News Channel Mortgage

I’ve been way too busy at my current day job during the past year to play real estate mash up games at the level Galen has been playing at. However, it appears Windermere has decided to up their game and yesterday they released an improved & simplified property search feature on their web site.

On the plus side, I like the improved site’s ability to see multiple photos of listings alongside the Virtual Earth map-based interface. It addresses one my persistent complaints that most map-based real estate search sites tend to share. I also like how they embraced what appears to be a trend of starting a property search with a textbox of a city name (ala Redfin & Estately) instead of a byzantine array of list boxes & check boxes.

On the minus side, the site only showed me properties when my search returns between 1 and 100 matches. I hate limits, especially small ones. I have a big monitor and a pretty fast net connection. My hardware could handle a thousand pushpins on the map if you let it. To channel Jerry Maguire – Show me the listings! I have Windermere’s competitors on the other browser tabs - John L Scott’s limit is 300 (good), Redfin’s limit is 500 (better), and Estately shows me a 100 at time, but w/ no upper limit (I like the no upper limit part). I also missed the wide array of features & data that I’ve come to expect from Redfin or Estately. However, given Windermere’s design priorities for this release were simplicity, rather than power & flexibility; I can’t fault them too much for accomplishing their goals.

In any event, if you write real estate web apps for fun and/or profit, you owe it to yourself to read the Windermere Tech Blog. If you merely use real estate web apps, you should check out the new Windermere.com.

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Windermere’s Web Site Strikes Back

• Changing the World One Banana at a Time
• Latest stab at on-line mapping
• Geekier than Geek Estate & Sweeter than Sweet Digs
• Realtors are feeding listings everywhere
• Estately True Areas: Search Beyond the Box

This recently discovered (by me) video on YouTube hits a nerve when it comes to how many are affected by the current market dynamics around the country.  I found this a bit funny, if not unnerving, considering how many people I’ve been talking to lately that are in short sale position.  The discussions are because I’m not just acting as an agent but because of my involvement in a real estate investment group that is buying these kinds of properties. 

What I’ve noticed while doing research is that an oddly large number of agents have been hit by the issue of needing to short sell - you’d think that these would be the people prone to seeing the fallacies of some of these loan products and how they’d impact them in a market downturn, but I’m not going to point fingers since I know as independent contractors and small business owners we are tied to these loan products that got misused during the market hey-day.  Even with my own great credit score, I know that today I probably couldn’t qualify for a loan in today’s market because as a business owner, I must go stated income.  I’m thankful that I was able to change my situation before things went nuts in the industry.

If you decide to watch the video, know that my linking to it here is only to provide a bit of levity to a not so fun situation for everyone right now.  I feel blessed that my business is doing so well right now and that many of my choices to downsize last year seemed to be a lucky break ahead of the curve of what is happening to many right now.

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Did the recent market shift affect Hitler too?

• Are you ready for FEMA Mortgage?
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• Exotic Loan Programs and Potential Foreclosures
• Sellers and Agents: Don’t Rule Out FHA Buyers

Could someone with Foreclosure sale experience answer the question below?  Or, at least discuss the possible outcome?

Scenario:

A homeowner has a Federal Tax lien against the property.  The homeowner is delinquent on their mortgage and it goes to Foreclosure.  At the Foreclosure sale, the property then goes back to the lender because there were no bidders for the home.

1)   Is the Lender required to pay off the Federal Tax lien at Foreclosure or resale of the home?

2)  If the Lender pays off the Federal Tax lien, what recourse does the Lender have against the borrower?

3)  If the Lender pays off the Federal Tax lien,  has the delinquent borrower just handed off their tax burden to the Lender and walked away with no liability?

Thanks!

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Question for Attorneys: Federal Tax Liens & Foreclosures

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This is a “real estate is local” post, as it refers to an option generally afforded to buyers in our local standard inspection clause (Form 35 item 1) b. on page 1).  Here in the Seattle Area, a buyer usually has the right to do “additional inspections”, IF the original Home Inspector recommends in writing that there be an additional inspection by a “specialist”.

