When completing BPOs, I have enough experience that if I’m familiar with the neighborhood I have an intuitive idea what the price of the home should be before I go about the work of proving it. My intuition is not enough for the banks though, so I have to complete a fairly rigorous form that goes over statistical averages for the neighborhood of the home that I’m evaluating.

I hate BPOs – but the truth is, doing them on a regular basis makes me a better agent. It’s easy to take what’s true for a majority of neighborhoods and assign the same market symptoms to every neighborhood. For instance, when evaluating most markets in Snohomish County, it’s easy to say that home values dropped 8-12% in the last year, or almost 1% every month. Here’s a graph to prove it (click on graph to load full scale PDF report):

If it’s a little small to read, here’s what you need to know. For all residential properties in Snohomish County, the average price has dropped 7% and the median price has dropped 8%. I’m not a statistician, and better people than I can explain the variables involved in a comparison like this, but the sake of brevity, let’s accept these values and move on (smile inflected).

So now, if you’re a homeowner in Snohomish County, I’ve just taken the wind out of your sails. Most people are hoping that we’re at the bottom, but with drops like these, that doesn’t seem to be the case. I’ve been saying for a long time that I don’t think that we’re at the bottom of anything, and until we get rid of the short sale and bank-owned inventory, it could be awhile until will do. But I would be in error if I led people to believe that this is the case everywhere.

Case in point: I recently had to complete BPOs in the Silver Lake / Silver Firs / Gold Creek / Cathcart neighborhoods, and I have two upcoming listings in these neighborhoods, and what I found was surprising (click on graph to load PDF report):

Compared to a year ago, the average price of homes in this neighborhood went up 7%, and the median price of homes sold only came down 1%. I do quite a few BPOs, and as I mentioned, I’d grown accustomed to seeing depreciation in almost every  neighborhood in Snohomish County. I’ve run these stats on different sizes and styles of homes, but the emerging trend that I see in these neighborhoods (Silver Lake, Silver Firs, Gold Creek & Cathcart) is that maybe – just maybe – we’re seeing signs of a stabilizing market.

No one will know for sure for several months, and just because we see some markets stabilizing doesn’t mean that the trend will continue. No one really knows what the impact of the tax credit expiring (eligible buyers had to be under contract by April 30th) means for the real estate market, but I can tell you that just about every neighborhood saw unusually high sales activity in March and April, and based on the trend for May thus far, activity will probably fall far short of those numbers. Even then there’s a trend – if you’re a homeowner in the Silver Lake, Silver Firs, Gold Creek & Cathcart neighborhoods, or if you’re a home buyer considering how much a neighborhood effects values, consider these graphs (again, click on either graph for a full PDF report). Let’s look at all of Snohomish County first:

So the red bar is the inventory of homes available (which is down 2% from last year), the blue bar is the number of homes under contract (up 33%) and the green bar is the number of homes sold (up 36%). Good news right? Anytime supply drops and demand goes up it’s a good thing.

Now consider the Silver Lake, Silver Firs, Gold Creek & Cathcart neighborhoods:

In comparison, available inventory in these neighborhoods dropped 1%, homes under contract rose 292%, and homes sold went up 88%!! So while it seems obvious that the expiration of the tax credit inspired home buyers to get in the game, it seems as though these areas are generating more sales activity than surrounding areas.

Overall, this is good news. I’ve gotten so used to seeing negative trends in our market that it took me a little while to recognize a positive trend. Do I think that that this means that we’re through the worst of it? No. Can I pause and enjoy the respite that a positive trend brings? Yes.

We’ll be doing further statistical posts regarding neighborhoods in Snohomish and King Counties, but if you need an analysis of your neighborhood in the meantime, please let me know.

Related Posts

No related posts.

Immaculate Rambler on nearly 10 acres! Just thru the gated entry- a slice of private paradise. Situated atop a knoll on almost 10 acres, this 3bedroom, 2.75ba immaculate rambler beams with pride of ownership. Inside are generous spaces including an entertainment size kitchen w/eating space, a separate dining room, living room and family room each with cozy gas fireplace. Attached 3 car garage AND detached 3bay shop/RV/Boat parking. Covered back aggregate patio for “any season” bbq’ing. Standby 13KW *natural gas* generator means you’ll always have power!

