Discrimination – “Love Letters” to Sellers

A Cautionary Tale that Multiple Offers can lead to Discrimination in Housing…somewhat inadvertently.

I had a young couple ask me if they should submit a “love letter” to the owners of the home with their offer. I had not heard the letter called “a love letter” before, but it reminded me that I had used a letter like this back in 2006 or so when the home had over 20 offers. I included a lovely picture of the couple and their two children.

Fast Forward to 2012. This year there were many multiple offer situations and in one case a lovely old couple who had lived in their home since it was brand new and for over 30 years did not choose my clients and I was told it was not about price. ??? What WAS it about then?

Long story short…my clients did get the home. Sometimes Sellers say “I want a nice family who is going to raise their family in “our” home the same way we did”. They identify with the buyers of the home and want to picture a “loving family” in the home that they love so much. They don’t intend to discriminate…but…net result???

There has been a lot of talk over the last 5 or more years about “Why do we NEED an agent?” A reminder that often the agent is the ONLY one in the room who can see when a law is about to be broken…intentionally or not.

We are not licensed to SELL Real Estate.

We are licensed to represent people who Buy and Sell Real Estate.

Many agents believe that they are simply passing paper back and forth between buyers and sellers and must follow the instructions of their clients. This is a CAUTION that many people need to be told when they are entering into that gray area of “unlawful” as it is not always blatant discrimination.

Sometimes the seller asking

“which offer is from that cute couple with the baby?”

IS discrimination.

The agent should say: “Let’s look at these offers on their merits, without regard to WHO is making the offer”. People who discriminate often do it quietly, without notice, and sometimes scream the loudest that they are NOT…when someone calls them on it.

Hope for Short Sales in 2013 – Congress is Working to Extend COD Income Tax Exemption

This is not legal advice.  For legal advice, consult an attorney, not a blog.  Furthermore, the post below addresses some BUT NOT ALL issues relating to foreclosure, short sale, etc., and the following analysis is cursory and not complete.  If you face a foreclosure or are considering some alternative, you should obtain legal advice.

US-GreatSeal-Obverse.svgThe Senate Finance Committee recently approved extending the Mortgage Forgiveness Debt Relief Act through 2013.  That’s GREAT news for anybody interested in a short sale here in Washington.  If you’re wondering why…

Generally speaking, the IRS considers as income any forgiven debt (Cancellation of Debt, or COD, income).  For example, if I borrowed $50k from you, that would not be “income” subject to taxation because, while I received $50k from you, I had a corresponding liability to you in the same amount.  But if you then released me from that obligation and forgave that debt, at that moment I would have realized $50k in “income.”  Therefore I would need to report this “income” — the amount of the forgiven debt — on that year’s federal income tax return (and of course pay taxes on it).

In 2007, as the housing crisis was getting underway, Congress passed the Mortgage Forgiveness Debt Relief Act.  This act allows homeowners to avoid COD tax liability on debt that was incurred by the purchase of a principal residence.  In other words, if the property is your principal residence, then you will not face income tax liability on the forgiven debt.

Here in WA, there is debate about the COD tax implications of a non-judicial foreclosure.  The vast majority of foreclosures in this state are of this variety.  In a non-judicial foreclosure, the difference between the funds paid at the foreclosure auction and the amount owed is extinguished as a matter of law.  In other words, following a non-judicial foreclosure, the owner/debtor neither owns the house nor owes any money to the bank, regardless of what was paid for the property at auction.  Accordingly, some — but not all — experts believe that a non-judicial foreclosure does not create COD tax liability.

The Mortgage Forgiveness Debt Relief Act expires December 31 of this year.  Thus, if the act is not extended, effective January 1 any forgiven debt, even on a principal residence, will be considered as income and taxed accordingly by the IRS.  Here in WA, the only possible exemption to this liability is the argument that a non-judicial foreclosure does not create COD tax liability.  Thus, an owner/debtor subjected to foreclosure at least has an argument that he does not have COD tax liability after a non-judicial foreclosure.

