New Appraisal Rules – A Problem, or A Solution?

May 18, 2009

appraisalSaturday’s Washington Post Real Estate section featured an article by Ken Harney entitled, “New Appraisal Rules Come With Costs,” in which he posits the following scenarios:

  • The real estate appraisal that used to cost you $325 now costs $450, even though the appraiser doing the work is getting only $175 or $200.
  • Your appraisal-related charges may now be subject to add-on feessuch as $50 to $100 extra in “no show” penalties if you get stuck in traffic and miss your appointment with the appraiser, or an extra $50 to $150 if the property is worth more than $500,000.
  • Your mortgage loan officer requires you to pay for the appraisal upfront with a credit or debit card, rather than including the fee with the usual lender origination costs at settlement. Your card may be charged more than the anticipated cost of the appraisalleaving debit-card holders in a potential overdraft situation.
  • The person conducting your appraisal may be new to the fieldwilling to work for a cut rateand may not be as familiar with local value trends and pricing adjustments as an appraiser with more experience.
  • If your mortgage application is denied by one lender, you could be forced to pay for a second full appraisal because the new lender may not accept the first one.

The “new appraisal rules,” which go by the name Home Valuation Code of Conduct, were imposed May 1 by Fannie Mae and Freddie Mac, and are intended to improve the accuracy of appraisals by eliminating pressure on appraisers from loan officers. The code pushes most large lenders to use third-party “appraisal management companies” that contract with networks of independent appraisers around the country who thus are not in direct contact with retail loan officers or mortgage brokers. The Code came about as a result of an agreement made between the Federal Housing Finance Agency and the New York State Attorney General. The intent of the agreement was made to enhance the independence of appraisers. The most relevant part of the code seems to be the following:

The lender or any third party specifically authorized by the lender (including, but not limited to, appraisal companies, appraisal management companies, and correspondent lenders) shall be responsible for selecting, retaining, and providing for payment of all compensation to the appraiser. The lender will not accept any appraisal report completed by an appraiser selected, retained, or compensated in any manner by any other third party (including mortgage brokers and real estate agents)

It used to be that a mortgage professional – whether working for a specific lender or as a broker – might have a “stable” of appraisers he or she could call on to provide services. Most of them just wanted a reliably thorough and competent job. However, and this is the reason for the new rules, some only wanted appraisers who were willing to find the right “comps” to hit a specific valuation necessary for the loan to go through. Under pressure to produce that number or perish, many appraisers buckled.

But are the new rules helpful or harmful to the more ethical mortgage lenders and brokers out there? Are they seeing big increases in appraisal costs? How about appraisal quality, now that they can’t choose one of their go-to guys? I asked several of the mortgage professionals I work with every day in Northern Virginia to give me their impressions about whether they find the scenarios suggested in Harney’s article to be happening here:.

We’ve actually been working under these rules for many years . . . All appraisals have been ordered through a 3rd party management company, and while we did have some communication with the appraiser (although not encouraged), we cannot any longer . . .

This is actually a good thing that is happening. Too many times appraisers have been bullied by agents, mortgage lenders and borrowers for not having the same opinion. This will take that opportunity away. This does NOT mean that you can’t call the appraiser, still meet them at the home, etc . . . this is so that lenders cannot contact the appraisers directly – even for a status, as this is seen as undue pressure. These appraisers are professionally trained, educated and have to uphold ethical standards just like all of us; yet no one challenges our decisions like these people.

[The fees and time requirements] are the same, for now. I bet the appraisal costs will go up, and they should. The appraisers can’t live on a “cut” and they have been required to do so many more compliance checks etc . . [Turnaround times] are longer due to volume.

This won’t change the quality . . . if anything the quality will improve because the lenders and agents are now separated from any undue influence.

Jennifer Duplessis, Prosperity Mortgage

Interesting article and I am happy to say we have not had the issues mentioned. [Local] appraisers have only added $25.00 to their fees due to some additional addendums that required extra research. Appraisal fees have ranged from $350 to $375 and now are $375.00 to $400.00 for under $1 million sale price, and they have always charged more for above $1 million – that is not new. Yes, loan officers are no longer allowed to directly pick the appraiser – it is an automated random selection of a pool of known appraisers in our local area.