List Price: $750,000 <–HUGE price drop!!!

MLS#: 4913

Address: 12711 238th St SE, Snohomish, WA 98296

Bedrooms: 3

Bathrooms: 2.75

Square Feet: 2750

Price/Sq. Ft: $345.45

Year Built: 1996

Taxes: $7,289 (2009 Tax Year)

Heat Source/Type: Gas / Forced Air; 2 Fireplaces / Gas

School District: Monroe
High-Resolution Slideshow

Call Lisa Bender at 425-770-4438 or Jesse Moore at 425.876.0766 or Dennis Pearce at 206.931.9945 for more information.

Related Posts

1. NEW LISTING: Equestrian estate in Snohomish
2. NEW LISTING! Rambler in Silver Lake neighborhood of Everett
3. NEW LISTING: Snohomish Rambler
4. NEW LISTING: Remodeled rambler in Madison
5. Snohomish Workshop Retreat

The Government is also allowing for a TRUE TAX CREDIT of $8000 for first time home buyers that is set to expire in April.  These 2 things can make a huge difference for a first time home buyer.  If you wait to buy and rates go up the roughly 1% that most experts are forecasting, you would be looking at a cost of about 5% of your loan amount upfront to buy down your mortgage rate back down to current levels, on a $200,000 loan that is $10,000.  Add to that the loss of the tax rebate, that is nearly $20,000, or about 10% of the purchase amount.  A more impressive number is the lifetime cost of a mortgage that is 1% higher than the available rate today.  The 30 year cost of a $200,000 loan with a 1% rate increase is $45,000.

This is a call to action, if you are debating buying your first house, or moving up to a larger home, please consider the cost of waiting.

Related Posts

1. The anatomy of a short sale
2. $8,000 Homebuyers tax credit: Got Yours?
3. Pickett Street on the radio
4. The New, Improved, (and extended) $8,000 Tax Credit
5. HVCC, HERA & other Bureaucratic Sausages

Currently, the base Washington state excise tax rate is 1.28%, with each county adding on their own percentage for a total that fluctuates somewhat by area. Snohomish and King County excise taxes (in most areas) are at a .50 rate,  bringing the grand total to 1.78% of the purchase price.

An obvious question if you’re a distressed home seller would be, “who exactly pays this tax in the event of a short sale?”  In most cases, the burden falls to the bank that is carrying the mortgage to ‘eat’ that cost, along with the other costs associated with selling a home.

For a brief time at the beginning of 2009, some sellers were required to pay excise tax on the amount of the shortage (the difference between what they owed, and what they were able to sell their property for in a declining market). Sellers in this category may now be eligible for a refund of excise taxes. Use the following link to download the required excise tax refund application form.

Should you have detailed questions about Real Estate Excise Tax (aka REET) or short sales, we will happily refer you to a CPA and/or attorney who can further assist you. Give us a ring, or send us an email for a referral list to professionals who specialize in these issues.

Related Posts

1. The anatomy of a short sale
2. All the things short sales are. And those that they are not.
3. The New, Improved, (and extended) $8,000 Tax Credit

One of the most frustrating forms of a real estate transaction of late is the “short sale.” We’ve had a lot of questions lately about this kind of sale, so I want to address some of the primary questions and myths.

1) A boy named Sue: There are a lot of misconceptions about short sales, starting with their name. A “short sale” is not a denotation of time – short sales actually take a long time to close. A short sale is a real estate transaction where the seller owes more for the property than the property is currently worth. In other words, the seller doesn’t have any equity and in order to sell, the bank is going to have to agree to accepting less than what they’re owed. For example, John Doe bought a property in 2007 for $380,000. It’s now 2010, and the local real estate market has tumbled. In a “choose-your-own-adventure” twist, let’s say that John (1) got divorced, (2) lost his job, (3) is transferred out of state, (4) develops a medical condition that forces a move, or (5) simply can’t afford his home anymore. John’s house is now worth $340,000, and since closing costs for most sellers run about 9% of the purchase price, if he was able to sell his home for $340,000 his net proceeds would be $340,000 (sales price) – $30,600 (closing costs), or $309,400. John owes the bank $380,000, so in order to sell, either John has to come up with $70,600 (which he doesn’t have), or (more likely) the bank is going to have to accept $70,600 less than what they are owed. The bank is going to end up short – so, this is a short sale.

