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

Chantilly, a 6-Figure Town

Who knew? Chantilly got into #11 in Money magazine 6-figure towns. There two Chantilly hoods: in western Fairfax county and in southeastern part of Loudoun county. Parents gotta pay attention to where the house is located if they're buying. Because kids who live in Fairfax part go to Fairfax Public Schools, and those live in Loudoun go to Loudoun Public Schools. (If you want to know the school ranking, go here.)

Population: 46,708

Median family income (per year): $132,603

Median home price: $360,425

It bears the same name as a town in France, but this bedroom community just outside Washington D.C. is a distinctly American town that allows its wealthy residents to work and play in style.

Once the site of the Battle of Chantilly during the American Civil War, the historical area features expansive million-dollar homes surrounded by private and public golf clubs. Blue chip companies such as Boeing, General Dynamics and Lockheed Martin are among the prominent employers in the area, which also boasts some of the best public schools in the country. 

[via Money Magazine]

What else Chantilly is known for? Dulles International Airport, Steven F. Udvar-Hazy Center (Smithsonian Annex Museum), and HQs of National Reconnaissance Office. Sully historic site also located in Chantilly, which after succession of ownerships is part of Fairfax County Park Authority.

The dwelling house at Sully Plantation was built in 1794 by Richard Bland Lee on land that had been patented in 1725. Lee was the first congressman from Northern Virginia and an early member of Phi Beta Kappa. His vote brought the capital city to the banks of the Potomoc. Lee was appointed by President Madison as one of the three commissioners to superintend the restoration of federal buildings burned by the British in 1814. Born at Leesylvania in Prince William County in 1761, Lee died in Washington in 1827. [via HMdb.org]

The best thing about Chantilly is: The housing prices. There are two zip codes there 20151 (Fairfax) and 20152 (Loudoun). So look for zipcodes when you're buying in Chantilly - Fairfax or Loudoun.

At-a-Glance

Chantilly, Fairfax (20151)

Active listings: 46 (from low $109,000 for condo to $1.2M mansion

                                    2009                           2008                      % change

Sold                              36                                 38                            -5.26%

Ave. sales                 $334,876                     $401,219               -16.54%

Median price           $304,000                    $355,750             -14.55%

Days on market         56                                88                           

Chantilly, Loudoun (20152)

Active listings: 54 (from low $254,000 condo to $1.3M mansion). Entry-level homes are higher over here than in Fairfax. South Riding neighborhood (new homes) is located here.

                                    2009                            2008                      % change

Sold                                49                                 56                            -12.

Ave. sales                  $425,273                    $465,629             -8.67%

Median price            $409,052                    $418,500            -2.26%

Days on market            64                                57

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data: MRIS

Buyers Rushing to the Finish Line.. to Claim the $8k Tax Credit

For No. Va., NVAR June stats shows that total number of homes sold up 14.16% from 1,900 to 2,169 homes. Year-to-date homes sales up 11.87% from 8,014 to 8,965 homes. Homes under contracts up 17.12% from 2,103 to 2,463 homes. Still wonder why multiple contracts are back? Here are the indicators.

• Inventory indicator down 36% is at 3.5 months down from 5.49 months last year. 
• Active listings down 27% from 10,440 to 7,617 homes.

DC is a different market than N. Va. According to GCAAR, DC condo sales, up 2.8% from 247 to 254 units. However, year-to-date sales still down -18.1% from 1,324 to 1,084 units. Though, listings declined 4.3% from last year. For detached and townhomes sales is better. It's up 20.8% from 269 to 325 homes. On year-to-date is up 4.2% from 1,357 to 1,414 homes.

Buyers are out there snapping properties left and right. First-time buyers primo motivation: To claim the $8,000 credit.

139 days (4.5 months) to go before the deadline to claim the $8,000 tax credit. Deadline is November 30, 2009. You MUST go to closing on or before 11/30/09 to claim the credit or lose it. Unfortunately, a tax credit kinda - use it - or lose it. There's no way around it. This year's tax credit is different than 2008 credit in which buyers have to pay back the loan in 15 years. For 2009 credit, it's free. No payback.

Speaking about timing. In real estate, 'time is of the essence.' Timing is very important. And 4.5 months is not a long time in real estate. It normally takes 45-60 days from ratification of sales contract to closing. This is only for regular sale and bank-owned properties. Short-sale, who knows? Your guess is as good as mine. It could be as short as 4 weeks or as long as 6 months or maybe even longer. However, lenders are faster now to turn around short-sale approval.

A typical planning, scheduling (short-cut) to get the house you want, goes like this.

I. Previewing homes: 4-6 weeks.

The more inventory the better. The less, uhm - a problem with timing there.

II. Once you know what you want to buy, depends on the type of sale it make take time to get to ratified contract.

a. Short-sale waiting for lender to approve the sale: 4 weeks (the shortest time) to 3 months (or maybe longer)

b. Foreclosure: once accepted, bank ratifies contract 1 week to 2 weeks.

In this market, many buyers are going after the under $400k homes. If you're one of them, I got news for you: Multiple contracts, contract date deadline (when contract must be submitted by such and such date and time) - is the norm. Even for short-sale properties! The higher the price range, the less competition you have. Prepare for extra time, in case you got into the bidding wars. You can read stories about multiple contracts here, and here.

III. Lender approval process: a minimum of 1 month.

In 2005, lenders can approve the loan in a blink! Now? It's a different story. A lender once told me "FHA is in the long .. " Gone are short approvals. Appraisal, is part of the approval process. If your appraisal comes in lower than your offer, you got 3 options: 1) either proceed at whatever 'modified' loan you qualify, 2) seller lowers the price, or 3) void contract. This appraisal thing deserve another post. Because it's a game change.

Even if you are "remotely" thinking about it, we're talking about 2-4 months process from where we are today. Which isn't much time left, really. And you know what, you don't want to wait till the last minute. Because things do happen. Even if your lender is ready to go, sellers' lender might not. We have a case right now, where lender told the settlement company, it may take up to 4 days to turn around the payoff package up from the normal 4 hours turn around! The thing is, you don't want to get into the last minute scenario to be told 'uhm, we're not ready to close" by anyone's (seller or buyer) lender.

Oh one more thing, say you have no money for down payment, but your credit score is good (min. 620). In Virginia, you can get help from VHDA that will advance you the "$8,000" credit for your down payment. (the financing process via VHDA may take longer). How about closing costs? That's something that you can always ask the seller to contribute.

So, get your b*** out there, now .. before it's too late..

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..

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.

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.

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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.

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.