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Homebuyer Credit Extended

Tax Credit extended and expanded for first time home buyer and existing home owner tax credit through April 30, 2010 

 Friday, November 6th President Obama signed the legislation.   

 The bill passed the house on a 403-0 vote and the senate on a 98-0 vote on Wednesday.

 KEY CHANGES

~   Written binding contract signed by April 30, 2010 / Close by July 1, 2010
~   Income limit increase:  Single $125,000 / Married $225,000
~   Cost of home cannot exceed $800,000

~   Existing homeowner credit eligibility of $6,500 tax credit.  Must have owned principal home for 5 of the last 8 years  (& be purchasing a new home).    

Link to Chart for more detailed information and  FAQ’s .  Great info. 

Multiple Offers–In THIS Market?

Multiple offers?  

In the current market houses that range from $425-500K are getting multiple offers. 

If you are pre-approved and ready to make offers, and are just waiting for the one house that tells you “I’m the one you want”, there are currently lots of houses on the market in this range, and many have been sitting there for months.  You may have been through dozens of houses, or just a few, but none of them has been quite the right thing. Today your realtor has taken you to one house that just had a dramatic price drop.  It just went from $450K to $399K or in some cases even $350K.  Why?  You may wonder why–has it finally come down to it’s real value?

This may be a marketing strategy that allows this home to stand out from the relative abundance of homes available in this price range.

So you go– and it’s a great house, in fact, it’s prettier and shinier than many of the houses you’ve been to over the last few weeks. Clean, charming, just the right layout, very cool!  But WHY is it $399k?  There’s a window of pricing that causes buyers to line up for affordable housing and these homes often receive multiple offers.

Here’s what’s happening out there now in Seattle and some other markets.  There are some listing agents who along with their sellers are willing to take a risk.  They know that the house they are selling is worth $450k, in fact they have an appraisal from the end of 2008 showing a value over $450k.  And they are gambling that if they drop the price under the $400K threshhold, that they could very well stir up a bit of a feeding frenzy, multiple offers and a sale over the asking price.  It’s happening all over Seattle.  Many of the homes priced this aggressively are bank owned homes, and we’ve seen a high percentage priced at, say $250K end up selling for $10K-$100K over the list price.

Naturally there will be some fallout, some buyers will be disgusted with this strategy and tell their agent, “Pay over list in THIS market, NO way!” But we see it every day, that this market is in flux, changing all the time. It’s a fascinating and sometimes frustrating time. You may experience it as frustrating, and while we understand your frustration, we also find it fascinating.  In this way listing agents open the door to a great or at least better-than-average deal on a home a buyer might not otherwise be able to afford.  The trick for the buyer is not to fall in love with the home and cut bait if the seller/seller’s agent are unreasonable. 

We may or may not have reached the bottom of the housing market.  Realtors as a class can be very creative in their marketing, and Realtors and sellers are getting hungry and savvy enough to find ways to pique people’s interest.

Most of this kind of multiple offer situation is in the bank-owned arena.  But sellers are catching on, realize that they are in competition with the bank owned homes too, and the ones that get tired of sitting or simply need a quick sale may want to employ this kind of strategy.  Buyers need to be aware that just because it’s priced at $225k doesn’t mean that’s where it will sell.  And if you want to be the buyer of such a property and you want to win, well, money does talk.  You need someone that can negotiate hard among an array of sometimes dozens of other agents/buyers.

Buyers need to think about the price vs. the value as they decide what to offer, and also need to understand that there may only be one chance at it.  Consider the other homes you have been looking at.  This is the one that stood out to you–is it only because of price, or is it because it’s the right house, well kept, move in ready, in a great location.  There’s value in that!  Others see the value as well, and even with lots of houses on the market, in our experience, the number of well-kept homes for sale right now is lower in proportion.  People sell in the low ebb of a market when they have to, and lots of folks are in financial stress, which means that many homes for sale at what seems to be a relative bargain have not been kept up very well.

Most of this article has been about multiple offers and buying over the list price.  There are plenty of sales where the final selling price is under list–the majority in fact.  Statistics show that homes in the greater Seattle area sell on average at 3% under list price. 

These are exciting times for real estate buyers.

