Corrections and a Sunnier Outlook

In the Fauquier Times Democrat Weekend paper, I'm quoted in two separate articles. The first one "Few Find Escape From Threat of Foreclosure" is on page one and continues throughout the paper. The second, "By The Numbers" is on page 3.

The second article is basically information taken from one of last week's blogs. No problems there.

The problem is in the front page article. First of all, thanks to Laura Ruby for putting this together. It's good to see local coverage on this, along with some helpful information. But, there are some inaccuracies in the article that I'd like to address.

Dave Bryan says that "97 percent of homeowners facing foreclosure will, in fact, lose their homes, leaving only three percent who are able to actually come to some sort of agreement with their loan servicer."

I've spent hours trying to verify that number. I can find no documentation to support it. I finally called Laura Ruby to find out if Dave had cited a source when giving her that quote. He said "he had read it somewhere."

So, just let me say that after trying NAR, Mortgage Bankers Association and realtytrac.com and being unable to verify that number, I have serious reservations about it. My experience is that the number is nowhere near that bad. And, I'm concerned because I don't want families to think it's hopeless!

I then made calls to agents, lenders and organizations designed to help people with these issues. No one had specific numbers. But no one believed that the numbers were anywhere near this grim.

Keep trying! It is not hopeless. Every situation is different!

Another paragraph says "When homeowners have a second mortgage, short sales are virtually impossible, as that requires the approval of two loan servicers."

A first and second mortgage certainly make things even harder. But I've successfully done short sales with two mortgages. Again, it's not impossible. But you've got to be willing to take on the battle!

The last piece in here that I disagree with is from Dave Bryan again. "If you get behind two or three months, it's too late. You won't be able to sell it before it goes to foreclosure."

Again, absolutely not true! In fact, you can't do a short sale until you are behind on paying your mortgage! Again, I've done this for clients and it's worked! You do have to very aggressively price your home. If the home languishes on the market for months, eventually it will move into foreclosure. Then you'll have lost that window of opportunity. And, some short sale homes are in such terrible condition that it's tough to price them low enough to find someone interested. But I'd never say it's impossible!

My big concern here is that not enough homeowners are seeking help now because they feel overwhelmed and hopeless. They need to reach out for help early. But most importantly, they need to get help, whether it's early or not! There are very few times I walk away from someone and tell them there's no hope!

Ask for help. Be aggressive! Don't take "no" for an answer! I can't guarantee anyone a win every time, but your odds are a lot better!

Condominiums and the FHA

We've got a guest blogger today: Vince Tricarico with First Savings. If you have questions you can reach Vince in his office at 703-827-4634 or on his cell at 703-283-7484.

When Will Things Turn Around?

I ran across this interesting article on when the real estate market is likely to turn around.

I believe he gets it mostly right. One thing I don't believe he adequately factors in is the likelihood of intervention by the government. That could help significantly help reduce the number of foreclosures. That, of course, would push this whole cycle forward a little faster.

Is the government really going to intervene? Well, now that they've bailed out the banks there is certainly increased pressure for them to intervene on the behalf of individual home owners. Clearly that whole moral danger they were worried about was much less of a factor once push came to shove. But at the heart of this crisis is the individual home owner and the banks will continue to be in trouble as long as the foreclosures continue to rise.

The above article gives you some key benchmarks to keep an eye on. The benchmark I'll be watching most closely here is the inventory levels.

Just Because You Like It...

It's funny how you see things differently when you look at someone else's home. A surprising number of the homes I've shown in the last week have had a feature that is often less than desirable for potential buyers.

Now let me say first of all, that I have nothing against hunters. And, you should be able to decorate your home any way you choose, WHEN YOU"RE NOT TRYING TO SELL IT!

But most Americans these days are not hunters. That's true even in our area. The percentages are pretty small. And, a lot of non-hunters are going to be less attracted to a house full of dead animals hanging on the walls. You may not think it's fair. But it's the truth.

I'm not singling out only hunters. If you have a hobby that's not exactly main stream, it's a good idea to send stuff to storage. Don't leave the handcuffs on the bed post! (Even if you're in law enforcement!)