But a short sale?  As it stands now, beginning January 1 any owner who sells short and is released from the debt will have to report that forgiven debt as income.  There is no question that debt forgiven as part of an approved short sale is subject to COD tax liability absent the “principal residence” exemption.  In other words, only a confused or misinformed owner/debtor will seek a short sale beginning January 1 given the substantial tax implications.  For example, if your house sells for $300k but you owe $400k, you will have to report $100k as income, resulting in a tax bill of an additional $30k or so (depending on your tax bracket).  Is a successful short sale worth that kind of money owed to the IRS?

But — and getting back to where we stared — good news is on the distant horizon.  Recently, the Senate Finance Committee approved extending the Mortgage Forgiveness Debt Relief Act through 2013.  While admittedly a very small step, it is at least a first step towards exending this income tax exemption.  And absent such an extension, short sales will become far, far less attractive.  If Congress can complete the job — a very big IF — then short sales will remain a viable alternative to foreclosure.  But if Congress sits on its hands and lets the exemption expire, short sales will likely dry up dramatically.  Or at least they should…

2012 Real Estate Prices

The basic Real Estate questions in 2012 have been:

1) Are prices UP or DOWN, going UP or DOWN…at bottom, in recovery, recovered?

2) Is Inventory low…will it get better…where is the shadow inventory?

To answer these questions I am using data from the Lake Washington School District, as it represents a good mix of all possible “home” types. It also gives you a framework of how to develop a similar snapshot in your area of interest.

First let’s look at the snapshot of what people chose to purchase YTD 2012.

Key: 1C Black is One Bedroom Condo, 2C Turquoise-Blue is 2 Bedroom Condo, 3C Purple-Blue is 3 bedroom condo/townhouse, 1S Yellow-Gold is a 1 story home, B/T Pink is a Bi-Tri level and 2S Green is a 2 story home with or without a basement.

Let’s add to that some historical perspective to see if those current choices represent a shift of any kind.

Now we add the impact of price changes on those volume graphs as to what people choose to buy…as prices change.

Back to the original questions…answered by Property Type in the order they are represented as to # of people choosing to buy them.

TWO STORY HOMES

First, let’s be clear as to what a “Two Story Home” is and is not. A two story home is where the children go UP to bed. It is not a 2 level home where the children stay on the same floor as the kitchen when they go to bed or when they go downstairs to bed. I say children as the Master Bedroom can be on the main floor in a two story home. A 2 story home can have a basement or not and in the graphs above these homes are represented in GREEN.

The 2 story home is by far the majority preference, if one can afford anything they want.

Prices have been pretty stable since 2009.

Prices are down roughly 19% from peak pricing.

Volume is pretty much fully recovered given we don’t expect volume to reach “zero down” levels.

Shadow Inventory is in 2 places for the 2 story homes.

First there are the homes ON market that are simply overpriced. Technically you have a 3.65 month supply currently “For Sale”, but only a one month to 1.5 month supply that is actually priced to sell based on current pricing. I’m being generous there allowing for homes to be 10% over where they need to be. A full 60% of 2 story homes for sale are priced at more than 10% of where they need to be…or above 110% of the price at which they will actually sell. These stay “in the shadows” and are basically invisible to those who are buying homes, until they have a price change.

Second are the homes that were bought in volume between 2002 and 2007 that are either underwater or just not yet offered for sale by the people who bought them. About half of those homes will come into the market in dribs and drabs over the next 3 to 5 years. Some will be short sales and foreclosures. Others will simply be homes bought from 2002 through 2006 or so that are not underwater. We don’t expect to see a huge surge of those coming on market all at once, so they should not impact the market by a large amount at any one given time.

Part of the reason for the decline in volume is that builders have shifted over to Northshore School District and Issaquah School District, due to the lack of available land. That probably won’t change in the near future.

TWO BEDROOM CONDOS, B/T SINGLE FAMILY HOMES & 1 Story Homes

Interesting that these three segments represent about the same market share as to real estate purchases overall.

The B/T Single Family Home is a Bi or Tri Level Home. It can be a one story with basement, a split entry or a tri level…sometimes a “multi level”. It is represented as bright PINK in the charts above.