Title Shows an Unpaid Tax Balance

Question:

Schedule B in the special exceptions section B paragraph 2, where it says General & Special Taxes there shows an unpaid balance of $1345.09.  Is that something we have to pay?  Do we have to pay for it on or before closing?

Answer:

Property taxes are paid 1/2 at a time, in April and October.  The October payment hasn’t been made yet, which is what’s showing. The taxes are prorated between the buyer and the seller as of closing day.  That’s what pre-paids are for–to have enough $ on hand for your mortgage servicer to pay your taxes when they come due.  So you will only pay for taxes during the period of time you own the house, not for the seller’s taxes.

Good question!

Lynette Hensley
Associate Broker

Short Sale Perspective

I asked if I could publish this article about short sales by Danette, because she has a unique view of the process as an escrow closer. –Lynette

Short Sales

By Danette Johnson, of Ballard Escrow

A short sale is when a seller doesn’t have enough equity in their property to fully pay off the underlying mortgage debt and negotiates a reduced payoff with one or more lenders holding a security interest in the property.  So long as the lender agrees to accept less than the amount needed to pay the debt in full, the seller is able to proceed with the sale of their property — shorting the lender or lenders the full balance due under the terms of the original loan.

With real estate values declining, sellers may consider a short sale as the answer to avoid foreclosure.  Anyone considering a short sale — sellers and listing agents and perhaps more significantly buyers and selling agents – should be educated in the world of short sales to formulate their plan of attack.

It is important to understand that a short sale does NOT protect a seller’s credit rating.  Once a payment is late or missed, the lender may report the late payment to the credit agencies. Upon completion of the sale, it may appear as a “charge off” or a “pre-foreclosure” on their credit rating.  Hence, short sales not only adversely affect the seller’s credit rating, but sellers need also be aware that they remain liable for the unpaid balance of the loan or loans being paid short unless the lender(s) agree in writing to excuse payment and confirm in writing that the debt is paid in full. Without something in writing from the lender confirming that all further payment of debt is excused, sellers may find that one or more of their lenders, post closing, will pursue payment of any unpaid loan balances by obtaining a judgement or a lien. Short sale approvals are also frequently conditioned upon the seller’s agreement to pay some portion of the remaining debt after closing.

Buyers need to be educated about the process of a short sale transaction.  Buyers may see a property advertised as a “short sale” and believe that property will be sold at bargain basement pricing, and therefore a wonderful opportunity for them.  However, buyers beware,  as short sales are plagued with delays and seemingly endless extensions of closing dates.  We find that more often than not, buyers end up extremely frustrated with the constant delay and re-negotiations by the lenders and finanlly just walk away from the transaction.  And, because of the fluctuating closing date, even buyers with the patience to wait the process out should be wary when locking in their financing until absolutely certain that their closing date will accommodate their lock-in deadlines. With interest rates again predicted to fall to record lows, short sales could cause a buyer to miss out on a very low interest rate while waiting out the lender’s approval of the short sale.  Interest rate fluctuations can mean the difference in qualifying for a buyer’s dream home or losing the opportunity to take advantage of the low rates anticipated for 2009. These frustrations should give pause and lead selling agents to question the wisdom of subjecting buyers to a short sale.

It would be helpful if our industry had a list of specific requirements that lenders consider when approving a short sale transaction.  If such a list existed, more certainty in the process would exist, and it would be easier to evaluate the property up front. To date we have found the approval process to be riddled with tentative approvals, then new conditions, and out of nowhere a new department or supervisor steps in to review what was believed to have been a pre-approved short sale. Unfortunately the work-out departments within the lending institutions are currently overwhelmed and appear to be under-trained, underpaid and under-valued by the lending institutions as a whole.   With lending regulations in turmoil and lenders continuing layoffs, short sales with preliminary approval may never reach final approval. Our experience over the last couple of years at Ballard Escrow tells us that short sales require a minimum of six months to close.  We are also finding that short sale transactions are closing with very low success rates of five to ten percent.  That means 90-95 percent are rescinded, often as a result of the buyers simply giving up and perhaps taking themselves out of the market altogether as a result of the negative experience of dealing with a short sale.

