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Are we at an Inflection Point?

Over the last decade, when home buyers were looking at mortgage rates there wasn’t a big difference between fixed rate mortgages and adjustable rate mortgages (ARM).

In fact, super-low 30-year fixed rates have ruled the market.

Although I don’t have a crystal ball, the tea leaves that I’m reading show a historic shift in the global bond market. With the U.S. committed to issuing staggering sums of debt and European regulators slowing fiscal stimulus programs, the marketplace must start increasing rates to attract investors.

This is the point when ARMs and Fixed Rate mortgages will start to meander in different directions.

Many people still move every 7 to 10 years!

Home sellers 36 years and younger typically stayed in their homes for six years, according to the 2017 NAR Generational Trends Report.

So, how is this going to impact you?

Although working with an experienced mortgage professional is the smartest tact, you can do some preliminary research online using a mortgage calculator.

Mortgage rates change daily and, if you see a significantly lower rate, read closely to see if there are “discount points” being charges.

Always try for an apple to apple comparison.

These loans are amortized over 30 years:

  • 7/1 ARM – the rate is fixed for 7 years, and then adjusts every year based on a set formula.
  • 10/1 ARM – the rate is fixed for 10 years, and then adjusts every year based on a set formula.
  • 30 Year Fixed – the rate will not change.

What you need to check out is the monthly interest differences, and then multiply by 12.

Depending on the term, meaning 7 or 10 years, multiply the annual interest.

Smart buyers are using ARMs to save thousands!

Let’s assume you are buying a home and will have a $400,000 mortgage.

Your lender says the 30-year fixed is 4.5% today.

And the 7/1 ARM is 4.125% today.

Using the calculator below, it shows that the 7/1 ARM saved $88.14 per month.

That equals $1,057.68 per year, and $7,403.76 over the seven-year term.

Try your own numbers…

Total Amount
Down Payment
Interest Rate
Amortization Period
Payment PeriodMonthly
Budget and Strategy

The goal is to find a mortgage that is right for your budget, so talk with your lender about current rates.

Although I don’t originate loans, I’m a Realtor, the 2017 NAR Generational Trends Report referenced a topic that was statistically significant especially in this new era of rising mortgage rates.

So, work the math. And I’m always open to your questions too.

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Ask anyone who lives in Vienna or McLean, and they will tell you about the impressive number of new homes being built.

Many are custom homes being built for long-time owners, but more often it is an investor or builder scraping off an old house to build a new, semi-custom house to sell.

What is happening here in Vienna, McLean, or Falls Church, is an economy where there are far more employers than there were twenty years ago. Companies such as Capital One, Nestle, EY, Northrop Grumman, AWS, INOVA and Accenture have diversified the employment picture beyond just government agencies.

In sharp contrast to my clients in 1999 who considered long commutes okay, today’s home buyers prefer to live closer to their jobs skipping the nightmarish daily commute on I66. Sitting in bumper to bumper traffic negatively impacts their quality of life, and quality of life is of greater value to this generation of home buyers.

They have refined today’s housing economics which are heavily influenced by wanting to see their kids, having dinner at home before heading to an evening event in their community, walking the dog, a ride on the W&OD trail, or an after-work class at CrossFit.

Factors like dynamic tolling influence today’s new housing economics.

Another new economic factor is the trend towards dynamic tolling during rush hour which can be a family budget buster. For example, the new dynamic tolling on I66 adjusts during rush hour every six minutes charging tolls if only one occupant is in the car.

If used only twice a week, forty-two weeks a year then the impact will only feel like an additional car payment or three.

The resulting consequences have been good for land values. And the old adage, “location, location, location” is very applicable in the Vienna real estate market.

So, I work in an active market where older homes are sold for top dollar to make way for larger, modern homes. But where are they, and how do you buy them?

Builder’s Hidden New Home Inventory

The issue for home buyers either relocating to northern Virginia or already living here, is how to find these new homes to buy.

Most of my clients don’t have the time to search street by street like I do every week. They are busy either at work, traveling for work, or looking on websites such as Zillow when they have some downtime.

Vienna, McLean, or Falls Church are dominated by home builders who build five to twenty-five homes a year. They aren’t mass production builders Toll Brothers or K. Hovnanian who, rather these builders often live in the community and will meet with you personally during the project.

For the most part, most of them are personable, interesting people who will be a part of the community after your sale.

One piece of this smallness is a hidden new home inventory that you aren’t going to find easily. Even for me who works in the new home or tear-down market, it is a full-time job keeping in touch with builders and following up on new lot acquisitions, permits, and approved floor plans.

