First Time Home Buyer Class - Scheduled in Arlington

Are you one of the estimated 53% of buyers in 2009 who will be buying for the first time?

Then register for a free first time home buyer seminar at Arlington Central Library to be held Wednesday, September 16 at 7:15 pm. As with our other classes, there is absolutely no cost or obligation to attend this one hour educational session where we will recap the current market conditions, discuss the future outlook, and provide an overview of the home purchase process. We'll also discuss the impact of the banking system collapse and bailout, the home purchase process and common pitfalls, financing basics and a how to get started checklist.

Details and registration information can be found here.

Search the MLS

See more Buyer Resources

Contact Katie to start your home search

State of the DC Area Real Estate Market: June 2009

The Spring market is hopping, but some recent changes are making it difficult to predict what's around the corner. Here's what's going on in the local real estate world:

Interest Rates Jump: Mortgage rates took a significant jump in the past few weeks. The short story is that optimism about the economy combined with fears about inflation are pushing rates up. But if you want the long story, you can read more about the relationship between the bond markets and MBS markets here.

Foreclosures and short sales continue to be a very active segment. Banks have finally figured out that the trick to selling foreclosures quickly is to price them ridiculously low and get a bidding war going. It's not uncommon to have dozens of offers in during the first few days for entry-level price points ($200-300k). Short sales continue to be a source of frustration for buyers, as noted in this good NPR story.

The area's inventory remains flat (Arlington and DC) to declining (NoVA)

--check out the significant decline in Northern Virginia inventory here.

Case-Shiller is still reporting significant price declines year-over-year, but here's a good article explaining why, if you read the data more carefully, the news is much less ominous.

New Appraisal Code Scuttles Deals: The new Home Valuation Code of Conduct was implemented in May, and is wreaking havoc with deals. This Code created intermediaries to manage the appraisal process, and some argue that quality has dropped. Many appraisals are coming in low, opening the door to a secondary round of price negotiations in many transactions.

Monetization of Tax Credit: Of significant note to first time buyers is the emergence of programs that will allow a buyer to "monetize" the $8000 tax credit. VHDA has developed a program to structure a second trust of $8000 with no principal or interest payments due during the first 12 months. Details are still evolving, but it is expected that a buyer could use this $8000 second trust as part of their downpayment.

If you are a first time buyer hoping to take advantage of the $8000 tax credit - start your search NOW! The lack of "good" inventory may make it difficult to find something that fits your needs and your price range. Settlements must occur by November 30 to file for the credit, and with the current volume of lending and refinancing banks are backed up. No doubt this backlog will increase for both lenders and settlement companies as we approach November 30 - plan ahead! Contact me to start your search - I'd love to help you!

And finally, just for fun: For all you Arlingtonians and those who want to be an Arlingtonian -- check out this rap.

As always, please let me know if I can do anything to help you or your friends with your real estate needs.

FHA to Allow $8000 Tax Credit to be Used as Downpayment

Update 5/29: HUD reversed course today on its initial plan to allow homebuyers to use the $8000 credit towards a downpayment. Instead, the credit may be “purchased” by FHA approved lenders (and credited at closing), to pay for additional closing costs. While this decision may be helpful, it won’t have the impact originally hoped for, since buyers frequently negotiate to have sellers pay their closing costs anyway.

Original Post:
HUD announced that they are going to permit lenders to allow homebuyers to use their $8000 tax credit as part of their downpayment. This "monetization" of the tax credit is big news for first time buyers struggling to come up withe their 3.5% to 10% downpayments required in today's lending environment. The current challenge to home buyers is that there is no way to 'advance' payment on the $8000 -- buyers must wait until they file their 2009 tax returns in early 2010, creating a catch-22: buyers need the $8000 to buy a home, but can't get to the $8000 until after they do so.

With this announcement, FHA-approved non-profit organizations will supply home buyers short-term or "bridge loans" up to the amount of the $8,000 first-time home buyer tax credit. Click here to learn about some of these programs, which provide funds for little or no interest.

Looking for info on the $8000 credit and eligibility? Read this post.

