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Name: ARDELL
Nickname: ARDELL
Member since: 2006-01-14 22:39:15
Website URL: http://www.realtown.com/ardell/blog
About me: An Associate Broker with Sound Realty. ARDELL was named one of the 25 most Influential Real Estate Bloggers in the U.S. for 2007 by Inman News, and has over 19 years exeperience in Real Estate up and down both Coasts. She represents buyers and sellers of real estate on both sides of the 520 Bridge from Kirkland, Bellevue and Redmond on the Eastside to Green Lake and surrounds on the Seattle side. You can reach her at 206-910-1000 or by hitting the email the author link above.

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Seattle Condo Market - Lender says "more insurance mandatory"

February 2nd, 2010 at 6:17 pm

On the bright side…yes, the escrow closed :) I had the seller, not the buyer. First they couldn’t get an FHA assignment, then they switched to conventional 10% down and couldn’t get PMI, then they went back and the FHA problem was rolled out to be effective at a later date and it closed FHA.

As to the subject matter I always felt that HOA insurance only, to close, was clearly not enough to protect the buyer. Not sure about the lender. But clearly not good enough to protect the buyer due to the large deductible on the Master Policy. In the old days when Master Policy was good enough, the deductibles were MUCH lower than they are today. Most HOAs do not have enough in reserves for multiple incidents to be self insured.

King County Home Prices 2010

February 2nd, 2010 at 1:37 pm

Dean,

You should have no problem at all being close to work in that price range.

To answer your questions literally.

“what areas in King County have been hit the hardest by the housing bubble burst”

Not really relative to your home search issues. The areas hit the hardest by the bubble bursting were the ones with the biggest air bubble, and where financing didn’t simply convert from subprime to FHA, but from subprime to – OMG…we have no replacement product for most people to buy them at all. That being high end. That particular bursting bubble did not bring things into your price range. For the most part, in your price range, the shift went from subprime to FHA without skipping much of a beat.

That being said, there are good options in your price range…but for a different reason. let me answer your other question first.

“I think that there will be a drop in housing that will be more than $6500.”

Yes for houses in the higher price ranges for sure, as the $6,500 is a constant. A $650,000 house coming down 5% saves $32,500 vs. a $6,500 credit. A $250,000 house may come down 5% also, but that’s $12,500 with the same $6,500 credit. FHA (assuming you don’t have 20% down) is increasing the up front MIP from 1.5% to 2.25% on or around April 7, which adds $1,875 to the cost; So you lose $6,500 plus $1,875 for not buying before those changes. You lose $8,375 vs. gaining “up to” $12,500, and that price dip is not likely going to happen the week after the credit expires.

IF the market goes down 5% IF the credit expires, and I think both of those things will happen, it won’t be instantaneous. If you are coming in May and need to be in a house by June or July…not likely the market will play in fast forward that way. The market will likely hit bottom (where it was in March of 2009) by August – September, and then go down below “bottom” in the 4th Quarter.

Now for the good news, Federal Way is one of the hardest hit areas of King County generally. Not because of the rise and fall of bubbles, but because of the concentration of short sales and foreclosures. Much like North Bothell, if you can find a new housing development where the builder went belly up after selling 70% or less of the product, you can get a super deal. You will have “issues” for sure, but it’s a good time to buy those. People who bought in 2 years ago are underwater, the empty lots may stay empty for a few years, but the few completed houses are selling at a bargain from the bank who got handed 90% complete homes when the builder filed for bankruptcy.

I just did a quick search and 35 new and almost new homes within 5 miles of Federal Way (mostly Federal Way, Pacific and Auburn) sold under $350,000 in the last six months and the median price was $275,000. I used a minimum of 3 bedrooms and 1,700 sf and a few were almost 2,500 sf and 4 bedrooms.

If you are going “to be here” in May, and you are buying FHA, I would suggest buying one of those before the MIP goes up to 2.25% and during the $6,500 credit timeframe.

I just checked the Active/For Sale listings, and there are 36 on market right now. Many if not most are new construction presale, so take a trip soon if you want the home to be ready by May-June. I don’t work that area, so can’t be more specific than that, or tell you much about the builder’s rep etc. I don’t even know where “Pacific” and “Algona” are :) but apparently within 5 miles of Federal Way.