Pretty much fully recovered as to volume, given they are not building more of these.

Prices have really leveled out well at 23% under peak pricing.

I don’t expect much MORE Shadow Inventory to come out of this class of housing that is not already ON market, but overpriced. A FULL 75% of these homes are on market…as overpriced…by a LOT.

The One Story Home has not yet settled into to a recovered position!

Still falling in both volume and price.

The Two Bedroom Condo is in the same boat.

Look at the 2nd graph and you will see these three housing segments, PINK, TURQUOISE & GOLD converging pretty much at the same point in 2009.

 

It’s important to note that there will be continual shift here for some time to come. When people can buy a B/T home for the same price as a 1 Story home…the 1 Story home suffers. Mostly due to the extra basement square footage in a B/T home. The 2 story condo taking the same place on stage is surprising…and being caused by the stability in price of the 3 bedroom condo-townhome.

LOTS of Shadow Inventory in the 2 Bedroom Condo and prices have much further to fall.

The 3 bedroom condos…mostly townhomes…are hard to call. They are running too close in price to the Single Family Home and way over the price of a 2 bedroom condo. I would have to say they are going to fall until they are closer to the 2 bedroom condo price than the Single Family Home price. But that’s a rough guess.

No Surprise…the One Bedroom Condo is dropping like a stone. They were pushed up in value and favor back when everything else was priced out of reach. For the most part people are just holding them as rental properties. LOTS of Shadow Inventory here, especially the underwater newer ones.

SUMMARY: The 2 story home and the Bi and Tri level homes have pretty much recovered and should stay relatively stable. Everything else has a long way to go before they have settled at a bottom as to both volume and price.

To determine where all that might be headed you might ask yourself these questions.

Looking at the price of a 2 bedroom condo at $170k and the price of a 3 bedroom condo at $315k…which would you buy? Is ONE additional bedroom worth an extra $145,000??? Probably not. That is what is holding up the pricing on the 2 bedroom condo, and why the 3 bedroom condo or townhome has further to fall.

Same goes for the 1 story home and the 3 bedroom condo-townhome. At some point the 3 bedroom newer townhome is winning over an old 1 story house without a basement…for other people not. These two have yet to come to an appropriate balance.

That’s it for now. The market should slow down a bit now that we are at 30 days to school starting. That is only as to new contracts and not August Closings. A good roundup of where we are…until we have the 4th Quarter results. in.

Everything should drop from here a bit and the big question is…Will the year END higher than it began?, and if so…in which market segments.

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Data in this Post and the Graphs is not Compiled, Verified or Published by The Northwest Multiple Listing Service. The dates used per year are from January 1 to August 1 in each respective year.

 

 

Outlook.com – The Journey Starts Today

Lumia 900 Windows Phone

One of the exciting things about being a real estate agent is you can really integrate technology in a meaningful way on an every day basis. I don’t have all the gizmos and gadgets just to “have” them. I can’t imagine doing business without them.

I recently upgraded to the Lumia 900 which I think was new to AT&T when I got it, but not “new” generally speaking. I liked it so much that I bought matching nail polish and even matching outfits to go with it. 🙂 I do miss the Samsung Focus now and again, but my partner Kim still has it, so I can switch over if needed. So far I think the audio is better on the Focus as is the camera. The audio is a Nokia hardware problem…well, actually it’s as good as the iPhone I had before the Samsung Focus, but the Samsung product is superior to both the iPhone and the Nokia Lumia 900. Still…the Lumia is exciting for a lot of other reasons and I like both of my Windows Phones better than I did the iPhone…and that’s saying a lot.

I have not used Outlook for a long time having switched to gmail. One of the reasons is I deal with very large file attachments often and Outlook just couldn’t handle that well. Yes…maybe it was more secure, but thinking every home flyer or contract was “too large” to go into my inbox was a huge problem for my business. gmail never seems to block any of my emails with large attachments.

I switch back and forth from chrome to IE but generally only use IE when I “have to”, which is for contracts. That I “have to” kind of ticks me off, I have to say.

