Mortgage & Finance

Why has the real estate market slowed down?

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Why has the real estate market slowed down?  In my opinion, it is a combination of a few factors.

Why has the real estate market slowed down?

First and foremost, it is interest rates.  Over the last year, rates have risen nearly 1.5%.  A lot of people say they can’t believe with rates so low, how people cannot qualify for a mortgage.  Well this kind of increase will remove buyers from the market regardless of where the rates start and where they end up – 3.25 to 4.75 or 8 to 9.5.   An increase in interest rates like this is going to have an impact on the market.

Also, house prices have increased by over 17% the last 3 years in our area.  This price increase has also helped to eliminate buyers from the market.  Higher prices in any area of our lives – cars, restaurants, food, etc. will eliminate buyers – it is a natural fact.  Couple this with the interest rate increase and we have a slower market.

Additionally, there are fewer homes to choose from in the lower price points as well making it difficult for buyers to even find acceptable housing to purchase.  There are only 1,210 properties priced below $300,000 in all of Northern Virginia and only 271 are single family homes, the rest are town houses or condos.  If there are fewer options for entry into the market, there are going to be fewer sales thus slowing down the market.

The upcoming finance reform with QM, QRM, and Basel III the first of the year together with the easing of QE 3 leaves a lot of speculation about the future of rates and sequentially, the housing market.  Keep a keen eye on these developments to measure their impact.

So is the sky falling Chicken Little? 

Why has the real estate market slowed down interest rate increase

Well, let the numbers tell the story.  The housing market today is not substantially different than this same time last year and everyone was excited about the market then.  Funny how the brisk spring market with low inventory, low interest rates and multiple contracts has clouded the vision of some people.  Inventory is up just 6% over last year – not a terrible or scary number.  Sales are up in a week to week comparison to last year by 3.5% – a pretty good increase, right?  The 2.1 month supply of homes is virtually the same as last year’s 2.0.  Distressed property inventory has dropped 40% – which is a fantastic number.  This has resulted in a majority of the increase in homes for sale being arm’s length transactions – another good thing.  The last number to mention is properties that settled the last 30 days.  We are up 14% over last year indicating we are actually experiencing more sales.  So, if looked at from a long term perspective, our real estate market is actually doing pretty well.  All this being said, we still need to price properties properly as well as get them in the right condition to get them sold for our clients.

Keep a positive outlook on the market, good things will happen.  Now, go sell something!

Scott MacDonald

RE/MAX Gateway, LLC

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How are Interest Rates affecting the Northern Virginia Real Estate?

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Scott MacDonald of RE/MAX Gateway offers valuable information as to how interest rates are driving the real estate housing market in his video blog Scott’s Market Minute.

Sellers are urged to price houses competitively to sell fast. For a free Home Market Analysis, contact Scott MacDonald (703) 652-5777  There’s still time to get your home listed for sale!

Buyers, rates are climbing, now is the time to buy a home! Email Scott for a free optimized homes for sale search list. scottmacdonald@remax.net

How Fast Will My House Sell? A Look Into The Real Estate Market Roller Coaster Ride

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July turned out to be a roller coaster month for real estate as the long-awaited day of reckoning came: The era of historically low interest rates is over.

How Fast Will My House Sell INTEREST RATES

Additionally, inventory levels continued to increase – we are up nearly double the number of homes for sale since the beginning of the year.  Also, home prices have risen and sales slowed slightly all resulting in a hectic month for residential sales.  Oh yeah, throw in a long holiday weekend so some sellers are a little anxious today about their home sale situation.

So the biggest question is…what was the impact of rising rates?

  • It knocked some buyers out of the home purchasing arena as they could no longer qualify.
  • Some buyers are waiting to see if the rates will come back down so they are on the fence.
  • Higher prices coupled with higher rates have made some people uncomfortable with the elevated payments and don’t want to make a move at this time.

How do we look going forward into August…. Houses will sell!

  • Existing home sales are expected to rise more than 8% for the remainder of the year.  As our prices continue to rise, albeit at slower pace than the rest of the major metropolitan areas as reported by Case-Shiller – home prices in the 20 biggest cities rose 2.4 percent from April to May, with a 2 percent monthly gain in the Washington market. How Fast Will My House Sell
  • Sellers in our area will continue to take advantage of the gain in equity, especially closer into Washington and put their houses up for sale giving us a more balanced market between buyers and sellers.
  • Interest rates will remain stable and we won’t have the drastic increases we experienced over the last two months bringing some of the buyers back into the market.

So overall, I believe we will have a good August, not great, but that is typical for this time of the year.

If you have any additional questions or concerns about your particular situation, feel free to call me (703) 652-5777.

