Piedmont Real Estate Blog An ongoing dialog on real estate news, opinion and trends in Northern Virginia and the greater Piedmont area. Julie is an Associate Broker at Century 21 New Millennium, 5451 Old Alexandria Turnpike, Warrenton, VA 20187
Apparently more and more banks are deciding some properties just don't have enough value to be worth the foreclosure process. When you consider that NAR (National Association of REALTORS) has estimated that the foreclosure process can cost a bank $60,000, properties at the low end of the market quickly become more trouble/expense than they're worth.
Of course, if you're a municipality with vacant, deteriorating homes where no one is paying any property taxes, you've got a big problem.
We haven't yet seen much of this in our area. Prince William would, perhaps have been most vulnerable to this with their high volume of low cost condos going into foreclosure. But the prices fell fast enough and demand jumped enough that the problem has been dodged.
There seems to be no chance of seeing this kind of thing in Fauquier or Rappahannock Counties. Culpeper does have some foreclosed townhouses selling below $100,000. But the numbers are very small and there seems to be enough demand in that price range to absorb what comes on the market.
I get asked frequently by buyers which website to use for their online home search.
There are a lot of different features out there on a lot of different web sites and so, in part, this depends on which of those features are most important to you. There are special mapping features and mapping overlays and mashups. I would definitely try out several to see what fits the way you like to search.
That being said, I always assume that very high on the list of vital criteria is data accuracy. For that reason the two sites that I would recommend would be REALTOR.com and HomesDatabase.com
For myself, I like the functionality of HomesDatabase.com better. It does only cover the mid-Atlantic area which is fine for buyers looking in this area. If you're selling here and looking to move elsewhere in the country I'd start with REALTOR.com.
The other sites often have properties listed for sale that were sold long ago. It's very frustrating for buyers to get excited about a property only to find out that it hasn't actually been for sale for months. Stale data is infuriating!
There are also plenty of FSBO (For Sale By Owner) sites out there. Many owners are willing to work with you if you have an agent. They don't want to pay fees to both a buyer's agent and a listing agent, but will often pay the buyer's agent fee if it gets them the sale. If you're working with a buyer's agent (and you should be) tell them you're interested in FSBO properties and ask them how they can help.
With so many homes in some stage of foreclosure right now, if you're buying without an agent, be very careful that you know you're buying a home that you'll have clear title on. Even with agents involved there are plenty of sales that are falling apart right now!
If you've got specific questions about specific web sites and the accuracy of their data, I'd be happy to help answer questions.
I just got back from a class on short sales. Things keep changing and you have to try to keep up with the latest trends.
Here's the biggest take away as far as recent changes to the short sale process go.
Banks are much less inclined to forgive the debt on a short sale. This is particularly true of the second mortgage holder. And, they're willing to hold the deal hostage at the last minute in order to get their pound of flesh.
It brings up the question of whether a short sale, deed in lieu of foreclosure or foreclosure is better for the homeowner. And, I'm going to tell you that if you're a seller wondering that you shouldn't be asking me.
If you're not talking to an attorney who can protect your interests, with this much money at stake, I think you're making a mistake.
A couple of years ago, most debt was wiped out completely on a short sale. So, if you got one done then, be very, very glad!
The other take away is how difficult these things still are. I've seen press reports that they're getting easier, banks are getting more reasonable or smarter or more efficient. Don't believe it!
On a short sale, if you go from contract to settlement in anything less than 120 days, consider yourself lucky!
If you're a buyer you're going to have to weigh your ability to wait that long against the incredible deals that are available on short sales. The truth is that most buyers are deciding short sales won't work for them. That makes the deals better for those few willing to endure the pain of the process.
There's a new roadblock on the way to getting to settlement these days.
The number of people refinancing has skyrocketed. And, as a result banks and some of the people they rely on are overwhelmed. Appraisers are overbooked. Lenders are pushing out settlement dates to be sure they can get everything through underwriting.
There are still settlements happening in 30 days, but it's getting a lot tougher.
