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

Stumbling Blocks to Condo Purchase

Today's buyers market is very populated with either investors or first time home buyers. The two groups are bidding each other out in some transactions, especially in buying distressed properties, i.e. foreclosure.

Here are two big stumbling blocks to condo purchase:

1. Down-payment.

Most investors got an advantage in terms of funding. Often times, they come in with cash. So, they will have no problem with down-payment. However, on the downside for investors, they are not really 'welcome' in condo developments that have already higher ratios of investor to owner-occupied.

Solution: if you live and work in Virginia, VHDA can help you 'bridge' that. (if your finances fall within their limits).

2. Financing.

Banks are reluctant to lend to condo borrowers since foreclosure and short-sales tend to be concentrated in the lower priced homes. Unless condominium building is FHA-approved, which requires only a minimum 3.5% down-payment. It will be a big challenge for first-time buyers, if condo is not on the approved list. Sometime your lender can do on the spot loan, but, that is kinda up in the air. 

A write-up from Lisa Fowler with GMU Center for Regional Analysis:

It has become increasingly difficult for condominium buyers to find financing. Since foreclosure rates nationally have been higher for condominiums, lenders have been more hesitant to lend. Also, Fannie Mae and Freddie Mac have been more cautious about insuring loans made to potential condominium buyers. Compounding that, Fannie Mae now requires up to 30 percent down to avoid an interest rate surcharge on a loan for a condominium, and it will only insure loans to people buying new condominiums in projects where at least 70 percent of the units are sold or under contract to owners.

The FHA, which is one of the only alternatives for buyers without a 20 percent down payment, will provide loans only to condominium buyers purchasing a home in an FHA-approved condominium project. (emphasis added)

The 70/30 ratio is a big, big challenge for new condo projects unless they can get FHA to approved their projects. Velocity condo in DC told reservation holders, who are using either VA or FHA, "..to ante up their DP to 20% for it's extremely difficult to find a mortgage lender until building is 51% sold." (building is less than half sold).

Resale condos might not have problem with the 70/30 ratio, though it might have another challenge, which is the investor to owner ratio...

Related articles by Zemanta

• Twelve Percent of N.Va. New Listings Under $200,000 in First Half 2009 (metrodcliving.com)
• Your Money: Seven New Rules for the First-Time Home Buyer (nytimes.com)
• First-Time Home Buyers: Use $8k Tax Credit For Down Payments Or Closing Costs? [Recession Watch] (consumerist.com)
• Foreclosures: The struggle continues (money.cnn.com)
• Buy a Foreclosure with a New Government Program (usnews.com)
• Those Who Walk Away (meganmcardle.theatlantic.com)

Do You Know Who Your Agent Works For - 'Exclusively'?

Image by Kathy McGraw via Flickr

We skip weekly roundup for this more important topic.. - dewita

---

There are three types of representations (agency relationships) for buyers and sellers in any real estate transaction. 

Agency relationships in residential real estate transactions involve the legal representation by a real estate broker (on behalf of a real estate company) of the principal, whether that person or persons is a buyer or a seller. The broker (and his/her licensed real estate agents) then becomes the agent of the principal. [wiki]

Buyers: do you know if your agent "only" represent you exclusively, as your buyer agent?

Buyer agency can exist exclusively (where a brokerage firm chooses to only represent buyers and never sellers, as an exclusive buyer agent) or, in a full service company, by offering buyer agency to buyers who become clients. [wiki]

Or, does your agent also work for the sellers as their "listing agent?" Sellers: the same question goes to you.

If your agent is working both sides of the transactions, we call this 'dual agency' or 'dual representation'. Many states, including Virginia, allows dual agency. Most agents only represent one side at a time, but, there are agents out there who are doing both sides.

The 'dual agency' transactions might not happen so much in resale. But it's not so with the new homes.

Before you walk into any new homes' sales office, you need to understand this: that builder's sales reps work for the builder to represent the builder - and "not" you, the buyer! Their sales agents work exclusively for the developer to protect builder's interests. So, if a builder sales rep writes a sales contract for you, and you are not represented by any Realtor - that means you have "NO" representation - at all! Nothing. If they write contracts, they're just doing admin stuff for you. And they have no fiduciary responsibilities to you, other than "you are" the company's customers. Yup- you read that right.

 To put it in perspective, here's something worth reading. (I'm putting it in its entirety). Via MarketWatch e-newsletter (subscription):

When home prices are rising and houses are selling like hot cakes, realty agents don't have to worry so much about where their next commission check is coming from. In the boom times in the middle part of the decade, the market pretty much maximized incomes.

