U r b a n T r e k k e r

More Short Sale (on the Market) than Foreclosure

If MRIS data is any indication, distressed properties trending short-sale could be a big threat for regular sellers. Regular sellers have a hard time competing with distressed properties owners, especially if these properties are priced way below the norm for that hood. On the flip side, this kind of condition represents opportunity for buyers. For the most part, short-sale properties tend to be in much better shape than foreclosures, especially if there are people still living in it, either owners or tenants. And short-sale and foreclosure are competitively priced.

From the resale front, this month market conditions for distressed properties weighs in more towards short-sale than foreclosure. That means many more 'underwater homeowners' are quickly trying 'to get out' from their situation. A recent study finds that no owners would default on a loan if they see their home equity drop only by 10%. However, 17% of household would default (walk away) even if they can afford to pay their mortgage, if their home values fall 50%. Unfortunately, in some pockets of our neighborhoods, prices have fallen below 50%.

Here's the data I extracted from  MRIS.

Active listings for NVAR market (Arlington, Alex., Falls Church, and all of Fairfax)

Total listings         4,507

Foreclosure        221  (4.9% of all listings)

under $500k       182

over $500k         39

Short-sale       601  (13.33% of all listings)

under $500k       491

over $500k        112 

Under contract            1,966

(total short-sale doesn't add up to 601 - something is missing here.. oh well)

You can see from the data, definitely the number of short-sale properties on the market crush foreclosures.

Here's the numbers for Prince William county, that used to be 'the' place to find foreclosure. Look at this stat. It's competitive with their adjacent neighborhoods north of I-95 (above).

Total listings 1,870

Foreclosure      96

Short-sale   239

Moreover, distressed properties over at Northern Virginia, on average carries higher price tags than at PW. Over in Fairfax, you can find homes on foreclosure list goes from $52k, condo in Alexandria - all the way - to $2.4M, a mansion in McLean. What striking is one-fifth of short-sale properties, are properties over $1M! Those custom built homes are on the market now at reduced price. Even a new home (never been lived) built by an architect over in my neck of the woods, is short-sale. This was a tear down. Think the architect got caught in the downturn..

Washington DC:

Total listings   2,523

Foreclosure 158          (6.2% of total listings)

under $500k 154

over $500k      4

Short-sale 168 (6.6% of total listings)

under $500k 152

over $500k   16

Under contract 93

I think for the lenders, short-sale is cheaper than going foreclosure. I heard sometime before from a lawyer, that foreclosure proceeding costs lenders on average $60k. (will be higher in some big cities).

2 Things about Short-Sales

Besides all the things that you've read and hear ( here, here) lenders are getting better in processing short-sales. Short-sale can be a good opportunity (not for everyone, though). I know that's me saying it. However, the process of getting short-sale a done deal.. still take time.

Here are the dollars-and-cents dealing with short sale.

#1.Successful short sale really depends on how good the listing agent is.

I had represented buyers in multiple short-sale transactions. Dealing with a good, experienced 'short-sale' listing agents make a big difference. There are companies doing just short-sale businesses. You'll find that some settlement companies also take a proactive approach - when it comes to dealing with the lenders. I had a case, where the banks approved it in a matter of 4 weeks! Which is rare, really rare.  The listing agent has been doing a lot of short-sales, so she knows what it takes to close the deal. On top of that, my client gets closing assistance, and the  first mortgage lender agreed to pay the second  mortgage.

And my client asked 'why?' ..that fast. Sheesh..

#2. The listing price sometime is not the closing price you ended up with.

If the property still in good conditions and priced competitively, it'll invite contracts. So, multiple buyers compete for 'that one' house. Higher demand drives up its price. On the other hand, since a short-sale transaction has to be approved by the bank/s (holding the loan/s) or what the industry call 'third-party-approval' the list price might not be the one bank wants to approve. In MLS, there are two kinds of remarks, one for agent and one what the public - you - see. The one for agents have all kinds of remarks that buyer agents read before proceeding.

The take home message is: Don't get too excited when you deal with short-sale (even after contract is ratified). You should continue looking, just in case.. The contract you're putting on - doesn't go through. (Or, your lender refused to financed your purchase).

Because things do happen..

--

FOR MARKET UPDATES, FOLLOW ME ON TWITTER

How to Fix Mold

Mold is a common problem you find in distressed properties (bank-owned and the like), esp. if properties been on the market for a while. Most likely is these properties are vacant.

Here is a quickie way to trouble shoot mold..