When I am at an inspection I am listening very carefully to the inspector and waiting for him to red flag an item that needs an additional inspection.  It is the ONLY time I tell an inspector that I need him to say that, in writing, in the report.  They usually get mad when I do that and I try not to interfere with the inspector and his written report.  But if he says the buyer should get an additional inspection, but does not include the wording I need to invoke the “additional inspection” clause in the Inspection Addendum, we have a problem.

The buyer usually has X additional days to do the additional inspection (buyer pays for it), and the inspection response in its entirety is extended.  BUT the buyer must respond, in writing, by the end of the 1st inspection timeframe that they are doing a 2nd inspection, in order to gain the extended timeframe.  That request must include the portion of the 1st inspection that indicated the need for an additional inspection by a specialist.  There is a response form where you check a box noting that you are invoking your right under the original addendum section 1) b. to do an additional inspection, and you attach the 1st inspector’s recommendation regarding the need for a specialist inspection.

Everyone’s Inspection Addendum will be different as to the number of days you have for the 1st inspection and for additional inspections, so read your Addendum carefully.  The default in the forms I use show 10 days for the 1st inspection and an additional 5 days for additional inspections, but your contract may have a different amount of days written in the blank spaces.   The additional days are not automatic.  You must respond within the timeframe of the 1st inspection, and indicate your intention to do an additional inspection, in order to gain the additional days.  I can’t say this enough and so apologize if I have repeated it.

I don’t want to get bogged down in the forms here.  I want this to be a practical guide that focuses on how these situations actually play out.  The items that I have seen that required an additional inspection are:

Heater (”recommend the heater be checked by a qualified HVAC contractor)”

Roof (”recommend that the roof be inspected by a qualified…”

Septic System, Drainage Expert (evidence of water in crawl space or basement, either current or old water line mark), Structual Engineer for foundation cracks, fixes and shifting evidences, electrical, etc…

Generally speaking, an additional inspection involves a very costly item that is not obviously, currently, defective.  When a hot water tank is past its life expectancy, an inspector usually calls for it to be replaced, and not that it be inspected by a specialist.  When a heater or roof is nearing the end of its life expectancy, even if it is currently functioning adequately, the inspector usually calls for an additional inspection by a specialist.

The heater is often easier to deal with than a roof, in my experience.  The inspection cost in most cases is under $100.  I usually call for the specialist to service AND inspect it, as the service cost is about the same as an inspection cost, and includes an inspection.  I need the seller’s permission to service his heater, but I have yet to have a seller object.  If there is nothing wrong with it except that it is old, then a general home warranty that covers many items including the heater, is often part of the resolution to the heater being old.  The specialist will install new filters and note any parts that should be replaced.  Pretty simple stuff.

A roof is harder to deal with for many reasons.  Replacing the roof is not usually part of a home warranty like a heater is.  Some home warranties include leak patch work, some don’t deal with a roof at all, and I have yet to see one cover roof replacement.  Even if a roof is not currently leaking, the first inspector is often calling for a second inspection based primarily on the age factor.  Roof Math = Life Expectancy of that particular roof minus it’s current age.  A 20 year shingle that is 18 year’s old is often worse than a 35 year shingle that is 18 years old.  So age alone is not the issue, nor is currently defective or not defective  the only parameter that needs addressing.

Even if a roof is not leaking, if the 1st inspector says that the buyer should “plan for roof replacement” within 3-5 years, often the buyer wants the seller to address the issue.  Sometimes the buyer wants to STOP after the 1st inspection, and just ask for a new roof or a new heater or generally ask for all items to be replaced or fixed, when they should be moving to the “additional inspection” phase.

