Dustin wanted to see this in the hard copy version. My thoughts on it.
ARDELL & OBAMA front page news above the fold - LOL!
ARDELL & Obama Front Page Above the Fold
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$15,000 Home Buying Credit? No! How about $8000 For Some Instead?
The $15,000 home buying credit in the Stimulus Package seems to be dead.
This credit would have been for more than just first time home buyers and was generating a lot of increased activity over the last week or so both on the Internet and in open houses across Seattle. There have been many arguments both for and against this particular tax credit and over who would benefit from it the most, but in the end the Senate and the House had to come up with a compromise
The Compromise?
According to Los Angeles Times and the Associated Press, only first time home buyers “could
Redfin Circles Back to an Old Biz Model…
Redfin‘s been through so many business models over the years, I can completely understand why some folks would think that Redfin is entering a new area by working with real estate agents, but I can’t help remind folks that this is a business model that they’ve tried in the past… and it failed miserably the first time.
In only the 2nd time Redfin was mentioned on RCG, Anna was upset (to put it mildly), that Redfin had gone from being a company that did only referral business to agents (accepting a 20% cut), to including a flat-fee option for FSBO’s to get their listings in the MLS. (Jun ’05)
A few months later, RCG agreed to give Redfin a 2nd chance after they had dropped all references to the flat-fee option for sellers from their website. (Oct ’05)
However, the Redfin evolution when Glenn Kelman took the helm of Redfin in Sept ’05. From this article Galen published in Jan ’06, Glenn Kelman is being quoted talking about Redfin’s referral busines to agents saying:
“How do we make money now? People sign up for a real estate agent… The real estate agent and Redfin share the fruits of that.”
I SOOO wish I had a screenshot of Anna’s profile she had on the Redfin site back in early ’05 because the content on the page would be shockingly similar to the current agent profiles. I can’t remember exactly what the profiles looked like, but I’m almost positive they listed the agent’s recent transactions and had consumer reviews (I vaguely even remember a star system for the agents).
I honestly wish no ill will on the Redfin folks and wish them the best in their latest endeavor. It’s just that the blogger in me can’t believe so many folks are letting them get away with saying they are doing something new. About the only thing I see new with this program is that they are charging a 30% referral fee instead of the 20% they used to charge to agents back when Anna took part in ’05.
Bank Bailout and Stimulus News Roundup
Bloomberg is reporting that the $15,000 tax credit has been mostly dropped from the stimulus bill. Hat tip CR:
“Asked what a proposed $15,000 tax credit for homebuyers looks like in the compromise plan, Baucus laughed and said, “not much.
Buyers: Write Your OWN "Seller Disclosure Form"
It amazes me that buyers and buyer’s agents don’t sit down and write their own addendum to the Seller Disclosure Form. In the hot market it likely would have scared the seller, and lost you the house in mulitple offers. But this is a Buyer’s Market! Where are the changes as we shift from seller’s market to buyer’s market?
My number one piece of advice for buyers and buyer’s agents today would be to supplement the Seller Disclosure Forms with some REAL questions you would like answered by the seller.
You know the forms at best run up the middle between seller’s interests and buyer’s interests. You know the forms are geared to “a smooth transaction” and closing for the agents and all parties. So why do you accept their questions on the form as being all you need to ask and know?
I’ve written a skazillion posts over the last three years on what buyers need to know that no one tells them. Not the seller. Not the agent. Not the home inspector. Why not put these questions in as an addendum to the things you want the seller to tell you?
Recent comments from Jerry the Seller who wants to keep the buyer’s Earnest Money, are the impetus for this post this morning. Read the comments of Jerry the Seller and weigh in…should the buyer get their Earnest Money back…or should Jerry get to keep it?
Be smart buyers!!! Write down the questions YOU want answered, and make the offer contingent on your getting and reviewing those answers. Don’t merely rely on the questions someone else deemed “enough” for you to know.
Underwriting Update for Financing of Investment Property with Fannie Mae
Last Friday, when Fannie adjusted the allowance for the amount of financed properties owned from 4 to 10, other underwriting requirements on investment and second home borrowers were updated as well. (Freddie Mac still has the 4 financed property limit).