It is important for consumers to know there is a wide range of quality craftsmanship which also makes it difficult to compare value. Unfortunately, not all these local builders deliver the same quality kitchen, flooring, or finished carpentry work which further distorts value.

There are two routes I see people taking. Often I take on clients who tell me they have spent a year running after builders or have been outbid on lots. They recognize that having a structured plan will help achieve their goal without the hassle or stress they have subjected themselves to… again, it’s a full-time job.

Two strategies

If you have plenty of time:

  • Map an area you ideally want to live.
  • Using Zillow or another App, search for homes in your price range.
  • Over a weekend, drive all the streets identifying homes you like.
  • With a house number and street address, search the county database for past sales information.
  • If county tax records aren’t helpful, search Zillow or another App for any records to determine who the builder was.
  • During your drive, identify any new homes being built. The builder may have a website or Realtor to contact.
  • On Saturday or Sunday, attend any builder open house, note natural design thinking, craftsmanship, and architecture.
  • Always note brands used in kitchens, HVAC, windows, doors, plumbing, tile or flooring.
  • Ask about other available properties and be prepared to share your contact information.
  • View other tear-down or lots available.
  • Carefully consider the floor plan design proposed for any lot, since setback rules may not fit every floor plan.
  • If existing, examine the utilities like water, sewer, gas, electric, and Internet.
  • If you like one builder, ask to see a list of past projects that you can drive by or even talk to recent clients.
  • Ask the builder to contact you when a lot comes available.
  • If you want a floor plan with a three-car garage or side-load garage, let your builder know before he submits permit plans.
  • Be prepared to sign a written contract for the house immediately. It will include a down payment which may be 10% or more of the sales price.
  • Most builders will not take contingent offers involving a financing contingency.
  • There are selections for floors, kitchens, cabinets, tile, doors, windows, and bathrooms.
  • Landscaping is critical after all the work is done. Put together a landscape plan including plantings, sod, grass, and fencing.
  • You may need compromise on any part of your plan, so categorize and create a list of must-haves.

If you want to use time efficiently, I explain these tips to my new home clients:

  • Hidden new home inventory may be in plain sight.
  • Understand who is a quality builder and what I look for.
  • Have a realistic and flexible timeline, this project could take three to twelve months.
  • Secure financing tailored to your finances.
  • The impact of schools, Metro, and shopping… essentially your future lifestyle.
  • Not all building lots are of equal value, understand the importance of natural light and driveway placement.
  • Understand the sequence of permitting, demolition, construction, and county inspections.
  • Reviewing a survey, plat, property corners, and underground easements.
  • Look for energy efficiency from windows to two zone HVAC systems.
  • How a floor plan can be flipped or reversed.
  • The importance of reviewing room dimensions on the building plans, not just marketing brochures.
  • How to negotiate on a new home so the numbers work for everyone.
  • Selections and who you’ll need to talk to during the building process.
  • Workflow, and how to not drop the ball.
  • Pre-drywall electrical and plumbing inspections.
  • Selecting floor colors, wall colors, tile, exterior colors.
  • Final Inspections, and landscaping.

To sum this up, helping clients over the years through this process has taught me how to help them make smart decisions saving considerable time and minimizing unforeseen expenses.

Together, I help you make on-time decisions because I look at each project globally from start to finish.

Buy Rather than Build

I can talk about “new construction, tear down and building” topics at length and, just to let you know, I like to convey an accurate picture or dose of reality because buying a lot and building is a full-time job. There is often a higher cost because you need to factor in acquisition cost, tear down, removal, permits, and possible unforeseen issues like poor soil may add an extra $100k to this project.

Deciding to Buy rather than Build is a more efficient concept making the new home buying experience less stressful and much more satisfying.

If you have been navigating this process without success, then let’s talk or set an appointment to discuss what you have seen, want, and ultimately hope to move into and call home.

My focus and first-hand experience will help you accomplish your goal accessing the hidden inventory with me.

Don’t wait six months to give me a call.

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Selecting a Settlement Agent often comes down to a quick decision based on a recommendation from your Realtor.

A quick decision?

This is an interesting topic since home buyers, in Virginia, are given the option to select a Settlement Agent when they put together their offer to purchase. The idea is that they can compare fees and services, and ultimately can get the best price for title insurance.

But, you really need to know, there is much more to it.

I have seen Settlement Agents go far beyond expectations to make sure deals get done… like when the old mortgage from 1987 hadn’t been recorded as paid in full, or FedEx-ing the reclusive brother in Montana who needed to sign, or helping my blind client legally “sign” her name on the Deed.