If you are starting your new job in May…I’d say don’t miss the credit OR wait for the FHA MIP increase. My $.02

Seattle Condo Market - Lender says "more insurance mandatory"

January 28th, 2010 at 6:15 pm

I used “clue” report because it had an easy link :) The “real” report used is called something else like “a loss run” and I’m sure a lender is entitled to know what problems an HOA has had, especially in todays lending environment. Knowing if there was a huge water intrusion claim is like knowing if a house has a bad roof. Controversial or not…a lender’s gotta do what a lender’s gotta do :)

Major Bank No Longer Allowing Mortgages with Zero Points/Zero Costs

January 28th, 2010 at 12:12 pm

My premise about real estate transactions in general, is we are going back to (or closer to) the “old days”.

Direct lenders were “cheaper” by the 1% origination, which was charged only by loan brokers.

Loan Brokers charged a 1% broker/origination fee

Those that wanted and/or needed a loan “broker” paid 1% more for the privilege.

One thing we likely will not see that was true in the “old days” was that most every rate was quoted as a 3 point loan, and most buyers of conventional loans paid 3 points (and stayed in their homes longer).

Then we saw 1 point loans, that was a 1/1. One point discount and 1 point origination.

Then we went to 0/1 No discount and 1 point origination.

Then we went to 0/0 No discount No origination.

“Par” Product only referred to no discount…not no origination OR discount.

Technically to include the zero origination, you have to price the loan OVER “par” not AT “par”.

The same as a “par” bond. “par” does not include the cost of buying that bond through a broker to get to no premium or discount. Par is the market rate without regard to cost of transaction.

From a buyer’s point of view, same rate direct lender vs loan broker SHOULD be less cost. As I reported earlier, at least one major lister of bank owned properties is requiring that the pre-approval be from a DIRECT lender, and finance contingency is requiring application with “lender” within 5 days of contract be the ACTUAL lender who will FUND the loan.

Getting rid of broker middlemen altogether may be the market’s answer to: “…more purchase transactions failed in 2009 than ever before”. Aside from the cost factor, what’s really happening is that there is little confidence these days in the loan broker vs. direct lender structure.

That said…the ONLY transacton I had in 2009 that didn’t fund (initially) WAS a bank-direct lender. We shifted to loan broker, and it did close. So Direct Lenders may not be the be-all-end-all as to fewer transactions failing to close, that “the market” thinks it is.

Seattle Condo Market - Lender says "more insurance mandatory"

January 26th, 2010 at 5:55 pm

Wow! “messed up escrow accounts” is scary.

As I said before, banks went downhill the day they decided they didn’t need Olga the debit and credit matcher upper :) They’ve been winging it ever since…and not doing so well with the winging.

Seattle Condo Market - Lender says "more insurance mandatory"

January 26th, 2010 at 11:07 am

P.S. As to why the lender required it in this case, usually it has to do with the history of insurance claims. In this case it is not the paid claims, but the unpaid claims, that exacerbates this issue.

http://www.privacyrights.org/fs/fs26-CLUE.htm

The name of that report when ordering it from the specific HOA insurance provider is not CLUE Report, but similar result. A list of claims showing which were denied and which were paid. If the Master Policy shows a bunch of “denied” claims, meaning the liability shifted to the unit owner vs. HOA, that could account for the additional unit insurance request.

Seattle Condo Market - Lender says "more insurance mandatory"

January 26th, 2010 at 10:59 am

Roger,

$400 “now” does not mean “$400 a month”. Escrow “catch up” is about the due date of the insurance policy annual payment. Same as Property Taxes. They may want $2,000 in property taxes the day of closing, but that does not make property taxes “$2,000 a month”.

$900 divided by 12 months = $75 a month.

The normal handling of insurance issues for a purchase loan vs refi, is to collect a year (paid to insurance provider at closing) plus 2 months (in lender escrow) at closing (*see RESPA restriction on escrow balances below). The year buys a full year policy paid in advance, and the 2 months provides a cushion so they can pay the next annual policy 60 days in advance of the policy expiration date.