How to Access $8,000 Tax Credit for Dowpayment & Closing via VHDA Loan Program

A while back HUD announced that FHA will allow state housing finance arms to provide second mortgage so you can use the 'anticipated' $8,000 tax credit towards your downpayment and closing costs to buy homes with FHA-insured loans. (h/t NAHB)

The big question is "how do you do it?" Yup- that is how. Last weekend I was out with a client. We talked about this tax credit thing. (This client used to work for IRS). She says that "she is familiar about how tax credit works however, she found out that none of the lenders she talked to, know how to do it. If such thing is available, she would like to apply for one."

The thing with tax credit is, you have to file your income tax first before you can get the credit. So, if we're talking about the deadline for the credit, closing by November 30, 2009 - you have a problem here. Because technically, you can't access the credit before you file your taxes. See how it's complicate things a bit..

Don't worry now. We've got the the answer to this "how" can you access the credit for downpayment and closing. It is done through state housing agencies. According to NCSHA (Natl. Council Housing Agencies), a number of state housing agencies offer this kind of program: Colorado, Delaware, Idaho, Kentucky, Missouri, Nebraska, New Jersey, New Mexico, Ohio, Pennsylvania, Texas, Tennesse and Virginia. (if it's not listed here, there's no such thing available in your state).

It's just because I do biz in Virginia, will talk about VHDA program. This is how the program works, via VHDA:

• Eligibility: Borrowers must meet federal First-time Homebuyer Tax Credit requirements as well as VHDA's requirements regarding first-time buyer status, income limits, sales price, etc.
  
• Maximum income: The combined income of all household members may not exceed VHDA's maximum income limit. For example, Wash DC MSA, 2 or fewer can't make more than $86,900. (more about max. income limit, here)
• Maximum sales price: On the 2 or fewer max. income above, the maximum sales price is $408,100.
• Max. sales price/ total loan amount: The combination of 1st and 2nd loans cannot exceed VHDA sales/ income limits.
• Minimum credit score: 620.
• Qualifying ratios: FHA ratios of 31% payment-to-income/ 43% debt-to-income apply. 
• Required borrowers funds: Must have a minimum of 1% of the sales price "VERIFIED" as their own funds to be contributed towards the transaction or have it available as reserves.
• Pricing options: Pricing options are available (think this info is for lenders). Rate on first and second mortgage will be the same (this is good!). No points or origination fee charged on the second mortgage. - emphasis added

So the program is designed to fill the need of first-time buyers. Oh, not all FHA lenders work with this kind of program. Only VHDA approved lenders offer their products.

The catch: you have to take a "free" VHDA homeownership seminars. That's it. Here is where you find out about the classes..in Northern Virginia.

DC Region Condo Shortage (possible) in 2010..

Sounds like the tide might be turning in 2010 if sales continue at current (robust) pace. The Washington Biz Journal reports that new report from Delta Associates shows that prices down and sales volume exceeding 600 units for the first time - since 2007. The two factors contributed to the high sales volume are 1) historically low interest rates and 2) tis' busy buying season.

On the other hand, supply might be on the low end come 2010 said Greg Leisch, Delta CEO. Because it takes time to build new condos. So, take note of this.

"Greg Leisch said the dwindling pipeline — now at its lowest in five years — will likely result in a shortage by 2010, causing effective prices to rise. Prices tend to rise when there inventory-to-sales ratio is at three years or less. It is currently at 1.7 years in Arlington and Alexandria and 2.8 years in D.C. For the region, it is 5.1 years."

Remember those condos (Park Crest, Zoso, Io Piazza and more) that were converted to apartments because of market conditions, there's possibility that those apartements be converted back to condos to fill the gap...

[via Washington Biz Journal]

First American CoreLogic: Wash-Arlington-Alexandria Home Prices Decrease..

According to the latest LoanPerformance Home Price Index from First American CoreLogic, even though Washington-Arlington-Alexandria home prices have decreased by -13.84 percent in April, it's an improvement from March. In March, the home prices showed a decrease of -14.09 percent from a year ago. Across the U.S., the national housing price fell -10.2 percent in April compared to a year ago, which represents the smallest year-over-year declined in 2009.

The LoanPerformance HPI is a repeat-sales index that tracks increases and decreases in sales prices for the same homes over time, which provides a more accurate "constant-quality" view of pricing trends than basing analysis on all home sales. The LoanPerformance HPI provides the most comprehensive set of monthly home price indices and median sales prices available covering 7,649 ZIP codes, 958 Core Based Statistical Areas (CBSA) and 676 counties located in all 50 states and the District of Columbia.

 

for larger view, click here

The top ranking states for 'annual depreciation' this year are Nevada (-26.1%), Florida (-23.2%) took second place from California, California's home situation have improved (-22.7%), Arizona (-20.5%), and Pres. Obama's home state, Illinois in fifth rank (-17.4%).

Mark Fleming, chief economist for First Core Logic, says that..