Well today we have a new “Outlook” experience, and I’m going to give it a whirl. Many of my clients work at Microsoft and I try to test out all the newest things and use them in my business. A fair amount of my clients work at Google as well, so I try both and use the best of each. The only product I have that is neither is my iPad, but I have to say the new Lumia 900 Windows Phone (coupled with some annoying NWMLS snafus in the newest upgrade) has all but made my iPad obsolete. But that’s another story.

Here’s what Microsoft has to say about their new Email Journey:

“An experience with no compromises
Outlook.com is the first step in creating one complete experience for the next generation of communications. Email should be connected to your friends – whether they like to use Facebook, Twitter, LinkedIn, Google, or a combination. Email should let you get more done, faster – with immediate access to your inbox and tools that can automatically categorize, move, or delete messages you don’t want. Email should be deeply integrated with other services – for Outlook.com, you’ll find that Office Web Apps, SkyDrive, and, soon, Skype come built right in. And we hope you have already noticed our fast, beautiful user experience.”
I loved Outlook for a very long time and some of the gmail features make it difficult at times, so I will be giving this new email product a try…but I’m far from abandoning my gmail. Will let you know if it ever comes to that.

 

 

2012 Median Home Prices UP…and DOWN

Single Family Median Home Prices are UP 6% YOY for the First Half of 2012 in Seattle.

First Half 2011 @ $399,000 – First Half 2012 @ $423,000

Bellevue School District is the Big Winner at UP 20% with a Median Home Price of $689,000.

Issaquah School District DOWN 4%, Northshore School District DOWN 2%

Lake Washington School District UP 4%

Median Home Prices for First Half of 2012:

Bellevue School District: $689,000

Issaquah School District: $521,000

Lake Washington School District: $498,000

Northshore School District: $376,000

Seattle School District: $423,000

Northshore School District has become a pretty good buy lately, given many of the schools have shot UP in the rankings and the median Home Price is by the far the lowest in the mix.

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Required Disclosure: Stats are not Compiled, Published, Verified or Posted by The Northwest Multiple Listing Service.

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ARDELL 206-910-1000   ardelld@gmail.com   ARDELL DellaLoggia, Managing Broker, SOUND REALTY

Calling a Piece of Junk Mail

mortgage spam emailI just published about junk mail that I received on my blog… but it doesn’t even compare to the piece of garbage we received in the mail today.  In fact, it was so bad, that I decided to call them to learn more about their services.

The mailer looks very official. It states “important legal information inside – please open immediately”.  No where on this POS does it disclose who this is from.  Not on the upper left corner of the envelope and nor in the actual body.

It does reference our mortgage company who originated the mortgage (Mortgage Master Service Corporation) and in the tiniest of small print at the bottom, discloses they’re not related to the mortgage company.

It goes on to say that the letter is from the “Loss Mitigation Administration Office” and that we receiving the notice because we may be eligible for “special modification program guidelines in conjunction with the New 2012 Home Modification Program… HAMP2 is an aggressive update to Obama’s original program. This new program may enable you to modify your existing home loan and reduce your monthly mortgage payments, receive interest rate reductions…without the traditional restrictions of credit history, income or employment status, equity and reserves…”

It goes on to offer a 2% fixed interest rate and says our information is “on file”… and if we don’t respond by July 13, 2012, we may not get this swell deal because “only a limited number of people can qualify”.

GARBAGE!!

So… I decided to call the toll free number after googling it, did not reveal who was sending us this great offer.

The gentleman on the phone had a very pleasant, soothing voice.  He answers the phone “Loss Mitigation Department, can I help you?”

Me: Yes, I’d like to know who sent a mailer to my home regarding HAMP?

Him: [He reveals it’s a law firm – I’m not going to promote them here].

Me: Why did I receive this? I’m not behind on my mortgage? Don’t you need to not qualify for a regular refi or HARP to have a HAMP loan modification?”

Him: Our company has done searches to determine who may be at risk for a loan mod, perhaps you’re underwater? Lets say you have a $350,000 mortgage but your home is only worth $250,000.

