This week in Northern Virginia Real Estate - For the Week Ending 1/31/2009
Happy New Year! I realize it is already February but I have gotten off to a busy start this year and have thus been neglecting my Blog. The market is picking up in certain areas and for certain property types which is good news.
Inventory: In the $250-400k price range there is a lot of foreclosure inventory. The problem that I am having for my sellers is that it is very difficult to compete with these properties if they don't want to lower the price of their house in the ballpark of these foreclosures. The problem for my first time homebuyers is that they are one of many contracts and investors come in and outbid them. Everyone is cherry picking the best of these properties. I am also seeing lots of foreclosure properties in new homes communities that are less than three years old. There are new homes communities where homes are still being built and every resale is a foreclosure or short sale. The problem that this is causing is that if you want new construction, so that you pick your options, the house may not appraise for what the builder wants to sell it to you for. The builders can't go that low because they won't meet their costs so they want you to pay a high price and not get major options.
Credit Market: The credit market is very tight and now 3.5% is required down on FHA loans. Below are some credit stories I have to share with you from clients that I have been working with:
Client #1: Currently in law school and has a job with one of the top law firms in DC when they graduate in May. A few years ago this letter would be good for a loan. Client has zero debt, has a $300,000 downpayment, and high credit score. Client will qualify for a purchase price of over $1M when they graduate. Client only wants to buy a $530,000 house. Parents had to co-sign so that they could get the loan. It used to be if you were putting 30% down you could go no doc. This client is putting down over 50% and has to go through this hassle. Client also has to move in within 60 days after settlement or has to pay an investor interest rate which is higher. Outcome: Parents co-signed and wife is moving back early. We are clear to close.
Client #2: Received signing bonus for new job of $450,000. Bank is considering a liability because client has to pay back signing bonus if they quit job within one year. Who would quit their job in this economy? Anyways, client is buying a $350,000 house. Outcome: Client had to pay cash for house because they couldn't get a loan even with good credit and no debt.
Client #3: Owns two properties one of which is mortgage free and owes less than $500k on 2nd property. Client wants to buy a property that is a combination of both properties (One is a farm, one is a suburban home). Client has over $1M in assets. Outcome: Client has to pay $1M in cash for new home and then will refinance once they sell their other two properties.
What this means for you as a seller is that the problem isn't necessarily the amount of inventory right now in the marketplace. The problem is that people with high credit, no debt, and lots of money are having problems getting loans.
Banks are also challenging appraisals and requiring full documentation from the Condo Boards. This is causing settlements to be delayed and buyers to incur extra settlement fees. Generally the condo docs are paid for by the seller but when the lenders request extra information it becomes a lender fee charged to the buyer. The highest one that I saw this week was $120 and it happened on two of my transactions this week.
Home Inspection Item: Make sure that your roof is sealed and calked around your fireplace. If not, the rain will gradually drip into your fireplace rust the tracks for the metal doors, cause holes in the firebox and will cost you $1300 to repair. Luckily I was able to identify this as something that the condo association is responsible for so my client will be reimbursed. If you are responsible for exterior repairs to your home you won't be so lucky.
Investor Report: Investors are out looking for great deals. Half of my clients are investors looking to pick up rental properties that they will hold on to for 10 or so years. It is extremely competitive in that market. Everyone wants a property where the rent will cover their PITI (Principal + Interest + Taxes + Insurance) and HOA/Condo fees. There are very few properties where this is the scenario even when you are required to put down 25-30% as an investor. Example: I sold a property in a neighborhood over the summer for close to $475k. A listing came on in the same neighborhood at $375k. I took my clients to see the property within hours after it came on the market. There were 12 contracts the next day. I am anxious to see how much it settled for and if the buyers actually got a good deal or if they got caught up in the moment and the competitiveness.
Money Saving Tip: Have your utilities switched over to your name prior to settlement so that you don't have to pay for service to be re-instated. Once service has been dropped even for a day they charge you a re-connection fee.
Frustration of The Week: Showed a property at 10:30 am on Thursday and immediately wrote an offer in my car. Sent offer over to listing agent and filled out additional 30 pages of Bank Addenda, and had client run to bank to get a certified check for EMD funds. Generally the Bank Addenda is filled out after offer acceptance on foreclosure properties. Scrambled to get this done before 5:10 Flight from Dulles. Called Friday morning to confirm with listing agent that all paperwork had been received. Listing agent confirmed that we were good to go. Listing agent sat on contract Friday, Saturday and Sunday. Listing agent called to inform me this afternoon that two other offers had come in and that my client needed to submit their "Highest and Best" offer. Apparently the Early Bird doesn't catch the worm with banks these days. :( We are now waiting to see if we are the "Highest & Best" which will probably take 48 hours.
Craziest Foreclosure of The Week: Estate property where the owners once again can't take responsibility for their own actions. I thought that I had truly seen it all with the last one that I reported on. Nope. This one the people stole the molding around all of the doors, all of the kitchen cabinets were gone, they attempted to rip the tile off of the walls, the master bath jacuzzi tub was gone, all bathroom plumbing fixtures (toilets, sinks, etc.) were taken, carpet was taken out of the bedrooms, and finally the usual items like light fixtures, garage door openers and shower heads were also removed. I am wondering if they had a contractor come in and pay them for various items.
That is enough for last week. It was actually a slow week with Tuesday and Wednesday being snow days and me taking off Thursday night through Sunday for my first vacation in a year and a half! It is only Monday but this week is shaping up to be a fun/challenging one! If you know anyone interested in buying or selling a home in Northern Virginia please have them call me or send me an email. I greatly appreciate the referral business! To search the MLS for free please visit my website http://www.kimdarwaza.com.
Kim Darwaza, Realtor ~ RE/MAX Allegiance ~ 703-856-2254 ~ kim@kimdarwaza.com ~ http://www.kimdarwaza.com