All of these issues combined should cause everyone to question the wisdom of dealing with properties that are subject to a short sale.  Be ready for a fight, or run for your life.  The choice is yours.

Nationwide Pending Home Sales Rise 2.1%

Just a note:

Pending home rise 2.1 percent in Feb. from Jan. – Yahoo! Finance
http://biz.yahoo.com/ap/090401/pending_home_sales.html?.v=7

Lynette Hensley
Associate Broker

Foreclosure Plan Summary from NAR

The Obama plan is designed to help stave off foreclosure for 7-9 million families by restructuring or refinancing their mortgages.  This will keep families in their homes, keep communities stable, and strengthen confidence in Fannie Mae and Freddie Mac. 

The Obama Plan for Homeowner Affordability and Stability

Feel free to call or email for more details.

Lynette Hensley
Associate Broker

Market Updates for November 2008

Here are the November 2008 Real Estate Market updates for King, Snohomish and Pierce Counties:

King County

Snohomish County

Pierce County

And statistics by neighborhood:

King County by Neighborhood

Snohomish County by Neighborhood

Pierce County by Neighborhood

Compiled by our title partner Commonwealth Title, from MLS statistics.

Lynette Hensley, Associate Broker, Realtor
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Current Observations of Buyer’s Market in Seattle

Here are my notes on buyer and seller activities in the current Seattle housing market:

Buyers:

1. There’s more inventory, so:  Buyers want to see them all, and with so many homes on the market, it takes longer for folks to decide which house to buy.

2. Buyers want the best bargain, which is always true, but in this market, more likely to happen, depending on the seller’s situation.

3. Buyers are having more challenges with financing, which is why it’s more important than ever to have that pre-approval letter from the lender.

Sellers:

1.  The situations are so varied for sellers. 

Banks that are selling homes are interested in their bottom line and getting the collateral/bad loan off their books.

New construction deals depend on the financial strength of the builder, how close they are to the due date on their construction loan, and if they have money to cover the payoff.  Also early sales in a condo complex or plat are not usually discounted, but the last few may be.  They have to preserve their sale price because the sold units or homes become comps for the subsequent sales.  If they discount early sales, they discount the whole project.  The way to get a good deal is to ask for closing costs, upgrades, appliances or other perks like homeowner dues paid for a specific time instead of price.  Is it the last one?  You may get a screaming deal if the builder wants to be done with the project–and they usually do want that.

Sellers/homeowners:  we look at time on the market, price drops they’ve already made and how leveraged they are in a mortgage.  The seller will be easier to work with if the offer doesn’t cause a short sale of course, as then we add the lender into the negotiations.  The lender will not okay a short sale until the seller is distressed and has missed some payments. A seller that doesn’t need to sell but can hold on and rent the house is not going to budge as much as a seller in dire straits.  A seller with lots of equity has room to dicker, but may or may not be willing.

2. Relocations are often a pretty good deal, and often the seller has two mortgages or a mortgage and rent in the new location, so they are anxious to sell.

3. If the house has been on the market a long time and the price has dropped, the seller has already done alot of the price hacking for the buyer, and it’s best to honor that and offer near the asking price as long as the sold comps support it.  They will be relieved to be working with a reasonable buyer and the buyer will be getting a good deal.

We work with buyers from all over the nation and world who have their own local real estate conditions and culture that they bring with them.  One of our clients said that buyers ALWAYS offer 20% less than the asking price and then they usually end up somewhere between 3%-10% below asking price.  Seattle is different.  Statistics show that even in this buyer’s market the average sold price/list price ratio is within 0%-5% of the listed price, and an offer 10%-20% low often doesn’t even get countered. 

This has frustrated some of our clients coming from other areas of the country, but the good news is that the real estate market in Seattle is still strong, and that as the nation recovers from the current financial turmoil, Seattle housing market will lead the way back up.

