What’s Happening with the $8,000 homebuyer credit?

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Post Updated based on Info available as of 11/5/09 – No significant changes, but a few minor ones, so if you first read this back when I wrote it on 10/29/2009, take another look at the updates.

$8,000There are a lot of rumors flying around suggesting that the $8,000 credit has been extended. While that is not the case, as nothing has been signed yet, there seems to be strong support for:

1) Extending the $8,000 credit for 1st time buyers, including people who have not owned a home for 3 years

2) An added $6,500 credit for move up buyers who have owned their current home for at least 5 consecutive years of the last 8 years. (this provision is still under heated discussion and most subject to compromise before the bill is passed.) Updated 11/5/08

3) Expansion of the income requirement to $125,000 for an individual and $250,000  $225,000 for a married couple.

4) Extension to contracts entered into by April 30, 2010 that are also closed by June 30, 2010 (before July 1, 2010)

The most credible “rumor”/story going around [IMO] is CNN Money’s “$8,000 Credit Still in Play“.

In my opinion #1 and #4 make the most sense in that it seems senseless to drop the credit at the end of “Spring Bump” vs. just before 2010 “Spring Bump”.  Closing the door on the credit on Nov. 30th never made any sense, as seasonal factors will make it appear that the credit going away is having more of an adverse affect than it really is, given November through February sales are almost always lower as to price and volume.

Cutting the cord on the credit at the end of April (end of March even better) makes perfect sense, and gives the market the opportunity to compensate during its most robust season.  If the market can transition from 1st quarter 2010 with a credit, to 2nd and 3rd quarters without a credit on a flat market basis, it will be easier to get rid of it altogether. And yes…eventually…it really must go away. I certainly hope the industry isn’t going to keep lobbying indefinitely for its continuation. That would NOT be a good thing.

While it seems that “Senator’s Have Agreed” this credit is still not signed sealed and delivered, (Update 11/5/09 at last step, needs to be signed by the President) so stay tuned for the final version as I think the wheel may still be spinning with regard to the $6,500 move up buyer credit, as well as the expansion of the  income requirements.

Buyer Beware – “great deals” may come with other “issues”

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big new houseWhen you get the opportunity to buy a house “worth” over a million dollars, for fifty to seventy cents on the dollar, you have to ask yourself if you can “afford” it before you say WooHoo!

#1 –  Real Estate Taxes may be too high

Often people ask why so many pending sales don’t close.  There are many reasons, one of which is that lender pre-approvals show a purchase price vs. a monthly payment.  Reality is that your lender is NOT qualifying you for a purchase price, but for some reason they think it is easier for you to understand a price vs. a monthly payment. They then make assumptions as to other costs, and convert their communication to you, the agents and the seller, to a Purchase Price. (This was not so when I started in real estate, and someone should change that.)

So you have a pre-approval to buy a house for $650,000 with a 20% downpayment.  What that really means is the lender “assumed” taxes of approximately $6,500 a year and homeowner’s insurance of $650 a year. Now you go out and find an amazing, super-great deal! You have the opportunity to buy a house assessed at $1.2 million for “only” $650,000! WooHoo? Maybe not.  The annual real estate taxes are $11,000 a year vs. $6,500 a year and the homeowner’s insurance is $1,100 vs. $650. That means your monthly payment is $412.50 more each month for that particular “$650,000 house”, than your lender assumed when you were pre-approved.

Your income needs to be $15,000 to $18,000 more per year, for you to be able to afford that particular $650,000 house.

There are two possible consequences. One is that the loan will “kick out” early enough for you to get your Earnest Money returned, assuming you have a good Finance Contingency. The other is that you planned to buy with a payment of  $3,400 a month, but end up being approved for a payment of $3,800 a month, with no recourse.

It’s possible that you could appeal the assessed value with the County, but I’m not hopeful that will work this year. I clearly wouldn’t recommend anyone promising you can have the taxes reduced to a level commensurate with the lower Purchase Price,  unless you are buying in California. In King County Washington this is NOT a good year to bet that you can prove that the purchase price of $650,000 is a good reason for the County to lower your assessed value of record. Nor is it a good year to think that lower assessed value will equal lower taxes. The County has already notified owners that they are dramatically reducing assessed values (not taxes). 2010 is a particularly bad year to rely on being able to get that tax bill dramatically reduced, in my opinion.