Remember, you must close on a house by November 30, 2009 to take advantage of the tax credit. Get started with your search:
Search the MLS
Attend a free first time home buyer class
See more buyer resources

Northern Virginia Inventory Sees MASSIVE Drops

Update 5/9/09: Looks like I've got some investigating to do - the final MRIS numbers are published (updated graphs now available at my website here - click on the "Market Stats" in the left sidebar) and they aren't even close to the "live" data I ran on the last day of the month. Not sure what's going on -- seriously, how can hundreds of listings be not there on the last day of the month but then appear retroactively 9 days later? I'll look into it and post results here when I get them. The short story is that inventory didn't drop in most cases--just a tiny increase of about 2% over last month for NoVA, for example. Still surprising but not nearly the big story the initial data hinted at. Contracts are up about 12% over last month, so the buyers are definitely biting! Obviously with an increase in contracts disproportional to the slight increase in inventory, it still indicates a shift in the market, just perhaps not that dramatic a shift as originally indicated.

In the meantime, here are some excellent charts detailing real estate inventory levels that illustrate my points and appear to be using the "live" data just as I had.

Original Post:
This. Is. Big. News. Typically in the Spring (from February through June) we see run ups in inventory as sellers prepare their homes for market. The final numbers aren't out just yet, but I think both buyers and sellers are going to be shocked by April's real estate statistics.

Let's take a look at the Arlington numbers I ran from today's MRIS (the consortium that owns our area's multiple listing service.) The spring run up looks like this for January through April: 875 - 925 - 986 --------and 793 for April! What?! That is the lowest number of homes available since February 2007. A 21% DROP in inventory in Arlington?! During SPRING?

And Northern Virginia as a whole: 7545 - 7811 - 8069 ------ and 5435!
A WHOPPING 33% DROP and the lowest number of homes for sale in NoVA since August 2005! Remember August 2005? When buyers were running around bidding things up like crazy because there weren't enough homes to go around?

What's going on?? First, buyers are getting it! Low prices, the lowest interest rates in 50 years, and the $8000 first time buyer tax credit have them out in droves. Just in the past week I had 3 of 4 buyers who submitted offers get outbid on properties in various locations.

To add insult to inventory, potential sellers are waiting to put their homes on the market because they don't want to have to take low offers. Much of the inventory, especially in the suburbs, is "distressed" (foreclosures and short sales) and many are in such poor condition that they will not sell for a very, very long time. So the level of "good" inventory (that is, will realistically sell within the next few months) is even lower than the numbers show. Homeowners who are on the fence about selling don't want to be lumped in with distressed comps, so aren't putting their homes on the market.

Finally, the 'moratorium' on foreclosures in the first quarter contributed to a lack of new distressed inventory coming on the market. But if there's another wave coming, it's not in the pipeline yet: a review of "preforeclosure" filings in Arlington listed just 73 properties, and Fairfax County showed 1000 (a big number, no doubt, but not enough to make up for the 2500 drop in inventory from March to April.)

What are the implications of this?

Buyers: Unless there's a big wave in May, you're going to have a lot less to choose from, especially if you want something that is 'move in ready.' Less inventory means more competition for the 'good' listings -- expect to pay closer to list price for those, and be ready to move quickly when you see one you like. Chances other other people are circling it too. Hope for a big bump in the coming weeks - otherwise it may be a tough road if you're trying to buy before November 30 to take advantage of the tax credit. Typically inventory peaks in June, with another much smaller bump in Sept/Oct.

Get started with your search:
Sign up to attend a free first time home buyer class or search the MLS

Sellers: If you are on the fence about selling, go ahead and get it on the market asap, especially if your home is a good option for a first time buyer. Make sure you put your best foot forward with some sprucing up, staging, multiple photos taken by a professional, a home warranty, and an extensive web presence as part of a comprehensive marketing plan. And it still needs to be priced right, of course. If you're wondering what the comps are for your neighborhood, contact me or visit my sellers resource center.


Source for all data: MRIS as of 5/1/2009. Data deemed accurate but not guaranteed

Stimulus Bill To Be Law: First Time Buyers Get $8000 Credit, Conforming Loan Limits Increase

The stimulus bill, having had its original House and Senate versions reconciled in Committee, is now on its way to President Obama's desk in time for his President's Day goal. I'm still wading through the Committee report text, but here is what I can see:

• Credit is $8000 (up from the House version of $7500 but down from the Senate's $15,000)
• Does not have to be repaid as long as you own the house for 36 months from the date of purchase and you purchased in 2009. If you sell before 3 years then you have to repay the entire thing.
  