Me: My home is not underwater and we’re not behind on our payments. I’m confused how I could qualify for a HAMP or why I would want one.

Him: Well you might want to consider a HAMP over a refinance because refi’s are so costly. Most have a 1% origination fee and 3.5% loan cost.

At this point, it’s hard for me to not totally blast him.  He’s so far from the truth…

Me: what are your fees?

Him: I really can’t say.  There’s a range depending on what you need.  Who is this?

Me: You can quote costs for refi’s but you can’t give me a range for you charge?

Him: We have a flat fee of $3700 on many of our transactions. Clients are grateful for the service we provide. We can often do better than what a home owner might when dealing with their mortgage servicer directly.

Me: How are you coming up with the fees  you’re comparing for a refi?

Him: You’re sounding like a “professional”, can I help you with a loan mod?

Me: No. You cannot. I am a mortgage originator you the fees you’re telling consumers for a refinance are way off base.

Him: Do you call on every piece of junk mail that you receive?

Me: I see we agree on something – this IS a total piece of junk mail and no, this is a first. It was so disgusting, I had to call to see who sent this to me.

If I were considering a loan mod, I would NOT select assistance by some scammy piece of junk mail. It sickens me when I think of folks who truly need help and might fall hard for something like this.

Why can’t they be upfront and disclose they’re an attorney’s firm and for $X, they’ll try to get you a loan mod.?

I’ll be sending this piece of solicitation to DFI for review.

Here’s information from DFI’s site regarding Loan Modifications and signs to watch out for.

Where Should I Live?

Not every client asks me where they SHOULD live. But the question comes up from time to time, and often from family members who are considering jobs in more than one city.

I am answering a more complex one for a family member who hopes to purchase a home vs rent. Scenario is they are graduating with an RN and looking at:

Los Angeles $82,000 Salary
Seattle $74,000 Salary
Colorado $71,000 Salary

The issue when people ask me is usually whether or not the salary differential makes up for the difference in the cost of the housing in various places. The offered salary is $11,000 more in Los Angeles than in Colorado, but does that compensate sufficiently for the difference in housing cost? In the past the scenarios presented to me were about renting vs buying, and often the differential did make up for that difference in rental cost. But when someone is buying vs renting…not necessarily the case.

In this particular example I am looking at Entry Level housing, VA Loan with zero down and a family that already has two children and is planning to have more children. So I need at least 3 bedrooms on this entry level housing.

Starting with “Seattle”…I know that the person is interested in The Eastside Cities of Kirkland, Bellevue or Redmond. For this “entry level” example, I am going to use a home that closed on Wednesday for one of my buyer clients BUT putting in the loan scenario of the family member of mine who is asking the question.

141st House

Price SOLD is $355,000. Plenty of space and yard for a growing family. Cul de sac lot. Could use some updating, but no expensive fixes needed. Had one owner for 44 years since it was built, in 1967. A good indication that a family can live there indefinitely without needing to upgrade to a larger home.

Now we’re matching this home purchase up to the above RN Salary for “Seattle” of $74,000 for the person asking the question, vs the person who actually bought it the other day.

First we’ll use the “rule of thumb” of 3 to 4 times annual income for the loan amount. That would put the loan, based on $74,000 Annual Income, at $222,000 to $296,000. A little short based on Zero Down for this home.

I’m going to move this WA scenario over to a home I sold in Mt. Lake Terrace that is a similar home, big lot, with a one car vs two car garage, but that sold for $250,000 vs $355,000. Edmonds School District. A reasonable example for Mt. Lake Terrace or Brier.

$250,000

Now we go back to our 3X to 4X Gross Annual Income “rule of thumb”. and we can fit $250,000 into that $222,000 to $296,000 equation without approaching the upper limit. NEXT we go into the actual real detail of payments, which isn’t worth doing if the Rule of Thumb = No Way, Jose.

