The Fed’s Buying – How About You?

March 22, 2009

Info from this week’s Mortgage Market Guide:

ben_s_bernanke

Last week, the Fed used their regularly scheduled meeting to make a blockbuster announcement.

Over the course of 2009, the Fed will purchase an additional $750 billion of mortgage-backed securities, as well as $300 billion in long-term Treasuries, primarily to help shore up the housing market and keep home loan rates low. On the announcement, bonds exploded higher, leaving bond prices within whiskers of the best levels ever.

How does this really impact home loan rates?

While the Fed’s actions may keep mortgage rates from moving higher, they may not cause them to move dramatically lower. The Fed’s actions create demand for mortgage-backed securities, which should help keep the ceiling on home loan rates from moving much higher in the foreseeable future. That’s good news for homebuyers who are seeing the bargains out there and understand that now is the time to act.

But – and this is very important – what actually happens to mortgage rates depends on which bond coupons the Fed purchases. If they purchase higher rate coupons – as they have done so far this year – their continued purchasing will likely keep a lid on rates, but not necessarily push them significantly lower. Additionally, due to many understaffed lenders and investors currently working at maximum capacity, we could once again see that improvements in pricing may not all be passed through to borrowers.

usamcashAnother factor that could impact whether mortgage rates see significant improvement are concerns of future inflation brought on by all the recent aggressive moves by the Fed. While we know there is little inflation at the present time, chatter about future inflation could have a negative impact on home loan rates, or at least stifle any improvements.

Although the media is already spinning it differently, this is not a time to stay on the fence, hoping and waiting for lower rates. Home loan rates remain within inches of all-time historic lows, but may not necessarily move significantly lower, so waiting could be a risky move.

Also, an update on Mark-to-Market – the accounting rule which has had a devastating impact on the financial markets: The Financial Accounting Standards Board (FASB) agreed that it will propose to allow companies to use more “leeway” in applying the accounting rules they use to value their assets, and planned a final vote for April 2. If this rule change is approved, it could result in better first-quarter financial statements for companies that have been affected by this rule. Stocks have been moving higher lately in the hopes that Mark-to-Market will be fixed, and a resolution could help stocks further improve.

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.

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


Why Is The Buyer’s Agent Paid By The Seller?

March 5, 2009

housequestionIt’s a strange arrangement. Here I am, the agent for the buyer, receiving my compensation from a party who not only is not my client, but whose interests are (one would think) directly opposed to those of my client – the seller. They want the highest possible price, my client wants the lowest. They don’t want to spend money on repairs, my client wants the repairs made. The list goes on. The two sides are in agreement on one thing only – they want the transaction to happen. Yet it it almost universal for the seller to pay the buyer’s agent. Huh?

This seemingly oddball arrangement exists for a couple of reasons. First, the historical background: until the mid-1990s, real estate brokers and agents operated under subagency agreements, whereby brokers listed property, and offered cooperative commissions to other brokers bringing in buyers for the listed property. Under subagency, these cooperating brokers and agents were legally bound to represent the seller.

conmanDespite this fact, most buyers thought “their” agent represented them, and acted accordingly, often to their detriment. By sharing how much they were willing to pay, when they had to buy, or how much they loved the home, they unwittingly provided the seller with useful negotiating information. Eventually the Federal Trade Commission put pressure on the states to have real estate agents disclose to consumers exactly whom they represent. Most states eventually adopted disclosure laws, and the industry adapted by creating buyer agency arrangements (similar to sellers’ listing agreements). But the existing commission arrangement remains in place – the seller still pays. Why?

no_moneytranspThe reason that sellers still pay the commission is because the main obstacle to buyers being able to buy is a lack of cash – cash for the down payment, cash for closing costs, cash for the move, cash for furnishings, and the list goes on. It takes a long time to save that money. Some people find it difficult; others find it impossible. Add the buyer’s agent commission, and the seller will have fewer buyers available.

The seller is receiving cash from the sale. If they pay the commission, more potential buyers are able to afford this property. The more potential buyers, the higher the likely sales price. The higher sales price provides the incentive for the sellers to pay the buyer’s agent in addition to paying their own.

