One of the real beauties of owning a home that is in good condition and in a good location is that it becomes attractive to people in the market to buy a home.  If the owners actually have equity in the home and have a bit of “wiggle room” to work with a potential buyer on price and inspection items, that’s even better.

One of the real disappointments of the glut of short sales and foreclosures on the market is that both the pricing and the condition of the houses are pretty inflexible. They are what they are.

A House Near Berwyn Heights

In my previous post I mentioned the sale of one of my listings in College Park Woods.

This home is “across town” (which isn’t really that far).  It’s a few blocks from the Town of Berwyn Heights and it’s till very close and accessible to the University of MD, METRO, and the main commuter routes of the Beltway, RT 95 and the Baltimore/Washington Parkway.

I had interviewed with the Sellers quite a long time ago and, yet, for reasons of their own, they decided to use a Realtor based out of Columbia, MD to sell their home.  The Realtor didn’t work out so I came into the picture.  We priced the home well and I implemented my marketing blitz.  Still it took 111 days to attract a buyer.

A buyer recently made an offer and because they have been involved in the home buyer program offered by NACA (Neighborhood Assistance Corporation of America) the financing was all lined up and ready to go.The program offers great home buyer education, access to mortgages with highly competitive rates and the first-time home buyer tax credit of $7,500 for qualified buyers.

There is nothing better than a financially qualified buyer who wants to buy your home.

Next Steps

We are now working through the home inspection phase. After that, it’s the appraisal phase and then onto settlement.

Interested in how you might get good results like this?  Shoot me an e-mail or give me a call at 240-417-9100.

College Park Woods is a quiet community of slightly less than 500 homes near the University of MD.  It has a wonderful community pool, a small park and solidly built single family homes in about four architectural styles.

I’ve been serving the College Park Woods community since 1999 - helping people sell their homes - as they get ready to retire and downsize or move on as the result of a job opportunity or just moving to another area. During the “frenzy” of 2000 - 2005 houses in College Park Woods sold just as fast, if not faster, than comparable homes in the area.  This was mostly due to its excellent location near the University of MD, METRO and a variety of other large employers (USDA, NASA, The Washington Post) and easy access to shopping and commuter routes (the Beltway, RT 50 and RT 95).

The Slowdown

Home sales in College Park Woods remained strong, if a little slower, through 2006.  Home sales really didn’t start to slow down until spring of 2007.  Yet when it did slow down…it really slowed down.  Short sales started to pop up.  People who had bought homes in the early ’00s using Adjustable Rate Mortgages (ARMs) or interest-only loans or a variety of other “exotic” mortgages found that they couldn’t keep up with the payments when the interest rate adjusted upward causing their monthly payment to increase.  They realized, also, that the value of their home had decreased, mortgage standards had gotten significantly tighter and they were unable to re-finance.

This created a challenge for the folks who had plenty of equity in their home.  People who had been paying their mortgage for years, had purchased their home at a low price (relative to today’s prices) and were not “in trouble” found that because of declining home values and the huge influx of the number of homes on the market, they could not sell their home quickly or for as much as they would have hoped.

In fact, in the last year only 6 homes have sold in College Park Woods and it took an average of 123 days for them to sell.

The Miracle of College Park Woods?

The last home that sold in College Park Woods went to settlement on August 15, 2008. It was a nicely updated split level with a nice addition and great kitchen.  Even so, it took 111 days to sell.

Then came 9312 Saint Andrews Place. This home is on a corner lot with an attached garage and beautiful woods behind it.  The owner had made some upgrades and the house was in great shape.  We found a buyer within 76 days. It settled and ownership transferred on December 30, 2008.  A nice belated Christmas gift for the previous owner.

The “Creative” Part

The buyer of this home decided to get creative with the financing.  It was all perfectly legal and the buyer was well qualified to make the purchase.  His intent was simple. He wanted to purchase a house near the University of MD so that his son and some friends could live in it during their years at the University and then sell it (or perhaps continue to hold it as an investment property) in four or five years.