Real estate transactions can deliver surprises, so, know it’s important to understand why there is a recommendation.

What is a Settlement Agent’s Job?

Each state handles real estate closings differently, and in Virginia the closing or Settlement happen at a designated Settlement Agent. The Deed are still written by attorneys, but Virginia allows non-attorneys to conduct the actual final paper signing.

The Settlement Agent has a complex role representing the real estate Sales Contract. They don’t represent either buyer nor seller, but play a critical role in helping both parties achieve the goal to complete the transaction.

The first step after a Sales Contract is Ratified is to deliver the Contract to the specified Settlement Agent. They may also be holding the Deposit funds in their Escrow Account so that check will be delivered with the contract.

They will collect contact information from the buyer, seller, buyer’s agent, seller’s agent, and specifics on the current loan and the future mortgage loan.

They are responsible for ordering a title search, also known as an abstract, to understand the chain-of-title and any recorded liens. If there are potential errors such as unreleased mortgages, or judgements against people with similar names then these issues will need to be resolved before a title binder can be issued.

An essential role is determining if the title is insurable. Mortgage lenders always require that title insurance is purchased to protect them against fraud in the land records, and buyers can add coverage for an extra premium.

Only structured workflow gets this job completed

They contact the current mortgage lender and request final payoff amount and instructions.

They will contact the Condominium or Home Owners Association, if necessary, to ensure the homeowner has properly paid their dues. And they will get instructions to collect any necessary dues required from the buyers on Settlement day.

They comply with requests from the new mortgage lender for specific legal information and jurisdictional transfer tax amount.

They will also double check on the transaction and if there have been any additional credits or adjustments made after a home inspection.

Communication between the new mortgage lender and the Settlement Agent is very important to ensure that documents, such as the Wood Destroying Insect (WDI) Report or Home Warranty, are accounted for on the Closing Document.

They will also make sure that the down payment funds and lender funds are in escrow prior to Settlement. Virginia requires sales to be fully funded and does not allow “wet settlements”.

After all documents have been signed or Notarized, the Settlement Agent is responsible for making sure the sale is recorded at the Courthouse.

Only after the Deed has been recorded at the Courthouse, then the Seller’s proceeds can be dispersed… typically by a wire transfer.

What I consider when recommending a Settlement Agent

Agents are often asked to recommend a Settlement Agent or two when they are putting together an offer.

I always consider the geographic location.

Because I have been a Realtor for a long time, I know Settlement Agents across Northern Virginia. I like to recommend a Settlement Agent who is near the property or at a location convenient for all parties, such as having a Vienna settlement agent for a Vienna real estate sale.

Although this sounds obvious, it isn’t always the case.

Communication style is very important because when issues arise all parties must be aware and everyone must take action.

Being available to talk on the phone to the processor or attorney, if necessary, is also important to me when there is an issue.

Although a Settlement Agent’s fee should also be important, buyers need to know that those fees are always competitively priced.

My company does not have an ownership interest in a Settlement Agency. They do not compensate me for referrals and do not incentivize business with free home warranty’s.

  New Homes and Multiple Offer Situations

If you are buying a new home then selecting a Settlement Agent may not be an option for a home buyer.

Often the Settlement Agent has done considerable title work beginning when the builder bought the property.

When the market gets hot again and every home has multiple offers, I typically contact the listing agent to discuss the Seller’s situation to give my client any edge possible. If the Seller is planning to buy another property, then it may be beneficial to your offer to have the same Settlement Agent.

That’s just one of my strategies.

As I mentioned at the start, each state is different and Virginia has its own process to buy and sell real estate. Make sure that the Settlement Agent you select is reputable doing a Google search, and discussing with your Realtor the benefits of the recommended Settlement Agent.

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Before we tear down older ramblers or splits in Vienna, there is a period of time when contractors will take houses apart so anything of value can be recycled.

  • Copper pipes
  • HVAC systems
  • Appliances

But many people don’t think about wood boards being recycled too.

When I remodeled my home and built an addition, I remember the day when the carpenters were excited to tell me that they found a Pacific Lumber Company logo on one of the joists that they were removing. This old growth 2 x 10 had a tight grain unlike most of the boards they see today.

Yes, it was a geeky moment for them.

Pacific Coast Hemlock Lumber

The real gold (for the carpenters) are the long boards, and these are typically found when a roof truss is dismantled. The boards that go from the peak to the side of the house (the heel) can be 18′ or more.

Recently when the guys were cutting out the boards, known as the Top Chords, I looked through the pile for logos and stumbled upon one from the West Coast Lumber Inspection Bureau. Although the mill number isn’t identifiable, the “Construction” grade stamp on the board is clearly visible.

