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..

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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..

DC Condo Sales May 2009

Since we're in the mood of condo today, might as well take a quick look at condo sales in Washington DC. This is quite interesting. Just by looking at the numbers, DC condo market still struggling, maybe because prices still up. The average condo sales is up from $411,663 a year ago to $433,421. The median price is flat at $360,000. The same from last year.

What's good about condos on the market in DC is this: Inventory drops -3.9 percent from 1,530 to 1.471 units. Other than that, market kinda slow.

On the sales side. The number of condos sold last month declined -20.1% from 259 to 207 units. Year-to-date sales volume dips -23.1% from 1,053 to 810 units. Furthermore, about 79 percent of all condo sold in DC in May are condominium under $500,000!

Break it down into price range, looks like the million dollar (luxury) condos are the winner in this market conditions. Those condos over $1.25M showed some sales improvement. From the range of $1.25M to $1.49M, sales up are 150%  and over $1.5M condo - sales are up 140%. While condos between $150k to $800k are all saw sales in the red. What an interesting trend. This is pretty amazing..

 

click on image for larger view (+)

Who are those million dollar buyers? Obama people?

So, apparently low interest rates and robust buying season (like what Delta Associates condo report showed)  don't help DC condoscape that much..

data: MRIS

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..   

Weekly Roundup

Which will hurt credit more, a bankruptcy or a foreclosure?

WASHINGTON (MarketWatch) -- Question: I am in a quandary. I don't know which will damage my credit score more, allowing my lender to foreclose on my house or declaring bankruptcy to buy myself a little more time. So my question is this: Which does more damage to a person's credit score, foreclosure or bankruptcy? And why?

Stay Cool, Naturally

Conserving energy rather than cranking up the AC will not only help cut greenhouse gas emissions but also keep your money in the bank. More than 40 percent of a typical family’s costs are spent keeping their home at a comfortable temperature.

Blight's Bargain, the Unfortunate Location

A WEEK after he moved into the circa-1800 farmhouse he had always dreamed of owning, David Evans spotted something glinting in his backyard. Within two hours, he had unearthed 19 spark plugs.   

Bill Gates Buys Historic Wyoming Ranch

Bill Gates, the world’s richest man, has reportedly purchased Irma Lake Lodge, a famous Wyoming ranch once owned by William “Buffalo Bill” Cody, who may have been one of the earliest successful entrepreneurs.

Anyone Want to Buy a Condo? Anyone?

Potential condominium buyers are facing a tough choice right now: new or used? There are deals to be had on new condos, as developers heavily discount units to move inventory. But getting a mortgage is tough.

Green Cubed Modern Eco Lux Home

This is the Green Cubed house, which was designed by Nelse Design + Build.  Located on an infill lot in the Phinney Ridge neighborhood of Seattle, the 5-star home was recently the superstar of a Green Built home tour.

HUD Offers $58M for Housing Counseling

The U.S. Department of Housing and Urban Development today announced that more than $58 million is available for a broad range of housing counseling programs to help families find and preserve housing. The funding is an increase of $11 million, or 23 percent, over last year.

The best U.S. transit systems you never knew existed

When it comes to public transit in the U.S., there are certain predictable all-stars: the Metro in Washington, D.C., is convenient, efficient, and clean. The anthropomorphically nicknamed El and BART in Chicago and San Francisco are legendary. And everyone knows it’s easier to navigate New York City without a car than with one.

Foreclosures grind on as lenders fail to modify loans

The Obama administration's $75 billion program to reduce foreclosures has been beset by backlogs and delays, leading many overstretched homeowners to complain about unreturned phone calls and inaccurate information from lenders, while others say they were denied help for reasons that weren't clear.

NEWS FROM AROUND GREATER DC REGION:

• Inner Harbor Ritz condos: 21 sold, 171 to go [Real Estate Wonk]
• Region's Economic Performance Ranks High [Washington Post]
• D.C. convention center hotel deal close [Washington Biz Journal]
• Drive in Traffic, Get Paid [We Love DC]
• Study to look at biker, walker paths near BRAC in Bethesda [Gazette.net]
• 26 Reasons to Love Washington [Washingtonian]
• Va. close to finalizing HOT deal on I-95/395 [WTOP]
• Dulles Rail focus turn to Herndon [Examiner]
• Color Primer [Washington Spaces]

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.

What is Seller Subsidy?

The last I checked, we are still in a buyer's market. So these days is pretty common to see buyers got some sort of seller subsidy or closing cost assistance. (Whatever term you want to use, it has the same meaning)

What qualifies as seller subsidy? Here is the paragraph on the subsidy from regional contract (DC, MD, VA). (Paragraph 10 for conventional financing).

Based on the financing terms specified in this Contract, Seller with pay at Settlement  $-------- (whatever amount or percentage of sales price)  toward Purchaser's charges, (including but not limited to loan origination fees, discount fees, buy down or subsidy fees, prepaids or other charges as allowed by the lender). Purchaser will pay all remaining Purchaser's charges. If applicable, Purchaser will pay insurance required by lender. It is Purchaser's responsibility to confirm this with his lender, if applicable, that the entire credit provided herein may be utilized. If lender prohibits Seller from the payment of any portion of this credit, then said credit shall be reduced to the amount allowed by the lender. 

Got hung up on some terms? Terms explained.

The term "points" is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Points also may be called loan origination fees, maximum loan charges, loan discount or discount points.

A typical amount of assistance is 3% of sales price, though a few lenders allow it to 6%. If you're buying a $400,000 home, you can ask up to $12,000 for seller's credit. It doesn't mean that you're going to get it. You're just ask, okay. It's worth the asking. (Yes, you can also ask banks when buying foreclosure).

Seller's subsidy is a 'negotiable' item. What comes next in money-related-thing in a transaction is: 'Home inspection.' If you're doing home inspection, and sellers know that they might get hit with some repairs on the house, you won't get the full amount. Unless a) sellers are desperate, or b) sit on decent profit margin (after expenses). 

It depends on the type of loan you're financing the purchase with - if you ask for subsidy - it's important to ask your lender before hand the max. amount. Lender is a gate keeper in this case.

Oh one more thing. The funds credited at settlement from the seller (on your behalf) either you use it - or - lose it. If you asked more than you need, you will lose the rest. The balance goes back to the seller. So if you asked and received $12,000 credit from seller, but at the end of the day your expenses are not more than $10,000 - seller will get back the $2,000 at closing.

Foreclosure Goes Upscale: Business Week

The second wave of foreclosures? Mortgage Bankers Association report pointed to that prime loans no longer immune to foreclosures. And then there is this:

According to research by the National Association of Realtors, there are enough $750,000-plus homes on the market to cover more than 40 months' worth of demand at the current rate of sales. That's four times the rate of oversupply in the housing market as a whole.

[via Business Week]

Time to buy?