The beauty of this was that he and his son were able to obtain a government backed FHA mortgage and take advantage of a number of opportunities:

1. a low down payment (3% in 2008)
2. preferential interest rate for owner occupied property
3. 30-year fixed rate
4. non-owner occupant eligibility
5. the $7,500 tax credit for first-time home buyers

You see, FHA requires that at least one of the people on the mortgage and title live in the house.  That would be the son.  It doesn’t matter that the owner occupant may not have the financial ability by himself. As long as the co-signer (the father, in this case) can qualify, they’re good to go.

I wrote about this at some length in this post.

So, it’s not impossible to sell houses in today’s market despite what you hear on the news.  If the price is right and the condition of the home is good they will find a buyer.  Mortgage interest rates are extremely attractive making homes more affordable. Sellers still have to make an effort.  A good Realtor helps (that would be me!).  It can be done.

Interested in how you might get good results like this?  Shoot me an e-mail or give me a call at 240-417-9100.

Is there a house in your future in 2009?  Interest rates are low (in the low fives and high fours). Homes prices have come down substantially.  Sellers are motivated to help make it happen.

Here are a few suggestions:

5709 Butterfield Road, Clinton, MD 20735
This single family, Colonial style home is located within minutes of Andrews AFB. It recently got a nice face lift with a brand new roof, brand new carpeting and flooring throughout the house and a new paint job. Click on the link for photos, a Virtual Tour and lots more information.  Offered for $314,900.

5918 Bryn Mawr Road, College Park, MD 20740
This is another single family, Rambler style home with a fully finished basement. It has lots of updates and upgrades throughout the house - a great, remodeled kitchen, updated baths, beautiful french doors that open up the space nicely. It even has a working sauna! It’s very close to the University of MD and METRO. Click on the link for photos, a Virtual Tour and more information. Offered for $349,900.

11322 Cherry Hill Road, Beltsville, MD 20705
This is the perfect condo for someone who wants a little privacy combined with a convenient commute to the University of MD, the USDA complex, NASA Goddard Space Flight Center and more. It has assigned parking and a community pool and tennis courts. Click on the link for photos, a Virtual Tour and more information. Offered for $149,900.

All these homes are being sold by their Sellers without any “third part approval” needed. In other words, these are “plain vanilla” sales that have Sellers ready and willing to work with qualified Buyers.

Don’t forget — first-time home buyers qualify for $7,500 tax credit. So it makes these homes all that more attractive.

Dear Santa,

2008 has been a tough year on all of us - home buyers, home sellers and all the real estate professionals involved in the sale of residential real estate: Realtors, lenders, home inspectors, appraisers, title companies, home improvement contractors and the many people - real human beings - that work at all these places.  It would be real nice if you could arrange for a 2009 that’s a little easier on everyone.

The List

• Equilibrium - this is where there are about the same number of houses for sale as there are home buyers who want to purchase a house.  This works well for everyone.  Home buyers still have a great choice of homes without having to get into bidding wars, they can still do inspections and get repairs completed and prices will be reasonable.  Home sellers won’t have to worry about waiting a year while their house sits on the market and, most importantly, the house will sell so they can move onto the next chapter in their lives.
• Low Mortgage Interest Rates - this will help people who want to buy homes and it will help people who own homes. Low mortgage interest rates will help keep monthly payments reasonable and affordable for new home buyers.  They will also help all those folks who bought a house years ago with those fancy Adjustable Rate Mortgages (ARMs). If rates stay low, their rate won’t go up (it may even go down) and they’ll be able to stay in their home and help with that equilibrium thing.
• Credit Standards That Work - No, Santa, I don’t want to go back to the day when anyone who could fog a mirror could get a mortgage.  That was way too liberal.  It would be nice, though, if requirements needed to get a mortgage were a little bit more relaxed. Right now, it’s almost impossible for self-employed people or even the affluent to get mortgages because of all the documentation requirements.  There are lots of people that may have credit scores in the high 600s that will probably pay the loan back like clockwork.  Appraisers need some leeway to consider the glut of foreclosures and short sales that are artificially depressing the market.  Santa, let’s just lighten up a little bit.
• Civility - I know that this is the tough one, Santa. It’s sort of on the order of “world peace”.  Home sellers want the absolute most they can get and home buyers want to pay the absolute least they can pay.  That’s OK.  But do we have to be so mean about it?  If home buyers get a good price do they also need to nit pick every crack and tear in the house?  Do Realtors have to scream or make threats about “walking away” in order to transfer real estate from seller to buyer? It’s alright with me that people stand firm on what’s important to them.  We should be able to negotiate in good faith and with an even temper so that everyone comes out feeling good about the process and the end result.