• Applies to purchases from January 1 through December 1, 2009. (Note: I've seen some other reports saying 12/31, and others saying July or August, but from what I read in the Conference report posted online, it says 12/1) If you bought in 2009 you can elect to treat it as purchased on 12/31/2008 so you can claim it on your 2008 return.
  
• Is a refundable credit - so even if you don't owe $8000 in income taxes then you get the difference back (NB: This is an update from previous post)
• DC buyers cannot claim both this credit and the $5000 DC homebuyer credit.
• Unlike the previous $7500 credit, you can claim the credit even if your mortgage was financed by a mortgage revenue bond (like with VHDA loans) - check with your tax advisor!
• Limitations are similar to the previous $7,500 "credit" (interest free loan) in 2008: income restrictions start at $75,000 (single) and phase out completely at $95,000 or $150,000 (married filing joint) and phase out at $170,000, and have not owned a home in previous 3 years.
  

See page 19 of the Conference Report pdf file here for more.

Here's a handy chart of the old law versus the new law.


Move-up (non first time) buyers -- don't worry, there's something in the Bill for you, too...

There is another important change that hasn't been getting nearly as much press: the temporary reinstatement of the increased conforming loan limits for high cost areas. You may recall that our local Washington, DC, area's conforming loan limits rose from $417,000 to $729,750 last year, giving purchasers of higher end homes an important break on interest rates for loan limits up to that amount. At the end of 2008, the temporary limit expired and it dropped to $625,500. That means any loan above that amount fell into the "jumbo" category--making it very difficult and very expensive for borrowers in that bracket. This stimulus bill reinstates that $729,750, which should make it easier for folks to get these loans which now qualify for Fannie, Freddie (and possibly FHA...unclear at this time) guidelines, which translates to lower rates and greater availability.

Read more about conforming loan limits and how they work here.

Ready to start your search and take advantage of the credit?

Attend a free first time home buyer class.
Contact me to discuss your search.
Search the MLS.

$15,000 Home Buyer Credit - What's the Deal?

2/14/09: Credit has been reduced to $8K. See my updated post here.

The big headline is the news of the most recent stimulus package with a special home buying credit. So what's the story? In short, we don't know yet. It's still in Committee because the House version and the Senate version are different (Remember "I'm just a Bill, on Capitol Hill..." if there two versions don't match--and they never do--then it goes to a committee.)

As of right now, according to CNN:

The Senate bill would double the size of an existing temporary home buyer credit to $15,000. It would also allow all home buyers to claim it and remove the requirement under current law that the credit be paid back. The House bill also removes the repayment requirement but leaves the credit maximum at $7,500 and would offer it only to first-time buyers.

If the Senate version wins out - that is HUGE! $15,000 of free money to ANY home buyer with NO income restrictions! The current Senate version has the credit going into effect the day it is signed and lasting for one year. The Senate version is also non-refundable, meaning that if you don't owe at least $15,000 in taxes, you can't take advantage of the full credit (it does, however, let you spread it over two years.) In that way, the Senate version has been criticized as being disproportionately favoring the wealthy.

This WSJ blog has some interesting detail though -- again, this is all preliminary, so don't get too excited--or disappointed--just yet.

Stay tuned!

Update 2/12: Still in committee, but word on the street is that the latest draft contains a provision for First-time home buyers to get a tax credit of up to $8,000. The bill is expected to hit the President's desk by Monday.

Update #2 2/12: Coming out of committee is the compromise of $8000 credit, does not need to be repaid, available through the end of November, and available only to first time buyers (those who have not owned a primary residence in the last 3 years.)

Ready to start your search for a home in the DC or Northern Virginia area? Consider attending one of my free first time home buyer classes - details are here.

Or start searching for homes in the MLS here.

First Time Home Buyer Class - Scheduled in Arlington

Note> For the most recent schedule of dates, please visit the First Time Home Buyer class page at my website. Classes will be held in Montgomery County, DC, Arlington, and elsewhere in Northern Virginia.

The first classes of 2009 are now scheduled at Arlington County Library. As in the past, there is absolutely no cost or obligation to attend this one hour educational session where we will recap the current market conditions (including stats like days on market, inventory levels, and average sales prices), discuss the future outlook, and provide an overview of the home purchase process, including common pitfalls and financing basics. Simply contact us to register (enter seminar and the date in the comments) so that we may have materials available for you. Space is limited. Details are as follows:

Date(s):
Tuesday, February 17, 2009
7:15 pm - 8:30 pm
registration required

Logistics:

Arlington Central Library, 2nd floor meeting room
1015 N. Quincy St
Arlington, VA
Metro: Orange Line/Ballston

Cost: There is no obligation, and the session is FREE, but registration is required by emailing me at Katie@katiewethman.com. Seating is limited.