I think the worst [problem] is the extreme pressure the appraisers are [receiving from the lenders] to include the foreclosures and short sales when determining values. During the recession In the early 90’s foreclosures and short sales were considered distress sales and discarded as [comparable to a] homeowner selling their property. In my opinion, this change in [guideline] has escalated the erosion of home prices. They should have allowed for an adjustment upward on the distress sale, but they did not, they are requiring the appraisers to use them thus providing for lower and lower values – how unfair to the normal seller is that?

Shirley Jones, First Savings Mortgage

I haven't experienced any true horror stories yet, but the new system will definitely change things. I think the appraisers will feel empowered to bring in property values at whatever they feel the value is, regardless of what it may mean for the transaction. The old system had a conflict of interest where (I believe) appraisers didn't want to ruin too many deals with a low appraisals since they were hurting their referral sources (potentially their future income) by bringing in the low appraisal. This new system will potentially change that, which ultimately will be a good thing, but could be painful. I think that will be the biggest change. I believe we will see more low appraisals (meaning appraisal comes in below contract price).

In the past we could choose appraisers and go with ones that we felt were "good appraisers." We now have less of a say. It also adds a layer to the process which usually means more time. I do agree with what the article said about the costs of the appraisals being higher. Mortgage brokers definitely kept costs down with the old system. Appraisals have gone up by about $100 over the past year I believe. I haven't noticed a big difference in the quality of appraisal, but it is still early in the process.

Overall I don't love the new system but the old system definitely had it's flaws also. I'm not sure I would want to go back to the old system even if we could.

Kevin Haddon, Wells Fargo Home Mortgage

So on balance, it seems, in the Northern Virginia area the new rules are seen in an overall positive light by people who I believe to be in a position to know. Yes, costs my have increased slightly, and there may be a somewhat longer turnaround – especially as the system gets established – but I think the horror story scenarios drawn by critics are not reflected in the actuality. I do agree with Shirley's view about separating the distress sales from the normal sales – it's unreasonable, but it's not a part of the new rules, just a lender-imposed requirement. Appraisers should be able to reflect adjustments for condition, given the lousy condition of most foreclosures, but it's unlikely to fill the gaps.

Kim Hannemann, Real Estate Consultant/Realtor®, Samson Realty
Cell: 703-861-9234 • Fax: 703-896-5055 • Email: KimTheAgent@gmail.com

It's Good To Have A Friend In The Business®
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If you would like to discuss real estate questions, sell or buy a home in Northern Virginia - including Alexandria, Annandale, Arlington, Burke, Centreville, Chantilly, Clifton, Fairfax, Fairfax Station, Falls Church, Kingstowne, Lorton, McLean, Reston, Springfield, or Vienna - contact Kim today.

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April 2009 Northern Virginia Sales Info

May 15, 2009

April 2009 home sales activity for Fairfax and Arlington counties and the cities of Alexandria, Fairfax and Falls Church and the towns of Clifton, Herndon and Vienna:

  • A total of 1,544 homes sold in April 2009, an increase of 6% over April 2008, and the ninth consecutive month of higher year-over-year sales. Terrific, but look at this – pending home sales, based on signed contracts, are 2,692, up 25% from last year! Pending sales have been up double-digits year-over-year for 13 consecutive months.
  • Active listings – homes on the market – decreased by 23% from last year, with 8,234 active listings at end-April. Fewer homes on the market usually means prices are poised to start rising. The supply of homes remains in the less-than-six-months “seller’s market” range.
  • Another sign of strong activity – the average days on market (DOM) for homes in April 2009 decreased by 15% to 85 days, compared with 100 days in April 2008.
  • Sales prices continue to remain lower than those realized last year. The average sales price in April fell 16% percent from April 2008 to $405,514, while the median price was $356,750, a decline of 14%. The average and median sale prices are again both higher than last month, however.
  • Agents continue to see a lot of multiple-offer situations on attractive well-priced homes in good condition, particularly in price ranges under $475,000. If you are looking for such a home, be prepared to act decisively.

StatsApr

Kim Hannemann, Real Estate Consultant/Realtor®, Samson Realty
Cell: 703-861-9234 • Fax: 703-896-5055 • Email: KimTheAgent@gmail.com

It’s Good To Have A Friend In The Business®
samson-realty-and-bird

If you would like to discuss real estate questions, sell or buy a home in Northern Virginia – including Alexandria, Annandale, Arlington, Burke, Centreville, Chantilly, Clifton, Fairfax, Fairfax Station, Falls Church, Kingstowne, Lorton, McLean, Reston, Springfield, or Vienna – contact Kim today.