So, there you have it, Santa.  It’s not a long list.  You don’t even have to deliver it all on Christmas Day. Sprinkle it on throughout the year.  Keep it in mind, though, Santa. Pretty please.

Yesterday the Federal Reserve lowered the famous “Fed Funds Rate” to between 0% and .25%. This means that the money that banks borrow from the Fed or among themselves is, realistically, “free money”.

According to the mortgage professional I refer my clients to most, Alan Gross of National City Mortgage, this change had an almost immediate effect on home mortgage rates. Mortgage interest rates for conventional, 30-year fixed mortgages are now below 5%.

Can Anyone Get These Great Interest Rates?

Absolutely.  Anyone with a good credit score, money in the bank for a down payment and verifiable documentation for employment and assets (bank accounts, retirement accounts, etc.).  You see, even though rates are are hugely attractive levels - and remember these 30-year fixed mortgages - the mortgage people are still only lending money to those who qualify.

In fact, in Maryland the law requires lenders to prove - with documentation - that the borrower has the ability to repay the mortgage. So, for moderate income and first time home buyers, the FHA mortgage is still the way to go.  Luckily, the rates for FHA mortgages follow the conventional market and are sometimes even lower!

First Time Home Buyers Dream

These low rates are now making home ownership for first time home buyers much more realistic and completely doable.  The low rates translate directly to lower monthly mortgage payments.  So it makes it that much more attractive to get serious about buying a home.

lower sales prices for homes+
seller concessions for closing costs+
extremely low mortgage interest rates+
=a very affordable way to buy a house.

And don’t forget that there is a $7.500 tax credit for first time buyers that is still in effect.  So it makes buying your first home that much easier.

The best part is that there are lots and lots of home in the MD Suburbs of DC that are not short sales and can be bought within a reasonable time frame.

Are you curious about what mortgage rate you qualify for and what a monthly mortgage payment would look like for you?  Shoot me an e-mail or call at 240-417-9100.  It’s free.

Great negotiating skill is one of the greatest values a good Realtor can bring to the table. By using his knowledge and expertise, a Realtor has a good sense of what can realistically happen in any given transaction.  Negotiation doesn’t stop at price or other financial terms, either.  It continues through the entire process from offer to settlement.

One of the critical junctures in the process is the home inspection. A buyer will bring in a home inspector to go over the home with a fine tooth comb looking for anything that could be wrong.  The inspector will look at the electricity, plumbing, heating and air conditioning and many other aspects of the house that the seller probably hasn’t thought about in years, if at all.

Since the buyer is paying for the inspection and since the home inspector is getting anywhere from $300 to $400 or more for a few hours work you can believe that the home inspector will find a few things in your home that need repair or replacement.  Sometimes there is a huge list of things…and it can all add up to serious money.

Negotiating the Outcome of the Home Inspection

At this point, the buyer needs to think long and hard about whether or not to continue with the process to settlement and buy the house.  If there are some seriously egregious things wrong with the house (a foundation crack or serious roof issue, for example), the buyer may just want to back out completely and look for another house.  If there is just a list of smaller things - a leaky faucet, some outlets that aren’t working properly - they may want to ask the seller to repair or replace some items on the inspection list.