Reserve requirements vary depending on the number of financed properties owned (including primary residence):
1-4 financed properties 0wned:
- 2 months of reserves on the subject property if it’s a second home.
- 6 months reserves on subj. property if it’s an investment property plus 2 months reserves on each other second home or investment property.
5-10 financed properties owned:
- 2 months of reserves on the subject property if it’s a second home.
- 6 months of reserves on the subject property if it’s an investment property plus 6 months reserves on each other financed second home or investment property.
Note: Freddie Mac’s guidelines are *currently* 6 months PITI.
Other underwriting changes for investment properties include:
- 70% LTV for purchase of 1-unit and 70% for 2-4 units.
- 720 minimum low-mid credit score.
- No history bankruptcy or foreclosure in the past 7 years.
- Rental income must be documented with two years tax returns.
- Borrowers required to sign form 4506 (which you can expect on ALL loans these days–including owner occupied).
Don’t forget that there is a significant price hit of 0.75% to fee from Fannie and Freddie with investment properties on top of the credit score/loan to value adds (LLPA). Seller contribution is limited to 2% of the sales price with investment property.
Why Connect with Facebook?
If you’re been to RCG recently, you’ve undoubtedly noticed that I added Facebook Connect to the sidepanel. I really want to invite you all to use this feature, so I thought I’d let you know why I added it:
- I’m a Facebook addict, love the service, and enjoy connecting with others. I’m thinking there’s at least a few other RCG community members who would enjoy connecting via the service
- I’ve been looking for a way to give a “carrot” to folks who properly identify themselves when they leave comments. I don’t want to “punish” anonymous commenters, I just want to give a bonus to those who aren’t anonymous.
The carrot we’re now offering is two-fold:
- Your comment will bypass almost all of the moderation filters that occasionally slow down a comment from showing up immediately on the site.
- Your profile link will be of the “dofollow” variety.
For most of the folks in the RCG community, I’m positive you’re here because you love the conversation and could care less about the positive link luv RCG can give you. Nonetheless, if you’re willing to identify yourself with your “real” identity, then these two things are just two small carrots we’re now offering…
So, please consider taking advantage by clicking on the “Connect with Facebook” button to the right and follow the simple instructions. As a bonus, after you “connect”, you’ll be able to update your profile on RCG with a few additional fields that will make it easier than ever to connect with others from the RCG community.
And finally, I launched FB Connect on the site despite the fact that I’m not 100% happy with it yet. Here are some problems I’ve found and/or things I’m working on:
- FB Connect plays funny (or doesn’t play at all!) with early versions of Internet Explorer, (especially IE 6.0 and below). This might sound harsh, but my solution is to beg for you to get and use Firefox (or even Chrome), but if you’re not willing to do that, at least get the latest version of IE
- The feature that let’s you “add your comment to your Facebook feed” was giving some folks some problems, so I disabled it. I really like the idea of this feature, so I’ll work on troubleshooting exactly what was causing problems, although I think it had something to do with old versions of IE (see previous comment!).
- I really want the avatar that shows up next to users to default to the “gravatar” instead of the FB avatar. My thought here is that many folks have a “fun” avatar on Facebook, but might prefer to have a more consistent avatar on a business site like RCG. I spent some time trying to get this work and while I made some progress, it’s still not working well enough for me to feel comfortable launching… but hopefully soon.
I have a feeling there’s going to be lots more to come in terms of taking advantage of Facebook tools within RCG in the future. Hopefully, you’ll play along and if there is something that doesn’t appear to be working right or a feature you’d like to see, please let me know!
Are you making your client homeless?
I’ve been wanting to warn sellers and seller’s agents about this for the last 10 days or so. Courtney’s new post is a great lead in to this added consideration for sellers and listing agents.
CAN YOU BUY THAT HOUSE, WHEN YOUR HOUSE SELLS?
Having had the benefit of working in a market exactly like this one, back in NJ/PA in 1992 or so, I think this warning will be timely advice for many.