Related Link: Search the MLS

Read More: Working with Katie as Your Buyer's Agent

Read More: Buyer's Resources

Read More: $7500 Home Buyer Credit

First Time Home Buyer Class - Scheduled in Arlington

Note> For the most recent schedule of dates for 2008 and 2009, please visit the First Time Home Buyer class page at my website. Classes will be held in Montgomery County, DC, Arlington, and elsewhere in Northern Virginia.

The first classes of 2009 are now scheduled at Arlington County Library. As in the past, there is absolutely no cost or obligation to attend this one hour educational session where we will recap the current market conditions (including stats like days on market, inventory levels, and average sales prices), discuss the future outlook, and provide an overview of the home purchase process, including common pitfalls and financing basics. Simply contact us to register (enter seminar and the date in the comments) so that we may have materials available for you. Space is limited. Details are as follows:

Date(s):
Tuesday, February 17, 2009
7:15 pm - 8:30 pm
registration required

Logistics:

Arlington Central Library, 2nd floor meeting room
1015 N. Quincy St
Arlington, VA
Metro: Orange Line/Ballston

Cost: There is no obligation, and the session is FREE, but registration is required by emailing me at Katie@katiewethman.com. Seating is limited.

Related Link: Search the MLS

Read More: Working with Katie as Your Buyer's Agent

Read More: Buyer's Resources

Read More: $7500 Home Buyer Credit

$5000 Credit for DC First Time Home Buyers

Here's a little known add-on to the 2008 Emergency Economic and Stabilization Act - aka the $700 billion bailout bill: the $5000 credit for DC first time home buyers.

Area residents are familiar with this credit, and know that it had expired on Dec 31, 2007. Though typically every year it's passed in a last minute rush of bill approvals, there's never a guarantee and 2008 home buyers had their fingers crossed that it would once again find its way into a bill before year end. Well, DC home buyers, start celebrating: The bailout bill approved the $5000 credit retroactively for all 2008 purchases, and approved its use for all 2009 purchases as well!

To use the credit:
- You must buy a home in the District of Columbia (and not have owned a home in the previous year)
- You must occupy the home as your principal residence
- You must meet the income requirements (up to $70K AGI for single filers, phased out until no credit for AGI above $90K; up to $110K AGI for joint filers, phased out until no credit for AGI above $130K).

Note that this is an actual $5000 credit (not a deduction--an actual dollar for dollar offset on money owed!) on your Federal Taxes. That's the same as Uncle Sam giving you $5000 of your hard earned money back just as a 'thank you' for buying in the District. But you can't take advantage of both this credit and the new Federal $7500 "credit"--not really a credit at all, but rather an interest free loan. For almost all buyers, you're much better off taking the DC credit and passing on the Federal loan.

If you're interested in buying a DC property and want to learn more, contact me.

North Arlington Condo Market Update - Oct 2008

North Arlington/Orange Line Condo Prices
Zip Codes 22201, 22203. Includes Ballston, Clarendon

ACTIVE LISTINGS: 1BR Condos / 2BR Condos
Number of Active Listings: 46 / 68
Average List Price: $351,858 / $526,993
Days on Market (Property): 74 / 100

SOLD LISTINGS: 1BR Condos / 2BR Condos
Number of Sold Listings in Prior Month: 18 / 14
Average Sold Price (excludes subsidies): $313,085 / $461,407
Days on Market (Property): 66 / 64


Absorption Rate
6 = Balanced Market;
>6 = Buyer’s Market;
<6 = Seller’s Market

1 Bedroom Condos = 2.5
2 Bedroom Condos = 4.9

* Statistics exclude retirement communities
Click here to see the previous North Arlington Condo Market Update
Source: MRIS data as of 10/17/2008. All data deemed reliable but not guaranteed.