The goal here is for the buyers to identify with your house, to see it as their own. That's hard for them to do if they see something that makes them uncomfortable.

So, stash the stuffed animals. If you question whether it's appropriate, assume the answer is "no". You want every edge you can get in this market!

Prince William Foreclosures

Saturday's Washington Post carried a story about foreclosure activity that primarily looked at Prince William county. As the story makes clear, things are pretty bad in Prince William County. The number quoted in the article is that 5.5% of the homes in the county are in some phase of foreclosure.

I took a look at RealtyTrac, a web site that specializes in providing foreclosure listings. It shows 3204 homes in Prince William County in foreclosure out of 5573 homes currently listed for sale. It says an additional 881 homes are in pre-foreclosure. And 1932 homes are up for auction. Some of those auctioned homes are likely to be foreclosures, although certainly not all of them.

To give you a feel for the rest of the area, Culpeper County has 137 properties in foreclosure, 20 pre-foreclosure and 97 up for auction. That's out of 819 listings.

Fauquier County has 111 foreclosures, 2 pre-foreclosures and 93 properties up for auction out of 730 listings.

Rappahannock County has 4 foreclosures, 0 pre-foreclosures and 6 properties to be auctioned.

Warren County has 0 foreclosures according to RealtyTrac, although I seriously doubt their data on this county. There are 4 in pre-foreclosure and 73 listings to be auctioned.

Cash Leverage

In the comments on a recent blog someone asked why someone who pays cash has more negotiating leverage. I answered briefly in response, but thought it made sense to cover it in more detail in a blog post.

There are several reasons you're in a stronger negotiating position if you're buying with cash.

First of all, many deals never make it to closing. Even when there's a ratified contract, that's no guarantee that the deal settles. And, over 95% of the time, deals that fall apart do so because of issues related to the buyer's financing.

If you can remove that concern for the sellers, they are likely to take a lower offer, trading price for the certainty of a closed sale.

Another factor is time. Typically right now it's about 30 days in most cases from ratified contract to settlement. The majority of that time is spent on items required by the lender. Some of those things include getting a survey, having the property appraised, verifying credit and employment for the buyers and sending the deal through underwriting. It's possible, these days, for most lenders to close much faster, say in two weeks. But in most cases if they buyers are getting a mortgage the settlement date is probably about 30 days out.

With cash, on the other hand, settlement can happen as quickly as the buyer wants. I've seen cash settlements in less than 48 hours. Mind you, I wouldn't recommend that. I think the buyer should still do a title search and a home inspection at the very least. But it does happen.

Most sellers prefer money in their pocket sooner rather than later!

And, lastly, along with buyers getting a mortgage come several related contingencies. Contracts that involve a lender typically include a contingency to make sure that the buyer can actually qualify for a mortgage. (Certainly not a sure thing these days!) There's an appraisal contingency. If the property doesn't appraise for at least the sales price, the deal may be dead. And, depending on the type of financing, there may be other contingencies and/or conditions that make a timely settlement more uncertain.

All in all, if I'm selling, I'll give a little on the price to get a cash buyer!

Green Matters

With energy prices high and potentially going higher, many of us have already replaced all those standard light bulbs in our homes with CFLs. What now?

I've found a great web site that has a few ideas on that score!

Green Matters has easy, practical tips for things to do around your home to save energy. If you take a look at their Green Guide you'll get a wide range of ideas, with more to come. I'd be surprised if there's anyone who can't find one new idea on this web site.

A House in Amissville

We're going to dive down to ground level today to take a look at the history of one house that recently sold in Amissville.

This home sold on December 27, 2007 after 574 days on the market.

This is a lovely home. I know because I showed it to several potential buyers. It sits in Rappahannock County on 51 acres with a pond. As someone who loves to cook, I can tell you that the kitchen is amazing! It has 5 bedrooms and 4 1/2 baths and a fully finished basement.

There is also a detached 3-car garage/shop with an apartment.

This home was built by a builder for his own family in 2000.