Not so today. Commission checks are much harder to come by and they are way smaller when they do come, given the drop in home prices across most of the country. That can lead to shenanigans among unscrupulous agents as they try to pocket as much cash as the can from deals, including the unethical practice of favoring buyer offers from their own clients or their brokerage-represented buyers, practices that let them keep both sides of a commission split.

That's why this is a good time to remind home buyers -- and sellers -- what the concept of agency means and why it is critical that you know who your real estate representative really works for. That's especially important when you are dealing with situations of dual agency, in which a broker is acting for both sides -- a situation ripe for abuse. (emphasis added)

Not that there weren't plenty of nasty tricks going on in the boom, too, especially in the sale of mortgages. But in the bust the financial incentive to stray can be boosted by desperation as well as greed.

-- Steve Kerch, assistant managing editor/personal finance

It's Cheaper to Wreck These Houses..

...than finished the development to sell them, according to the bank that owned these 16 houses that were acquired via foreclosure. 

What You Should Know: Basic of New Home Warranties

You gotta to know this that the new home industry is so different than the existing market (or resale). Builders have their own standards including their own contracts. I am not even going to discuss contracts here because that is outside the scope of my expertise, but there are certain basic things that you as a buyer should know about new home warranties.

There's all kinds of variations on warranties out there that covers all or part of a new home, i.e structural, new construction, remodeler's home improvement, extended warranty, and more.

Generally new home warranties fall into three categories, via Realtor:

1. Statutory. These are warranties specifically required by law. Some states, including Indiana, Louisiana, Maryland, Minnesota, Mississippi, New Jersey, New York, and Virginia, have passed new-home warranty acts that require builders to provide protections to home buyers. These warranties range from two years for the quality of workmanship and materials to 10 years for structural defects.

2. Implied. These are warranties inferred by legal precedent set in past lawsuits. Today, most states have case law that protects new-home buyers from faulty workmanship. One of the most common implied warranties is the implied warranty of habitability, which guarantees that the house will be free from defects that substantially impair its use and enjoyment. Such a warranty often covers significant defects in the plumbing, electrical, roofing materials, and structural systems such as the foundation. This warranty may also include a guarantee to the initial buyer that the materials, products, or fixtures that make up the home (such as the plywood or siding) are free from defects.

3. Express. These are written warranties provided by the home builder. A builder may decide to provide express warranties about the home in the purchase contract, even in the absence of a law requiring it to do so. The express warranties might read something like: “The builder of this home hereby warrants the quality of the completed structure for two years from the date of completion.” Specific express warranties often benefit a home builder because the builder may attempt to disclaim all implied warranties by providing specific ones. For example, if a builder provides an express warranty covering structural defects for a period of five years from the date the home is completed, it will probably try to disclaim implied warranties that cover the same defect for a period of seven years. However, most courts hold that a disclaimer of an implied warranty is void because it defeats the purpose of the warranty: to protect consumers from faulty workmanship.

(emphasis added)

Based on observations, the big builders use typically have 'strategic business partnerships' in place with major home warranty companies. In this case the warranty company is the 'gateway' between you and the builder.

The one thing that you should NOT do is: to hire a professional to repair the alleged defect and then file a claim against the builder.  Unfortunately, in the builder's world - it doesn't work that way. They have disclaimers in place to prevent in the legalese term 'actions against them for defects.' In layman's term lawsuit...

Read full story here..

Tysons Route 123 Dulles Rail Construction to Begin

image: Dulles Metro

Pre-construction work for phase I Dulles Metrorail  slated for Route 123 Tysons Corner area, schedule to begin the week of the 15th, which is this week. If you work, live, and play around Tysons, you know that this is going to be a traffic nightmare just to get around the area. Because you get the regular rush hour traffic and holiday traffic (holiday shoppers) to the mall - combined.

Via Dulles Metro.

The work will take place on land bounded by International Drive and Tysons Boulevard, and by Route 123 and Galleria Place. The site will be cleared of existing brush and vegetation to make way for construction trailers, utility relocation work, and the start of the easternmost section of a 2,100-foot tunnel that will run below the intersection of Routes 7 and 123. This is the highest natural point in Fairfax County. Existing trees will be retained along the perimeter of the property. Some of the trees may have to be removed during future construction of the tunnel.