North Arlington Condo Market Update - September 2008

Zip Codes 22201 and 22203 (includes Ballston, Virginia Square, Clarendon)

	1 BR Units	2BR Units
ACTIVE LISTINGS as of Sep 29
Average List Price	$352,725	$542,493
Number of Active Listings	50	57
Average Property DOM(P) – Actives	69	119
SOLD LISTINGS
Average Sold Price for Previous Month (does not include seller subsidies)	$323,929	$458,069
Number of Sold Listings in Previous Month	31	32
Average Property DOM(P) - Solds	70	64

Absorption Rate

6 = Balanced Market

>6 = Buyer’s Market

<6 = Seller's Market

1 Bedroom Condos = 1.6

2 Bedroom Condos = 1.8

* Statistics exclude retirement communities

Click here to see the previous North Arlington Condo Market Update

Source: MRIS data as of 09/29/2008. All data deemed reliable but not guaranteed.

First Time Home Buyer Class Now Scheduled in Montgomery County

Note> For the most recent schedule of dates for 2008 and 2009, please visit the First Time Home Buyer class page at my website. Classes will be held in Montgomery County, DC, Arlington, and elsewhere in Northern Virginia.

I am scheduled to teach another “First Time Home Buyer” seminar in Montgomery County on October 23. Please invite your friends and colleagues who currently rent to join me for this session where we will cover a recap of the market, current trends and market stats including days on market, average sales prices, and inventory levels. We'll also discuss the impact of the banking system collapse and bailout, the home purchase process and common pitfalls, financing basics (including interest rates, points, fees, and closing costs), and a how to get started checklist. Details are as follows:

Date(s):
Thursday, October 23rd (DATE CHANGED FROM PREVIOUSLY SCHEDULED Oct 16)
registration required

Logistics:
7:30 – 8:45 pm
Location: 930 Wayne Avenue, Silver Spring MD 20910
Metro: Red Line/Silver Spring

Cost: There is no obligation, and the session is FREE, but registration is required by emailing me at Katie@katiewethman.com or leaving me a voicemail at (703) 847-3336. Seating is limited.

What Does the Fannie & Freddie Bailout Mean To Home Buyers?

Big news over the weekend and today is that the Federal government is 'bailing out' Fannie Mae and Freddie Mac, who lacked enough access to capital to keep the secondary mortgage market going. While buyers and sellers might initially think that this is bad news, it's actually good, as evidenced by the 300 point market rally at the opening bell today. The markets are glad that what was an 'implied' guarantee is now an explicit one and the markets like transparency.

This is critical to the mortgage industry: Freddie and Fannie buy mortgages that are originated by banks, then package those loans up, slaps a guarantee on them, and sell them to investors. This helps transform what would normally be a very illiquid and long-term investment (30 year mortgages) into a very liquid asset: mortgage-backed securities. This keeps access to capital for borrows high, and interest rates low. Both Fannie and Freddie were chartered by Congress for specifically this purpose.

Before you start slamming this as another taxpayer funded bailout, remember that Congress has control of both their charters and heavily regulates what they can buy and sell. Both companies, though publicly traded, have many restrictions on how they operate their businesses. (The government, for example, sets the conforming loan limit of $417,000, now $729,750 in our area, but due to drop back down to $625,000 at year end). If the governments wants the right to legislate how a publicly traded company--presumably accountable to shareholders--is going to operate, then it's only fair that when things get mucked up the government needs to help out.

In terms of rates, we should expect to see conforming/jumbo-conforming rates drop in the coming weeks by as much as a percentage point.

If you're on the fence about buying, this means the (possibly temporary) return of rates in the 5.5% range! For those of you who recently purchased, keep a close eye on rates -- if rates drop to a full percentage point below what you have, it may actually be worth it for you to refinance. Discuss this with your lender.

Client Testimonial

I got the nicest letter today from a first time buyer client couple. It really made my day and I wanted to share it:

Katie,

We wanted to thank for your guidance and tremendous service during our condo buying process. Given the issues with FHA and our lender situation, this process had a lot more twists and turns than we ever imagined. But at the same time, we were reassured that your innovative solutions and attention to detail would get us through and it did!

Honestly, as we told you, before attending your home buying seminar and leveraging your expertise during our condo purchase, our opinion of realtors was not the highest. However, after working with you, that has changed. We really appreciated your vast array of knowledge as well as your super prompt response to what at times were our incessant questions. Plus, the little extras like the website of preferred vendors, use of the pick up truck, and letting us borrow your dolly helped us to move in.

Finally, thank you for the card. It now graces our new stainless steel fridge and we have already put those gift cards to good use.