Interest rates won't stay at this rate forever. In fact, interest rates in the mortgage markets will jump before a lot of other interest rates do. Mortgage interest rates are very sensitive to inflation worries. With all the money being pumped into the economy, I suspect this is a pretty small window of opportunity before rates start to move back up.
But for right now, if you're buying a house talk to your lender about whether 30 days is doable. And, if you're a seller, don't be surprised to see delays on the way to settlement.
You can tell me I'm crazy. And, I won't entirely disagree. Bottoms are unknowable when you're there. You know it's the bottom after the fact when the statistics confirm it. So, anyone who tells you this is the bottom is, at best, guessing.
And, I will admit that this is an educated guess. But I look relentlessly at the numbers, day in and day out. I watch for trends. I study this stuff as though I was prepping for a final exam.
And, everything I see makes me believe we're at a bottom here. In places like Prince William I think it's clear we've already passed the bottom and all those people who are still waiting had best hurry up! Prices are already starting to rise.
In places like Fauquier and Culpeper it's much less obvious. There's still too much inventory and we have a ways to go to get to "normal". But the trend is solidly in the right direction. Even now, at the end of March when there should be tons of new inventory coming online for the spring market, inventory is still dropping. But new buyers are coming out.
Let me add one note and one caveat.
This is a sales bottom. I don't believe we'll see sales numbers fall from here, other than the seasonal dips we would ordinarily see. This is not a price bottom everywhere. In Prince William I believe prices have bottomed as well. I think you'll see small appreciation in Prince William this year.
In Faquier and Culpeper I believe you're still looking at a very small downward adjustment this year, perhaps flat if we get very lucky. And we will not bounce off the bottom quickly. Expect relatively flat prices next year as well.
And, the caveat is, this assumes that we are not, in fact, entering another Great Depression. It assumes that the recession lingers through much of this year but that there is some recovery in 2010.
And, if the plan Republicans are introducing today for a $15,000 tax credit should become law, we could even see more price appreciation than I'm currently predicting. A note that this new tax credit is predicated on the buyer being able to put 5% down on the house.
He wonders in his blog post about how long it will be until they're copied. I don't know the answer in Charlottesville, but I hope it won't be long before I'll be copying him here!
If you were selling, how appealing would this be to you?
If you are a potential buyer, how helpful would such signs be to you?
The compensation system in real estate is, in my opinion, broken. There are many reasons the way the system has worked for so long doesn't seem feasible any more. But I want to talk about just one aspect today.
Buyer's agents in Virginia (and every other state) get paid based on what is listed in the MLS as the "coop fee" or the fee to the cooperating broker. In most cases, that fee is half of what the listing agent has negotiated as the fee for listing the house.
There is endless debate in the online real estate community over whether or not the seller is, then, in effect, paying the buyer's agent. After all, the listing agent is asking the seller for the X percent and then splitting it. Nowhere does the buyer's agent get asked to come up with this money to pay their own agent. The other side of this debate is that the buyer is paying for the house and that out of those proceeds come the fee for the buyer's agent and so, in the end, they are paying for their agent. I won't come down on one side or the other of this argument. Suffice it to say I think the fact that it's unclear who's paying the buyer's agent is a bad thing!
I think it's a horrendous thing, however, that the buyers agent's compensation is based on the sales price. That means that by negotiating the best deal possible for my buyers, I essentially hurt my own earnings. This is a very basic conflict of interest. It makes no sense that in a huge financial transaction, most buyers are represented by someone who has a conflict of interest!
The origin of this system dates back to when all agents represented the interests of the seller. Back then, even if I never met the seller and if I spent all my time working with you the buyer to help you purchase this home, I was still legally representing the seller's interests. So, it made perfect sense to compensate me based on how much the seller got for his house.
They did finally create buyer agency, but compensation has never caught up with that change.
The argument from agents is often that the amount of compensation difference between getting my buyer that house for $300,000 or $295,000 is so small, typically less than a couple hundred dollars, that it in no way influences my behavior.
And, I agree that in many cases, perhaps even in most cases, that's true.
The problem is the appearance of impropriety. The problem is that the buyer shouldn't have to wonder whether or not you're influenced by that difference. The problem is that it tarnishes the reputation of good agents. And, finally, the problem is that it makes the whole industry look shady.