For the latest traffic updates check out here.

Crossposted at In Tysons Space

McMansion Homes No More in Alexandria

image: Cameron Station

Over in Arlington, Alexandria City, Fairfax City, Fairfax, PG County, MD - either has regulations already in the books or in the works - for infill development of McMansion or Super-sized homes. The amendments include: height, front setbacks, garages, floor area ration (FAR), tree coverage and teardowns on substandard lots.

Alexandria City recently passed three amendments to address the super-sized homes issues. Three amendments approved by the City Council, via Update (subscription-only):

1. For houses that are 'too big.'

- Alexandria imposes Floor area revisions (FAR) for both residential and commercial. Removes exclusion on areas under 7'6" ceiling heights. Attic under 5' excluded. Vaulted ceilings over 15' shall be counted twice, and those over 25' counted 3 times FAR.

2. For houses that are 'too tall.'

- Dwelling height calculation is set at the greater of 25 feet or average building ht on the blockface plus 20%. Special permit is needed if owners looking to build homes that exceed those requirements.

- Front threshold heights. It's a permanent approval given to interim regulations. It limits the front threshold and by extension the first floor height. The new limit is average of front threshold height on the blockface + 20%.

- Measuring building height. This is how Alex. City would measure it: Building height will be measured from the lower of the pre-construction grade or post-construction grade to prevent cheating (for lack of better word) when builders using dirt along the foundation that gives the impression of decreasing building height. Other def are added for mansard and gambrel roof types. (sample of restoration of a gambrel home in Virginia).

image: gambrel roof (via Wiki)

image: mansard roof (via Wiki)

 

3. Curbing the growth of out-of-character houses.

To preserve neighborhood characteristics, the City gives incentives for front porches, detached garages.

- Open porches up to 240 s.f. is excluded from FAR calculations.

- Rear yard garages will be excluded from FAR measurements. Garages can only be used for cars (no more junks store in the garages).

More details, after the jump....

CRA: Foreclosure Trends DC Region

Some eye-opening stats & trends from the recent report on "Foreclosures in the Washington Metropolitan Region," via Center for Regional Analysis- George Mason University.

Mortgage foreclosure rate by county by April 30, 2008 per 10,000 units:

• Arlington (68)
• Alexandria (87)
• Montgomery (88)
• Fairfax (189)
• Frederick (91)
• DC (115)
• Prince George's (219)
• Prince William (722)

Obviously, Prince William county is the ground zero for foreclosures with City of Manasass with the highest number of foreclosure among all neighborhoods in Metro DC region.

source: CRA-George Mason (click for larger image)

PAST vs. CURRENT foreclosure situations

In the past, foreclosures happened because of divorce, lost job, economic downturn, and major unexpected expenses (i.e. medical bills).

However, if the current trends is any indication, foreclosures occurred because of: 1) sub-prime loans, 2) greater new home building activity. Look at the crash and burn trends for building permits.

source: Cardinal Bank Metropolitan Economic Indices (click for larger image)

Connecting the dots. The rush in building new homes in the past few years triggered higher number of purchase by speculators and first time home buyers using sub-prime mortgages. More details from the Federal Reserve of Richmond data shows that subprime related mortgage delinquencies for the District spiked up from 13.71% in second quarter 2007 to 18.85% in 2Q 2008.

source: Federal Reserve Richmond

These days, big builders clearly have adjusted their pricing to current market conditions - to just stay afloat. They probably see their margin (of profit) shrinking.

source: Federal Reserve Richmond

The other day, while driving to Haymarket, VA, I saw Hovnanian's billboard advertise a new community of $200's garage townhomes. That price..am sure, two years ago, K Hov would have priced it at no less than low-$300's!

Hmmm. With falling prices, you kind of wondering what the 'survival rates' be among builders.

According to CRA, the City of Manasass has the highest level of concentrated activity in the region. DC, PW county, Loudoun and PG county has also high level of foreclosure with dispersed activity. While Arlington, Fairfax, Montgomery and City of Alexandria has low level, concentrated foreclosure activity.

HOT SPOTS hoods with highest foreclosures:

• City of Manasass
• Dale City
• Gainsville/ Bristow
• Accokeek
• Woodbridge, Fredericksburg, Leesburg, Upper Marlboro, New York Avenue (DC), Columbia Pike and West End (DC).

So, foreclosures affected not only outer burbs but also close-in. New York Ave. and West End are close-in. How much closer can you not be in DC in those hoods?

