to show a home when his buyer clients want to see it and he can't find any other agent to cover for him, he'll simply give his clients the combination and let them go in the house on their own.

Hmmmmm! The number of reasons this is a bad idea is very long. The liability to the agent should anything go wrong, is huge. It could be that his clients are good people with the best of intentions but they have trouble getting the keys back into the lockbox. It happens all the time. It is, of course, highly unprofessional and, I'd suggest, unethical. The listing agent should definitely be making a phone call to the agent's broker at the very least, to protest this behavior.

By the way, when the agent was confronted with what a bad idea this was the response was "Everybody does it." I never got that one by my Mom. And, I'm not buying it now!

HOA Law Changes

Effective on July 1st there are a number of changes to the rules governing homeowner's associations in the Commonwealth of Virginia. The previous laws were so vague that it had become the wild west in terms of fees to sellers requesting HOA packets and inspections. So a number of changes were made.

First of all, they created the Virginia Common Interest Community Board to investigate complaints about community association managers. They also require that associations now publish their fees for certificates or packets either in paper or electronic format.

It also has mandated the maximum fees for the following services:

Inspection: $100

Disclosure Packet Copies:

    Hard Copies: $150 for 2

    Electronic Copies: $125 for 2

Additional Hard Copy: $25

Expedite Fee: $50

Update Fee: $50 (For packets produced in last 12 mos.)

These should, first of all, let sellers know what to expect when they're calculating how much it will cost them to get the documentation needed to sell their home. And, while these fees are higher than were allowed under the previous law, many associations were completely ignoring those fees anyway. So the practical effect may be lower fees overall.

The Virginia Association of REALTORS took a leading role in getting this pushed through and I think they've done a great job. This will benefit consumers, and, in particular, real estate sellers in Virginia.

When Will Things Turn Around?

The real answer to that question is, of course, that no one knows. There are some positive signs out there, but it's too soon to say if they're a trend or a blip.

But based on a current client situation, I'd have to say it hasn't happened yet.

I'm working with a buyer client who's also a licensed agent in a neighboring jurisdiction. This client is buying a home with other family members and there's a lot of nervousness about the future of property values in this area.

Here's the thing. This is a licensed agent. Agents get that this is cyclical. They get that if you're planning on staying in your home for many years (which is the case here) you're highly unlikely to lose any money. And, yet... there's a tremendous amount of concern.

We'll know the market has turned around when the agents aren't worried about buying!

This proves it's easier to be dispassionate about any market when it's not your money involved!

Short Sale Story

My first post now that I'm back from vacation and I thought I'd let someone else do most of the writing.

Besides, this story is just too good (and, unfortunately too typical) not so share with you!

Lenders still don't get it!

And, why do they keep proclaiming publicly what a good job they're now doing of helping consumers work these things out?!

Hogwash!