How you handle the matter is between you and your agent and the seller and the seller’s agent.  If the roof or the heater is 30 years old, often everyone agrees it needs a new one, even though it is not currently “defective”, without the need for an additional inspection.  But it often takes time to negotiate these things, and having a 2nd inspection gives you additional time and also pinpoints the actual cost involved.  The original inspector may give you a ballpark replacement cost, but a specialist will give you an actual “work order” and a cost the seller is more likely to consider valid.  The seller can then get his own estimate during his response timeframe to counter your request and estimate.

Jumping to asking for a repair based on the original inspector calling for an additional inspection by a specialist, is usually the wrong way to proceed, unless you know the seller is aware of the issue and has already anticipated it.  Sometimes the buyer wants the seller to pay for the additional inspection.  The contract indicates that the buyer pays for the additional inspection.  The seller should pay for any subsequent inspections that are needed for his counter proposal.  Say you submit a request for $17,000 for a new roof.  The seller would pay the cost for an additional inspection to counter with a different amount, attaching the work order from a different specialist.  He has a timeframe to respond in the original inpspection addendum as well.

There is no one right answer except TIME IS OF THE ESSENCE.  If you don’t want the house even if the seller fixed the problem, then you can cancel without calling for an additional inspection.  But if you still want the house as long as the seller adequately address a specific item, buy yourself that extra time to negotiate, by calling for and doing an additional inspection.

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A buyer’s right to do “an additional inspection”

• Top Ten Things A Home Inspector Says
• Home Inspections
• No Credits “For Repairs” Allowed
• Which Home Inspection Addendum to Use?
• The ROOF - Things you should know

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Another Proof that it doesn’t always rain in Seattle

• It Never Rains in Seattle
• Great Views = Landslide Waiting to Happen? Looking for a Geologist to Evaluate Slope Stability
• A World Series View Shot
• Sunset Hill 2004 Year-in-Review
• 6602 30th Ave NW

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Another Proof that it doesn’t always rain in Seattle

• It Never Rains in Seattle
• Great Views = Landslide Waiting to Happen? Looking for a Geologist to Evaluate Slope Stability
• A World Series View Shot
• Sunset Hill 2004 Year-in-Review
• 6602 30th Ave NW

Compared to the past few weeks, this week seemed a little more calm with regards to mortgage interests rates.  30 year fixed hung around 5.875 - 6.00% based on what I quoted during this past week via Twitter using the conforming criteria below.  Don’t let this lull you a false sense of being able to float your interest rates.  I still highly recommend locking once you have a signed around purchase and sale agreement.  A majority of lenders are offering free “float downs” once rates are locked due to this volatile market.  If your loan originator does not offer a free float down, find one who will.  The risk of floating your rate is still too high.

ALERT: if you are planning on closing a “jumbo conforming” mortgage by the end of the year, check in with your mortgage professional.  Some lenders are beginning to either pull out of that market or repricing that segment in advance of new loan limits.  It’s an odd limbo time for lenders as they try to wrap up the jumbo conforming market to be able to deliver the loans in time to Fannie or Freddie before the lower loan limits go into effect.  No lender wants to have a loan over $506,000 $500,600(for our tri-county area) if Fannie and Freddie will no longer buy it.

Conforming Mortgage Rates (loan amounts up to $417,000 for 1-unit properties).  The conforming rate quote below is based on owner occupied with a mid-low credit score of 720-739, “full doc” purchase with a sales price of $500,000 and a loan amount of $400,000.  This scenario includes reserves (taxes & insurance) not being waived.   Rates quoted are priced based on a 45 day lock with no prepayment penalties on any of the rates quoted below.   