My guess on the $400 now vs. $1,050 now (which it would be on a purchase loan for main insurance policy) is it is a monthly paid vs annually paid policy. So be happy for $400 as usually it would be $1,050 on a $900 a year policy :)

I’m wondering if there was an “aggregate adjustment” downward on a separate line? If what the lender “wants to be at an acceptable level of reserves ASAP” is in excess of the legal limit (and often is) for escrow accounts, there will be a negative amount in a different column of the closing statement.

The #1 question asked most often regarding a closing statement is “What is this negative aggregate adjustment?” The lender can’t escrow as much as they “want”…there is a limit to what they are allowed to “want”. The “official” answer is:

“RESPA does not require lenders to maintain a cushion. The RESPA statute and regulations do not require the lender to maintain a cushion. However, since 1976 the RESPA statute has allowed lenders to maintain a cushion equal to one-sixth of the total amount of items paid out of the account, or approximately two months of escrow payments. If state law or mortgage documents allow for a lesser amount, the lesser amount prevails.”

Because the norm is 2 months and that $400 is almost 6 months, I’m wondering if there was a negative number on a different line on the closing statement to conform to legal limits?

Should You Buy a Short Sale Property?

January 25th, 2010 at 5:57 pm

Short sales don’t have to be “iffy”, but often the listing agent isn’t asking the right questions or understanding who does and does not qualify from the seller’s perspective for a short sale. For instance, if an owner is not behind in their mortgage payments or has a ton of equity in other property or lots of money in the bank…short sale is very, very “iffy”. But if the house is heading to foreclosure in a couple of days and vacant, very likely the short sale will be approved if the offer price is relatively reasonable.

Should You Buy a Short Sale Property?

January 25th, 2010 at 5:54 pm

I have not seen that, Hubert. I think it depends on the area. There is risk, so vacant is often better, but I’ve been pretty darned lucky on the non vacants looking the same when vacated as they did before vacated. Better than buying “at foreclosure” for sure. I think those get damaged more “on the way out” out of anger. As long as the owner is selling short, they feel part of the sale process. Foreclosure happens “to” them, and often creates anger issues.

Seattle Condo Market - Lender says "more insurance mandatory"

January 25th, 2010 at 5:41 pm

hmmm $900 a year doesn’t add up to $400 “a month” anyway you slice it. Still $900 seems awfully high for a supplemental policy, unless it is a very big and expensive condo.

You lose me on all the “refi” talk :)

As to % with both master and unit insurance, several years back some HOA’s were trying to make it mandatory for unit owners to have supplemental unit insurance, without much success. They did have someone come and speak about it at HOA meetings, but…you can lead a horse to water but you can’t make them drink.

New condos might be able to make it a condition, but for older ones…hard to add that “new rule”. The old “master policy only” needed for closings was from the old days when the master policy covered most everything and had a small deductible.

Seattle Condo Market - Lender says "more insurance mandatory"

January 25th, 2010 at 4:00 pm

Roger,

For a couple of years I managed Condo and Townhome complexes and I can tell you that EVERY lender SHOULD require a supplemental unit owner policy. The reason I recommend they try to use the Master Policy insurance provider (not always possible – used to be) is they fight back and forth over whether it is the master policy to pay or the individual policy to pay. If they are the same company there is no delay on processing claims.

If the HOA policy is $10,000 deductible, and many are these days, then that doesn’t cover most unit type issues that are less than $10,000. Individual polices carry $500 deductible or $1,000 max usually. So it’s not about “walls in” it’s about the deductible. If the claim is $6,000 the master policy doesn’t help them if the deductible is $10,000.

At first I thought you were saying $400 a month! This is $400 a year and $35 a month and well worth it! Instead of fighting it…lenders and loan brokers should put this cost on the GFE and tell the borrower to get it even if the lender does NOT require it.

Can you clarify that $400 is the annual amount and not the increase in monthly payment. An extra $400 of closing costs should not be a “deal breaker”, especially if it is for something the borrower should be encouraged to have. One blown in-unit hot water tank or leaky dishwasher or spilled over washing machine will make the condo owner glad to have that supplemental policy. It is not the Master Policy problem if you stuffed your washing machine too full and went to work to come home to a wet mess that flooded into your unit AND the neighbor’s unit.