4 – 4.5% Listings with First-Class Service — Cash Back to My Buyers!


March 2009 Northern Virginia Sales Info

April 15, 2009

chartMarch 2009 home sales activity for Fairfax and Arlington counties and the cities of Alexandria, Fairfax and Falls Church and the towns of Clifton, Herndon and Vienna (this sounds like a weather alert, doesn’t it?):

A total of 1,384 homes sold in March 2009, an increase of 11% over March 2008. That’s great, but look at this – pending home sales, based on signed contracts, are 2,306, up a fantastic 33% from last year!

Active listings – homes on the market – decreased by 20% from last year, with 8,069 active listings in March, compared with 10,123 homes available in March 2008. Fewer homes on the market usually means prices are poised to start rising. The supply of homes has again fallen into the under-six-months “seller’s market” range.

Another sign of strong activity – the average days on market (DOM) for homes in March 2009 decreased by 18% to 89 days, compared with 109 days in March 2008.

Sales prices continue to remain lower than those realized last year. The average sales price in March fell 17% percent from March 2008 to $395,512, while the median price was $335,000, also a decline of 17%. Interestingly, though, the average and median sale prices are both about 5% higher than last month.

Agents are reporting a considerable number of multiple-offer situations on foreclosures, and on attractive well-priced homes in good condition, particularly in price ranges under $425,000. If you are looking for such a home, be prepared to act decisively – and, if the home is right for you, don’t let yourself be outbid.
statsmar1

Kim Hannemann, Real Estate Consultant/Realtor®, Samson Realty
Cell: 703-861-9234 • Fax: 703-896-5055 • Email: KimTheAgent@gmail.com

It’s Good To Have A Friend In The Business®
samson-realty-and-bird

If you would like to discuss real estate questions, sell or buy a home in Northern Virginia – including Alexandria, Annandale, Arlington, Burke, Centreville, Chantilly, Clifton, Fairfax, Fairfax Station, Falls Church, Kingstowne, Lorton, McLean, Reston, Springfield, or Vienna – contact Kim today.

4 – 4.5% Listings with First-Class Service — Cash Back to My Buyers!


February 2009 Northern Virginia Sales Info

March 15, 2009

graphFebruary 2009 home sales activity for Fairfax and Arlington counties, the cities of Alexandria, Fairfax and Falls Church and the towns of Vienna, Herndon and Clifton:

A total of 1,067 homes sold in February 2009, a 10 % increase above February 2008 home sales of 969.

Active listings decreased by 18 % from last year, with 7,811 active listings in February, compared with 9,497 homes available in February 2008. The average days on market (DOM) for homes in February 2009  to 109 days, compared with 116 days in February 2008.

The average sales price in February fell by 21 % from February 2008, to $380,077, compared with last February’s average of $479,320. The median sales price of homes sold in Northern Virginia in February was $318,000, which is a decline of 23 % compared with February 2008’s median price of $410,500.

The February pending home sales data, based on signed contracts, is bucking the national trend – 1,817 contracts are pending compared to February 2008 when 1,526 were pending, an increase of 19 %.

febstats


Making Your Home Affordable – The Plan

March 4, 2009

mhalogo

The US government’s Making Home Affordable plan was released this morning. Millions of homeowners wanting to see if they qualify under the plan for either a refinancing or a loan modification will be eager to check out this program.

You might qualify for refinancing under the plan:

  • If the home you want to refinance is your primary residence; and
  • The loan on your home is controlled by Fannie Mae or Freddie Mac; and
  • You’re current on your mortgage payments (not more than 30 days late on your mortgage in the last 12 months); and 
  • You have sufficient income to support a new mortgage.

You can owe between 80-105% of the current value of your home, but no higher than 105%.

If you think you might qualify to refinance, you’ll need to give the following documents to your mortgage lender:documents

  • Your monthly gross (before taxes) income of your household, including recent pay stubs.
  • Your last income tax return.
  • Information about any second mortgage on the house (you can only refinance your first mortgage under the plan, but having a second mortgage won’t automatically exclude you).
  • Account balances and minimum monthly payments due on all your credit cards.
  • Account balances and minimum monthly payments for all your other debts, like student loans or car loans.