Conservative numbers put monthly housing payment, whether that be rent or mortgage payment, at 28% of MONTHLY GROSS income. VA guidelines are usually 40/40 ratios, allowing people with no debt to put the entire debt budget on home. This Family is a Zero Down…but also a Zero Debt, so they can go somewhere between 28% and 40% as the housing payment.

I am not a Lender…so you have to check the ratios with an actual lender before making offers, but since I don’t recommend going to 40% on housing payment even if you have no debt…as you may incur debt at a later point, let’s proceed.

This family would have ZERO Closing Costs on the above $250,000 scenario as they can be included in the price with a Seller and/or Agent Credit to cover the Closing Costs entirely. So we don’t have to factor in Closing Costs on the WA scenario. That will change for the other cities.

Rates are very low today…too low to use for this scenario, so I’m going to pump the rate up to 3.75%. We are going to stack the VA Funding Fee on top of the price for Loan Amount and Payment purposes. That amount is $5,375. It can be fully or partially paid as part of the Closing Costs, but let’s assume a stack on this one taking the Loan Amount up from $250,000 to $255,375 at 3.75% is . Property Taxes are $250 a month. Homeowner’s Insurance is $50 a month.

NOTE: There are different VA Funding Fee rates for different scenarios. Putting 5% vs ZERO down can reduce the Funding Fee by almost 2%. I have used a rough scenario based on the person who asked the question. These Funding Fee rules change from time to time, are different for Refinance vs Purchase Loans, whether you were in Regular Military or National Guard and whether it is a 1st time or subsequent use of the privelege. See your local lender for specifics.

OK…back to the payment on the $255,350 Loan Amount at 3.75%. $1,182.57 for the Principal and Interest plus $250 for RE Taxes plus $50 for Home Insurance (Fire, etc.) gives us a monthly payment of 1,482.57. That happens to be pretty close to what the home would rent for, probably less than rent for this style of home in other nearby places like North Seattle or Lake Washington vs Edmonds School District. Not sure about Northshore School District, which would also be in the mix as to Bothell homes. But all in all, a good basic scenario.

Back to $74,000 Salary in WA and $1,482.57 a month housing payment. $74,000 Annual Gross Income divided by 12 gives us $6,166.67 Gross Monthly Income which puts $1,482.57 a monthly PITA at 24% of gross. At 40% of Gross Income the monthly housing allowance would be substantially more at $2,466.67. $2000 a month PITA would be a loan amount of $430,000. hmmmm.

Let’s go back to the Rule of Thumb. $430,000 is 5.81 X Annual Income vs 3 to 4 times Annual Income. Low Interest Rates do impact this rule of thumb issue, but still…going over 4X Annual Income just doesn’t look right.

Let’s go back to the first house at $350,000. That payment would be $1,679.41 plus taxes of $330 a month plus insurance of $75 a month would be $2,084.41 a month or 34% of monthly gross income. That’s really enough to spend on housing, and likely appropriate in this case as we are only using one income at an entry level salary. So the payment will become more affordable with some supplemental income from the other spouse and future raises.

So let’s say either of the above examples will work…as well as something in between.

That’s the hard part. Now let’s throw up a $250,000 home and a $350,000 home in Colorado in the Cities of preference as noted by the person asking the question.

Most Every Home in Parker Colorado fits the bill. No problem there. So Parker Colorado, even at a few thousand less in Salary down from $74,000 in WA to $71,000 in Colorado…very easy to get a house for $300,000 give or take.

This big 5 bedroom, 3,200 sf home in Parker is listed at $314,900 and there are plenty of others to choose from. Easy to see why Parker Colorado made the list of options.

Parker

Castle Rock, another choice in Colorado, is even lower priced. This new 3,530 sf new home is listed at $288,000. But Parker doesn’t seem so far out of the way, and is plenty affordable.

Castle Rock

That’s all I can say about Parker and Castle Rock Colorado, as I don’t know the area at all. It works, so it would depend on the salary offers in the various locations. WA works. Colorado works. Now to L.A.