Seattle Condo Market - Lender says "more insurance mandatory"

January 25th, 2010 at 9:28 am

Rhonda,

I normally don’t have the owner order a resale certificate “up front” because they get stale as to the amounts in reserve and delinquencies, etc. In a hot market, you could order them up front, but not in this market. They expire, and then the owner has to pay for them twice. They are not free to the owner. The usual cost is about $150 and some HOAs will not issue them until you have the name of the buyer, much like Title Insurance.

Having the Resale Certificate early would not help the buyer or the seller on this issue. Having a copy of the Master Policy Dec Page might be helpful to get insurance quotes in advance. But the seller isn’t getting the quotes, the buyer is. So ordering it early doesn’t work anyway you slice it. The buyer when getting a pre-qual often doesn’t know what they are buying yet. So I see no way to get in front of this issue.

The only way to handle all this is as I have written before, buyers should NOT be qualified to the MAX point, such that a higher rate by the time they find a house or an insurance requirement like this, will render the pre-approval invalid. The assumptions as to real estate taxes and other costs has to be realistic and even on the high side.

In fact the pre-qual should be for a range “$350,000 to $375,000 depending on the particulars of the property you choose”. Then both the buyer and the seller know if they are pushing the limits if the sale price is the upper limit of the range.

Seattle Condo Market - Lender says "more insurance mandatory"

January 24th, 2010 at 5:20 pm

The lender “requirement” may be different from one buyer to the next. I have noticed that some car dealers are requiring a full 4 year warranty prepaid for some car buyers and not others. The requirement to have extra and optimal insurance may be greater if the home buyer/borrower is borderline qualified with little excess reserves after purchase.

Seattle Condo Market - Lender says "more insurance mandatory"

January 24th, 2010 at 5:09 pm

Hi Joe! Happy New Year!

To both Jillayne and Joe, that is really not a “listing agent” function. It is the responsibility of the agent for the buyer, not the agent for the seller.

The agent for the buyer should be recommending a separate policy, whether the lender requires it or not. The agent for the seller would not want to increase the cost to purchase by recommending more than is required. It is contrary to the seller’s objective to do that. It has to be handled by the Agent for the Buyer.

If we get to the point where ALL or even MOST lenders require this insurance, then it may appear in the condos. But I am not a big fan of lender info being inside listings since, again, the agent for the seller should not be interfering or steering the buyer’s loan choice or process. It would be like having the name of a home inspector the seller likes inside the house. Not a good idea. Let the buyer choose lender and all services without prompting from the seller.

The buyer’s agent in many if not MOST cases is getting paid more than the Listing Agent. This job falls on their side of the fence.

New Construction Tip

January 24th, 2010 at 11:31 am

Thanks Darren. Appreciate being able to address you by name. Are you “the” Seattle Inspector” or are there several associated with that company name?

New Construction Tip

January 24th, 2010 at 11:17 am

I clicked the link, Seattle Inspector, but I can’t tell who I am speaking with. Can you post your full name please? Thanks!

New Construction Tip

January 24th, 2010 at 9:27 am

Seattle Inspector,

Even if the buyer hires an inspector, they should bring the tape as most inspectors do not evalaute cosmetic items to the same degree that a buyer does.

Thanks for stopping by…

King County Home Prices 2010

January 23rd, 2010 at 5:46 pm

Roger,

As to prices, volume does not change my expectation from chart one as to median home price for King County being $360,000 to $400,000, for some time to come. Perhaps the first 3 quarters of 2010. Whether or not we will go below $360,000 in the 4th quarter depends on where we are in the third quarter as to pricing.

We had every possible scenario of volume in 2009. From very low in Jan and Feb…lowest, to abnormally high as to increase from there in the last quarter. So 2009 ran the potential gamut as to volume.

As to “relative to the past 5 years”, I don’t ever expect prices or volume to be what there were when anyone who could fog a mirror could get just about any mortgage they wanted. When I do volume expectations I go back to 2001 and 2002 levels. There is no reason why we shouldn’t rise to those levels, so the market has room to expand within reasonable expectations.