You might qualify for a loan modification (first mortgage only) under the plan: 

  • If you originated your mortgage before Jan. 1, 2009; and
  • You are an owner-occupant; and
  • You have an unpaid balance that is equal to or less than $729,750 (for a single-family home); and
  • You have trouble paying your mortgage due to financial hardship – perhaps because your  mortgage payments increased, or your income was reduced, or you suffered a hardship (such as medical problems) that increased your bills, or you can show that you soon will be unable to make your payments. You will be required to enter an affidavit of financial hardship; and,
  • Your monthly mortgage payment must be more than 31% of your gross (pre-tax) monthly income.

You must successfully complete a three-month trial period at the modified rate. If you make all payments on time, you will keep this lower rate that will be fixed for five years.

The idea is for your monthly payments (not including private mortgage insurance) to reach 31% of your pre-tax monthly income. The monthly payments are defined as payments on the principal, interest, taxes, insurance (not including mortgage insurance) and homeowners association/condo fees. First, the lender will reduce the interest rate to no less than 2% on the loan, so that the monthly payments are less than 38% of your monthly income. Then, the Treasury will match further reductions, dollar-for-dollar, with your lender, to bring the monthly payments down further, to 31% of your monthly income.

If you keep your payments on time after the modification, the government will pay up to $1,000 each year in the first five years toward reducing the principal on your mortgage.

After five years, the interest rate on the loan will start to increase by no more than 1% per year, but can’t go higher than what the market rate was on the day your loan was modified.

The amount you owe versus the current value of your home doesn’t matter for this program.

The foreclosure process will stop while you’re being considered for the program, or for any alternative foreclosure prevention option.

The borrower does not have to pay any charges or fees. Any fees are supposed to be paid by the company that holds the loan, and the servicer of the loan will pay for your credit report. The company that services your loan will get a an incentive fee of $500 for each modification they do. Once your lender modifies your loan, they’ll be paid a $1,500 incentive.

Gather these required loan modification documents:

  • Information about the monthly gross (before tax) income of your household, including recent pay stubs if you receive them or documentation of income you receive from other sources;
  • Your most recent income tax return;
  • Information about your assets;
  • Information about any second mortgage on the house;
  • Account balances and minimum monthly payments due on all of your credit cards;
  • Account balances and monthly payments on all your other debts such as student loans and car loans;
  • A letter describing the circumstances that caused your income to be reduced or expenses to be increased (job loss, divorce, illness, etc.).

Then call your mortgage servicer (the company you make payments to). Your servicer is not required to join the program, but the government hopes that the incentives will motivate them to participate.

Kim Hannemann, Real Estate Consultant/Realtor®, Samson Realty
Cell: 703-861-9234 • Fax: 703-896-5055 • Email: KimTheAgent@gmail.com

It’s Good To Have A Friend In The Business®
samson-realty-and-bird

If you would like to discuss real estate questions, sell or buy a home in Northern Virginia – including Alexandria, Annandale, Arlington, Burke, Centreville, Chantilly, Clifton, Fairfax, Fairfax Station, Falls Church, Kingstowne, Lorton, McLean, Reston, Springfield, or Vienna – contact Kim today.

4 – 4.5% Listings with First-Class Service — Cash Back to My Buyers!


Organizing Can Be An Emotional Thing

February 16, 2009

messydeskStuff. Most of us have waaaaay too much of it. If you know my wife, you will understand who keeps stuff organized in our house. She spent a good part of this weekend moving cookbooks, camera and various electronic gizmos from one cabinet to another, tossing things we haven’t been using, and getting some new things put away. It’s certainly not me – you should see my desk right now. I am not the best person to talk about decluttering, though it’s definitely a mantra of mine when talking to sellers! So that’s why I asked for professional help in writing this piece, and Aimee Saldivar obliged:

tmntDo you feel bad throwing out every greeting card you receive? Or do you feel the need to save every toy your children owned to hand down to their children someday? Keeping these toys and remembrances can add up, especially if you don’t have the space to store them. If you save the toys’ original boxes or perhaps the toys that are slightly tattered, they’ll be of no value if your children decide to buy their kids new toys altogether. Get rid of them! One way to keep that precious toy close to your heart is to take a picture of it and create a digital album for you and your children to cherish tomorrow. Those pictures would make a great hardback album for a holiday gift, or can be used to create a scrapbook. It will not only take up less room, be cost effective and environmentally friendly, but it will allow more room for you to use today.

walshI recently finished a book by Peter Walsh, professional organizer and motivational speaker, called “It’s All Too Much: An Easy Plan For Living a Richer Life With Less Stuff.” He makes some great points about happiness: more material things don’t really measure success, having more possessions may be more suffocating than liberating, and the stuff we own ends up owning us. When we feel like we have too much stuff, we buy more containers; but in reality we aren’t cleaning out clutter, we’re just storing it away. Eventually this will build up and take over our space.