UPCOMING hoods with spiked activity in foreclosures include Germantown, Centreville, Herndon, Alexandria (part of Fairfax County).

FYI. There are two Alexandria separated for tax purposes. The City of Alexandria and Alexandria with zipcodes of Alexandria, but the locality is part of Fairfax jurisdiction. The difference is in taxation. Residents of the City pays three layers of income taxation: Federal, State and City (local). Ditto with Falls Church. (h/t nobody special).

Foreclosure Trend Watching

Other hoods that CRA seen has low foreclosure activity, however, with continue decline in housing prices these neighborhoods 'might' see higher number of foreclosures in the future.

These hoods are:

• Olney,
• Falls Church (Fairfax county),
• Vienna and
• Adams Morgan.

The good thing about Washington DC is: The job situation. Among 15 largest metro markets - Washington DC ranks second! after Dallas, TX, added 44,600 jobs from August '07 to '08 - which is not bad considering the U.S. economy.

With the passing of bailout bill, the job market for financial related firms should pick up? Since Treasury is on hiring mode.

Fannie Deletes Higher Payment

Months ago, Fannie Mae decided that buyers should come up with higher down payment (DP)  in what they call 'declining markets.' (Read about it here). Maybe it's such a bad decision because it helps put on the brakes home buying especially for first-time buyers.

According to AP, Fannie decided to scrap the plan. So now only 3%-5% down is needed regardless of local market conditions (declining or not) which our area, DC metro region, is one of the 'declining markets.' We're now back to 97% or 95% loan-to-value ratio.

Via Fannie Mae.

"... Starting June 1, 2008, Fannie Mae will accept up to 97 percent loan-to-value ratios for conventional, conforming mortgages processed through its Desktop Underwriter^® (DU^®) automated underwriting system, and 95 percent loan-to-value ratios for loans underwritten outside of DU, in all geographic locations in the United States. The new national down payment policy will supersede the policy the company adopted in December 2007 that required higher down payments in markets where home prices are declining.

"As another part of our 'Keys to Recovery^TM' initiative, we are today announcing that we will be equalizing the down payment requirements for borrowers in all parts of the country, regardless of local market conditions," Marianne Sullivan, Senior Vice President, Single-Family Credit Policy and Risk Management, said. "This new down payment policy reinforces our goal to support successful home-owning, not just home-buying, as we seek to bring liquidity to all communities and help the housing market recover."

The new national down payment requirements of 3 or 5 percent will apply to loans for purchase of single-family, primary residences. Down payment requirements will vary for other occupancy, property and transaction types. The company will implement systems and operational changes over the summer to accommodate the new national policy. [emphasis added]

That's just the down payment part. Other restrictions still apply.

UPDATE: This announcement was so 'new' (announced this am) that even the loan guy in my office was not aware of this :-)

FURTHER UPDATE: Not clear if condo included in the new policy? It doesn't say about it anywhere in the context, it refers only to "..single family, primary residences." Does primary residence extends to condo? We have yet to see how this going to play out soon.

 

Dunn Loring New Homes

A while back, when I just get started tracking new homes for New Homes Trekker blog, the first post was this.

It looks like new homes will be built on this site sometime soon. I don't know exactly how many acres of lot. There are a couple of houses next to this one that's been bought out in addition to this house.

The site is about a block away from Merrifield Metro. Wonder what type of homes will be constructed on this site. Condos? Townhomes? Single Family Homes? There's no information available yet as of now.

Merrifield is part of Fairfax County Revitalization project and one of the fastest growing condo communities in Fairfax. Easy access to Metro, the Beltway, I-66 and Tyson's Corner helps fuel the going condo trends over here.

Fast forward a few years, there are two communities across the street from each other, Dunn Loring Chase and Dunn Loring Glen. Both of these communities are within walking distance from Dunn Loring metro station. That's why they name it Dunn Loring - and - something. Two different developers, Brookfield Homes and Dittmar Company, working the area across from each other's site. The constructions for single homes is an unusual move by Dittmar, because their core of business is rentals. The last condo they built in Arlington was converted to rentals.

Brookfield had done clearing the bigger land and ready to build 18 new single homes on the site. Not sure how many homes sit on the land before it was bulldozed to build the community. Across the street from here, Dittmar has already subdivided their (smaller) land for 7 homes.