We had no idea how stressful this process could be and honestly, we could not have done this without you.

Thanks Katie!

If you're a first time buyer, please contact me. I'd love to help you find a home, too!

$7500 First Time Buyer Tax "Credit" Info

NOTE> This post applies only to homeowners who purchased in 2008. If you purchased in 2009, see the updated version of the credit here.

It's official, the $7500 tax credit for first time buyers is now law. But how will it work?

First of all, it's not really a 'credit' per se -- it's an interest free loan. Nonetheless, as my first time buyer clients will tell you, an interest free loan is the best kind of loan! First time buyers -- defined as buyers who have not owned a principal residence during the 3 year period prior to purchase -- will claim this credit on their tax returns, and receive a credit of 10% of the purchase price, up to a maximum of a $7500 'credit.' (Note this is NOT a deduction. Taxpayers receive the full $7500.) Here are the additional details:

• All homes, including condos, are eligible.
• The 'loan' part comes into play because it must be repaid over a 15 year period at $500/year starting in 2010.
  
• The purchase must be on or after April 9, 2008 and before July 1, 2009. (Note the law says BEFORE, so those of you buying next year - settle on or before July 1!)
• There's an income restriction: Single taxpayers can't make more than $75,000 and married couples are limited to $150,000. Above those limits, the credit is phased out.
  
• Sorry, DC home buyers, you can't claim both this and the DC First Time Buyer credit. (That one is a real credit, not a loan, so for almost everyone the DC credit is the better deal.)
• There doesn't appear to be any way to get the money in advance, so this credit will have to be a 'reimbursement' of sorts for buyers. You can however, as with any purchase, adjust your withholding to better match your (now $7500 lower) tax bill. The closest thing you can do to getting it sooner than later is to buy a home in early 2009, but then you apply the credit to your 2008 return (before April 15) since the law allows you to choose the year in which you apply the credit.
  

You can learn more at www.federalhousingtaxcredit.com

Update 1/29/09: President Obama's $820B stimulus package contains a proposal to eliminate the need to repay the $7500 -- it would change into a straight on credit, rather than the interest free loan it currently is. This bill has passed the House and is currently with the Senate -- the bill is NOT yet law. Stay tuned.

Housing Bill: Buyer Credits, Loan Limit Increases, FHA Changes

Breaking news on the latest version of the Housing Bill, now on a fast-track to a vote and onto the President’s Desk, where he has signaled he will sign it. The newest developments:

• Permanently increase the conforming loan and FHA loan limits (previously $417,000, and increased to $729,750 in the Washington, DC, area in 2008) to 115% of the median home value - $625,000 in our area, effective 1/1/09
• Increase the FHA down payment from 3% to 3.5%
• Provide a first time home buyer “credit” (really, more like an interest-free loan, to be repaid over 15 years by the buyer) of up to 10% of a home’s price, to a maximum of $7500. The refund is gradually reduced for single filers with AGI above $75K ($150 for joint). It applies to home buyers who purchased between April 9, 2008 and July 1, 2009.
• Bar down payment assistance programs like Nehemiah
• Allows the Treasury to offer Fannie and Freddie an unlimited line of credit over the next 18 months to serve as a ‘backstop’ and provide liquidity. The bill also creates a regulator for the two companies.
• Gives $4 billion in grants to states to buy and rehabilitate foreclosed homes
• Create an FHA program which will help strapped homeowners who are upside-down. The program will require lenders to write down loans to 90% of the appraised values and pay an FHA fee in exchange for an FHA guarantee. Lenders and FHA would then share in any future price appreciation.

Update 8/10/08: Here are some FAQs, including one important for our answer -- can a DC homebuyer claim both the DC credit as well as the non-interesting bearing loan ("credit")? Unfortunately, no.

Update: Housing Bill Credits for First Time Buyers

Congress continues to work on resolving conflicting versions of the housing bill first discussed back in April. Word is that they're close to a deal. Here's the latest scuttlebutt as to what is planned (remember, though, that this is NOT YET FINAL):

- The credit (yes, that's a CREDIT, which is much more valuable than a simple deduction) will be $7500 .

- Eligible properties will include condos, co-ops, and single family residences.

- The credit is available to those with an AGI of less than $70K ($140 for joint returns), and is phased out above that limit.

- Credit is available only to first time buyers, defined as those who have now owned in the previous 3 years and who purchase between April 8, 2008 and June 30, 2009.