There are “exclusive buyer agents” who accept their payment only from their buyer client and refuse the seller’s offer. They argue that the only way for a buyer to be certain to avoid any conflict of interest is to avoid firms that both list and sell homes, and to compensate their own agent. In practice, I have never been tempted to change my buyer representation perspective regardless of the offered compensation. I disclose to my buyer clients the compensation offered on every property, and have on occasion used higher compensation levels to assist my clients in the purchase.

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!


Foreclosure Pricing – Real or Pretend?

February 21, 2009

Excerpt from one of my favorite Real Estate bloggers, Kris Berg in San Diego:

wheelofWe are finding ourselves spending a whole lot of time explaining lender pricing methods to buyers. This week we saw another bank-owned listing priced a full 20% below one active listing and two in escrow – all identical homes within two blocks of the perpetrator. Now, one can argue this is a brilliant strategy for ensuring a speedy-quick sale, and one might even argue that the price will tend to float toward something more in line with true values. Both arguments are valid, but is blatant and gross under-pricing moving toward an ethical gray area? And, what about an agent’s fiduciary responsibilities? Lenders are clients, if not people, too, and pricing a property using a dreidel could be considered negligent. Finally, there is the confusion among buyers that this causes.

Pretend prices – This is what the prices we see attached to many of the foreclosure homes on the market actually are. Most of these homes are knee-deep in offers numbering double-digits before the sun goes down on the first day of showings. Unfortunately, this is a difficult concept to explain to buyers. “Yes, the home is priced exactly at the amount for which you are approved and, no, you cannot buy it.” This is a bitter, even seemingly incredulous message to swallow, and so often a buyer will need to go through the exercise once or twice before they take my word for it.

There is a bigger issue  . . . the one of uber-low pretend prices becoming a popular “lead generation” tool for the agents representing the listings. In a world where buyers are doing their own searches, a too-good-to-be-true carrot can sure make that phone ring. And it leaves the rest of us who use real numbers with a lot of explaining to do.

Read the whole post at the San Diego Home Blog  – Kris’s writing is pretty good, by the way.

This is happening here too. Buyers call me excitedly about a home they have seen in their real-estate-search-engine-of-choice, supposedly in their price range – “Wow! Can we go see this one NOW???” Sure. If you can get past the hordes of other buyers waving offers. You can make an offer, too . . . and let me show you the “escalation clause” addendum, because you are going to need it.

No such thing as a free lunch.

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


Things That Make You Say, “Hmmmm . . .”

February 10, 2009

graphLooking at the January 2009 data for the housing market in Northern Virginia (Fairfax and Arlington Counties; Falls Church, Fairfax and Alexandria Cities), the year-over-year trends of the past several months are continuing – sales are up (+39%), active listings are down (-16%), pending sales are up (+23%) and sales prices continue to run 20-25% below those of a year ago, and -30% from two years ago. Average days on market is declining but is still in the 100 range (for sold homes).

The absorption rate has picked up from December’s 5-month figure – we have about 7.5 months of homes on the market now, in the low “buyer’s market” range – largely, I think, because a sizable number of sellers were waiting until after the holidays to put their homes on the market.

There is a lot of action in the sub-$300,000 detached home market. Here are some interesting numbers: 

homesalepriceDetached Homes for sale under $300,000:

  • January 2008   =   55
  • January 2009   =   436

Detached Homes sold under $300,000:

  • January 2008   =   8
  • January 2009   =   90

Here’s another interesting number:

Homes financed through FHA/VA:

  • January 2008   =   39
  • January 2009   =   328
bankrate

So the government guaranteed the mortgages of over 33% of all homes sold in January 2009. In the entire year of 2006, FHA/VA loans totaled 253, or only 1% of sales in Northern Virginia. Wow.

The mortgage market has been volatile and will continue to be, though the federal government will do all it can to hold it down until the economic outlook improves. Rates are now in the 5.4% range for 30-year fixed. The chart from Bankrate.com shows the last 3 months’ rate movements in Virginia.