2) Mr. & Mrs. Scott Free…: For a seller, deciding to sell your home as a short sale is not an easy one, and so we are always going to encourage our clients to consult with a bankruptcy attorney and their financial adviser. The primary benefits of a short sale to a seller will be reflected in their credit report – if they want to buy a home again in the next 2-3 years, then a short sale will be less damaging to their credit than a foreclosure and/or bankruptcy. The other benefit is simply timing – due to the overwhelming amount of short sales in recent history, the government has instituted The Mortgage Forgiveness Debt Relief Act which runs through 2012. Under the provisions of this act, sellers that short sale their home will be forgiven the potential tax burden that would otherwise occur because of debt forgiveness. For example, if the bank forgave John Doe (in the example above) a debt of $70,000, the IRS would normally treat that as taxable income, and now John Doe owes taxes on the amount the bank forgave. Because of The Mortgage Forgiveness Debt Relief Act, this forgiven debt will not be taxed, and John won’t owe taxes because of it. There are exceptions to this act, which is why we encourage our clients to speak to their lawyer and their financial adviser. Still – the primary benefit of selling a home as a short sale is that it can be less damaging to your credit.

3) …or not? Why wouldn’t I sell my home as a short sale? While the bank may agree to accept less to get the property sold, this doesn’t always leave the seller off the hook for the remainder of the balance. Indeed, there are cases where foreclosure is a better option for clients than a short sale (in short, talk to a lawyer and your financial adviser). If the bank (or banks) has agreed to a short sale, they’ll often forgive most of the debt, and may ask the the seller to sign a promissory note for a lesser amount, perhaps in the form of an interest-free or low-interest long-term loan. In a short sale the seller may not get off completely scott-free, and may have remaining debt after the sale of the home. Still, this debt will generally be much less than the amount forgiven.

4) I want to sell my home as a short sale – what should I know and do? Contact a bankruptcy attorney and discuss your options (if you don’t currently have a bankruptcy attorney, call us for a referral to one). It might cost a couple of hundred dollars, but it could save your credit and a lot of pain and suffering. Contact a financial adviser to see how a short sale or bankruptcy would affect your assets and the future of your assets. Contact a listing agent that has experience marketing short sale properties, and make sure that they work with an experienced negotiator that is going to negotiate on your behalf with the bank. Be prepared – this is usually a long and frustrating process, but working with a team of capable people will save you some suffering. We have enough experience to know what banks will and won’t pay for, and which banks are going to take a long time (national franchise banks) and those that might respond more quickly (local banks).

5) Who pays the real estate agents? And the excise tax? We don’t work for free (not on purpose anyway), and the State of Washington is going to want their 1.78% excise tax on the sale of your home, so a lot of people wonder how these get paid in a short sale transaction. For the most part the bank pays these fees. They usually negotiate these fees down, so the real estate agents might make a little less, and the buyer might have to kick in a little money to get the bank to move forward to closing. The State of Washington doesn’t forgive excise tax easily, so the banks have to pay excise tax if they’ve agreed to a short sale.

6) I’ve heard buying a short sale can be a great value. They can be, but for a buyer, there’s nothing short about a short sale. The process can take 6 weeks or 6 months (even longer – one of our short sales took 2 years!). The seller doesn’t have any money, so the properties usually aren’t in great condition and they aren’t going to be paying for any repairs. Yes – there is value to be had, but only for the patient. If you’re looking for a real value, focus on bank-owned properties. There’s a reason banks agree to short sales – on average short sale properties cost the bank about 15% less than if they were to take that same property through the entire foreclosure process.