Scott MacDonald

RE/MAX Gateway, LLC

What You Need To Know To Prepare For A Home Appraisal

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We had a great training session with John Chapman and Nathalie Palmer from Omni Appraisal Services about the current market and how to help get your properties to appraise for the contract sales price or at least get better results.

Here are a few key items to take into consideration when know who you are working with on your appraisal:

There are two types of appraisers – licensed and certified. Licensed Appraisers can only do values up to $1,000,000. Certified Appraisers can do any property value. Additionally, Certified Appraisers must take a test and have a Bachelor’s degree. Only Certified Appraisers can appraise FHA loans.

Did you know there are two types of appraisers?
– Licensed and Certified
Do you know the difference?

  • Larger banks are paying less to appraisers through Appraisal Management Companies.  Almost all of the banks own them so they can make more money.  This is not always a “good thing”.  Often times you will get an appraiser with less experience or one that will rush through the process because they have to make up their income by doing more volume.  Appraisal companies are in place to put a buffer between the lender, Realtor and appraiser to perpetuate a more “arm’s length” transaction.  What has resulted is that the banks are using this as a profit center and not always employing best in class appraisers.
  • Check with the appraiser’s competency and local knowledge.  Ask where they are located and if they are familiar with your property/area.  Additionally, ask how long have they been appraising homes?  Lastly, check and see if they work from home or office?   Many small owner operators work from home and as a result, don’t get exposures to other appraisers.  This lack of networking, idea sharing and updates on the market can hurt appraisals.
  • Education for appraisers is getting tougher.  There is an apprenticeship for 2 years now.
  • There are two types of appraisers – licensed and certified.  Licensed Appraisers can only do values up to $1,000,000.  Certified Appraisers can do any property value.  Additionally, Certified Appraisers must take a test and have a Bachelor’s degree.  Lastly, only Certified Appraisers can appraise FHA loans.

What you need to be prepared for your appraisal:

  • Always bring your own comparable sales – make sure they are good comps so you can build creditability.  Even bring low sales and let them know what the issues were that resulted in their low sale – pet odors, back to power lines, short sale, foreclosure, etc.
  • If at all possible, provide plat/floor plan – proper measuring is critical because if its 100 square feet off the true square footage you will have issues
  • Bulls eye approach – first look in subdivision, then do a radius search of 1 mile, 2 miles, etc. to find the right comparable properties.
  • Use a couple of higher sales, couple of smaller home, the radius approach to finding properties and a couple within the timeframe of settling within 3 months or less
  • You now need to have 5 to 6 comps
  • Provide 1-2 under contract comps as part of your presentation
  • Find FSBO too!  They can help your cause
  • Pass on any and all information you know about your property – list all recent improvements and their cost/value to help support your price.
  • Provide details on other offers if you had multiple offers
  • Provide additional pricing details like the Home Pricing Wizard, RBIntel statistics, and articles relating to escalating prices.

Steps to overcome low appraisal

  • Get a “good” conversation going, kill them with kindness
  • Provide new info that the appraiser might not be aware of when you met initially at the property
  • Be there when the appraiser wants to meet at the property
  • Use their language
    • Beneficial
    • Neutral
    • Adverse

Appraisers need to be concerned with the following items:

  • Safety –  the house needs to be safe, easy to explain
  • Soundness – the house needs to have structural integrity including but not limited to the roof and foundation
  • Security – the house needs to have locks on windows and doors

Integral issues for appraising

  • You have to know the condition and the subsequent ratings of the properties condition.  The rating scale goes from C1-C6.  One is the best and 6 is the worst.  Speak with the appraiser in terms of the condition to get more value for your clients
  • You also have to know the quality of the construction in order to help get more value.  Was the home custom built or was it a cookie-cutter built in the late 70’s with 7.5 foot ceilings?  These rankings range from Q1-Q6

As you see, it is extremely important for you to be a professional agent, do you job thoroughly for you clients and get the results that everyone is looking for from the appraisal process.  Get it?  Got it?  Good!

Now, go sell something!

Scott MacDonald

RE/MAX Gateway, LLC

 

Multiple Offer Strategies In Real Estate: Help For Home Buyers

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It is no surprise that we are seeing more and more multiple contract situations.  The perfect storm is in place – interest rates are at 65 year lows, inventory levels are at extremely low levels, and there are buyers anxious to get into houses.  Affordability levels are near all-time highs as well so it only makes sense that buyers are finding themselves competing to get into a home today.

So, the question is how do you win and get the home your client’s desire?