Vienna’s building boom in the 1950’s delivered houses appropriate for that generation, but today those homes are often functionally obsolescent and the land value is far greater than the old structure.

50 year old lumber

This house on John Marshall Drive NE in Vienna had been built in 1959, and these Pacific Hemlock boards are still straight and usable. Anyone who has been to the Pacific Northwest has probably seen photos of the old growth forests where these boards likely came from, and wondered where all that lumber went.

Some went across the U.S. and into building 1950’s Vienna, VA.

Better yet, the recycled lumber likely will receive a higher grading and appreciation when they are sold again.

Next Steps | Today’s Community

WCLB stamp

Although I always like to assure families when we buy a home to tear down that there is value to the components, and that I understand every house has a history and was a home full of memories.

Vienna has a long history and I like to discuss with the sellers what will happen to the old family homestead… often sending them photos after the new home is built (if you want).

It is exciting to see a property transform into the modern age for the next generation of families who call Vienna home.

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My clients will remember when I said, “Don’t go out and buy his and her BMWs until after you are finished buying the house!”

Those days were so simple.

Innocent really, almost charming.

All that has changed after the recent hack of Equifax essentially exposed everyone’s personal financial information to a remote outpost on the Dark Web… where some dude will make $20 flipping your good name to a cyber gangster.

At least they don’t have your 23andMe lab results!

Know these Numbers

If you plan to buy a home using a mortgage anytime soon, it’s a good idea to check out your credit report(s).

Don’t assume your file is okay – take a look at Equifax, Experian, TransUnion or FreeCreditReport.com . When YOU review your credit report, it does not reduce your FICO Score.

If there are old accounts or errors that need correcting, then know it may take a month or two to correct them. Starting today is a smart step that could save you thousands (explained below).

The ideal credit line is one that has aged well. Like a Capital One card that you got in 2003 with a $16,000 credit line and a balance below $5,000 and no late payments. It’s okay, really.

The FICO algorithm factors in the ratio of the maximum and actual balance. It’s the ratios that are really important.

Ratios are really important. Do NOT close accounts.

When you review your credit file, take a look at your account balances because getting them down will improve your score.

Two-Step Authentication

A smart step is to set up a two-step authentication on your credit. Which means, when you apply for any new credit, mortgage, car, furniture, and possibly insurance, Equifax will need to contact you and confirm with you first in a manor you have instructed them to ahead of time. Yes, they will even call you.

It’s like when Microsoft or Google texts a code to you when you log in from a new location.

I set this two-step process up on my Equifax account about ten years ago after reading an article in BusinessWeek. It seemed smart especially since I have published a ton of personal information on the Interwebs.

It was also when I decided to get serious about managing any credit balances and hold myself accountable like I was preaching to my clients.

At that time, I added the Automatic Fraud Alert to my account. You should do this too.

The Automatic Fraud Alert requires Equifax to contact me when I apply for new credit. For example, when I bought my VW TDI (that’s another dark story) I was contacted by Equifax and required to confirm my identity with a PIN. After VW bought back my super-polluter TDI, I bought another car triggering the same two-step authentication.

Maybe it is a freeze on my account, but hopefully, it makes my credit a little harder to hack.

The FICO Score is baked into our lives.

The FICO Score is baked into the life algorithm of America.

Want insurance? Your rate depends on your FICO Score.

Want to finance a car? Your rate depends on your FICO Score

Looking for a new job? They will look at your FICO Score.

Hoping to get a mortgage? They will look at your FICO Score.

The role that Experian, TransUnion, and Equifax play is monitoring your open credit lines, payment history, and ratios. And they have information such as your previous addresses, current and past employer, and any criminal activity (including unpaid parking tickets or Court convictions).

All that information gets plugged into the FICO Score algorithm generating a number ranging from 300 to 850. You want a high number.

That FICO Score will 100% determine what happens to you and how much you pay for a wide variety of things. FICO is totally baked into the U.S. financial system.

Home Buyers… Start Here

When you are buying a home and are working to get a mortgage, you really have to control what you do. Such as not buying new BMWs, adding a new line of credit at Ethan Allan, or saving 20% at Target with a new Target Card.

Any new credit line additions are really bad decisions, and break Doug’s Prime Directive for buyer clients.

Mortgage lenders pull your file when you apply for your loan. But, it is critical to know that the lender will pull your credit one more time just before Settlement.

If you have added any new credit or a fake account shows up… then they will see it. And, your FICO Score may be impacted.