- A portion is to be repaid each year for 15 years, so it's not exactly free money, but rather will operate more like a 'loan.' However, it is a 'refundable credit', which means that even if you owe absolutely nothing in taxes, you can get this money refunded to you when you file. If you sell the property before the 15 years are up, then you will be required to repay the balance of the credit. Clearly Congress is trying to gear this opportunity towards those who intend to stay in their residences for the long term.

Though this isn't as generous as first planned, this nonetheless is a great way for first time buyers to get an up-front $7,500 to help with down payments and closing costs, enabling them to take advantage of this buyer's market sooner.

As I've commented in this blog many times, I find it takes first time buyers a minimum of 3 months to find a home they want at a price they're comfortable with, so this deadline of June 2009 gives buyers about 9 months to get started, in my estimation. However, real estate prices often fall sharply in the Fall and Winter, so you may want to get started sooner than later, so you can maximize how far that $7,500 goes!

Stay tuned as this bill makes its way through committee.

Real Estate Market Update - Montgomery County, MD

A review of the current Montgomery County market statistics confirms what most people already know: it's still a buyer's market. Inventory is up almost 15%, and median price is down to $410,000, about 8.5% from May 2007. Number of sales is down 33% from 2007, and days on market is up 24% from a year ago.
(Click the image to enlarge)

Does this mean buyers should wait? Maybe. As always, it depends on your personal circumstances. However, with the passage of time comes the uncertainty in the lending market. Just in the past year, we've seen the elimination of 100%, 95%, and even 90% financing in many cases, meaning much larger down payments for buyers. We've seen higher interest rates, stricter credit requirements, and fewer loan options. Though FHA has become a viable option thanks to higher limits in our area, the loan limit of $729K remains temporary through the end of 2008.

Waiting might bring lower prices, but with the looming threat of inflation, high rates become more and more likely, and unless you have large cash reserves AND outstanding credit, changes in credit guidelines may surprise you (would anyone be surprised if 20% down payment requirements again became the norm given how badly banks were burned by defaults??)

Further, market statistics may be lulling buyers into a false sense of security that time is on their side. Similar to Arlington (see my 2007 Post: Some Sellers Do Get It, and Get It in 30 Days) the average days on market in Montgomery County of 103 is very misleading, and buyers may be fooled into thinking they have plenty of time to think about whether or not to make an offer on that house that they love.

(Click the image to enlarge)

A review of the successful sales in May reveals that over 1/3 of the homes that sold were on the market less than 30 days, and almost 2/3 were on the market less than 90! Then, as with every market in our area, there are the homes with sellers that drop and drop and drop the price to what is eventually the 'correct' price, and they sell sometime in or after the 4th month.

As I've mentioned before, once a buyer sees 10-12 homes in a given neighborhood, it becomes pretty easy for one to identify the 'value priced' homes, that is, that 1 in 3 that will sell quickly. The issue for buyers is that all the other circling buyers out there recognize it too, and at least some of them will jump on the opportunity when they see it.

Montgomery County is a big place, and it's unfair to paint the entire area with one brush. Contact me to discuss the neighborhood you have your eye on, and to see whether it's one that is following the trend, or whether waiting may not bring as much benefit as you hope. After all, an average is made up of points higher and points lower--see where your dream neighborhood falls in the range.

Interested in learning more? I will be teaching a free, one-house first time home buyer class at Montgomery County Library on July 31st at 7:30. We will be covering a general market overview in addition to the mechanics of the home buying process, including tips and tricks. There is no cost to attend, but registration is required. Contact me to sign up.

How Do I Start My Home Search?

If you read my recent post "Why I May Not Be Able to Represent You" then you know that it's imperative that you choose an agent early in your home search process. But what happens when you meet with an agent for the first time?

Everyone is different of course, but here is a general idea of how many of my first meetings with clients go. Typically, we'll spend about an hour to go over the basics:

1) Go over the home purchase process.

2) Get an idea of needs vs. wants (i.e., 'must haves') - Bring any listings that you are already interested in.

3) Discuss neighborhoods, what you get for the money, etc.

4) Discuss the financing process. Before we go out to look at properties, you will need to be pre-approved by a lender. If you have already spoken with a lender by this point, bring your Good Faith Estimate(s) and I will go over some key points on them.

We'll also briefly discuss buyer agency agreements, and our mutual obligations.