  • Add an escalation clause which allows you to bid up the price above any other offer up to an amount you are comfortable paying.  The escalation amount should be an interesting number like $1,150 as most people just do $500 or $1,000 – make your offer stand out.
  • Increase your earnest money deposit to show your interest in purchasing the house.  If your down payment is 20%, make your deposit 10%.  If you are doing FHA, have your deposit equal your down payment of 3.5%.  You are going to be putting the money down anyway, why not do this and attract more attention to your offer?Multiple Contract Strategies
  • Have a very short time frame on your home inspection contingency and radon contingency if you choose to have them.  Also, consider doing the inspection contingencies for informational purposes only just leaving yourself the opportunity to void if you find something so egregious or beyond what you expected.  If you and your agent are confident in the home’s condition, you may want to consider eliminating these contingencies but be extremely cautious when not exercising these contingencies.
  • Have a quick settlement date – Ashley Smith with Atlantic Coast Mortgage can close a loan in just 8 days if she has a complete loan application from her clients.
  • Additionally, encourage your loan officer to be proactive and call the listing agent and explain the financial arrangements and status of the loan.  Pat Cunningham of Home Savings and Trust was one of the first lenders to mention he was doing this for his clients.
  • Allow the seller to rent back after closing giving them flexibility on when they need to move or to give them time to find a home.
  • Put in a home of choice contingency for the sellers if they have not found a home yet – make the contingency for an extended period of time so they have the opportunity to find the house they really want.
  • If you are so bold, you can have the clients waive the appraisal contingency.  In order to do this, you need to work in conjunction with your lender and see if they can get a quick turnaround on the appraisal.  If so, have the appraisal done in concert with the home inspection contingency and if it doesn’t appraise, you can void based upon the home inspection or on the HOA/condo documents.  Not one of my favorite suggestions but it is a strategy you can undertake to help your contract win.  Also, if your lender can get a quick turnaround, make the appraisal contingency 5 or 7 days.
  • If you are dealing with a home owner and not a bank or investor, have your clients write a letter along with photos explaining why the house is so important to them and the trials and tribulations of their home buying experience.  It can sometimes help to pull on the heart strings of the owners.
  • You can explain to the listing agent, the highest contract isn’t always the best contract.  You need to have the right people in place to consummate the transaction not just someone willing to throw a high number just to get the house to only experience remorse later and back out of the contract.

These tips will help you win more contracts.  Consult with the clients and make sure they are comfortable with your recommendations prior to implementing them so they fully understand the repercussions of their actions.  Get it?  Got it?  Good!

Now, go sell something!

Sequestration: FHA Delays, Department of Agriculture, USDA Loan Processing and How It Will Affect The Real Estate Market in Northern Virginia

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Sequestration is here and it is going to affect a lot of areas of our life – some people more so than others.  The initial $85 billion cuts will include furloughs for 2.1 million federal workers for five months.  They will be required to take 22 unpaid days beginning in April and will end in September.  This 20% reduction in pay to many people has the potential to put them behind in their mortgages resulting in an increase in default notices.  This in turn could result in more short sales and foreclosures thereby affecting prices and more importantly the housing recovery.  Additionally, if people are making less money, they do not have the ability to “move up” so we will continue to see a lack of inventory in housing.  Worse yet, in some cases if people with security clearances fall behind with other bills, they could lose those clearances and their jobs.Image

Speaking of housing, FHA has acknowledged they will see delays in endorsements/claims time frames which will impact settlement dates because of getting loans not being completed in time for closing.  FHA is responsible for approximately 25% of loans so this is a big deal and you should pay attention to your closing dates.  Along these same lines, cuts in the Department of Agriculture will mean there will be delays in the processing of USDA loans.  These loans typically take a minimum of 75 days – I would encourage you to look at a minimum of 90 days to be safe.

In addition, people who rely on Federal Housing Assistance are going to lose their benefits which would leave them homeless.  These people include veterans and the disabled.  One other area that is affected is foreclosure prevention aid to nearly 75,000 people – keep an eye on this development.  People who receive Housing Choice Vouchers will be cut.  These vouchers are used for renting apartments.  Approximately 125,000 will be affected here potentially leaving them homeless.

A majority of the cuts will come from defense spending.  It is estimated that nearly 207,000 Virginians will lose their jobs with 75% of those residing in Northern Virginia.  California will also lose a total of over 200,000 jobs with Maryland not far behind with over 100,000 jobs lost.  In totality, it has been predicted 2.14 million people would become unemployed as a result of sequestration.  There will be unintended consequences resulting from these cuts which will total $1.2 trillion by 2021.  One area that comes to mind is travel by air.  Fewer air traffic controllers and fewer TSA employees will result in delays at the airports for sure.  Another area is Hurricane Sandy victims, their aid will be diminished as well.  Lastly, when the hardworking, lower middle class government workers get 20% of their income slashed, there will be less discretionary spending which could have broad sweeping consequences – let’s see what else will be impacted.