We have more winter ahead of us, but it’s a great time to start planning our organization. Here are few ideas to get you started without being overwhelmed by the task:

  1. One room at a time. Focus on a room rather than your entire home. A smaller goal cuts down your anxiety and helps you stay focused. Prioritize each room according to either your budget or the time you have to spend. This will help you plan your project more effectively and will keep you on track to organizational success.
  2. Think about what you want to achieve out of that room. If you’re planning to put your home on the market, you may want to consult a professional stager or organizer to create a “punch list.” An extra set of eyes can’t hurt, and they know creative ways to minimize clutter and maximize your sale price without going overboard. If you’re looking simply to organize, store away those keepsakes into one box you can bring out when you want to reflect, and keep the room livable without feeling cramped and cluttered.
  3. consignTIP:  In today’s economy, second-hand and consignment stores are becoming the hot place to shop. If have you some great items that you feel guilty about giving away, consignment shops are a great way to get rid of them without having to host a yard sale or post them in the classifieds online. Remember, one man’s junk can be another man’s treasure – at less than half the price! [Followup tip from Kim:  Drop off your stuff and drive away quickly, or you will come home with more than you took in!]
  4. If you haven’t used in the last year – GET RID OF IT! Some things we own may be seasonal items, which is okay; however, if you’re still thinking that the one item you’re saving may go back in style, dump it. If it comes back someday, there will plenty of options to choose from. Many times we get so wrapped up in how much we paid or how much we saved on a particular item when, in reality, it was probably an impulse buy at the time. We may also keep something “in case we need it.” Unless you are talking about fire extinguishers and the like, if we haven’t used it in a year, then we don’t need it, and we’ve probably forgotten about it.
  5. books1TIP:  Getting rid of dust collectors such as books, lampshades and dried flowers can help alleviate dust for people with allergies. You may continue to dust the shelves, but not the books on the shelves or the dried flowers you are saving from a special occasion. It rarely occurs to people that dust build-up on these items is overlooked and can make matters worse for people with allergies. Once you finish reading a book, trade it for a new one or donate it. Donating books to your local public library is a very simple process and is a tax write-off for you next year.
  6. The more you can eliminate, the better. Linen closets become an emotional trap for us since they house blankets and linens we don’t want to part with. This is usually where Grandma’s hankies and table linens end up. Instead, think about storing them in a dedicated keepsake box from Grandma, or framing and hanging them in a guest bedroom (if they go with the theme). Once you make room for the linens you actually use, you won’t have to shuffle through mismatched sheet sets and torn towels. If you have different sizes of sheet sets for different rooms and/or family members, a great way to keep them organized  is to color-code them. Buy a different color of two-inch grosgrain ribbon rolls for each size or family member to keep the sheet sets together for “grab and go.” It adds a nice touch to your linen closet, too. NOTE:  When you have your home on the market, prospective buyers look through everything, especially closets – they’ll be impressed.
  7. medalsA great way to pay tribute to a loved one after they have passed would be to dedicate a space or a room for their items. If they were in the military, one way to pay tribute would be to frame their military medals along with their uniform jacket. Or if you are having a hard time parting with their collected items, perhaps you could sell them and donate the money in their memory to an organization or educational institution they would have appreciated.

ladybugsoMany thanks to Aimee Saldivar, professional organizer and home stager. She also offers special occasion set-up such as table setting and arranging. You can find before and after pictures on Facebook by looking up Ladybug Staging and Organization.

If you mention this article, Aimee will provide a free consultation when you sign up for a service. Plan ahead and call today for an estimate at 703-856-3404 or email ladybugstaging@gmail.com.