“There is still a great deal of uncertainty with the housing market and the economy in general. But the rate of change in home price declines is beginning to show signs of not only a bottoming, but an improvement in both nominal and real terms, which is the more important indicator because real prices adjust for the distortions caused by inflation or deflation.”

Furthermore, according to the study, since U.S. home prices peaked in 2006 (over here in DC region, I think it's in 2007), national home prices have declined 21.2 percent on cumulative basis and currently down to the lowest price level in 5 years.

For more details here..   

DC Housing and Transportation Calculator

 Over at the Urban Land Institute, they have a housing and transportation calculator, a neat tool to help you calculate the combined housing and transportation costs in Washington DC region. 

The Housing + Transportation Calculator was developed to help individuals, households, planners, and municipalities understand the true costs of housing and transportation, as well as how these costs can vary from place to place.

Okay so I play around with the calculator using a couple different locations, metro accessible, inside vs. outside the beltway. In my example, I use hoods inside the beltway vs outside. McLean, Falls Church zip code 22043, Arlington's Pentagon City zip code 22202, Columbia Pike (which has no close Metro station but accessible by metrobus) zip code 22204 and Alexandria City for inside the beltway hoods vs. Burke, Reston in Fairfax County and Bristow out in the neck of Prince William County for outside the beltway hoods.

Here's the comps for one person with one car:

click on image for larger (+) view

So you see the two components housing and transportation can make a difference in your living style. Transportation can make a big ding to the total cost of owning a house. The farther out you live, the more you will pay for transportation. (calculator based on $2.4 of gas per gallon).

Think gas back at $4 a gallon..

The other thing is. When you look at Alexandria City vs Arlington, they're pretty close together places. However, because housing cost is relatively cheaper, your money stretch a little bit farther in Alexandria than in Arlington. Reducing the two costs would be the "ideal" situation.

In addition to the two costs, there are other info as well, like the transit connectivity (bad vs good), density, and more - you can find there.

To create your own comparison, you can go here.

The New 2009 Laws, If You are Renting in Virginia

Virginia's new bill HB 2080 covers Landlord and Tenant Laws that will become law effective July 1, 2009 .

• Requires the landlord to give notice for insecticide application. Tenants must follow written instructions to prepare the unit for insecticide application and pest elimination.
• Eliminates the landlord’s obligation to pay for mold remediation when a result of tenant actions.
• Removes tenant’s right to repair or replace damaged items. The landlord may now charge all costs to the tenant, payable on the next rent due date.
• Sets liquidated damages at 150% of the per diem of monthly rent.
• Requires written notice to tenants when a mortgage default or pending foreclosure notice is received.
• Sets 2009 deposit interest rates at 0 percent.

[via Update]

It’s good that the State now requires landlords to let the renters know that there’s the possibility of short-sale or foreclosure – way ahead of time. I've heard too many times renters didn’t know about it until a few days before property got foreclosed!  Just because landlord got foreclosed on, renters  sometime can’t get their deposit back.

Details on renters protection from the Fed for are here, here and here.

Technorati Tags: housing market,virginia,northern virginia,real estate,foreclosure,real estate trends,general assembly,hb 2080 2009,landlord and tenant laws,mold,distressed properties,short sale,upside down investors,arlington,alexandria,falls church,mclean,vienna,oakton,springfield,reston,herndon,chantilly,centreville,prince william county,loudoun county,fairfax county,rental

2009 Virginia New Green Laws

Legislation passed by the General Assembly in 2009 in Virginia becomes law effective July 1, 2009. The same thing with the no text message bill while driving law that will become law come 7/1.

These are the new "green" laws for 2009, that includes land development, environment and taxation:

Preservation of Historical sites (SB 1416) - allows the local governments to establish areas of known historical or archaeological significance and to require development applicants to document how they will preserve such resources.

Land Preservation Credit (HB 1891/SB 986) - reduced from $100,000 to $50,000 the amount of the land preservation credit for tax years 2009 and 2010. Affected taxpayers may claim the credit for two additional years. 

Open-Space Easements (SB 907) - authorizes estate trustees to donate open-space easements to obtain estate tax exclusions.

Green Roofs (HB 1828, HB 1975/SB 1058) - allows localities to offer incentives for green roof construction.

Certification of Buildings (SB 1004) - allows architect to certify energy-efficient buildings for local taxation purposes.

Geothermal Heating (SB 1128) - requires the Board of Health to allow the construction of wells used solely for closed loop geothermal heating systems.

Clean Energy Financing (SB 1212) - allows localities to provide loans for initial acquisition and installation of clean energy improvements.

Stormwater (SB 982) - requires localities to provide full or partial waivers of charges to any person who redevelops or retrofits property to permanently reduce stormwater flow and pollutant loading. 

[via Update]

There you have it..

