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

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..

Virginia Lines up for Stimulus Fund's High-Speed Rail Projects

According to Governor Kaine, Virginia has submitted pre-applications for more than $2 billion funding for high-speed rail projects under American Recovery and Reinvestment Act's or Stimulus funds for high speed rail.

Virginia has two types of projects lined up. The ready-to-go projects, or Track 1, is focused on I-95 corridor connecting Washington DC and Richmond, which is the state's most congested travel corridors. Strategically, it will also connect Amtrak's Northeast Corridor (see map on right) and the Southeast High Speed Rail Corridor (below), in which the state has invested some $197 million to this corridor - to date.

The projects, via Gov. Kaine office.

• Arkendale to Powell’s Creek: $72 million in rail infrastructure improvements between Fredericksburg and Prince William County, including 11 miles of third track; proposed for Round 1 funding under Track 1 as a “ready to go” project. This project could advance independently of the Washington, DC to Petersburg corridor program defined below.
• Washington, DC to Petersburg: $1.57 billion in rail infrastructure improvements such as additional tracks and signal, station and rail yard improvements; proposed for Round 1 funding under Track 2 as a corridor development program. This project includes Arkendale to Powell’s Creek as described above, in the event that FRA elects to fund the project as part of a corridor development program.

Southeast high speed rail corridor, via sehsr.org.

High speed rail in the southeast will mean top speeds of 110 mph and average speeds between 85-87 mph. Virginia, North Carolina, South Carolina and Georgia have joined together with the business communities in each state to form a four-state coalition to plan, develop and implement high speed rail in the Southeast. The system will be developed incrementally, upgrading existing rail rights-of-way.

Read more about the corridor, here and here.

Looking at both maps, based on location alone, Virginia is on strategic located to take advantage of the Stimulus funding for high speed rail that connect tracks up and down East Coast.

Next in line, track 2, is: Richmond to Hampton Roads corridor. 

Richmond/Hampton Roads: $330-$844 million in rail infrastructure improvements to support the introduction of high speed rail service between Richmond and Hampton Roads; proposed for Round 2 funding under Track 2. This project is proposed for Round 2 since a federal Environmental Impact Statement is currently underway to select the high speed route, and should be completed prior to Round 2 grant awards. The cost is expressed in a range since the exact route has not yet been determined.

The timeline for these projects: Round 1 is in Fall 2009 and round 2 in Spring 2010. This high speed rail project is for the next Governor of Virginia to complete... (Kaine's term is up this year).

I can see more TODs sprouting up here and there along DC-Richmond corridor..

image: Treehugger

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.

Weekly Roundup

America's Most Expensive Homes

There's been a lot of denial among luxury homeowners. In 2006, it was thought that the luxury market wouldn't suffer the same fate as the broader market.

The State of the Nation's Housing 2009 report gives U.S. market mixed grades

The nation's housing industry should remain mired in an epic slump for the rest of 2009, but the longer-term picture is not all doom and gloom, according to the "The State of the Nation's Housing 2009" report, to be presented on Monday by Harvard University's Joint Center for Housing Studies at the Ford Foundation in New York City. (We'll have more news from the event later this week.)

41 Charged as Mortgage Fraud Hits Condos and Suburbs

Federal law enforcement officials recently announced charges have brought against 41 defendants in five separate cases in Chicago. The cases involve more than $48 million in fraudulently obtained mortgages for dilapidated homes in urban areas as well as deals involving million dollar condominiums in a Chicago high-rise and sprawling homes in affluent suburbs like Wheaton and Glenview. The vice president of a title company, mortgage brokers, loan officers, appraisers, real estate investors and an attorney are among the 37 defendants charged.

What's With All the Moaning About Home Appraisals?

Lately, mortgage brokers, builders, real estate agents and others in the housing business have been moaning about appraisals. On Tuesday, it was the turn of Lawrence Yun, the chief economist of the National Association of Realtors. He lamented that May home sales were “less than expected because poor appraisals are stalling transactions. Pending home sales indicated much stronger activity, but some contracts are falling through from faulty valuations that keep buyers from getting a loan.”

10 Things Moving Companies Won't Say

The moving industry packs in nearly 55 percent of its business during the summer months, but often leaves a trail of frustrated consumers in its wake. The Department of Transportation receives up to 4,000 household moving complaints annually, mostly about loss and damage, poor service, or overcharging. The Council of Better Business Bureaus, meanwhile, reports that complaints about movers jumped from nearly 3,800 in 1997 to more than 9,200 in 2007.

Additional news from around DC region:

• Q&A: Sally Wilson on the USGBC Headquarters, LEED Fine Print, and Negotiating a Green Lease [Metropolis]
• Montgomery Approves Project Before Moratorium [Washington Post]
• Eastern Market reopens after $22M renovation [Wash Biz Journal]
• Index finds D.C. has best 'brain smarts' in U.S. [WTOP]
• Looking for a rent-free home on a lot of land [Real Estate Wonk]
• "Not Paying the Mortgage Yet Stuck with the Keys" [Hot Property]
• Prince William transfers Silver Lake to Park Authority [DC Examiner]
• Cuts Coming to Community Center Hours [Arlington Gazette]
• Experts: Investment in Green Amenities Pays Dividend [Gazette]
• DDOT Launches Real Time Circulator Mobile App [DCist]
• F.C. Council Unanimous in Bid to Convert City to 'Green Lab' [FCNP]

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.

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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.