It's time to fix this. I've got some ideas on how compensation could change. And, there are plenty floating around on the internet. But I'd rather hear your input. How should compensation work for a buyer's agent? What model would allow for a sustainable business on the part of the agent and no conflict of interest?
There are too many things I want to talk about today so I'll throw a little of everything out for your consideration.
The Wall Street Journal has an article this week about a plan they are proposing to help stabilize housing prices by granting resident status to foreigners who buy homes here. It suggests that they would have to own the properties for five years and couldn't rent them out during that time. It's an interesting idea. How would you monitor whether or not they were rented? There are lots of details that would have to be worked out but I'm always happy to see people getting creative!
Kudos to Hazel Homes. Clients bought a home from them this week and they were a pleasure to work with from start to finish. They went above and beyond to make sure they exceeded my clients' expectations. They asked for the full home inspection report and proceeded to work to rectify every item on there, no matter how small and insignificant. Trust me, that is not standard and they deserve recognition for their excellence! If you're looking for new construction in Culpeper I'd highly recommend them!
And, a plague on the houses of dishonest lenders. In a separate transaction I have clients who have been working with a lender for two months who's lied throughout the process. The loan he guaranteed was "ready to close" is now dead and my clients are scrambling to find other financing. After everything that's happened around lending in the last few years, it's unconscionable that there's still no accountability for lenders.
Mortgage rates dropped significantly after yesterday's announcement by the Fed of additional intervention to get credit flowing. 30 year fixed rates can now easily be found under 5%. Add that to the $8000 tax credit and a lot of prospective buyers should be excited about what they can afford right now.
I'm a big Seth Godin fan. I think he's one of the smartest marketing minds around.
His latest blog talks about agents in general and real estate agents in particular.
He says anonymous agents are "interchangable and virtually worthless."
He also says that agents need to say "No, I won't sell this house, it's overpriced. List it yourself."
I think I'm a bit more diplomatic, but I've said no to an awful lot of listings this year. Hopefully I'm on my way to being the "great real estate broker" that Seth talks about.
It's a changing industry. I believe the business models continue to evolve and I look forward to figuring out what's next and how my clients need me to work with them in this new environment.
The status quo was boring anyway!
The question is, what will replace the models we see today?
Despite what you read in the news media and hear from banks, in Culpeper County, at least, there does not appear to be much slowing down of foreclosures.
There were 78 new listings in Culpeper last month. 38 of those were foreclosures. Another 17 were short sales, meaning the house is worth less than it will sell for. That's 55 listings or just over 70% of new listings being bank owned or influenced.
It's going to be tough to get to a stabilized market as long as that's true. While Prince William county appears well on its way to a more normal real estate market; Culpeper county clearly still has way to go.
So, what hapened to all the banks who were supposed to be holding off on any more foreclosures?
In general, we're seeing a long lag time between a foreclosure happening and that particular home being put up for sale. So, most of these homes that came on the market in February probably actually went into foreclosure some time in 2008.
If the banks really are following a moratorium on new foreclosures, I'd expect to see the impact of that in the April/May time frame. Will owner occupied homes then start to come back on the market to fill that void? I suspect that most will hold off waiting to see some evidence of appreciation in values.
That may mean the tightest inventory we've seen in Culpeper during the spring and summer for at least three years. And, if that happens, there may, finally be some good news for sellers.
Good news in this case simply means a stabilization of prices. I think we're still a long way from much in the way of seeing rising prices!
It's not only the Days on Market and number of offers and volume of sales that are improving in Prince William. I'm also seeing some strength in pricing there.
The sale price as a percentage of list price has risen year over year from 87.64% to 90.97%. While it's true that much of this strength is in the lower price ranges, the fact remains that inventory is selling and prices are firming up. And, in the under $350K inventory, the pricing strength is even more apparent with very little selling much below asking price.
And since we're still not seeing the typical early spring flood of new inventory, prices, so far, seem likely to continue strong.
There's some indication of firming of prices in Fauquier, although it's too small to assume there's anything in the way of a trend here yet.