We have a bit more room here, as the salaries are higher by $10,000 or so as the average. Using the same 34% of Gross I used above vs the 40% allowance, and using $82,000 as Gross income is $2,325 for housing payment. Let’s use $1,900 after taxes and insurance. That gives us a home price of $400,000 allowing the extra $10,000 for VA Funding fee on top of the mortgage.

What does that buy in L.A. in the specific areas of interest?

It doesn’t buy us anything in Walteria, one of my favorite not too Ritzy places. 🙁

It doesn’t buy us anything in Redondo Beach, even when I throw in 3 bedroom condo-townhomes.

There are a few in NW Torrance that would work, but they are short sales, so not sure if that price is reflective of “the going rate” for the area.

This 3 bedroom 2 bath, 1,468 sf home at $365,000

This house looks nice, but you can see a huge electrical tower behind the house.

Obviously L.A. is not as doable as WA or CO, so the salary difference would have to be higher. If the salary offer in L.A. was double that of WA and CO…well we can revisit this. But for a small difference…may not be worth it.

Let’s find an L.A. house and work the salary backward.

Well…I can’t find any for sale BUT the GOOD NEWS is I did find a few in Redondo Beach that SOLD. So the answer is there are a few…but the sell very quickly.

This one sold for $419,000. It’s only 914 sf though. 3 bedroom, 1 bath, but small. Nice sized lot and yard though…and it is warm and sunny enough to be outside most of the time year-round, unlike WA and CO.

Redondo Beach

This 3 on a lot sold for $410,000. Nice Street. 1,612 sf with 3 bedrooms and 2.5 baths.

BOTTOM LINE: All three are potentially doable…enough so to put out resumes in all three areas and see what kind of offers come in. WA is probably the best option for several reasons. L.A. is doable IF the salary offered is high enough…OR…if you rent for a bit until the salary improves by raises. Parker vs Castle Rock is probably an excellent option. Depends on how close to the actual work site they would be.

The purpose of answering the question “Where Should I Live?” is not to really answer the question, but to give some food for thought. There are some other considerations like schools and safety, but I already know the not Colorado options well enough to factor that in and the Colorado Cities seem to have pretty much ALL good schools. There are a couple of exceptions in Castle Rock, and I still prefer Parker for several reasons, but most Castle Rock Schools are pretty darned good except for one or two.

Shooting this link to the person who asked the question. Hope it helped someone else with the general “thought process” and work through format. No matter where your thoughts travel as to “Where Should I Live?”, it’s not to hard to do a comparison based on Salary Differences and Home Price differences. The cheapest homes are not always the best choice…nor is the highest salary.

Of course I’d have to say WA vs CO, but to compete, I’d have to throw in a nice looking house for $350,000 in Duvall. 🙂

duvall

How to Buy a Home Stress-Free in a Seller’s Market

There is a lot of evidence out there, both statistical and anecdotal, that it’s a “seller’s market” in the Seattle area. And that is consistent with my own experience as well. The best example? (Or perhaps worst, since this post is from a buyer’s perspective…) I helped make an offer on a home in Mount Baker, the proverbial “tastefully updated bungalow” with lots of nice features. And it got quite a bit of interest. How much interest? Oh, only 13 pre-inspections, 10 offers, and a final sale price 20% over list. POW! Talk about getting punched in the mouth.

In other words, a bidding war. These situations are emotionally trying for any buyer, and are simply too stressful for some. So what to do if you’re a buyer who has no interest in a bidding war?

Tailor your strategy accordingly. First, don’t even look at a listing until it is at least 14 if not 30 days old. At that point, the odds of a bidding war drop dramatically. You are much more likely to have one-on-one negotiating that allows you to keep control over negotiations and gives you the ultimate ability to either buy the house or not.

But that leads to the next, and much tougher, question: How the heck do you find a good house in this market if you only look at old listings? Admittedly, it’s a challenge, but not impossible. First and foremost, don’t just rely on the pictures in the listing to determine if a house is worth a closer look. For whatever reasons, some agents don’t do the best job with the pictures. So don’t think that the pictures necessarily reflect the true condition, layout, and overall “gestalt” of the house. Instead, look for possible homes primarily by neighborhood, space/size, and price. Compile your list, and then go have a look in person regardless of what you might think from the pictures. Yes, you’ll end up touring more homes, but that’s the only way to find that “diamond in the rough” that will work for you but won’t give you a heart attack when making the offer.