Success as Appraisal Concerns Rise In Northern Virginia Real Estate

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Uh – oh some appraisals are low!
As we enter the spring market I have growing concerns over appraisals here in Northern Virginia. As we come out of the “slower” winter months, appraisers have fewer homes to choose from to help catch them up with the market today. We are seeing 20-30 people regularly at open houses which is rare for this time of year. There are only 3,081 houses for sale in all of Northern Virginia – a true supply issue for the number of buyers in the marketplace. As a result, it is rare not to see multiple offers on houses listed today. This is not an artificial “run up” of housing prices and we are not stretching prices as we are still below the highs of the housing bubble in many areas. The law of supply and demand should dictate property values in my opinion.
Here are examples of the last few appraisals we have come across. Two single family homes in the same neighborhood in Fairfax both recently came in low – one was sold at $850,000 and appraised for $847,000 – really? The other one sold at $877,000 and appraised for $811,000. How can these numbers be so far off from each other and where is the real estateAppraisal Concerns scottymacsblog market headed today? One of our agents listed a town house in Countryside for $320,000. They received 3 contracts in the first weekend – an obvious issue of supply and demand. Well, it sold for $326,500 and appraised for $300,000. The appraiser used a short sale that had closed several months prior to this sale at $260,000 as a comparable. Short sales are less than 8% of the market plus if it closed several months prior to this sale, because of the short sale process, the contract was written several months prior to closing – how is this truly a reflection of the market today? We also had an offer come in on a town house in Centreville recently which sold for $450,000 and appraised at $435,000. The appraiser used a new town house in a community down the street that settled in July of 2012. Again, as it was new build, the contract was written a few, if not several months prior to the settlement – is this a true indication of market value today? What’s worse is there was a closing in the same neighborhood which was a higher value that settled in December that was not used to support the price of our town house. Lastly, we had a condo in Sterling that came in low by $8,000. The sales price was $175,000 and it appraised for $167,000. I think you can understand our issue.
What can be done? First, provide information to your sellers and buyers early. Set the expectation that the property may not appraise for the sales price and discuss the potential options with them so they understand what the next steps would be for them. Let them know that the appraisers may have difficulty finding suitable comparable sales – this is where you must be diligent and provide solid comparable sales to the appraiser. If you are dealing with an FHA appraisal and the sellers of comparable properties paid closing costs for their buyers, let them know the appraiser will take that amount off the top of the sales price which could bring down your value. As there are many multiple offer situations, some buyer’s agents are putting in high offers to get an approved contract knowing they won’t get the needed appraised amount – let your sellers know this is the case and the highest price is not always the best offer. If you are selling a new home, most builder contracts do not have appraisal contingencies in them for their protection, not the buyers. As prices of new homes are escalating this becomes a concern for buyers today. Remind them that an appraisal is a snap shot in time based upon historical data that is already behind our escalating market.
In addition to providing information to your sellers and buyers, provide extensive details to the appraiser. Plus, don’t just provide them with information, meet them and discuss what you and they are seeing in the market – build rapport by sharing your stories and listening to theirs. Share with them your comparable sales and why they should be considered. Explain the Home Pricing Wizard to them in detail and how it helped you determine the market value. Provide them with copies of the competing offers so they can see it is a desirable property. Share with them your feedback from Showing Suite that shows other agents that visited the property how they felt the property was priced at market value – or below. Bring market data from RBIntel that shows the market is increasing in value, as well as, articles that point to this fact. You must be diligent in your representation of our clients and do all you can to get the houses to appraise.
The good news is not all properties are appraising low, but there are enough that are, so this is why you need to pay attention and educate our clients on what is happening in the market. This separates you from other agents and makes you a professional. Get it? Got it? Good!
Now, go sell something!

Scott’s Northern Virginia Real Estate Market Minute

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2012 Synopsis and a quick look forward into the Northern Virginia Real Estate Market for 2013. Scott MacDonald (703) 652-5777 or read his blog scottymacsblog.com

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Prediction #3 Scott MacDonald TOP 10 Predictions 2013

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Scott MacDonald counts down his 2013 Top 10 Predictions for Northern Virginia Real Estate PREDICTION #3 Lending Guidelines, Mortgages, and Lenders affect on Housing Market projection for 2013.

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Prediction #5 Scott MacDonald TOP 10 Predictions 2013

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Scott MacDonald counts down his 2013 Top 10 Preditions for Northern Virginia Real Estate PREDICTION #5 Resale Residential Housing Market projection for 2013.