Lynette Hensley — Associate Broker

How Seattle Rides Real Estate Storms

This article and letter to a customer (from March 08 with subsequent updates) are a brief collection of my thoughts on Seattle’s ability to ride out the current national economic storm.  As with all research, anyone can tweak any data to mean what they wish, so I have tried to find the most balanced perspective possible. I do believe in Seattle Real-Estate as a sound real-estate investment in comparison to other parts of the country. When to sell ? When to buy? That’s as individual as yourselves.  Where to buy? HERE as soon as you find a place that’s comfortable.  How much to buy, what percentage of your debt to income ratio? Likely up to somewhere around 41% of your gross income, including all your debts is the old standard before this last unregulated splurge that got many in trouble.  Well here it is, hope this is of some help.

info added 11/19/08
Forbes where to invest in real-estate
(specifically commercial but homes follow that market closely)
http://realestate.msn.com/buying/Article_Forbes.aspx?cp-documentid=12808843&GT1=35000 

Info added 10/30/08
New US home price comparative graphs 1990-2008 US as a whole and select markets Seattle  SanDiego, Miami, etc
http://mysite.verizon.net/vodkajim/housingbubble/

Seattle is an area of excellent opportunity in real estate. The most stable is King County. Currently, home prices are down 1-6% + – over last year in King county (the area Seattle, Bellevue and Redmond are in), each micro area has its own story most readily explainable. Most stable are the areas just north of Seattle’s city core and then east through north Bellevue and Redmond.  These areas are home to Microsoft, Amazon.Com, Zymogenetics, UW, and their employees.  Many Boeing management employees also live in these areas.  Boeing plants are south and north of town and while the areas around the plants are susceptible to air tanker, and dream liner, sales and losses (causing housing to fluctuate) the management core doesn’t fluctuate as much.

The historical charts show somewhere between 3 to 5 years for the average slump which is usually fairly flat then turns upwards. By my count we’re at about 18 months in and hopefully near the bottom of the curve but who really knows.  My family has been in real-estate in WA state since 1914.  My Grandmother was a real-estate lawyer in a downtown Seattle office. She always said real-estate was a sure deal, but always buy it knowing it could be a 20 year investment.  You might be able to sell it at 5 or 10 years at a profit but who can tell?  At somewhere between 10 and 20 years it was her feeling you would always have an opportunity to net a sizeable gain.  Choosing just when to sell was the art … I guess some things never change.

I think right now or fairly soon is a good time to invest.  How much?  That depends on your available funds … Properties at the $250-350k are “affordable housing” and every house flipper/investor or newlywed/first time buyer are eating them up.  Many of the GREAT deals seem to be in new construction town homes $500-600K or you can look for the last $700K house on the cul-de-sac because the builder wants to be done with that plat.

This article (admittedly from March 08) excepting the new US market comparative graphs at http://mysite.verizon.net/vodkajim/housingbubble/

These links are some of the best I have found on defending Seattle’s ability to ride out the current national economic storm.  Obviously, there is no crystal ball, but next is one of the best single sources of a fairly balanced view that I’ve found, as well as a couple of links to some graphs I found interesting:  http://seattlebubble.com/blog/2006/09/03/seattle-times-we-are-immune-so-says-history/
 
http://seattlebubble.com/blog/2008/02/19/king-county-home-prices-1946-2007/ http://seattlebubble.com/blog/2008/02/28/king-county-affordability-1950-2007/#more-1621http://www.zillow.com/static/images/quarterlies/2008-Q1/Home-Price-Appreciation-Seattle-WA.jpg 
Zillow can be kind of up and down on their pricing/valuing of current homes on the market, however these links are the compiled home prices sold last year and not their “zestimates”.

http://seattlebubble.com/blog/
For continued discussion of the local market, the Seattle Bubble blog is a fairly well balanced neither Polyanna nor the Harbinger of Doom.

Larry Baumgartner  | Realtor 

Ways to Use the Free Search on our Website

 Whether you are buying or selling a home or just want to know what the current values are in your neighborhood, you will find our Free MLS Search and email reports to be a useful tool.  
The main use of our search is for buyers who can preview the market or actively search for their next dream home.  Yet that’s not the only purpose.  If you are preparing to sell you can see what neighborhood prices are, which homes are in competition, and how they are being marketed.  This information along with your ComeBuyAHouse.com team’s current knowledge of the market will be useful as you place your home for sale.    
Homeowners who want to stay put and just want to be in the know, can simply track the current neighborhood values accurately using MLS listing data.  
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