Depending on the situation, we may even go out to tour properties following this initial meeting. If not, then we'll work together to identify some properties that might fit your needs. If/when we have a few properties (about 6-8) that you wish to view, we'll set up a block of time that we can go see them.

I find that most buyers need to see 8-10 properties (through a combination of open houses and agent tours) in a given neighborhood before they have a good idea of what they like and what they get for the money. Typically during our first few weeks working together we get you "caught up" to homes that are already on the market. Following that, it's easy to keep up to date and see what's new via open houses and brief (1-3 property) tours.

The search process may take longer than you think, though it varies widely by person. The search process itself takes anywhere from a few weeks to a few months. I've had buyers make an offer after just one or two days of looking--it's part focus, part preparation, and part luck.

From contract to settlement (for loan processing, appraisal, home inspections, etc.) then takes 30-60 days additional. You should count on at least 3 months from start to finish.

Shoot me an email today if you'd like to discuss starting your search!

Why I May Not Be Able To Represent You

When someone calls me to tell me they want help writing an offer and they already know what property they want, my heart sinks. Seems counter-intuitive, right? I had to turn down two qualified buyer clients so far this year. I really wanted to work with them, and they each really wanted to work with me. What gives?

Both instances had procuring cause issues. Procuring cause is the legal term that gives a buyer agent the right to claim the person as their client, and therefore claim the compensation due in the sale. The agent must cause the buyer to procure the property—and only one agent can be a procuring cause for any given property. Interestingly, procuring cause has very little to do with whether or not a buyer has signed a buyer broker agreement, which leads to some very unfortunate circumstances like I experienced.

In the first case, the buyer had contacted the listing agent (who represents the seller) to view the property. The agent went on to recommend a lender, and discuss specifics of what an offer might look like in terms of a proposed offer price, settlement date, inspections, etc. (This brings up another pet peeve of mine—dual agency. I’ve yet to have someone explain to me how a single agent can best represent both the buyer and seller in a single transaction. You can deal honestly of course, which one would hope an agent would do regardless of whom they represent, but to fully represent the best interests of both sides seems impossible to me. That’s why many states have made it illegal.) This buyer did NOT sign an agreement with the agent, but nonetheless had an implied agency agreement due to their interactions, which prevented me from representing her.

Moral #1: Do NOT call the listing agent to view a property you’re interested in—you may inadvertently restrict your representation options later. Wait for an open house, or better yet, find your own buyer’s agent.

In the second case, the potential client again reached out to me to ask me to represent him. Unfortunately he had already seen the property—new construction—on which he intended to make an offer. He had seen the property with another agent he had been working with, but whom he now did not wish to be represented by. Again, no signed agreement was in place. But merely by being accompanied by this agent to the sales office, he was now ‘registered’ with this agent. He did it exactly right by registering with an agent—sales offices are notorious for now allowing representation later if you don’t, but unfortunately he decided he just didn’t work well with this agent. But my hands are tied—the other agent is his registered agent, at least for purposes of that particular property.

Moral #2: Choose your agent carefully. You may not be able to change later, with or without a signed agreement.

In both of these cases, the agent is reasonably seen as the procuring cause—that is, the agent who took significant steps to help the buyer procure the property either by providing access, assisting with process guidance, or simply being present at time of registration. Which is why my heart sinks a little bit whenever someone calls me to ask me to represent them and says ‘and I already know which property I want.’ Because chances are that I can’t help them, as much as I’d like to.

Procuring cause gets very complicated. It doesn’t mean that once you start working with an agent, you’re locked in even if you didn’t sign anything. Assuming you are not bound by a written contract, you can begin working with another agent. It just gets a lot trickier (though not impossible) if you end up buying a property you saw with the first agent.

If you’re concerned that you have unwittingly created an implied agency relationship, talk to the agent, or if you’re uncomfortable, the agent’s managing broker. Or barring that, the agent you then wish to engage. It’s quite possible that the first agent will ‘release’ their right and you can move on as you wish. Or alternatively, the old agent and the new agent may be able to work something out. Of course, the best thing to do is, right at the beginning of your search, choose an agent with whom you’re comfortable, but hindsight is 20/20 in that regard. I encourage potential clients to get me involved as early in the process as possible—even if your purchase is many months away. Better to have a patient advisor (I have clients who have been looking well over a year!) than to be denied the representation you want later.