Start right now:

  • look at https://www.equifax.com/
  • look at http://www.experian.com/news/data-breach-five-things-to-do-after-your-information-has-been-stolen.html
  • look at https://www.transunion.com/equifax-data-breach-faqs

When you apply for a loan, your mortgage lender will ask for permission to review your credit. They order a tri-merge credit report seeing all three reports, and see your FICO Score.

A higher FICO Score will allow the mortgage people to offer you a better rate saving thousands of dollars every year. That is why I want you to spend time now taking the effort to improve your score.

Example:
  • $500,000 loan amount at 3.75% on a 30 year loan has a Principal and Interest payment of $2,315 vs.
  • $500,000 loan amount at 4.25% on a 30 year loan has a Principal and Interest payment of $2,460
  • After 30 years… that’s $52,200 more!

So, I hope you understand why it is really important that you check your credit file and your FICO Score especially if you are planning on buying a home. The myth that pulling your credit negatively impacts your score is wrong, totally wrong.

When you review, check for errors, you will see easy opportunities where you can improve your debt ratios.

With a little work now, you will improve your ability to buy a home in 2018.

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Sitting at their kitchen table while explaining the sales contract and putting together a competitive written offer, I was asked…

“What’s the earnest money deposit formula in Virginia?”  this Vienna home buyer studiously asked.

This really isn’t an uncommon question because most buyers are reading websites written by mortgage lenders, product marketing, or media companies. Their professional content people (we used to call them writers) write to fit this topic into digestible chunks that people can read on iPhones while crossing a busy street in DC.

Essentially, professional content creators oversimplify every strategic piece of the typical negotiation process. If you ask me, they can make anything sound like it’s not a big deal because, after all, it isn’t their $10,000!

Earnest Money Deposit amounts aren’t formula based

Deposit amounts need to be strategic, and not considered a secondary item when you are planning an offer.

This year, specifically, I have seen a lot of inbound offers from agents which have allowed me to collect research data on what consumers are hearing from their agents, the Web, Dad, Uncle Ted, or watching The Property Brothers™.

Home buyers really need to understand that buying someone’s house isn’t like buying a car. Often there is an emotional connection to a home or other subtle influencing factors.

Showing Strength, not just 1%

A Deposit will be credited toward your down payment at the Settlement.

In Northern Virginia, Deposits are put into an Escrow Account within five days of Ratification (agreement).

So what you need to decide is how much you want the house? Is it the one?

If you have decided that it’s the one, then it is critical to make a strong offer since there may be another competitive offer on the table too.

Showing your financial strength is critical, and your Deposit amount needs to reflect that strength.

“Don’t they have any money?”

There were offers that I saw this year when eager home buyers, in multiple-offer situations, attached Deposit checks that were 1% of the sales price.

Needless to say, 1% is a half-baked strategy, and in my follow-up calls with desperate agents, they did not get the concept that allowing a client who includes a 1% Deposit when their offer has a 20% Downpayment offer is a poor strategy.

The earnest money deposit needs to be competitive… or at least impressive.

I have sat with sellers who have had to decide between multiple offers that were almost identical.

The Deposit amounts were:

  1. $4,200
  2. $6,000
  3. $15,000

Which offer do you think really wants to make the deal work? When you prepare an offer to buy a home, it essential to envision how it will be received and interpreted by the seller.

Pro-tip from the field

Your Deposit is only a small piece when submitting an offer, so it is essential that you have a global view of the elements.

A large Deposit can demonstrate, especially in a competitive market, that you are willing to put your money where your mouth is and complete the sale.

Talk with your real estate agent about the protections of the escrow account as outlined in the sales contract, and who the escrow agent holding the money will be.

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Anyone looking for a home to buy knows what to do when their smartphone vibrates signaling a new listing.

What most home sellers can’t grasp is the immediate impact a new listing has on home buyers.

Tech savvy home buyers quickly open up the alert and flip through the photos, see the basic stats like which school it attends or if there is a screened-in porch. These photos tell a make-or-break story that will result in a miracle weekend.

These home buyers are making the decision right now if they want to rush over and make an offer this weekend (or sooner).

Preparation for the big leagues (and Miracle Weekend)

Achieving Miracle Weekend bragging rights realistically won’t happen without considerable effort leading up to hitting the market. Yes, there are some niche markets where even the dumpiest of homes will sell immediately, but as prices continue to rise like we see in the Vienna real estate market even those tear downs may need a little prep-work to get a miracle offer.

Always start by referring to my list of tips for preparing your house for sale, because getting an offer quickly typically yields the highest net.