30 Year Fixed @ 1 Pt: 5.875% (APR 6.029%) 

30 Year Fixed with 10 Year Interest Only @ 1 Pt: 7.000% (APR 7.155%)

15 Year Fixed @ 1 Pt: 5.500%  (APR 5.753%)

5/1 ARM - LIBOR @ 1 Pt:  5.500%  (APR 7.000%) 

Conforming-Jumbo Rates.   Pricing is based on the same criteria above except where the loan amount is $417,001 - $567,500 for properties in King, Snohomish or Pierce Counties; specifically priced for a sales price of $650,000 and a $520,000 loan amount.  

30 Year Fixed @ 1 Pt: 6.000% (APR 6.147%)  0.125% to rate

FHA.  Pricing based on credit score of 620 or better and loan amounts up to $362,790 for FHA in King, Snohomish and Pierce Counties.  

30 Year Fixed @ 1 Pt: 6.250% (APR 6.938%)  0.125% to rate

FHA-Jumbo. Pricing based on loan amounts from $362,791 - $567,500 for King, Snohomish and Pierce Counties.  

30 Year Fixed @ 1 Pt:  Pt: 6.625% (APR 7.310%) 

VA.  Pricing based on credit scores of 620 or better based on loan amounts up to $417,000.   VA loan amounts over $417,000 are also available.  

30 Year Fixed @ 1 Pt:  6.375% (APR 6.497%)

Non-owner occupied/Investment Property.  Pricing based on 25% down payment with a $400,000 sales price and credit scores between 720-739.

30 Year Fixed @ 1 Pt:  7.125% (APR 7.307%). 

Prime Rate (what HELOCs are based on):  4.00%   

12 Month LIBOR(what a majority of ARMs are based on): 2.75% per WSJ.   0.09% change compared to last Friday’s rate post.

This is just a small sample available of rates and products.  Rates are as of Friday, November 14, 2008 at 1:00 p.m. and may change at any time.  Available programs may change at anytime as well.    Check out RCG’s new Mortgage Info page for live rate quotes via my Twitter feed.

This is not a guarantee nor is it a commitment of interest rate.

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Mortgage Rates for Friday Afternoon

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• Friday Rates

Back in a late October post, I said “Once prices roll back to January 2005 levels, we will be “at bottom” here in the Seattle Area…”.  There was some discussion in the comments disputing my “prediction”.  We split the difference at mid 2004, though studying the numbers today, I’m still fairly convinced that my January 2005 prediction is likely more accurate.

As you can see from the charts below, we are pretty much at October 2005 levels as to prices, with October 2004 levels very far behind where we are now.  Volume is down 21% (vs. down 30% last year).  Besides giving you price and volume changes for King County Single Family Homes October YOY, I’ve broken out the homes built 1990 or later.  Homes built through 1989 are generally on larger lots and are often closer in, though fewer have a tub in the master bath.  Homes built since 1990 are more likely to have a tub in the master bath, in fact 95% of them have 2 full baths or more.  Still, due to location and lot size, prices for the older homes are running slightly ABOVE October 2005 levels, and prices of newer homes are running slightly UNDER October 2005 levels.  But both are fairly close to October 2005 levels.

Prices are down 14% on older homes YOY and prices are down 8% on newer homes YOY, but both are running at the same level, given the older homes appreciated more as well.  You can see that in the charts.  For instance when newer homes went up 8%, older homes went up 12%.  When newer homes went up 2%, older homes went up 5%.  So on the way down you are seeing the older ones dropping by a higher %, but landing in the same place relatively speaking as in back to October 2005 prices.

Prices would have to go down an additional 17% -19% to get to October  2004 levels.  I put that in the charts as well, so you can follow what happens from here.  The strike point of January 2005 (my prediction of bottom) is $166.39 which is 15% lower than where we are now.  June of 2004 is $161 which is where I  compromised as to bottom.  To get to 1/2004 we’d have to get to $149.  I don’t think that is going to happen. 

Why are we discussing this?  Because based on my thinking, if you can get a house for 15% less than current prices via short sale, foreclosure or Bank Owned property, then you (in my opinion) will be buying at bottom today. 