Kim Hannemann, Real Estate Consultant/Realtor®, Samson Realty
Cell: 703-861-9234 • Fax: 703-896-5055 • Email: KimTheAgent@gmail.com
It’s Good To Have A Friend In The Business®

samson-realty-and-bird

If you would like to discuss real estate questions, sell or buy a home in Northern Virginia – including Alexandria, Annandale, Arlington, Burke, Centreville, Chantilly, Clifton, Fairfax, Fairfax Station, Falls Church, Kingstowne, Lorton, McLean, Reston, Springfield, or Vienna – contact Kim today.

4 – 4.5% Listings with First-Class Service


What’s My Home Worth?

January 27, 2009

The first question a potential home seller has is undoubtedly, “What’s my home worth?”homesaleprice

A real estate professional will establish the likely selling price by doing a comparative market analysis (CMA) – comparing your home to others like it that have sold recently. We would include market conditions, such as the inventory of homes for sale and the ease of purchase (interest rates, mortgage availability).

Ideally, your agent will be looking for homes

  • of similar size;
  • in similar condition;
  • in the same or a nearby neighborhood; and
  • sold in the past three months.

In a large subdivision or condo complex with many recent sales, this can be fairly easy. If your home is very similar to several recently closed sales, except for the level of improvements, adjustments can be made for the various differences.

It is more difficult to establish market value when there are few or no comparable sales (“comps”). Sometimes your home is unique compared with nearby homes sold recently. In this situation establishing a reasonable market value will also be a matter of adjustments, but the adjustments will be trickier.

The most important factor is location, so up to a point we would tend to favor closer homes over more recent sales from a distance. On the other hand, if we can locate several recent sales of similar model homes by the same builder in a distant neighborhood, we can adjust for location.

mcmansionAdjustments may be made for the home’s “fit” in the neighborhood. A home that “sticks out like a sore thumb” – either too fancy or too big compared to nearby homes, or relatively small or unimproved relative to the neighborhood – will require more up or down adjustment. If the comps are in a more highly sought after school district than your home – or vice versa – it will be necessary to adjust for the schools.

Occasionally we might try multiple approaches. For instance, in addition to pricing recent sales of similar homes from other neighborhoods,  we can also research sales in your neighborhood from previous years and then adjust for what has occurred in the local market since then. By establishing the value from several perspectives, a more accurate price range for your home will become clear.

Finally, when a property sells, it’s not just about the price. There are other factors that influence what a buyer will pay and how much a seller will accept:

For example, terms such as these might induce a seller to take less money:

  • an all-cash offer (no mortgage contingency to worry about);
  • an as-is offer (no concern about repairs);
  • a fast closing or a longer closing, depending on what the seller prefers; or
  • a free rent back, to allow the seller time to complete his move at a more leisurely pace.

And these terms might make the seller demand more money:

  • seller financing all or part of the purchase price;
  • seller paying for closing costs; or
  • offer contingent on sale of buyer’s home.

If you would like to know the likely market value of your home, please contact me. I’ll be happy to help you evaluate your property’s value.

Kim Hannemann, Real Estate Consultant/Realtor®, Samson Realty
Cell: 703-861-9234 • Fax: 703-896-5055 • Email: KimTheAgent@gmail.com
It’s Good To Have A Friend In The Business®

samson-realty-and-bird

If you would like to discuss real estate questions, sell or buy a home in Northern Virginia – including Alexandria, Annandale, Arlington, Burke, Centreville, Chantilly, Clifton, Fairfax, Fairfax Station, Falls Church, Kingstowne, Lorton, McLean, Reston, Springfield, or Vienna – contact Kim today.

4 – 4.5% Listings with First-Class Service


New Limits On Home Sale Profit Exclusion

January 14, 2009

If you are one of the fortunate folks who own a second home or rental property, and were planning to take fullest advantage of the capital gains tax exclusion on sale of your primary residence, the Housing Assistance Act of 2008 included a change that could impact your tax on the gains.

monopolypoortaxThe existing law excludes $250,000 of the profit from taxation if you’re single, and $500,000 if you’re married, when you sell a primary residence you’ve lived in for at least two of the last five years. (Your primary residence is the place you live; the address you use on your drivers license; where you’re registered to vote, etc.) If, for example, you bought a property in Ocean City, rented it out for several years, and then moved into it as your primary residence for a couple of years, your free-of-tax profit when you sell it under the existing law would have included any increase in value during the whole time you owned it (up to the limits).