The home was listed for sale on May 4, 2006 for $2,275,000. The price was dropped three times. The final price drop was in November of 2007 when the price went to $995,000.

The final sales price was $850,000. That's 37% of it's original sales price. It's 85% of the final listing price. Any way you look a this, it's an incredible deal!

To give you a frame of reference, there are currently four parcels of land of approximately the same size for sale in Rappahannock County. The prices range from $599,000 to $1,348,500. This is for unimproved land!

This could create problems for future sales if it's used as a comparable. Rappahannock has been a little more sheltered from dramatic price declines. At least for the higher end properties, that may no longer be true.

It's also interesting to note that the buyer paid cash for the property.

There are some bargains out there! And cash provides a lot of negotiating leverage.

Creativity Abounds

Sometimes the optimism hits me, even on a Monday morning.

You've heard the old saying "Necessity is the mother of invention." In the same way, crisis often seems to bring out a flood of creativity.

So, on this Monday morning with dismal economic news continuing to bombard us, it's nice to see a blog post with another interesting suggestion on how to help fix the housing market.

Three Boxes

February Numbers

I've got February's market numbers. I'll give you the scoop on Culpeper, Fauquier, Rappahannock, Prince William and Warren Counties. If anyone is interested in information on any other counties, contact me and I'll be happy to provide.

In general, what we're seeing across the board is a jump in inventory. This being March, that's not a surprise at all. The increase in inventory will continue for the next several months.

In three out of the five counties the number of closed sales was flat. Rappahannock had one sale in both January and February. Warren had 22 each month. And Fauquier actually fell from 33 in January to 32 in February. As I said, flat.

Prince William showed a huge increase in the number of contracts written, from 498 in January to 698 in February. This may have something to do with the steeper price drops we've seen in that market. They may have finally broken the stalemate between buyers looking for a deal and sellers determined to hang on to every dime of equity they can, even if it means not selling!

Warren showed a nice increase in contracts, up by about 25% from last month. Rappahannock went from 0 last month to 1 this month.  Culpeper was up just slightly from 47 written last month to 51 written this month. Fauquier actually fell from 53 to 44.

Most of the counties are sitting at around 2 years worth of inventory on the market right now. Prince William is an exception with only about 16 months of inventory. The numbers for Rappahannock are pretty meaningless, but if you're interested the math shows a 70 month supply!

Across the board prices are still falling. And, I expect that to continue throughout 2008. This will vary a lot by neighborhood. In some neighborhoods, you may see some stabilization. In some neighborhoods, there's still a lot of adjustment needed. I'd be shocked if anyone found a single neighborhood where prices increase over the next year.

That's the scoop for February! If anyone needs me to dig deeper into any of these numbers I'm happy to help. Just send me an e-mail.

The Dilemma

I got a call from a lender yesterday on a deal we're working on together. She's got some potentially bad news for my clients and wanted to let me know the scoop. It's the kind of heads up I very much appreciate!

But she also proceeded to tell me that she wasn't going to call my clients with this information for a couple of days. She wanted to research all the options and have every potential question answered before she called them.

I understand that instinct. It's hard to call someone and know they'll have questions and know you won't instantly be able to answer all of them.

But, I have a basic belief that I shouldn't know something about your transaction that you don't. This is NOT part of the canon of ethics for the National Association of REALTORs. There are plenty of other agents who think this goes a step too far and that in some cases we should be protecting our clients from things they don't really need to know.

But, I don't necessarily appreciate it when other people decide what I should and shouldn't know. I can't believe most of my clients would appreciate that.

In this instance, it's not permanently hiding information from anyone. It's just a couple of days delay in relaying the information. We're not talking about someone doing something immoral or unethical.

Still, it's the kind of thing I struggle with.

So, what do you think? If you're a consumer, do you want to know everything I know as soon as I know it? Would you rather I only told you things when I think you must be informed and that I spare you some of the scary details? If you're an agent or broker,  how do you deal with this question?

Who Will Survive?

There is an old adage that says that in tough real estate markets the agents that survive are the best agents. I first heard this in one of my first real estate training classes. And, I absolutely, positively believed it.  It made perfect sense to me. In tough times, the best shine, right?