The only sure course is if the bank-owner would have the assessment and taxes reduced prior to sale, in order to obtain a buyer for that home. But I strongly doubt that will happen. Anyone who can’t afford the $11,000 tax bill that comes with that “great deal”, should not be buying that house.

 

#2 – The “carrying costs” may be too high

When a lender pre-approves you for a Purchase Price of $650,000, they do not consider annual use and maintenance costs. Unlike real estate taxes and homeowner’s/hazard insurance, the lender makes no assumptions as to utility bills and other maintenance and repair/replacement costs. In King County a $650,000 house is generally about 2,900 square feet. A house for $1.2M is usually about 4,400 square feet, and often on a much larger lot.

Before you buy that 4,400 sf home on an acre+ lot for $650,000, instead of a 2,900 sf home on 1/4 acre, be mindful of the extra cost to heat and maintain that larger home on that larger lot, in good condition, over a period of years.

 

#3 – Cheaper, bank-owned, new construction may not be “complete”

Most recently we are seeing builders losing their construction projects to the bank. The bank then puts the house on market “as-is”.  Yes, the prices can be awesome! But will your lender finance the “new home” without it being completed? There are programs available to provide funds for purchase and rehab or completion, but are you ready to be your own “general contractor”? Even if you think you can handle it, will the new lender allow you to be your own “general contractor”?

Again, two possible consequences. One is you don’t qualify for the new financing, including cost to complete the home. Again, hopefully that consequence “kicks in” early enough for you to get your Earnest Money back under the Finance Contingency. Another possibility is that the things that need to be completed do not cause the sale to fail, but you end up with a house like the one pictured above. No landscaping, temporary construction fences or barriers, no garage doors…and no money to comply with the neighborhood rules to get your new home in good order in the timeframe required by the CC&Rs.

Once you enter into a Contract to Purchase, you may not be protected against “biting off more than you can chew”. Before you enter into a contract to purchase that “screaming deal”, make sure you can handle all the “issues” that come with.

Las Vegas Taxi Driver wants a fair deal…and I don’t want to be taken for a ride.

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On one of my many trips back and forth from the BlogWorld Conventionto my hotel, a taxi driver asked me what was going on at the Las Vegas Convention Center.  I told him it was a blogging convention and I received a weird glance from his rear view mirror.   The rest of the conversation pretty much went like this:

Taxi Driver:  What do you write about?

Me: mortgages for the most part.

Taxi Driver (seeming oddly interested in this):  You actually write about mortgages?   Are you a loan officer?

Me:  Yes I originate mortgage loans and help people decide which program might best fit their needs.

At this point, the Taxi Driver is getting very excited…to the point I’m concerned he’s not paying enough attention to the road.

Taxi Driver:  What are rates right now?

Me:  Well, I’m a little out of touch because I’ve been in this convention for a few days.

Taxi Driver:  What if you had to guess?  

Me (feeling like I better give “the captain of the car” an answer):  From what I’ve been able to track, probably high 4’s to low 5’s with excellent credit scores, 20% down payment and depending on other factors like loan amount and programs…but it’s really difficult for me to say for certain.

Taxi Driver (very excited):  I’m buying a house.  Can you please take a look at my mortgage papers to make sure they look okay?

I’m beginning to wonder if he’s going to drive me to his mortgage originator’s company…he actually had his file right next to him on the front seat of the cab.   He starts waiving the file around with one hand on the steering wheel.   Of course, wanting to get to my hotel in one  piece and also not minding helping someone, I agreed.

He tells me how excited he is to buy this home and for his family to visit and that it has a pool.  He never thought he’d have a house like this.  He says he feels sorry for whoever lost the home to foreclosure.

We pull to the front of the hotel and the doormen are trying to let me out.  The gruff Taxi Driver is waiving them off.   His rate looked fine and everything seemed in order.  All that I could recommend is that he contact his mortgage originator to get a written lock confirmation.   He believes his rate is locked but there is no written documentation in the papers he had in his cab.

I’d say out of all the cabs I used in Vegas during BlogWorld, I had probably had a 40% chance of dealing with a taxi driver who would take the most direct route.   Most would “steer me wrong” in order to jack up their cab fair.    I realize that this is a much much smaller scale than someone who is buying a home and working with a mortgage originator…it’s a similar feeling (hopefully odds are improving with working with a quality mortgage professional).   