The new law modifies that rule – it limits your exclusion (your free-of-tax profit) to the time the home was your primary residence. You must prorate the total profit between the periods the property was not your primary residence, and the periods that it was.

Only the period after January 1, 2009 is relevant – the period it was not your primary residence before that date won’t be counted in determining the “non-residence” time. For example, if you bought a second home on January 1, 2007, rented or vacationed in it for three years, moved into it on January 1, 2010, then lived in it for 3 years until you sold it, you would have owned the home for 6 years, during which it was a rental or vacation home for 3 years, and your residence for 3 years. However, since only one of the rental years was after January 1, 2009, the numerator in your calculation would be one (the number of non-residence years after January 1, 2009), and your denominator would be 6 (the total number of years you owned the property). In other words, 1/6 of your gain would be taxable; if your total profit was $150,000, then $25,000 of that would be taxable. Under the previous law you would have been able to avoid tax on up to $250,000 ($500,000 if married).

The new law only applies where the period when the property was a rental or vacation home before it became your primary residence. It does not apply if it was your primary residence first, and then became a rental or vacation property. In this case, you could be out of the home for up to three years before you would lose the $250,000/$500,000 exclusion.

If you had been planning to move into your current rental or vacation property, you should consider doing it as soon as possible to minimize your eventual taxes.

I’m not a tax professional – consult yours to verify this and explain it further.

Kim Hannemann, Real Estate Consultant/Realtor®, Samson Realty
Cell: 703-861-9234 • Fax: 703-896-5055 • Email: KimTheAgent@gmail.com
It’s Good To Have A Friend In The Business®

samson-realty-and-bird

If you would like to discuss real estate questions, sell or buy a home in Northern Virginia – including Alexandria, Annandale, Arlington, Burke, Centreville, Chantilly, Clifton, Fairfax, Fairfax Station, Falls Church, Kingstowne, Lorton, McLean, Reston, Springfield, or Vienna – contact Kim today.

4 – 4.5% Listings with First-Class Service


IN and OUT For 2009

January 13, 2009

in_n_out1No, I’m not referring to the West Coast burger chain (which can’t match up with Five Guys). I’m talking about home buyers!

What’s IN

  1. Sidelined home buyers. Family or lifestyle additions or changes made in buyers’ households in the last three years are forcing those waiting out the market transition to finally get off the fence and say, it’s time for our family to buy the home that suits our new needs. 
  2. Home uplifts. Not a big renovation, but some new finishes that can work for stay-put home sellers. Not a “gut rehab to the studs” new kitchen, but new flooring, countertops and appliances. 
  3. Collaborative home pricing. The old days of home sellers configuring a home’s price are out. What’s new is that the seller with their agent will look at closed comparables, set a price, then the buyer and their agent agree or disagree, but in the end, a mortgage lender and their appraiser will set the price, as they are assuming the most risk in the transaction. 
  4. Balanced reporting by real estate and personal finance journalists. Consumers learned in 2008 that the ‘doom and gloom” residential real estate market headlines don’t apply to all markets. What’s been lost in the foreclosure hype is that there are still homes selling in short market times (in as little as 1 day), homes selling at full price and some selling with multiple contracts on the table. Existing home sales will be 5.02 million versus 5.652 million for 2007, a decrease of just over eleven percent, considerably less that the recent correction in the U.S. stock market – plus a realistic view that over five million people purchased a home despite the headlines in 2008. 
  5. Creative home seller financing. Exhausted home sellers are turning to self-financing to move properties. Installment sale contracts and lease to own are the most popular and effective ways for sellers to begin to receive income from a property that has languished on the market. 
  6. Real estate agent as a housing resource not salesperson. New-age real estate agents help consumers through the home sale or purchase process, which takes a skilled agent who is not driven by sales, but instead provides resources to help the consumer determine if they should buy or sell a home. Home ownership is not for everyone. Factors such as a job move in 3 years or less, marginal credit, or lack of interest in home maintenance can be reasons for a resource-driven agent to advise their client not to buy. 
  7. Architectural overhead garage doors. After years of bland vanilla garage doors, the architecture has permeated the door most people look at the most. Traditional styling has arrived with mullioned windows, faux wrought iron hinges and latches that provide the original non-overhead garage door look. Contemporary looks now include the adjacent siding applied over the door for a seamless look, much like the panels installed on refrigerator doors to complement cabinets in a kitchen. 
  8. Loveseats. A pair or trio is gaining acceptance as the functional way to rearrange a living or family room. Consumers appreciate the ease at which they can rearrange them, move an extra one to another room, or provide long-term furniture flexibility in future homes. Plus, they’re tired of sitting miles away from others on over-sized sectional sofas. 
  9. The master bed as a throne. With consumer spending down and more nesting at home, home owners are focusing on making their bed like an at-home luxury hotel experience. Posh linens, pillows and mattresses create a getaway without leaving home. 
  10. Older war-horse appliances. Collectable, working appliances from the 1940’s through the late 1980’s have found a new niche among homeowners who appreciate their rock-solid construction and durability. Harvest gold double ovens from the 1970’s (we had a great one in Almond) have been repainted a metallic red and go from boring to bold. A Coldspot refrigerator from the 1950’s refinished in sky blue perks up the butler’s pantry in a suburban home. And, the early 1960’s dryer that looks like it’s from a Jetson house – painted pink – punches up the in-unit laundry room in a condominium. 
  11. Dining chairs that don’t match. With consumers watching their non-essential spending closely and electing to stay home to entertain friends, many have found a quick pick-me-up for their dining room suite, mismatched pairs or single chairs. Feedback from friends and family has been favorable to this easy and cost-effective way to say welcome to my cutting edge table. 
  12. Obama-era paint colors. The President-elect will add a fresh, younger and forward-looking feel to residential interior paint decor in the spaces at The White House when he and future First Lady Michelle have a say. Look for parchment whites, cashmere yellows, bright optimistic blues and radiant golds. Depressing Bush-era colors such as plum, chocolate brown, rusty mustard and pale sage will happily be replaced by more optimistic colors in American homes.