Moral of the story: if you’re thinking about selling your home as a short sale (or if you’re a buyer thinking of purchasing a short sale property), you need to call us. Everyone’s situation is different, so the internet won’t give you the answers you need. Let us sit down with you and go over your options. We’re happy to help even if we don’t end up listing your property. Leave us a message at (425) 502-5397 or email us at info(at)pickettstreet.com.

Related Posts

1. All the things short sales are. And those that they are not.
2. Paying the Governor’s Share: Excise Tax & Short Sales
3. Housing: swimming in info, searching for the bottom
4. NEW LISTING: Marysville Rambler Short Sale
5. NEW LISTING: Phinney Ridge Bungalow Short Sale

And you’re thinking, “I’ve been wanting to buy a home… maybe there’s something to this procrastination thing, after all.” In this case, you’d be right; The last go-round provided up to $8,000 to homebuyers who had not owned a home in the past 3 years, and whose income was $75,000 for single taxpayers and $150,000 for married taxpayers filing joint returns.

In recognition of your patience and wisdom, you are now eligible for the Sweetened Deal: For home purchases occurring after November 6, 2009, the new income limits are $125,000 for single taxpayers and $225,000 for married couples filing jointly.

Be prepared to prove it!

Due to the very real potential for fraud, you will be required to prove that you have not owned a home in the last 3 years, however, the credit can be allocated to the person who has not owned previously, in cases where parents are assisting with a purchase, or where one member of an unmarried couple has previously owned.

Saving for a downpayment?

Another element of the new version is that it allows prospective home buyers who believe they qualify for the tax credit to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the downpayment.

Keep the Cabin!

Also of note is that ownership of a vacation home, or rental property that was not used as a primary residence, does not disqualify a buyer as a first-time home buyer.

Upgrade your digs.

The most significant change to the ‘bonus round’ homebuyer tax credit is the addition of a ‘move-up buyer’ credit. This provision allows for a tax credit of up to $6,500 to homebuyers who have lived in the same residence for 5 of the last 8 years, on purchases up to $800,000.

You’re Not from Around Here?

Anyone who is not a nonresident alien (as defined by the IRS) and who has owned and resided in a principal residence in the United States for at least five consecutive years of the eight years prior to the purchase date can claim the tax credit if they meet the income limits.

Get Educated.

The income limits for move-up buyers are the same as for first-timers, and the allowable credit amount is graduated at the same rate, so please speak with your accountant for details on how your specific situation may be affected.

Some Restrictions Apply.

In order to qualify, all purchases- both first-time and move-up, must be completed on or before April 30, 2010 (or purchased by June 30, 2010 with a binding sales contract signed by April 30, 2010).

The Fine Print.

If you’re considering purchasing a home, and want to take a look at the tax credit qualification and application process, here’s a link to download the IRS Form 5405

Related Posts

1. The anatomy of a short sale
2. $8,000 Homebuyers tax credit: Got Yours?
3. The cost of waiting

Among the many contentious issues of our day, the concept of being ‘environmentally conscious’, certainly strikes a few hot buttons for some. This post isn’t going to explore the politics of Al Gore, or Rush Limbaugh, because, controversial as that subject may be, there’s just not enough space to do the topic justice, and frankly, I don’t find it that interesting.

My personal angle on the Green Movement tends to slant more toward the practicalities of implementation, and looking at the cost/benefit balance for long term value. Given the condition of our current economy, and the impact of rising energy prices, and prices overall, I don’t think it’s an overstatement to say everybody’s looking for ways to save money.

From that perspective, the question becomes one of whether it’s more practical to save money now (which frequently means either making do with less, or doing nothing), or to take the preventive and holistic steps that provide for long term cost and resource savings through conservation, thoughtful design, and practical implementation of new home-building technologies.

The Green Movement is really just a convenient handle for the overarching conversation that revolves around the management and distribution of resources within a given community, and attempts to provide quantifiable benefits for the conscious, thoughtful, holistic use of those resources.