Why is new so important?

Last weekend I held an open-house at new listing on Sunday afternoon.

Typically a colleague will want to do it, but I was in town and decided to schedule the open house in our MLS database.

When that scheduling is done, home buyers get an extra “ping” that a new listing is holding an open.

Case in point…

At this open, one of the first people in the door was a couple who had seen “seen over 100 homes” over the past few months.

These folks really knew the market and there was a real sense of urgency to get inside. Their internal checklist of must-haves and must have-nots helped them place it somewhere on their list, but their feedback was extremely helpful for the future of the listing.

What I saw were home buyers who were too overwhelmed to make a choice or make an offer. Some people get caught up in the “grass is greener” conflict when they feel a better-looking place must be around the next corner.

  • The Ping of a new listing is totally intoxicating.
  • The Ping of a new listing can be suffocating too.
Days on the Market and Price Adjustments

There isn’t a buyer out there who isn’t looking at each home’s DOM number. Anything over 30 days likely isn’t going to get anyone’s heart pumping.

“Must be something wrong, let’s see that new one” a buyer will say.

So, how can a home seller jump start the excitement? Resuscitate their homes appeal to the buyers almost like it was a new listing?

Real estate agents may have many tips and I feel that 98% of them need to get done.

The list may include painting, removing wallpaper, cleaning, eliminating clutter, cutting back overgrowth, changing door handles, removing personal items, replacing carpets, sprucing up a bathroom, and adjusting the price.

Doing a laundry list of items (that should have been done before going live) and adjusting the asking price will introduce a new buyer pool who may have dismissed your house. They will get the “Ping” on their smartphones that will generate another important miracle event!

I’m always interested in the apps my clients use to search for homes. Let me know which one you use and why?

And, if you have already bought a house and still get alerts everyday… it’s time to stop and get on with your life. Maybe start painting!

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Understanding the appraisal process can befuddle even the most experienced real estate agent, let along a home buyer or seller.

A few weeks ago in Ashburn, Virginia where some clients had a contract to buy a home, the Appraiser showed up to physically inspect the home a few days after the 21-day appraisal contingency expired.

Yes, you read that correctly.

You see, the mortgage company had accidentally misplaced their contract and not put it into the workflow queue. And, even though I personally spoke with the loan officer specifically about the 21-day timeframe in the first week… it still got screwed up!

The workflow is a lot more complex these days with complex checks and balances. The reason for them is thanks to fast and loose Wall Street money that fueled the mortgage business back in the go-go days of the early 2000’s and thoroughly corrupted the previous set of checks and balances. I saw this coming back then specifically when a few clients quit their “real jobs” to become no-doc loan pitchmen using dirty Wall Street money (I’m not making that up).

(See the video clip below)

Let’s get back to our case in Ashburn…

A few days after the appraiser showed up, I had a call from the loan officer telling me that the home did not appraise at the contract sales price. It was low, firesale low.

It was low, firesale low.

The standardized sales contract that we use here in Northern Virginia real estate transactions has a sequence on how the buyer and seller can renegotiate the sales price, ultimately allowing the buyer to Void the contract if the final offer isn’t to their liking.

Yes, Void the contract and get their Deposit back with no obligation to buy the property.

In this case, the seller agreed to lower the price, not to the appraised amount, but closer to current market value.

In my opinion, this appraiser’s scientific, state-approved method of determining value did not accurately reflect current market value. Appraisers need to use sold comparables and couldn’t use the 25 nearby sales that were currently pending (under contract but had not closed).

Appraisers are licensed professionals who use a specific calculation to compare nearby recent sales to the subject property to justify market value to an Underwriter at the bank. They use “Uniform” paperwork to add and subtract value. These adjustments are often murky to a commoner, including me.

Our situation in Ashburn was unique because the Sellers had to sell and were really motivated to get the deal done. They couldn’t be greedy, like many sellers these days, and didn’t complain about the delays or price reduction.

Wait, it gets better.

As we hit the home stretch towards the closing, the mortgage company notified the buyer that the Underwriter ordered an updated appraisal and then planned to send it to Internal Review for extra scrutiny.

It seems that this internet based lender who doesn’t really know that Ashburn is located in Loudoun County, Virginia which is one of the wealthiest high growth counties in the U.S. of A. It’s where new data centers are being built and the Metro is extending the Silver Line. Near where Amazon Web Services, Verizon, Orbital ATK and other kinda-well-known companies employ engineers and rocket scientists… WTF?

The result was a delay in the final loan approval because of the Internal Review.

Stress, and more stress for both buyer and seller.