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FHA Mortgage Insurance Premiums Increased for Most and Reduced for Few Streamlined Refi’s

Earlier this month, FHA mortgage insurance premiums (both annual and upfront) were dramatically increased for purchases and refinances with exception to *some* FHA streamline refinances.  If you were preapproved with an FHA insured mortgage prior to April, you should check with your mortgage professional to make sure your preapproval is still valid with the increased mortgage payment.  Remember, it’s your mortgage payment (debt to income ratio) and down payment that determines how much home you qualify for.

Upfront mortgage insurance premiums (typically financed) has been increased to 1.75% of the base loan amount.

Annual mortgage insurance for FHA loans with terms greater than 15 years (30 year fixed and adjustable rates) are now 1.2% of the base loan amount if your loan to value is 95% or lower; if  your loan to value is greater than 95%, the annual mortgage insurance premium is 1.25% of the base loan amount.

For a 15 year fixed rate FHA mortgage, if your loan to value is 90% to 78.01%, the annual mortgage insurance premium is 0.35% of the base loan amount; loan to values over 90% will have annual mortgage insurance rates of 0.60%.   NOTE:  If you have a 15 year fixed FHA mortgage and your loan to value is 78% or lower, there is no annual mortgage insurance required.

If you have what’s considered an FHA “high balance” mortgage, which in the Seattle area, would be a base loan amount of $417,001 to $567,500 for a single family dwelling, annual mortgage insurance premiums are set to go up again effective on case numbers issued June 11, 2012 or laterHUD is scheduled to increase annual mortgage insurance premiums for FHA Jumbos/High Balance loans by an additional 0.25%.

Annual mortgage insurance is paid in your monthly mortgage payment. To determine how much your annual mortgage insurance premium will be, multiply the percentage reference above by your base loan amount and divide by 12.

**So how about those lucky folks I referenced above who may qualify for reduced FHA premiums?  HUD is dramatically reducing mortgage insurance premiums for FHA streamlined refinances IF the FHA loan was endorsed by HUD before June 1, 2009.  “Endorsed” is different than when your loan closed – it’s when HUD insured the FHA loan. This process often takes place several weeks AFTER the mortgage has closed – you may have closed your refinance on April 30, 2009 and if HUD endorsed it on June 1, 2009 (or later) you won’t qualify for the reduced rate.

Those who qualify will benefit from seeing their upfront mortgage insurance premium reduced to 0.01% and annual mortgage insurance reduced to 0.55%.  This is effective on FHA case numbers issued June 11, 2012 or later.  The good news is that you don’t have to wait to lock in your rate if your FHA loan qualifies for the reduced rate – you can start your application now!   Your local mortgage originator can probably help you determine when HUD endorsed your FHA insured loan – I’m happy to help if your home is located anywhere in Washington state.

“Motivated Seller” ???

motivated sellerWhy is it that when you call to set up appointments to see homes that are for sale, the owner that gives you the longest song and dance, is the one that says “Motivated Seller”? It’s as if the agent is saying… I know the owner doesn’t appear to be motivated…but please ignore that.

Generally an agent calls to make an appointment and says something like: “Hello. I am planning to show your home today between 4 p.m. and 5 p.m.” The potential responses from the other end of the phone should be:

1) Thank You
2) NO…sorry, that’s not a good time.

Answers come in all forms:

1) Well I was going to go to the store, but I guess I could stay and clean up and go to the store later…

2) Can you come on Tuesday instead of today? Tuesday is a good day for me.

3) Can you call my agent because I like her to be here when agents show the home so she can tell you about all of the wonderful things about my home?

4) Is it a “serious” buyer? Because I don’t want people coming who aren’t serious buyers.

It’s a yes or no question. If your home is for sale and an agent calls to show the home, remember that is what you are supposed to WANT to happen!

Say Thank You and Yes…whenever possible.