How unrealistic are sellers generally?  Properties on market are asking 10% to 11% more than properties are selling for.

Houses taking more than 120 days to sell has doubled from this time last year as to older homes.  Last year 7.45% of older homes sold in 120+ days at 95.25% of asking price.  This year 14.68% of older homes sold in 120+ days at 94.64% of asking price.  23.85% of newer homes take 120+ days or more and and those sell at 94.39% of asking price.  Last year that number was 16.69% at 96.89% of asking price.

Absorption Rate (aka Greg Perry bait) - There is a 10.68 month supply of newer homes on market (built 1990 or later) and a 7.57 mo. supply of older homes on market (built 1989 or earlier).  Per my previous comments that has to do with older homes being in better locations and having larger lots.  Too large is not good; too small is not good either.  Far out on a small lot is not as good as older, closer in, on a larger but not too large lot.  If there’s a tub in the master…all the better.

Now for the charts.  Green column is all properties.  The purple column are homes built 1990 or later and the orange column are the older homes built before 1989.

King County Single Family Home Sales

King County Single Family Home Prices

Stats in the post hand calculated by ARDELL and not compiled, published or verified by NWMLS (required disclosure)

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October King County Home Prices at 10/2005 Level

• Sunday Night Stats - Days on Market DO Matter
• Older sells faster and for more
• Sunday Night Stats - King County
• Why are sales down and prices up?
• Sunday Night Stats - Prices Down

This chart reminds me of the crash in real estate prices in the late sixties when REIT (real estate investment trust) stock prices dropped to pretty much worthless.  I was still in high school, but the Courts got involved in the loss of value in trust portfolios, so I was looking at those in 1974 in my accounts.  I would think that today’s national drop in home prices emulate the drop in the late sixties to some degree.

I do recall in recent years warning people not to buy into REITs, but must admit I felt a bit “old-fashioned” at the time.  Once you see those losses, you don’t forgive or forget, somewhat like people who lived through the Depression.

This post is supplemental to last night’s post and as a result of the comments that follow in that post.  The source of this info is at the end of last night’s post for those who want to look at the detail.

U.S. YOY % Home Price Changes

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U.S. % Change in Home Prices

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Many people are asking, “What do you think will happen if I buy now and hold for five years?” 

You may be surprised to see that this “bubble” is not nearly as big as the 3 five year periods from 1973 to 1988.  1973 to 1978 is the highest appreciation period. The lowest appreciation period is the five years that followed those dramatic increases for 15 years, and still not showing a loss for any five year period going back from third quarter 2008.

Five Year Price Changes based on U.S. 3rd Quarter average prices of homes sold.

Sold in 2008 at $283,400; bought in 2003 for $248,100 - UP 14.2%

Sold in 2003 at $248,199; bought in 1998 for $184,300 - UP  34.6%

Sold in 1998 at $184,300; bought in 1993 for $148,000 - UP  24.5%

Sold in 1993 at $148,000; bought in 1988 for $141,500 - UP  4.6%

Sold in 1988 at $141,500; bought in 1983 for $ 92,500 - UP  52.9%

Sold in 1983 at $ 92,500; bought in 1978 for $ 63,500 - UP  45.6%

Sold in 1978 at $ 63,500; bought in 1973 for $ 35,900 - UP  76.8%

Sold in 1973 at $ 35,900; bought in 1968 for $ 26,600 - UP  34.9%

Sold in 1968 at $ 26,600; bought in 1963 for $ 19,200 - UP  38.5%

Note: U.S. Peak Price to date 1st Quarter of 2007

Sold 1Q 2007 at $322,100; bought 1Q 2002 for $227,600 - UP 41.5%

Data Source

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Sunday Night Stats - 5 Year Hold

• Sunday Night Stats - King County
• Sunday Night Stats - Prices Down
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• Sunday Night Stats - Seattle Real Estate
• Real Estate Geekiness…

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