What I see as the potential holdup to home prices is lack of good inventory. I have a very difficult time finding a good house, realistically priced, for people who are more than ready, willing and able to buy a home. Prices will be influenced by quality vs. quantity of inventory. Generally speaking, January is always sad inventory, so let’s hope for the best on that. My fear is the good houses will come out too late if the homebuyer credit influences people only to April 30, and the good houses come out in May and June.

Shadow inventory is really not all that “invisible”. I am poking out shadow inventory for a client right now. It is not on market or in the stats or accessible by computer function in the normal way. I have to literally walk the streets like the old days before the mls. Spot the vacant houses, the ones half built and abandoned, and the age old identifier “tall grass”,etc… Shadow Inventory can be found and counted in small geographic zones, but it is only worth doing that for a specific client, and not on a broad scale to gather data for blog fodder.

The big news story will continue to be weak housing starts, because as I said earlier, profit margins for builders are thin. One day they may get used to thinner profit margin and proceed as usual. But most are wishing the days of 4X lot value would come back.

Much like the Lending Industry and Agent Population, many will simply leave to other fields, including builders who only got into the game when the game had abnormally high profit margins. There is still a lot of shake out as to industry professionals deciding “should I stay or should I go”. Until then there will be continuous whining that short lived, high on the hog “old days” aren’t coming back.

Anyone who thinks a “recovery” will be V shaped and swing back to peak pricing anytime soon, will be sorely disappointed. If the media keeps acting like we are in bad shape until and unless we get back there, or if sellers keep wanting to price near there, the recovery will be stalled as a result. This IS the recovery. There is no “second coming”.

It's Official: FHA Upfront Mortgage Insurance to Increase in April

January 21st, 2010 at 4:28 pm

A bit off topic Rhonda, I am concerned with the new Finance Contingency requirement that loan application must be made within 5 days (same) and application must be to the entity that is going to actually FUND at closing. Isn’t that not the case for most Brokers vs. Direct Lenders?

It's Official: FHA Upfront Mortgage Insurance to Increase in April

January 21st, 2010 at 4:26 pm

1.5% to 2.25% a big increase, but my guess is since it is financed, it will not create much of a reaction in the market. The 3% limitation will not likely be a problem either. Most requests for monies toward closing costs do not exceed 3% of the sale price.

Most people will view both of those as a change for the good. A little more money coming in to the FHA coffers to insure against defaults, and less fluff in the loan amount for dollars not associated with true net purchase price.

All things considered for the Country at Large…good changes, both.

New Construction -- does that property even legally EXIST?

January 20th, 2010 at 8:21 pm

Craig,

As to your bio change LOL! I just asked for a one word change from all agents to many or even most agents. You watered it down too much. You are clearly better than most agents, just not “ALL” :)

As to this comment: “One other thought: the “title officer” has no obligation whatsoever to the buyer prior to closing.”

I agree whole heartedly, but I do expect more from Title than just a stack of papers. I want a Title Review and will not work with a company who won’t provide that service. I believe they should explain to the buyer what the title exceptions are, as best they can, and also explain how the insurance they are providing the buyer covers them or does not cover them.

In my case going to an attorney with that title report was a huge Catch 22, given two attorneys (one for the bank owner and one for the neighbor) were hashing out new agreements that would change the old ones listed as exceptions on the title report. In that case bringing “the title report” to an attorney would have been a waste of money, until the final changes were incorporated into that title report.

The awesome attorney for review is the one who wrote all of the previous agreements and did the original short plat, as he is intimately familiar with the property and the well and all that goes with. But until the new agreement is hashed out between the owner and the neighbor…we’re in limbo. I handled it a bit differently than inclusive addendum, but given we are still in the middle of this, that’s about all of the detail I will share.

Anyone who thinks a boilerplate 22T is the be all end all, or the lender will cover the buyer’s butt automatically, is living in la la land. There’s blood in the streets and with that comes every imaginable odd scenario one can dream up. Great deals come with “issues” whether that be short plat or bank hiring a different builder to finish what the first builder walked away from (a lot of that going on). Using attorneys may not be “customary”…but this market is anything but “ordinary”.