And Culpeper prices remain soft at best, probably still declining.
The question continues to be whether higher prices and lower inventory in Prince William and east will push people further out as the peak sales season approaches.
The rental market is soft, whether you're talking residential or commercial the story isn't pretty.
I spend more of my time looking at residential and I've been thinking about this change. Over the last few years more and more fees and special clauses have been piled on tenants.
There are lease clauses that say you have to have the chimney cleaned before you leave. There are clauses that say you have to have the carpets professionally steam cleaned before moving out. There are deductibles charged any time a service call is made. There are clauses that state that tenants will make repairs on anything under $200 with their own money.
And, now there are lots and lots of empty rental properties. So will the pendulum swing the other way?
My hunch is it will to some extent. You're already seeing apartment complexes running all kinds of specials to lure tenants in.
Final February numbers became available today. There are no startling changes to current trends. Inventory continues to decline. Sales continue to look pretty strong.
Culpeper's absorption rate indicates that current inventory would be entirely absorbed in just under 13 months. That's the best that number's looked in a very long time. In fact, for the first time in several years Culpeper's absorption rate is higher than Fauquier County's rate. Fauquier County's absorption rate shows it would take almost 16 months to get rid of current inventory. Prince William County stays at an astonishingly low 5 months. And, Rappahannock continues to move along at its own pace!
The biggest surprise to me in this month's data is that we did not see the big jump in new listings that I expected we'd see. Typically this is when you see sellers trying to get a jump on the spring market and inventory starts to climb. And we did see small increases in the number of new listings in a couple of counties. But they were very small increases and sales increased enough that there was no impact to overall inventory.
Sometimes what I see on a particular day is more striking than numbers. Today I was out showing properties in Prince William County. I showed four properties. The first one had already gotten one offer in today. At another property we were greeted by an agent and her clients who informed us that the bank had already accepted their offer. At the third a property that had just gone on the market this week already had cards from 21 agents that had shown it. And, our showing was interrupted by another couple right behind us.
The only property of the four that didn't appear to be overrun with potential buyers was one that clearly had water issues and possibly even foundation issues in the basement.
If you're looking at properties in Prince William County that are under $350K we're back to multiple offers, bidding wars and potential buyers tripping over each other in houses.
Overall, the market seems healthier and I'm pretty optimistic that the number of sales overall will be substantially above 2008. I still don't anticipate a big jump in prices. However, prices in Prince William are likely to increase this year if current trends continue.
Sellers have reason for optimism. Buyers still have a great market, but there's definitely a sense of urgency if you're buying in Prince William County.
Interestingly, a friend recently e-mailed me to ask for my definition of a McMansion. Now, in the blog Bacon's Rebellion, there's a very, very local definition if you live in Fauquier County. (You have to read at least the first comment.)
By the definition here, pretty much every property I've ever sold is a McMansion so I believe I'd argue with that definition!
Here's my very slopping definition: Too big a home on too little space too far from any jobs that would support a mortgage on the property.
The details are out on the government's latest attempt to help stem the tide of foreclosures:
I especially like the CNBC hosts' comments at the beginning about losing a few states to get rid of the whole mess. I think they're seriously delusional. I know that would be news to people in Culpeper Virginia.
This plan will help some more people. That's good news. Whether it will help enough remains to be seen.
CBS news makes it official. Manassas is the hot place in the region for getting a real estate bargain!
And, no wonder! There are currently 324 properties for sale in Prince William county for less than $100,000. That's incredible when you consider the prices just a few years ago.
And, while the rental market has softened as the economy has softened and the inventory has risen, it hasn't softened so much that you can't make a profit at those prices!
For those who say housing prices have to fall alot further this year, I'd say, not in Prince William! Obviously I'd be an idiot to declare a bottom, especially with so many economic difficulties still ahead. But if this isn't a bottom in Prince William, we're awfully close!
And, in general, I see some firming up of prices in this area. Note I did not say I see any appreciation. And I don't expect any this year. But it seems like some kind of bottom is in the process of being established. Depending on what happens with the rest of the economy it may or may not hold. But for now, there is reason for optimism.
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