For more in-depth coverage of these bills, check out Virginia Legislative Information System. And to learn more about other Virginia green initiatives, go here.

Home Inspection and its Consequences - for Buyers

 Given the current market conditions, (where we have a combination of regular sales, short-sales, and foreclosures) there are two types of sales contracts floating around, whether it has a "home inspection contingency" or not. A home inspection could be a contingency (condition) in a home purchase that has to be statisfied (and lifted) when the work is completed.

Pre-2006, there's a high percentage of buyers skipped home inspection because they wanted to win the bid - of owning a house. In Realtor's lingo, at that time agents would tell the listing agents "we have a clean contract." Meaning no contingencies (financing, appraisal and home inspection). However, times have changed since then. Post-2006, home inspection becomes the norm again.

Then distressed properties flooded the market. With these kinds of properties, you are buying properties As-Is. There are different consequences to the sales. (disclaimer: am not a legal professional so what am going to discuss here only to illustrate examples)

What is a home inspection?

From our friend at Wikipedia.

A home inspection is a non-invasive examination of the condition of a home, often in connection with the sale of that home. This is carried out by a home inspector, who usually has special equipment and training to carry out such inspections. A home inspection report is then issued by the home inspector. Many home inspectors use home inspection software.

An inspector will check the roof, basement, heating system, water heater, air-conditioning system, structure, plumbing, electrical, and many other aspects of buildings looking for improper building practices, those items that require extensive repairs, items that are general maintenance issues, as well as some fire and safety issues. Home owners or home buyers often use a home inspection service before selling or buying their houses. A home inspector conducts a thorough examination of a home to detect any potential systems or components requiring attention. A home owner receives a detailed report of the condition of his/her home so that he/she can plan for needed repairs and upgrades when it is time to make them.

Here's what typically you find inside a home inspection report:

• structural condition and basement
• electrical, plumbing, hot water heater, heating and air conditioning
• quality, condition, and life expectancy of major systems
• general interior, including ceilings, walls, floors, windows, insulation and ventilation
• kitchen and appliances
• general interior, including roof, gutter, chimney, drainage, grading

In other words, a home inspector only check those 'accessible' areas of the building and is limited to visual observation. Depending on the size of a property, a home inspection may take a couple of hours.

Buying a home with home inspection

When buying a home with a home inspection contingency, your agent will include a Home Inspection and Radon Contingency form. The language is legalese. (we're using regional form for DC-MD-VA jurisdictions, so it's a standardized form)

Basically what it says in the contract: a) you have a deadline to meet or send Seller the report before deadline, and b) utilities have to be on. Make sure you understand the utilities have to be on - covers only when you do regular sales - with a home inspection contingency. Because buying As-Is have different consequences.

Once you do home inspection, now what?

You and your agent will go over the home inspection report and come up with a list of things (part of the inspection) needed to be fixed. Once you and your agent decided what items from Property Condition and come up with a list, your agent will send your request to the Seller via the listing agent. When Sellers received the request to fix some things, they have so many days (you decide) to either: 1) yes, will fix it therefore will counter your offer, 2) no we don't want to, sorry, or 3) we decided not to respond (silence is golden?). 

Then what usually happened behind the scene, when Seller responded: Two Realtors representing buyers and sellers - negotiate the deal. And the dialogue goes back and forth until both parties agree to a term/ solution to remove the contingency.

If a Seller decided to give no say, or no respond, then deal is off...unless you're willing to pick up the tab.

The game changes when you're buying an As-Is property. The paragraph from sales contract on As-Is property condition.

The Property is sold in its "As Is" physical condition, to be determined as of the - contract date, date of home inspection, settlement or other. The Seller makes no representation or warranty, express or implied, as to the condition of the Property or any equipment or system contained therein. The Seller will have no obligation to make repairs to the electrical, plumbing, heating, air conditioning, or any mechanical system, equipment or fixture. Smoke detectors will be installed and functioning as required by the laws or regulations or the appropriate jurisdiction. (emphasis added)

Most of the distressed properties on market are for sale under this As-Is condition. For bank-owned or REOs, most likely the properties are winterized (utilities turned off). Reading the paragraph, all the Seller has to do is to make sure that the smoke detectors are on. That's it. Nothing in the paragraph says that the utilities have to be on. If you want to do a home inspection, you will have to pay yourself - to de-winterized the property - so your home inspection guy can come in and do the work.

So, between regular sales and distressed sales - with respect to home inspection - each type of transaction exposes to different risks and consequences. One on hand, when you don't have to do home inspection you save a couple hundred bucks to thousand dollars (depending on the sales price and size of the property) on this expenses. On the other hand, if you want to do it, it may save you thousands of dollars down the road, because you know what's coming ahead - and you can do something about it. Like buying a home warranty.