I’m glad I could help the Taxi Driver know that he had a fair deal with his mortgage–now if I could only figure out how to do that with taxi’s the next time I travel!

Join us this Friday for a Tweetup at Elysian Brewery

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Elysian BreweryI’m going to be in town this week and thought it would be fun to organize a tweetup this Friday at the Elysian Brewery in Capitol Hill… and you’re invited!

More than likely, there will be more than a few real estate folks, but everyone is invited to join us.  Here are the details:

  • Date: Friday, October 23, 2009
  • Time: 4:30pm – 7:30pm
  • Location: Elysian Brewery
  • Street: 1221 E Pike St.

And while there’s no need to RSVP, I would love to know if you’re planning to show up!   You can either leave a comment, or use the tweetup and/or Facebook invites to let us know you’ll be there as well as invite others:

The RCG meetups of the past have not only been a blast, but I’ve always ended up meeting great people.  In particular,  I’m thinking of the Ballard one where a huge number of people who became contributors showed up, and the last-minute event we put together with Sami Inkman of Trulia when he dared show up in Seattle (Trulia definitely didn’t have many supporters among agents back then!).   There was also the meetup last January, which I totally missed out on.  (Don’t let that be you this time!)  🙂

I’m sure we’re going to have a fun evening and hope to see you there!

Short Sales & Bank-Owned pulling prices up?

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King County Home Prices, and what is causing them to go up or down, is dramatically different from one area to the next. I often think about the many who track short sales and bank owned sales, and the growing number of them, who think that these distressed property sales pull the median home price down. That is not always or even often the case in many areas.

North Seattle and Bellevue School District median price per square foot numbers would actually be LOWER if there were no short sales or bank owned properties in the mix. In Bellevue School District, the current median price per square foot would be $330 vs. $338 if there were no short sales or bank owned properties selling. The median price per square foot of a home not in distress is $230, bank-owned $298 and a short sale $268. Given the median asking price of homes for sale there is $899,000 vs. the median sold price of $563,500, the distressed properties of today and for some time into the future are more likely to be the most expensive homes that fewer people can afford to buy.

Now to Seattle North of Downtown.

NSMPPSF

 

 

 

 

 

 

 

 

 

 

 

 

 

Again, short sales and bank owned property sales in North Seattle are pulling the median price up from $244 to $248 in the 3rd quarter. Not necessarily for the same reason as Bellevue School District. More likely due to their being bid up or banks pricing them high and people thinking they are “a bargain” because they are “distressed properties”.

This is NOT the case with sales in Seattle SOUTH of Downtown where the median short sale sells for 15% less and the median bank-owned property sells for 25% less.

I’m working on volume and price stats to determine if the $8,000 Homebuyer Credit expiring will pull prices below “bottom” and for Seattle South of Downtown…no question that is a big yes. But for North Seattle and Bellevue School District (not finished with the rest of the Eastside School Districts) we just might see the bottom holding “post credit”.  I’m still speculating on where volume of sales would have been in North King County, if there never were a homebuyer credit. And while I expect a 4th quarter price drop, I don’t expect prices to fall below the 1st quarther “bottom” of $233 median price per square foot.

Not finished with all of my predictions and stats yet. But thought it was very interesting that in some areas Short Sales and Bank Owned property sales are actually pulling median price per square foot UP…vs. DOWN.

(Required disclosure: Statistics not compiled, verified or posted by the Northwest Multiple Listing Service.)

reblogworld, Baby!

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I can’t tell you how much I’m looking forward to participating at RE Blogworld in LasVegas this week.  I feel like I’m inrebw_final “nerd-vana”…in a good way, really!   I’m going to be on a panel with Jay Thompson, Derek  Overbey and Jeff Turner moderated by Matt Fagioli.  We’re going to be the “first track” on Thursday, October 15,  covering Using Social Media for Real Estate.    And if the bantering I’ve witnessed via emails together is any indicator of what our panel should be like…it’s going to not only be informing…it should be entertaining as well.    I’m totally honored to be included with this group and to be taking part in this event.