The holistic view can be overwhelming but done well, it brings together the critical elements of a home: location (both within the community, and the specific site), materials usage, durability, water management/usage, power usage, lighting, walkability/transportation, and landscaping to name a few.

As resources in our finite world become increasingly difficult to procure, and consequently more expensive, finding cost-effective ways to recycle old materials into new products, and avoiding the dead end of landfills, will become yet another major industry- as we’re already seeing in many third-world countries. It’s not a matter of ‘if’, this is truly a direction all developed nations are already heading towards- from mining turkey carcasses for oil, to reinventing formica countertops- the race is already on for renewable solutions to our most challenging environmental questions.

There are an endless array of opportunities within this shift, some of which have been proposed as elements of a recession-ending strategy, and others that feel truly sci-fi.

Having recently earned my Realtor, Green Designation, I find this topic to be an endless source of ideas and look forward to implementing as much as I can in my own home. If you have questions or ideas about green construction, I’d love to chat.

Related Posts

No related posts.

In the spirit of an inefficient bureaucracy, and under the guise of “economic recovery”, we’ve seen several new edicts handed down from the mountain lately. The 2 most onerous directives go by the handy handles of ‘HVCC’ & ‘HERA’. Both attempt to right the wrongs perpetrated in this last housing runup, but from my perspective, they are relatively undisguised attempts by big banks to utilize the fear in the marketplace to have their way, creating legislation that does little to remedy the actual problems, while pushing the BIG BANKING agenda well down the road.

The Home Value Code of Conduct (HVCC), enacted in April, puts severe restrictions on the lines of communication between lenders and appraisers, requiring the use of an automated online system to place appraisal orders, while keeping lenders and brokers from speaking directly, and purportedly preventing the collusion that took place in the dark ages between ’04-’07.

The fly in this ointment is the reality that quality work requires quality people. The new system requires lenders to draw anonymously from a predetermined pool of appraisers, who indicate their acceptance of the offered appraisal, with it’s attached valuation for the work. That sounds fine, but this is where things start getting sticky. In the past, the lender/broker would call their appraiser, tell them the general spec’s of the property (dimensions, location, etc.) and the appraiser would give them a quote for the appraisal at that time, based on the anticipated time required.

The new system doesn’t allow any conversation. The lender submits the appraisal into the system, along with an amount they are willing to pay for the work. The appraiser reviews the job and either accepts or rejects it. Sounds reasonable, right? The problem is that the prices being submitted are preset by the banks. And as a rule, they’re generally set low. Which means that the appraiser who accepts a low price is typically doing so because they are either inexperienced, or desperate, or both. So the appraisal on the home you’re about to buy is now being done by someone who hasn’t spoken with your lender, their abilities are questionable, and you have no way of assessing their accuracy. Does that sound like the recipe for hope we’ve been looking for?

The HERA or Housing and Economic Recovery Act is another recent piece of legislation governing your GFE, or Good Faith Estimate, and the timelines surrounding your transaction. Initially put into place last year, it became effective August 1, 2009, and is designed to provide what is essentially an extended time Lemon Law for home financing. In essence, it sets specific timelines for the allowable window of days that must pass between your receipt of information, and the next step in the process. The HERA law, as with many things attached to legislation and bureaucracy, has good intentions. The actual effect, however, will be to extend the standard closing period from the customary 30-45 day window to 60 or more, as lenders jump through the new batch of hoops. A sample of the Act is as follows: If the APR increases more than .125% from the initial disclosure, it must be revised and reissued at least 3 business days before closing. If mailed via US Postal Service, it is considered ‘received’ 3 business days after mailing. Additionally, Closing cannot be less than 7 days after the homebuyer is issued their initial mortgage disclosures (GFE) from the lender.

The problem with both of these ‘sausages’ is that the people who have to implement them were apparently not involved in their creation. You can say that was part of the idea, as it would be counterintuitive to put the fox in charge of the henhouse- but assuming that every participant in any given situation is a fox, leaves little recourse for input when the time comes for change.

Many lenders have reviewed and implemented these changes over the past several months. However, there are some who have adopted a wait-and-see stance, who will likely be bitten.