As I mentioned in a previous post, it’s OK to ask for whatever you want.  After all, if the seller agrees to make all the repairs your house will be in just the condition you want it to be in.

On the other hand, it is also important to “know when to hold ‘em” and “know when to fold “em”.  In other words, what is really important to you to have repaired or replaced.  Pushing to hard for cosmetic items like cracks in tile or dirty carpet may just push the seller over the edge.

If you’re the seller, it’s important to understand that, for buyers, this is their single biggest expense in their lives and they’re probably singing a 30-year mortgage, to boot.  It’s also important to realize the end goal: to sell your house.

Let’s Work Together

There are important considerations on both sides of the transaction and it’s really up to the Realtor - the person who has been through this process many times and does it for a living - to sit down with his client and have that heart-to-heart talk about what’s important and what’s not.

Then it’s time for the Realtors - representing their clients - to talk to one another in a civil manner to reach agreement.  Both sides end up giving a little.

I’ve never met a seller yet who loved doing all the repairs requested by the home buyer especially after some hefty concessions on the front end at the time of the offer. I’ve never met a home buyer that didn’t want the seller to fix everything and then some so they wouldn’t need to do anything once they moved into the house.

The bottom line is to know what’s important and to know why you want to buy or sell the house. If you keep those two things in mind and have that heart-to-heart with your Realtor, the rest will fall into place.

Back in the Spring when the economy was bad but not quite in meltdown stage yet the Congress passed a housing bill that raised FHA loan limits in the MD Suburbs of DC area to $729,750 from their previous limit of $369,900.  That was a good thing.  It was also temporary.  The new limit was set to expire on December 31, 2008.

The Good News

The good news about FHA backed mortgages is that the limits are being reduced to $625,500 in the MD Suburbs of DC. Limits vary from location to location but in this area we’re good for the top limit. The new top loan amount is good for the foreseeable future. This is a huge plus for our area because homes prices are still pretty high and since the mortgages are backed by the US Government there are lots of mortgage compainies that are willing to lend money to people who qualify for them.

The other great part about FHA mortgages is that the qualification standards are significantly more relaxed than conventional mortgages.  That’s a good thing for first time home buyers, buyers with less than perfect credit, buyers who may need a co-signer that will not be living in the home (such as a parent or other family member that wants to help but won’t be living in the house), gifts from family members are still allowable for the down payment.  Here is a full run down of the FHA guidelines for lending.

Speaking of Down Payments

Part of the bad news is that the down payment required for FHA 203(b) loans - the regular type - is increasing from 3% to 3.5%. Thius means that home buyers will need to come up with more cash to make a home purchase or get someone to provide them with a gift to help out. However, the FHA 203(k) which is the loan used to help renovate homes that need repairs - think “short sales” and foreclosures - will still have the old down payment requirement.  So it actually makes the FHA 203(k) an even more attractive option when buying a home.

The Bottom Line

So the good news is that FHA loan limits remain high enough to be able to use FHA mortgages for most homes int the MD Suburbs of DC. More good news is that the FHA 203(k) and FHA 203(k) Streamlined mortgage products will stay at the old down payment requirement. The not-so-good news is that the down payment requirement for the regular “plain vanilla” FHA mortgage with increse from 3% to 3.5%

FHA is still one of the best ways to home ownership around, though.

I’m representing a wonderful client with a nice home in College Park Woods. One of the nice things about the home is that there is no wolf at the door. The Seller isn’t in a bind and there is no bank or “third party approval” that needs to get involved with the sale of the home.  If a good offer comes in, the Seller can say “Yes” and move forward to settlement pretty quickly.

It’s probably a sign of the times that no matter what condition the home is in (this one is in excellent condition) or the location of the home (excellent location, too) or the price (very reasonable), Buyers insist on offering way, way below the list price.  It would be insulting if it weren’t a little sad, too.

When Is A House A Home?