DUNN LORING CHASE (by Brookfield Homes)

image: Brookfield Homes

Over here, Brookfield plans to build 18 Craftsman-inspired homes that offers 3,400-7,900 s.f. of living space and up to 7 bedrooms and 7.5 baths. The standard is 4 bedrooms, 3.5 bathrooms, and 2 car garage. Nothing has been built there yet. According to the sales rep, it'll take anywhere from start to finish 6-8 months after contract data. There are five different models (with different elevations): Chadwick, Dudley, Edgemont, Halley, and Meridia. It seems that the Dudley model offers the largest living area among these five models.

Each home comes with fully equipped kitchen, luxurious baths and energy-saving features. Few of the things you'll find in the kitchen: GE Profile Energy Star appliances, granite or silestone countertops, 42-inch oak cabinet, butler's pantry, kitchen island, morning room and hardwood flooring. Some of the features in the bathroom: ceramic tile floors and bathtub surround in bathroom, garden soaking tub (not sure I have seen this before) and separate shower in the master bathroom, private water closet.

There's only a few communities in our area that have build 'truly green homes.' At the most, you'll find Energy-Savings features. Here is some of the 'good energy savings' features.

• Energy Star appliances
• Clean and green recycling center
• Dual-zone gas heating for maximum efficiency
• 75-gallon, high-efficiency gas hot water heater
• Maintenance-free low-e, double glazed, insulated, double-hung windows with tilt-in sashes
• Insulated entry door
• Insulation in roof ceiling, overhangs, vaulted ceilings, exterior walls and basement walls
• Air infiltration prevention system
• Attic ridge vent system
• OSB with house wrap

The insulation in roof, overhangs, ceilings, exterior walls and basement walls plus the low-e double glazed windows and vent system - would help you maintain a lower energy bills, keep the house warm in the winter and cool (comfortable) in the summer.

Homes are priced from the low-$1 million.

DUNN LORING GLEN (by Dittmar Company)

model home

There are only 7 homes planned to be built in this community. One of them is already been completed, that's the house they use as a model home. Size of lots approximately 0.25 acre per home with finished homes from 3,600 to 6,500 s.f.

Each home features designer kitchen, luxurious bath finishes, and energy efficiency. Designer kitche features granite countertops, stainless steel GE appliances package, walk-in pantry, butler pantry with sink and wet bar. The energy-efficiency shares some similar features as Dunn Loring Chase even though not as comprehensive as what they have to offer here:

• Andersen thermal pane windows and sliding doors
• Efficient forced air gas heating
• Dual zone central heating and cooling
• 75-gallon 'quick recovery' gas hot water heater
• Tyvek insulated house wrap
• R-15 exterior insulation, R-38 attic insulation

There are two models available: Albermarle and Brentwood.

Homes are priced from low-$1.3 million.

Schools: Stenwood ES, Thoreau MS, George Marshall HS. Community info, here.

Crossposted at New Homes Trekker

Bob Peck Redevelopment Approves

Before and After: Bob Peck redevelopment

A new TOD [transit-oriented-development] gets approval from the County. Located a few blocks from Ballston Metro, at intersection of Glebe Road and Wilson Boulevard, the 4.82 acre project will include two office buildings, incorporating more than 400,000 square feet of office space and 36,000 square feet of retail space; 90 units of affordable housing, and 28 townhouses. Via press release.

“This project has it all,” said County Board Chairman Walter Tejada. “It adds to our stock of affordable housing in the Metro corridor. It replaces a  car dealership with well-designed, environmentally sustainable buildings that will offer first-class office space, ground-floor retail space, and a mix of affordable and market-rate homes. It will benefit the Ballston area and the neighboring community.” 

The last parcel for redevelopment in Ballston metro area gets a nod from Arlington county board. The site sits on the former Bob Peck dealership located a few blocks away from the Metro station.

A couple of things going for the project.

• Project seeks for Gold and Silver LEED certification (there are two buildings)
• Additional 66 affordable units which will rent anywhere between $1,050 (1br) to $1,500 (3br) designed to achieve energy efficiency and sustainability measures through EarthCraft rating
• Contribution of $5.9 million for affordable housing, utility under-grounding, full streetscape and substantial open space
• 28 market rate townhouse

:: Previous posts on Bob Peck, here and here.

Technorati Tags: arlington county,northern virginia,washington dc,real estate,transit oriented development,earthcraft rating,LEED,gold,silver,environment,sustainability,ballston metro,arlington metro corridor,affordable homes,new townhouses,preconstruction,JBG,urban living,mixed-use,redevelopment