When an agent is called to sell a house, they touch on the subject of “Where are you going to go when this house sells?” But most often the antennae of the agent is focusing on whether you will also be buying a house with them, or if they can get a referral fee by referring you to an out of area agent (usually 25% of the commission.)
WARNING TO SELLERS: IT IS VERY HARD TO GET A MORTGAGE. In the last market like this, many sellers assumed that since they had a HUGE downpayment, they didn’t have to worry about qualifying for a mortgage on the house that they were planning to buy. NOT SO!
Having 50% down and little income could leave you homeless, as NWMLS does not permit “provisional” listings. There’s no turning back.
Here’s how it usually “plays out”:
1) Seller doesn’t want to look at homes until their house has a contract. With houses sometimes sitting on market for well over 100 days, looking at what you will buy when your house sells is often put off until you have an actual buyer for the home.
2) Once the contract is signed around, the seller goes out and makes an offer on a house they are buying with 30% to 50% down.
3) Often the seller and the agent for the seller of the home they are buying are so impressed with the big downpayment, everyone all the way around assumes that someone with that large of a downpayment can get a mortgage.
REMEMBER: The buyer of a home has a legal out phase lasting about 10 days, but the seller does not have a legal out phase if they can’t get a house to go TO.
Often you can’t just go to the buyer and say, “Sorry. I can’t buy a house so you can’t have mine.”
So to listing agents, I know you want that listing, and your are primarily interested in getting the seller to sign that listing contract. But be careful that you are not making your clients homeless. If they are people living on a fixed income, saying they are planning to buy, part loan, your ears should perk up. Make sure they check with a lender as to getting that loan…before you sell their house out from under them.
We are often in the business of “GETTING PEOPLE FROM HERE TO THERE” moreso than simply “selling houses”. Don’t leave your seller’s homeless, as you walk off to the bank to cash your commission check for “selling their house”.
What Happens When The Equity Isn't There, But The Contract Is?
Responsibility on the listing side…
Last week’s Rain City Guide discussion on Short sales got me thinking about some of the other things that are occurring in this market as well. Many homeowners have taken out a ton of equity and are either maxed out or upside down at this point, but some may not be aware of exactly how much they owe. When it comes to listing these properties – or any property, the listing agent should pull title, but also talk to the title rep and find out how much the property is monetarily encumbered by liens. Merely relying on the seller’s information is not enough to be truly diligent.
Take a seller who thought he owed X amount of dollars on his home. After being on the market for a while, the seller’s agent relied on that information to help when it came to reducing the price. A buyer came along and a contract was executed for the purchase of the property. One week before closing the listing agent calls the buyer’s agent and drops the bombshell: The seller actually owes quite a bit more than they thought. Instead of getting a nice chunk of change from their seller net proceeds, the seller will be short X amount of money to close.
Does this really happen?
You bet! Twice I have seen this happen personally and both times the listing agent had not bothered to check the actual amounts owed on the properties. Yes, a listing agent should be able to rely on the seller’s information, but as a matter of diligence shouldn’t they go ahead and take the extra step to get the full accurate information? Title has already been pulled in most cases anyway.
Sellers, you still have signed a contract:
It is helpful to know what you actually owe on your property before you sign a purchase and sale agreement to sell it. In order to stay within contract, a seller will have to come up with the short fall dollar amount to bring to the closing table.The NWMLS Form 21 Residential Purchase & Sale Agreement clearly states: “ Monetary encumbrances or liens not assumed by Buyer, shall be paid or discharged by Seller on or before Closing.
Sunday Night Stats – At Bottom
Many buyers are waiting for the $15,000 tax credit for homebuyers in 2009 to be signed into law, as well they should. This will continue to keep the volume stats down through the month of February as to closings. If the bill is signed by the 16th of February or so, as expected, you will begin to see volume pick up in March.
The other thing that buyers have been waiting for, are signs that prices are “at bottom”. While median prices for King County continue to slide as short sales and foreclosures continue to impact sold prices Countywide, we are seeing two emerging trends as to “bottom”. 20% for non-distressed property and almost but not quite 40% for distressed property, more like 37%.