After many calls to Supervisors and Supervisors of those Supervisors, the Closing Department called to say they had the loan and were putting together the final Closing Document (they had already sent this to the buyers a few days before) but, since it was after 2:00, Settlement needed to take place a day late.

Key takeaways:

  • Home buyers need to prepare for a low appraisal
  • Don’t be afraid to nag your loan officer if the appraiser hasn’t scheduled to see the home.
  • Do not plan on a Back-to-Back Settlement (Seller tip)
  • Lean on your Buyer Agent to be an advocate
  • Have your real estate agent show you the current under-contract homes

Our regional real estate market isn’t unique. Reading WSJ articles discussing analysis like the Case-Shiller Index are interesting, but know they are using data that is months old which does not really reflect your local market this month. The CNBC report on the CSI is using statistics that are totally out of touch with current conditions giving the analysts room to refine their reports.

If you can’t find someone who you really trust in your area, then send me an email and I will help you find an agent (fyi – they may pay me a referral fee) in the market you are interested in. I’ve done this for decades with great results – I look forward to helping you out.

Want to know more about Wall Street’s involvement, watch or read The Big Short.

The Big Short Trailer (2015) ‐ Paramount Pictures - YouTube

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People are always surprised when they ask me about a house, and I tell them that I have already been inside.

Realistically, I can’t see every new listing in Fairfax County without making that my full-time job. But, I do make an effort to see as many as possible especially when a home is interesting to me or to one of my clients.

That market research helps me keep up with pricing, floor plans, lot sizes, builder quality and interior condition.

Although this may seem like just another story, recently I received an email from a guy who was moving here with his family and wanted to know what I knew about a specific house in Vienna.

He was surprised to read my quick response since I had toured the home a week or two before, and then gave him an analysis of the location near busy Lawyers Road. It was a nice home with a three-car garage, but it was too close to a road that I feel will be widened over the next ten years encroaching on the property probably negatively impact on future resale value.

He really appreciated my response and hired me.

Having specific knowledge is really important especially when the market is starting to swell with luxury inventory. That’s a trend that might not be obvious to someone looking only at a list like the one below.

“Wait, what did he just say?” you ask.

Yes, the inventory of new custom homes for sale has spiked recently. Some new and resale are just sitting there…

The inventory of homes priced over $1.2 million has been growing at a fast clip. McLean, Falls Church, Vienna, Oakton, Centreville, are all now competing for the same home buyers as our workforce works all across the region.

With that in mind, understanding your future lifestyle is critical before you fall for the sales pitch from the agent at that open house.

Yes, you will miss a good opportunity or two. Or you may not realize that that great school’s boundary is going to change in 2018.

Why are 5 houses for sale over on that street? Is there a problem or are the sellers just cashing in after listening to NPR’s report about the crazy DC real estate market?

Knowing the real estate market or really knowing the real estate market.

It’s your call.

This sample list of homes for sale in Vienna was updated 10 minutes ago!