Except that now that we're well into a very tough real estate market, as I look around, I'm entirely unsure that this widely believed wisdom is at all true. Yes, there are lots of good real estate agents who are doing just fine. (Although I don't know that I've talked to anyone in the last six months who hasn't complained about slower business.) But I've also seen a large number of excellent agents leave to pursue other careers or return to previous careers.

So maybe the question is, what constitutes the best real estate agent?

If you define the best agent, by those who do the most business, then the old adage is perhaps true. If you've done high volumes of business during the boom times, if you were smart, you put away a fair amount of cash for a rainy day (or year!)

But, if by best, you mean those who are best able to serve the needs of their clients, I'm not sure that they are always the survivors. Some of those excellent agents are just too new to have built up the client base or the financial wherewithal to survive this market.

The ability to attract new business is a prerequisite for surviving as a self-employed real estate agent. But it's not a prerequisite for doing a good job taking care of your clients. Those are different skill sets.

Lawrence Yun, the chief economist for NAR has just released a blog post talking about the current surplus of real estate agents. Unfortunately, that number is not adjusting downward nearly as fast as home sales and home prices! But it surely will.

And, I suspect that some of those who survive will be the cream of the crop. And, some will simply survive because of a fat bank account and lots of time in the business.

Attending a Real Estate Auction

Last night I attended the Tranzon auction in Fairfax. Since most of you will probably never attend one, but many of you are probably interested, I thought I'd give you a report.

There were originally 19 auction lots to be sold. (Auction lots as opposed to parcels of land.) Ten of those 19 lots were from our area. They also had a half dozen DC properties and some land parcels in Clifton and Chantilly. I believe the proportion of local properties is representative of how much tougher the real estate market is as you move further away from DC.

Four of those 19 properties were pre-sold prior to the auction. In addition, one of the lots was three Culpeper townhouses. Two of those were pre-sold as well.

It was interesting that not one of the parcels of land met the reserve price. There were bids. But the seller had set a minimum price at which they'd accept an offer and none of the bids on any land parcel met that reserve. Land prices are always less elastic than residential homes and this confirmed that. And, since many of the bidders on land were builders, it's pretty clear that they're being very cautious right now. (If they weren't they'd be bankrupt, not bidding at auctions!)

I was at the auction with a buyer client so I had that hat on. So, I'll give my impressions from the buyer side first.

While the auction prices on some of these properties were attractive, there were no "steals" here. The ultimate sale prices overall were not far off current market prices. That tells me the people in that room had done their homework and weren't going to overbid. It also tells me that the heat of a bidding competition got some of them to bid a bit more than they really wanted to.

It was a cautious crowd overall. (And a large crowd.) For example, on the first property of the evening, a large colonial in Manassas on a 1.18 acre lot, the auctioneer tried to start the bidding at $700,000. He ultimately had to go down to $400K to get the first bid. The final sale price was $530K.

I was also struck by some of the comments by Tranzon, both the auctioneer and the gentleman providing the descriptions of each property. Comments like "You know this is going to be worth $350K in a year or two" and "The value on this can only go up" were shocking to this REALTOR who has been trained to never misrepresent value. And, the interesting thing is that I think those kind of statements were actually counterproductive. You could hear some of the scoffing after these comments as the potential buyers seemed to be reminded of the current state of the local real estate market and the folly of such predictions.

From a seller's perspective, this is not an unattractive way to sell a home. None of the residential properties failed to meet the reserve price. They all certainly sold faster than they would have under normal circumstances. And, I don't believe there was a significant decrease in the net in the seller's pocket. Remember that all of these properties are sold as-is with no inspections, appraisals, etc. And, settlement must take place within 30 days. I wouldn't hesitate to help a seller use an auction to sell their property. In this market, it's probably a method more sellers and their agents should seriously consider.

It was a very educational evening. If you're interested in more information on either buying or selling at an auction, let me know and I'd be happy to help!

Squatting in Your Own Home

Appealing Property Tax Bills

With property values falling in our area, many of you have been astonished that according to the county your property value actually increased.