Be sure to ask your preferred lender what their understanding and compliance of the HERA law is, and consider carefully if you want to risk your home purchase with someone who is not prepared.

Download a summary of the HERA law, HERE.

Related Posts

1. The anatomy of a short sale
2. Housing: swimming in info, searching for the bottom
3. What this economy needs is a Hero.
4. The cost of waiting

The US Housing market officially hit bottom on Tuesday, June 16, 2009, according to Mad Money’s Jim Cramer. Based on his analysis of better than expected housing starts, increasing sales, and decreasing inventory, Cramer argues that we’ve seen the worst of this housing debacle, and can begin the slow climb back to sanity.

And yet, a month later, we’re still seeing headlines that read like footnotes to the 4 horsemen’s sightseeing tour. So, how can we have this extreme swing in opinion? We’re all getting the same numbers, and existing on the same planet, correct? Yet I’d swear I’ve never seen more schizo info. There’s nothing consistent, no standards of reporting, no BIG HOUSING CHART that we’re all referring to- like the digital counter ticking up the national debt ( I think they ran out of slots on that one).

Shouldn’t there be some agency (job security!), or body of standards keepers (bureaucrats) who sift through all the info and disseminate it into neat little bite-sized, easily digestible (And Accurate) chunks so those of us with lives to lead can get our (Useful) news and still have a life? I’m sure this was the original thinking behind the current crop of infotainment/news magazine formatted shows that we now channel surf through in search of actual information (had enough of MJ yet?).

As a Realtor, I spend a lot of time every week, reviewing current data on our local market, viewing current inventory, looking for trends, and hunting for the useful bits of info that can help my clients make good financial decsions. It’s up to me to filter out the noise, hone in on the facts, and extract the  hidden nuggets of truth. The pieces of data that don’t fit the trend line are commonly referred to as ‘froth’.

What I’ve been finding lately is that there’s frequently more froth than trend. With foreclosures, pre-foreclosures, short-sales, reluctant homesellers, hesitant home buyers, underwater builders, fearful banks, newly revised appraisal systems and lending standards all exerting pressure on prices, the resolute, able, focused homebuyer or seller has become a rare bird.

Providing clear, concise answers to pricing questions has become a black art; in a large black cauldron, blend 1/2 cup of recession (the cup is always 1/2 empty), 2 pinches of foreclosure, add 1 minced jobs forecast, a sprig of stock market turmoil, 1 new bailout, 1 eye of newt. Stir for as long as it takes one short sale to close (or for Countrywide to respond to an offer-60 days to 6 months), then bring to a boil over an open flame for 18 months. Serve cold. Leftovers are even more flavorful!

In spite of the fact that unemployment rates for Washington are still below 10%, and foreclosures make up less than 2% of the market, psychologically, their impact is much greater. When headlines trumpet endless destruction, it takes a strong will to keep marching to your own drum. Which is why steely-nerved investors are the first ones out of the trenches, snapping up everything that looks mildly tasty.  Just ask Warren Buffet- he’s the one who said, “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”

Related Posts

1. The anatomy of a short sale
2. The cost of waiting
3. Pickett Street on the radio

On Tuesday Dennis and I were asked to participate on a round table discussion of the real estate market on “The Money Thing,” a local talk radio show that airs on Tuesdays from 12-2pm on 1150AM (KKNW). Neither of us had ever been on the radio before, but that would never keep us from offering our opinion! The show is hosted by Howard Bono, a mortgage originator and owner of Old West Mortgage in Everett. We had only met Howard once before, but that meeting prompted enough thought that he asked us to come on the radio program to share our ideas with his audience.

The discussion was lively, and was largely in reference to the short sale processs, what we anticipated for our local market over the next 12-18 months, and how we counsel buyers in times like these. The entire program segment is available on Howard’s website, TheMoneyThing.com, but I’ve posted just our segment below. Thanks to Howard for having us – and thanks to Jerry Jaz for taking the time to take in-studio pics.

Related Posts

1. Pickett Street goes to New Orleans
2. The cost of waiting
3. And the winner is…