If someone is looking for a home to live in it makes sense to try and get the best terms they can get.  A fair price, possibly some help with closing costs are both good. Yet, at some point, they have to ask themselves, “Do I see making this house my home?”.

You see, this house is actually the Sellers’ home, for now.  They have lived in it, made improvements to it, gotten to know the neighbors and paid the mortgage every month. So when Buyers come and “low ball” the price and then ask for lots of additional cash for closing costs on top of the low price, it kinda hurts.

Just Saying No!

Even though this particular house has been on the market only two months, it recently received two offers. Excuse me — one Letter of Intent and one offer. Both were so low that the Seller and I, for that matter, were stunned.  The Seller also said, “NO!”  You see, not everyone is ready to sell their house at any price just to sell it.  Not everyone is in a short sale or foreclosure situation.

Sure. It’s OK to offer lower than list price.  It’s OK to ask for closing help.  It’s OK to ask for inspections and a settlement date you like.  It’s also OK for the Seller to say “No” if you’re being ridiculous. The idea of negotiating terms that are beneficial to the Buyer is to leave room for the Seller to meet the Buyer at some middle ground. If the gap between the list price and the offered price is too wide, there is really no place for the Seller to go.

So they stay put.

In a previous post I entitled: Will A New Administration Stimulate Home Sales?, I suggested that just because a new Administration was coming to Washington didn’t necessarily mean that home sales would see a big spike…or even a little spike.

I wrote about it because many people believe (or want to believe) that an election brings in lots more people that will need houses to live in.  This would be especially true is a brand new Administration from a different party comes to town.  Such is the case, now, with Barack Obama winning the Presidency and the Democrats gaining seats in both the House of Representatives and the Senate.

It Ain’t Necessarily So.

An article in today’s Real Estate section of The Washington Post confirms my thinking (and experience) about the likelihood that anything different will happen. This article :Change You Won’t See authored by Maryann Haggerty shows research that indicates that many of the players are already living in the area or will be commuting back and forth to their home elsewhere.

In the accompanying graphic there is a bump shortly after George W. Bush was elected for his first term. This coincides with the beginning of the housing frenzy/bubble.  As you can tell the number of home sales rises and rises and rises from about 2000 to 2005 - the year the air is being let out of the housing bubble. After 2005 you see a serious decrease in home sales, again, due to increased credit restrictions and the overall decline of the economy.

So the moral to the story is that we should not expect to see an increase in homes sales just because a change in Administration is taking place.

It’s my fantasy that the optimism and confidence that the President-Elect brings will help. We can only, er, hope.

One of the loan officers I routinely refer to my clients, Alan Gross of National City Mortgage, sent me the following update on the mortgage environment.

Earlier this year the loan limits for conforming  and FHA loans were raised up to a maximum $729,750 in high cost areas by The Economic Stimulus Act of 2008. (Ken’s note: The MD Suburbs of DC is such a high cost area.) These higher loan limits disappear on December 31, 2008.

What may not be understood is that the Jumbo Conforming Loans are almost gone now. Because of delivery requirements for the Jumbo Conforming Loans, most lenders are requiring that the loans be funded before December 15, 2008. Some are cutting off locks as early as mid November. Buyers who are considering purchasing a home with the new temporary higher limits and plan to close at the end of December may find themselves out in the cold.

Although new maximum loan limits up to $625,500 have been announced the newly calculated area median sales price index hasn’t been announced yet. The area median sales prices index is recalculated based on the housing price data from October 2007 - October 2008. This data is expected to be released in November 2008. Until the data is released the Jumbo Conforming Loan program will be in a short hibernation mode.

FHA loans will be able to close using the current maximum loan loan amount of $729,750 through December 31, 2008. The new FHA loan limit will also be $625,500 starting January 1, 2009. The maximum loan limits for various areas will also be set when the newly calculated median sales price information is released. The maximum loan amount will be 115% of the median sales price.

Stay tuned for further updates as they are released.