New Construction -- does that property even legally EXIST?

January 20th, 2010 at 10:15 am

P.S. Further, expecting the buyer to know what they need to ask the attorney…simply saying “you should consult an attorney” generally, is not sufficient either. No attorney replaces a good agent and no agent replaces a good attorney. The attorney in his office can’t see the well house…heck the county didn’t even “see” it, and it was not a matter that was disclosed, given the well is not connected to anything and the house is on public water.

I respectfully request that Craig change his bio from “Craig provides better representation than an agent” to “better representation than ‘many’ agents” :) I doubt Craig would have discovered that the County didn’t know there was a well on the property when it issued the CO. It takes a diligent buyer, a diligent agent and in some cases a diligent attorney advised adequately about the property specifics, to pull together a best result. Most often the “discovery” phase of due diligence happens in hip boots walking the property and studying the house itself, and not merely studying the papers on the desk. A blanket claim to be better than any and every agent on the planet, is likely not as credible as a qualifier of “many agents”.

P.S.S. The Title Contingency likely covers a buyer better if they want to cancel…but not if they want to buy the house.

New Construction -- does that property even legally EXIST?

January 20th, 2010 at 10:01 am

Jim is correct…to a point. I have a buyer client in escrow on a new construction home on a short platted lot. Unlike the post topic, the short plat was complete, but there are some resultant after the fact complications involving a well on one of the short platted lots.

I scheduled a face to face meeting with the Title Company executives to review all potential Title Insurance issues, including a lis pendens involving the well. The house is on public water, but the well is on the property and a significant issue as to shared rights. While the house had it’s Certificate of Occupancy, when I investigated further I found that the County “did not know” there was a well on the property when it issued the CO. That’s hard to believe since I can SEE the well house from the deck of the house, and have scars on my legs from going through the blackberry bushes to take pictures of it :)

The agent for the seller wanted us to merely rely on the Title Contingency as Jim suggests and likely “customary”, but that only covers the seller resolving the issue to the satisfaction of the seller and “clear title”. That’s the minimum needed “to close the sale”, but not necessarily the minimum needed to protect the buyer client.

One of the most important phrases in Craig’s post, and this covers most any Title problem and not just short plat being recorded:

“allowing the buyer to receive and approve the…”

Just because the Title is cleared enough to close, is not enough. Historically real estate has been operated as if the buyer “has to” if the seller is ready to, and unfortunately many of the boilerplate forms express that sentiment, and are insufficient when representing a buyer client vs. a seller client. The Title Contingency gives 5 days to review changes in Title, but there is a gray area there as to the buyer’s rights if the seller resolves the problem to the point where it “can” close, but the buyer is not happy with some of the new details created in order to resolve the matter and clear title. Reviewing “title” does not necessarily give the buyer the full right to review, and be HAPPY with, all of the documents that created that change in Title.

This was a significant issue for me on behalf of my buyer client, as the contract and Title Contingency as worded in the boilerplate, does not give the buyer the time and right to review all of the paperwork, that does not yet exist to be reviewed, and will resolve the lis pendens. I reviewed this with Title and it is clear if something new is added to Title as an exception, that the Title Contingency kicks in. But not as clear if something is removed vs. added. The paperwork to remove the exception is another matter entirely. Not necessarily covered in the contingency is the buyer’s right to receive and not be happy with those documents that removed the Title exception, and right to cancel without losing their Earnest Money.

To make matters more complex, the property was foreclosed on by the builder’s lender, making it “bank-owned” and subject to “no recourse” addenda. This makes the buyer’s “due diligence” without reliance on disclosures by the seller or the seller’s agents of tantamount importance.

All buyers AND sellers need to be aware that because the contracts run down the middle of representing both buyers and sellers somewhat, they do not adequately cover either adequately in extreme scenarios. There are not enough buyer OR seller protections in boilerplate contracts to cover all of the extreme cases in today’s marketplace. Short Sales, Bank Owned Property, new construction that is 98% complete…but not quite complete. All of these “as-is” transactions require a greater degree of care. Simply saying “you should consult an attorney” and then turning a blind eye if and when they do not, is clearly not enough for many of today’s complex transactions.