What’s OUT

  1. Fixer-upper homes. With larger down payments required by mortgage lenders, and credit cards maxed out, home buyers want a home in move-in condition. The DIY days are on the wane as buyers want new kitchens and bathrooms from the get-go. 
  2. Foreclosure fluff. The foreclosure rate nationally in 2008 was just under 3 percent. In the Great Depression it was just over forty-percent. 
  3. Home buyers endless “circling” prospective short-list properties. Overly optimistic thinking by buyers to circle a preferred property indefinitely, often for months, waiting for further price reductions or to wear out long weary sellers. This practice has backfired for buyers who practice this style of pre-negotiating. They often lose their short-list dream home and frustrate savvy price-right sellers. Ditto the bottom-feeder buyers. 
  4. Home staging. A recently over-used low cost marketing band-aid for vacant or occupied homes with longer than normal market times. Buyers have said enough of the non-professional usage of assorted leftover props placed around a for-sale home to make it supposedly homey. Buyers say, market it as it is and clear out the tired silk flowers and stale potpourri. 
  5. Indoor-outdoor carpet. The staples of quick-fix home sellers for basements, balconies, screened porches and lanai’s, buyers have said enough. Many have told agents that inexpensive indoor-outdoor carpet is visual pollution and often masks flaws in a home. 
  6. Track lighting. Thought of by homeowners to be a quick way to get an art gallery look, many prospective buyers usually take them out and discount their appeal. As one Gen-X home buyer said, “Why do sellers install them when they don’t really have any interesting artwork or architectural features to spotlight? They bring undue attention to nothing.”

Thanks to Mark Nash. Originally published in Realty Times 12/31/2008


Good News for Countrywide Borrowers

January 13, 2009

From the Virginian-Pilot:

Countrywide Financial Corp. has agreed to cut interest rates and provide relief to more than 8,900 troubled Virginia homeowners to help prevent them from going into foreclosure, the state attorney general’s office announced Monday.

Virginia joined a nationwide settlement between state attorneys general and the home loan giant, which was acquired in July by Bank of America. Designed to help those most at risk of defaulting on their mortgages, the settlement will provide as much as $212.8 million of relief in Virginia, mostly in the form of loan modifications.

Some of those states had sued Countrywide for deceptive business practices, alleging the lender had misled consumers on the escalating nature of the loans. The institution agreed to provide $8.4 billion in loan modifications to as many as 397,000 homeowners across the country.

If you have a loan financed by Countrywide before 2008, read this article:

Mortgage giant offers relief in Virginia to buyers on brink