Who determines “bottom” as to prices? Sellers and real estate agents would love to control prices, but the buyers of homes ultimately control home prices. While we wouldn’t expect to see prices bottom with continued bad news as to layoffs, buyers are consistently calling the bottom at 20% under peak pricing for non-distressed property.
The odd thing about the stats on this is that it doesn’t seem to matter how long the property is on market. If it takes the seller 800 days on market to get to 20% under peak prices, the property sells. If it takes the seller 65 days to get to 20% under peak prices, the property sells. In several cases when the property gets to 20% under peak prices, there is more than one offer. BUT rarely do those offers push the price much under the 20% under peak range.
Exception seems to be when the homes sold at peak values did not have remodeled kitchens and baths, but the property sold today does have a remodeled kitchen and baths, and possibly an addition as well. In those cases, the sales can be as high as 11% to 14% under peak pricing.
Because every neighborhood has a different peak value, and peak MPPSF, you can’t do whole zip codes or a whole County using median statistics. You have to find the peak price in each neighborhood for each house sold, and calculate the % off peak of the sale. A tedious chore.
House #1 – Redmond – peak pricing $249 MPPSF – Home sold at $210 PSF, 16% under peak with a remodeled kitchen of 8 years ago. The odd thing about this house is that in September through January, this home sat on market at 16% under peak, after first trying only 5% under peak for over 200 days. Once the market determined the price was not going to reduce further and reach 20% under peak…it sold anyway. This is not the norm and if the kitchen remodel had been more recent, it may have sold a bit higher and faster.
House #2 – Bellevue – Peak pricing $1.5M – this property sat on market for well over 700 days. The minute it reached 20% under peak it sold. This would not seem like a basis in and of itself, for calling bottom at 20% under peak. But when you see house after house going from not sold to sold when it hits the same price point of 20% under peak, the buyers speak in unison.
House #3 – Peak pricing $1,059,000 – This is a sad one. More than 4 buyers called this one at 20% under peak at roughly $850,000. Unfortunately it is a short sale and the lienholder would not approve the sale price at 20% under peak, even with several multiple offers all in the same price range. How much more proof of value to do need then several buyers in a market like this all calling current value at the same place? This one will likely go to foreclosure and end up selling for even less than 20% under market. Still…the buyers called the price of 20% under market the acceptable level.
House #4 – Seattle 98103 – peak pricing $425,000 – Asking price at 20% under market sold – this one was unusual as the opening asking price was 20% under market…it sold immediately…in less than a week. Doesn’t seem to matter if the seller takes over 700 days or 1 day to get to 20% under market…it still sells either way. This consistent price point of 20% under peak turning a property from ‘for sale ‘”to “sold”, gives us a price at which buyers determine, bottom has been achieved.
House #5 – Seattle 98115 – peak pricing $800,000 – sold when asking price reduced to 20% under peak. This is a sad one because the owner started out at well OVER peak pricing. Hard to believe that someone was thinking prices would actually be going up from mid 2007. But the end result was consistent with the other properties, and a buyer made an offer when the price was within 20% under peak prices.
There are some houses selling for less than 20% under peak. There are many, many houses for sale with asking prices that are much higher than 20% under peak. But unless it is a distressed property or an especially miserable location or condition, there are NO houses sitting on market without an offer ,where the seller is asking 20% under peak pricing.
I don’t “call bottom” nor do sellers or any real estate agent. The buyers call bottom. And when they consistently respond to an asking price of 20% under peak by bringing an offer…the buyers are calling bottom.
It’s very hard for a seller to price his house at 20% under peak pricing, even if he bought it 15 years ago for much less that that. Now it seems equally hard for buyers to see a house at 20% under peak…and pass it by.
“At bottom” has nothing to do with more activity. “At bottom” does not help real estate agents sell MORE houses, as most sellers are not ready to price at this point that buyers have determined is the price at which they will buy. When a given price point not only guarantees a sale, but brings multiple offers consistently at the same price point…buyers as a whole determine that “comfort zone” of pricing. Now sellers collectively have to agree with them…or not.