The government has a lot of things going on – from Congress to the Treasury to the Federal Reserve to Fannie Mae and Freddie Mac. So many are up in the air that it would be foolish to write about them today.

All the more reason to subscribe to my blog!

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


Let’s All Think About DRAINAGE!

February 10, 2009

springrainSpring is on the way, and it will probably bring a fair amount of rain. Combine that with melting snow – assuming we get any – and we might start to think about drainage. Some of us cringe at the sight of rainfall, looking outside to see half of the yard engulfed in water. Others relish the fact that we live uphill from the neighbors or have handled the run-off with no problem in previous years. Regardless of which scenario in which you find yourself, drainage control is a major priority in every landscape.

Proper drainage control reduces or eliminates excess water in your landscape, which can help to protect your home from water damage and eliminate mosquitoes and other bugs that breed in the still water in your yard. There are several different options that can help to solve drainage problems. The difficult part for the homeowner is choosing the solution that will work best for their unique landscape. Here is a quick overview of several available options:

Dry Creekbed

POSITIVE GRADING
Positive grading uses the existing land contour or a manipulated version of existing contour to direct the water to a specific location. This is one of the most helpful solutions. However, manipulation of the site may require it to be accompanied by one of the other solution types.

CREEKBEDS AND SWALES
Creekbeds and swales are a more recent solution to correcting drainage problems. They’re filled with various-sized stones, and a few large boulders are added for additional aesthetics. Water is allowed to flow through creekbeds and swales, helping to control flooding and erosion.

PIPING

French Drain

French Drain

Piping is typically used with downspouts or in “French drains” (also known as “freedom drains” during the W administration). This solution takes the water from a specific problem area and pushes it through a pipe to another location. At the new location, either positive grading takes over to disperse the water, or a collection area is developed to handle the water (see Sustainable Solutions).

Sustainable System

Sustainable System

SUSTAINABLE SOLUTIONS
Sustainable solutions are the up-and-coming answer in drainage control. They reduce the flow of water to storm drains from homes and businesses. Typically, these solutions work well in locations where water can be collected (and sometimes filtered) to be used for additional purposes throughout the landscape. Sustainable solutions not only reduce or eliminate excess water in your yard, but also benefit the environment by preventing pollutants from entering our watersheds.

Remember, each landscape is unique and may require a different solution or a combination of solutions to properly correct drainage problems.

Many thanks to Jeff Findley, our Landscape Designer from Professional Grounds

 

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


It Depends . . .

January 27, 2009

askingpriceWorking with prospective home buyers, I often find that early in the process they are inclined to suggest an offer price based on the listed price – as though they should always offer X% or $XXX less than the list price.

I can understand why they would make that assumption, if they’ve been looking at market averages or listening to people who do.

But basing your offer on the list price is a big mistake. Some are ridiculously high. Some are tantalizingly low. And until I do a Comparable Market Analysis (CMA) – investigating the sales price and terms of recently sold similar homes in the area – I can’t know if the asking price is anywhere near market value.

Some agents might toss out a number when you ask them while touring the home. They would not be the best agents.

Here’s an example:  A home is listed for $399,000. You love it, but you firmly believe that you should offer 10% under list, and your offer of $360,000 is accepted! Wow, you’re a great negotiator . . . until you find out that similar homes sell for about $345,000.

Example 2:  A home is listed for $399,000. You love it, but you you firmly believe that you should offer 10% under list, and your offer of $360,000 is rejected without a counteroffer. Someone else got your dream home! THEN you do your homework, and learn that similar homes sell for $425,000 and the asking price was intended to attract multiple offers, or even ignite a bidding frenzy.

I will not give my opinion on price until I do my research. In the first example, if you know the likely sales price of a home is $345,000, and it is listed for $399,000, your agent might suggest an offer of say $325,000 with other terms that might pique the interest the seller – and you’d be pleased to get the home for $335,000.

In the second scenario, if the house you love is listed at $399,000, but research reveals that similar homes typically sell for $425,000, your agent can help you construct a winning bid. If yours is the accepted offer at $415,000, you did great!

It’s all about doing your homework. When negotiating, you can’t really know where to begin until you know the market value of the home.

 

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