You should know that nothing is written in stone and that these things can be appealed. First, you should contact your county immediately to find out what the process is for an appeal. It's different in each county.

Now you need to start gathering data to support your contention. One source of help can be your real estate agent. I've helped clients in the past by putting together a current analysis of the market, including comparable home sales.

If you're doing this on your own, you're going to need to get information on what has recently sold in your neighborhood, and what it sold for. The homes you're using for comparison should me as much like yours as possible.

You should talk to neighbors about their assessments. There are a surprising number of clerical errors. If your assessment is completely out of line compared to neighbors with similar homes you've got good grounds for appeal.

Take into account factors that may decrease your homes value. What's going on in the neighborhood? Is there a heavy increase in traffic that impacts the value of your home? How abour rezoning?

Are there factors unique to your home that might affect the assessment? Do you have structural issues? Is there, for example, a crack in the foundation?

There are resources in the web that can help as you prepare your case. The Federation of Tax Administrators site has good background information on the appeals process for each jurisdiction. The American Homeowner's Association has a kit to help with this process. You can download it for free on their web site. And, the National Taxpayer's Union has a guide ($6.95) on fighting property taxes.

Lastly, I'd also urge you to remember that these same property taxes are the ones that pay for policemen, firemen, schools and school teachers, etc. If no one pays property taxes you might find you don't like the place you end up living in!

What REALTOR Associations Do For You

REALTORS belong to local, state and national associations of REALTORS. While these groups serve the interests of real estate agents and the industry, they also do an awful lot of good things for homeowners. I don't think most homeowners are even aware these associations exist, much less what benefits they might provide them.

First of all, these associations provide training for real estate agents. This is a critical piece of their mission and it's important to buyers and sellers of real estate. The better educated your agent, the more likely you are to have a smooth transaction. Education doesn't eliminate the problems that can arise in any real estate purchase or sale. But it does help provide the expertise to the agent on how to deal with issues.

The associations also educate lawmakers. Whether it's providing input on how extending the size of the historical district might affect home values, or explaining the impact that new transaction fees will have on the Virginia real estate market or laying out for those in national government what might work to help stem the tide of foreclosures, these associations provide a very useful service.

They also educate homeowners. Whether it's through the information on the VAR (Virginia Association of REALTORS) or NAR (National Association of REALTORS) web sites or through newspaper articles and editorials, they help get the word out about changing real estate laws, how to buy or sell a home and a host of more specific topics.

There are a lot of good things happening behind the scenes with these groups. Don't ignore the help they can provide!

Friends and Real Estate

I've had several instances recently where a potential client had to choose between working with a friend or family member or working with me. In the majority of those cases, they've chosen me, thankfully. But those decisions haven't been without consequences. Feelings have been hurt. And given the number of real estate agents out there, it seems worth a discussion.

The Greater Piedmont Area Association of REALTORS (the local assocation for the counties I primarily work in) has more than 700 members. That's a lot given the number of transactions happening these days. In all likelihood, most people know someone who had a real estate license.

And, as soon as you start thinking about buying or selling and mention it to them, they will, of course, want you to do business with them. I've been that friend or relative and I've definitely asked for the business. However, there have also been times when I felt that the friendship would be best served by that person using another agent.

If you're trying to make a decision and are torn, I'd recommend first of all, talking to the friend or relative and let them know that however much you care about them, you'll be basing your decision on who can best help you achieve your goals in this area. A person can be a wonderful human being and not necessarily the best in their professions. Or, you may feel that you don't want to mix business and pleasure. But treat the individual fairly, give them a chance to interview for the job. That's all anyone can ask.

Having been on the receiving end of not getting the business in this kind of situation, I know how important it is to be gracious. I also know how hard it is, especially right now. There are real estate agents fighting to stay economically viable in a very tough market. Rejection is hard to take under those circumstances. Grace does not come easily in such situations!

In the end, making the best decision for yourself and your family is what's important. Whether that's using a friend or family member or the professional you believe can best get the job done, don't be afraid to do what's right for you!