Social media has done so much for me and my career.  I absolutely love writing for the consumer and being able to work for people I “attract”  (and my past clients) instead of having to use “cold” methods such as post cards to strangers, up-calls or paying for “leads”.   I’m looking forward to learning more ways to fine tune and streamline social media.

I hope to write a post while I’m at Blog World…I’ll have to see how things go.  Odds are that you may not be seeing rates from me on Friday.  Because I’ll be in Vegas, Baby!  🙂

President Obama Wins Nobel Peace Prize

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Hope - ObamaI am stunned to wake up to the news that President Barack Obama has won The Nobel Peace Prize, while I slept.  The range of emotions and thoughts running through my mind are hard to pin down to a reaction to this.

It makes me want to be a better person…it makes me want to be “greeener” and more frugal and a postive influence on any life I may touch. It fills me with a huge responsibility to “have his back” and do anything I can to support him and do my part to make the World a better place.

It doesnt fill me with “Hope”…the main reason he won…it makes me want to be part OF that Hope.

Congratulations, Mr. President. You do certainly do us proud…

Truliaboy gets his house…and a puppy

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truliaboyBack in June, a young man posted a question on Trulia Voices. The question no longer appears, though the answers to his question do. I had him remove the question once he became my client, because if you find a great house that you want to buy, you don’t want to highlight it on social media sites for other buyers to see and possibly make an offer on.

This post has SO many messages, it’s hard to stick to one subject…that being the young man did get the house (and a new puppy).

1) Trulia Voices is a great place for home buyers and sellers to ask questions anonymously, and get the opinions of area (and out of area) real estate professionals.

2) If an agent is NOT willing to do a short sale, that should be a disclosure up front to potential buyers who have not yet chosen a home to buy. Truliaboy found the home himself…it was a short sale. His question, which was removed, indicated that his agent ignored 3 of his requests to see the house and make an offer on it.

3) St. Joseph played a huge role in the Truliaboy story. While my answer to his question (“…If you have the time and the energy to get what you want…don’t give up!…”) prompted him to “look me up”, it was actually my connection with St. Joseph that caused him to hire me. You never know 🙂

I usually do not post the real estate stories of my current clients, but he and I have been talking about posting his story since it started. He’s a fabulous young man who found a house he wanted to buy. He had two previous agents who did not think he could buy the home of his dreams, at the price he could afford to pay. As you can see from the few answers that were posted before I had him remove the question, some agreed. For those who suggested that he could not possibly get the house for less than current market value…he got the house for 15% less than current market value (his lender’s appraised value). The sold price was 17% less than summer of 2004 pricing and 32% under the face amount of what the bank lent to the previous owner, at market peak.

Most importantly…he got the house of his dreams…and a new puppy. I give a special thanks to Trulia Voices for making this forum available to buyers who have questions that need an answer. Truliaboy asked me to include his special thanks to St. Joseph.

Rhonda Porter Receives the Jim Fitzgerald Service Award from WAMP

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Today, during the Washington Association of Mortgage Professional’s State “Connect” Convention, Raincityguide author Rhonda Porter was presented with the Jim Fitzgerald Distinguished Service Award for her outstanding contribution to the mortgage broker and lender community.  Presenting the award was Rhonda’s brother-in-law John Porter who received the same award from his father, Bob Porter, who ALSO received the award.  Yes, mortgage lending does have a way of running in the family.

Jim Fitzgerald passed away in April of 1999 at the young age of 48.  He was President of the Washington Association of Mortgage Brokers in 1994 and an active member of WAMB,* working tirelessly on behalf of the membership. “Jim worked hard to bring the Association up to a new level.”  John Porter said, “People knew Jim all over the country even before social networking started. This is the most honorable award I ever received and I am so proud to present this to my sister-in-law.”

This year Rhonda volunteered to be the WAMP Social Media Chairman. She created a facebook page for the Association and helped organize two Social Media RE Bar camps during these last few months and has volunteered her time to help mortgage professionals here in Washington State and in other states learn how to effectively and professionally participate in social media.

Rhonda, we are all proud to know you.

*WAMB is now WAMP
Wash Assoc of Mortgage Brokers changed their name in 2008 to the Wash Association of Mortgage Professionals

Below, WAMP President Jason Bloom with Rhonda Porter.

Rhonda