  1. 5 beds, 6 baths
    Home size: 4,802 sq ft
    Lot size: 10,848 sqft
    Year built: 2017
    Days on market: 1
  2. 6 beds, 5 baths
    Home size: 4,328 sq ft
    Lot size: 8,869 sqft
    Year built: 2002
    Days on market: 7
  3. 5 beds, 4 baths
    Home size: 4,878 sq ft
    Lot size: 9,844 sqft
    Year built: 2006
    Days on market: 7
  4. 3 beds, 3 baths
    Home size: 3,244 sq ft
    Lot size: 21,958 sqft
    Year built: 2005
    Days on market: 7
  5. 6 beds, 5 baths
    Lot size: 13,715 sqft
    Year built: 2012
    Days on market: 8
  6. 5 beds, 5 baths
    Home size: 3,450 sq ft
    Lot size: 22,399 sqft
    Year built: 1953
    Days on market: 8
  7. 5 beds, 5 baths
    Home size: 5,041 sq ft
    Lot size: 12,961 sqft
    Year built: 1995
    Days on market: 8
  8. 6 beds, 7 baths
    Home size: 6,742 sq ft
    Lot size: 12,960 sqft
    Year built: 2017
    Days on market: 9
  9. 5 beds, 4 baths
    Home size: 2,687 sq ft
    Lot size: 10,670 sqft
    Year built: 1975
    Days on market: 14
  10. 5 beds, 5 baths
    Home size: 6,070 sq ft
    Lot size: 15,248 sqft
    Year built: 2017
    Days on market: 18
  11. 6 beds, 7 baths
    Home size: 7,101 sq ft
    Lot size: 18,225 sqft
    Year built: 2017
    Days on market: 23
  12. 6 beds, 6 baths
    Home size: 7,242 sq ft
    Lot size: 23,940 sqft
    Year built: 2017
    Days on market: 24
  13. 6 beds, 6 baths
    Home size: 4,120 sq ft
    Lot size: 19,547 sqft
    Year built: 2013
    Days on market: 28
  14. 7 beds, 7 baths
    Home size: 7,473 sq ft
    Lot size: 22,426 sqft
    Year built: 2017
    Days on market: 29
  15. 4 beds, 4 baths
    Home size: 3,611 sq ft
    Lot size: 11,366 sqft
    Year built: 2017
    Days on market: 30
  16. 5 beds, 6 baths
    Home size: 5,300 sq ft
    Lot size: 13,866 sqft
    Year built: 2018
    Days on market: 32
  17. 6 beds, 5 baths
    Home size: 5,100 sq ft
    Lot size: 10,824 sqft
    Year built: 2017
    Days on market: 33
  18. 5 beds, 5 baths
    Home size: 4,688 sq ft
    Lot size: 10,080 sqft
    Year built: 2018
    Days on market: 35
  19. 5 beds, 5 baths
    Home size: 5,671 sq ft
    Lot size: 21,780 sqft
    Year built: 2006
    Days on market: 38
  20. 5 beds, 4 baths
    Home size: 3,936 sq ft
    Lot size: 22,000 sqft
    Year built: 1952
    Days on market: 44
  21. 6 beds, 5 baths
    Home size: 6,396 sq ft
    Lot size: 12,399 sqft
    Year built: 2015
    Days on market: 50
  22. 5 beds, 5 baths
    Home size: 5,580 sq ft
    Lot size: 22,000 sqft
    Year built: 2017
    Days on market: 51
  23. 5 beds, 4 baths
    Home size: 5,018 sq ft
    Lot size: 5,622 sqft
    Year built: 2001
    Days on market: 56
  24. 5 beds, 4 baths
    Home size: 4,438 sq ft
    Lot size: 23,399 sqft
    Year built: 1987
    Days on market: 59
  25. 1 bed, 1 bath
    Lot size: 16,539 sqft
    Year built: 1938
    Days on market: 60
  26. 5 beds, 6 baths
    Home size: 5,172 sq ft
    Lot size: 12,832 sqft
    Year built: 2017
    Days on market: 61
  27. 6 beds, 6 baths
    Home size: 5,112 sq ft
    Lot size: 10,787 sqft
    Year built: 2017
    Days on market: 66
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Scheduling a home inspection in Virginia may be a little more difficult after July 1, 2017 when a new licensing law for home inspectors goes into effect.

The immediate impact will be a reduction in the home inspector population… yes, fewer home inspectors!

Every July new laws go into effect in Virginia, and this year the real estate business will feel the impact immediately.

After July 1, inspectors will need a valid home inspection license to get paid. Those who are still in business may charge more and possibly stop working seven days a week.

Here’s my prediction… those still in business will charge more and stop working 24/7.

So, if you are planning to buy a home, research home inspectors early on as part of your strategy. Have at least two vetted candidates in the wings may be smart since each inspector creates unique final reports.

In recent articles that I have written about inspecting new homes,  I will revise them to include a paragraph on the New Residential Structure (NRS) designation. NRS is required if this transaction is truly a new, new home (not a remodel job).

Why is this so important in Virginia?

Looking at a steep roof

Home inspections can be a critical part of the home buying process. Really a make or break test for a home buyer.

Virginia has slowly added a voluntary accreditation process.

I always like to point out to clients that Virginia is a buyer beware state, caveat emptor!

Yes, we have the Buyer to Beware Statement in Virginia meaning it’s the buyer’s responsibility to consult with professionals.

Home inspection contingency tips

A good offer can become less desirable when they buyer includes a home inspection contingency period longer than ten days. Especially in a seller’s market, like the current Vienna real estate market, when there are two or more buyers in line for any home priced under a million.

Understanding how the paragraph is written is important too because, during the inspection period, a buyer can hire any professional to examine the property. For example a structural engineer, chimney inspector, plumber, and electrician.

Especially with an older home that has been remodeled, looking at everything is essential.

The NVAR home inspection contingency gives you two options at the end of the period.

  • void the contract
  • submit an addendum for negotiation

You can discuss these options with your real estate agent since each situation is unique. Remember, Virginia real estate law places the responsibility of the home buyer to be satisfied with what he or she is buying.

After July 1, 2017, make sure your Virginia home inspector has the proper state license.

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