Residential Real Estate in SW Washington State

Residential Real Estate Services with Passion, Integrity, Knowledge

Mediation?–Yes, You’re Entitled!!

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debateYesterday I posted information about what to do as soon as you fall behind in your mortgage payments. As a second step in the foreclosure process in Washington State, the Foreclosure Fairness Act stipulates that if your loan is through one of the big banks, after receiving notice that a Notice of Default has been filed, you’re entitled to have your situation formally addressed through Mediation. The purpose of Mediation is to determine whether there is any alternative to bank foreclosure of your property.

Ideally, the outcome of mediation might allow you to restructure your loan, save your home, or agree to sell it as a short sale. In fact, a decision maker for the bank is required to be present at the Mediation meeting – at least by phone. Of course, if no agreement is reached, the ultimate outcome might be to allow your home to proceed through Foreclosure.

This mediation step is a bit more complex than the informal meeting to which you are entitled right away (see yesterday’s post). Mediation must be requested by an attorney or housing counselor within 30 days of the bank or Trustee filing of the Notice of Default and must be held within 45 days of the referral to Mediation by the attorney. You’ll also be required to pay your half ($200) of the cost of Mediation hearing ($400).

Prior to Mediation meeting, both you, as the owner-occupant, and the bank will need to assemble a list of documents – yours will include financial documents such as tax returns, pay stubs, and so on. It’s an extensive list, but not difficult. Since you will be working with an attorney or counselor, they’ll assist you in determining exactly what documents you’ll need.

Note that the Foreclosure Fairness Act took place on July 22, 2011. If you received a Notice of Default prior to that date and foreclosure of your home has not yet been completed by the bank, you are also entitled to Mediation. You’ll want to contact an attorney experienced in the Foreclosure Fairness Act as soon as possible! Doing so can delay a scheduled auction!

As usual, you should also contact your Realtor© so that you are fully aware of your options and for the name of an attorney that is experienced in Foreclosure work.

Just Open the Mail!

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reading mailIn Washington State, folks that get behind on their house payments have options as described in the Foreclosure Fairness Act. The Act prescribes a series of steps to which a homeowner is entitled prior to any auction of their home.

One of the first steps a lender must take for a home in Washington is to send a letter to the homeowner describing their options – the first of which is the right to request an informal meeting with the lender before a Notice of Default is filed.

But here’s the thing … the homeowner has to make the request within 30 days from the date of the options letter.

  • So … open every piece of mail that comes from your lender.
  • Read it carefully and then  exercise your option to meet with the lender to discuss the situation.
  • Do it by phone and ask insist that they confirm your request in writing.
  • Follow up with a letter to them in writing — maybe even registered mail so that you have a record of your request.
  • Keep copies of anything and everything you send and notes about every conversation you have with them.
  • Get the names of the people with whom you talk … and write down the phone numbers and dates you make any calls.

and finally …

Engage an attorney to represent you at the meeting. Talk everything through with him/her … and with your real estate agent so that you know what your options truly are.

But first … Just Open the Mail!

The Value of Photos: It’s Good Seller Representation

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Buyers are hooked on photos. I mean REALLY hooked on what they see when searching online for a home. They read a home’s description in the marketing remarks, then expect to see a visual confirmation of all of the features mentioned. From there they go to Google maps, or Bing, or wherever and pull up aerial photos. They look at birds-eye views; sometimes they try to get elevation views so they can get an idea of what can really be seen when looking out of the living room windows!

Sellers are too! They want to see their home in all of its beauty up on the Web. Every feature. Every room. With flowers in bloom and counters gleaming. They’ve already looked at lots of houses on the internet and know that their house looks at least as good as all of the ones they see, and probably better.

And then there’s us Agents/Brokers. We do a quick MLS search for a home for a particular feature trying to find the perfect house for our clients, or in an attempt to begin evaluating the competition.

When working with clients, it’s so important to listen to what they want and/or why they bought the house they did. Perhaps it’s a great back yard. Or they want “this” kitchen. Or that master bathroom is amazing. That sort of thing. And, as agents, we tend to write all that down and include it in the description.

But sadly, so much of that glorious description isn’t borne out in the photos.

Case in point: Today I began searching for a Buyer who wants a mountain view. My MLS search pointed out 17 listings in his area and price range. Of those 17 listings, only three (3!!) actually gave some attempt at showing the mountain view they described or had included as a feature in the listing itself.

Now that’s a bit of a problem. The client wants to see photos and I’m left to question just how much of a view there actually is. One listing described an “amazing Mt. Rainier view.” Not a picture anywhere. Not even a mention that “The Mountain” really IS out there on a clear day. Of course I’ll drive out and take a look myself, but really? Is the mountain really visible?

Good photos are immensely valuable, especially to the Seller. This “amazing Mt. Rainier view” is intriguing enough to call the Buyer to go take a look. But just imagine how many folks would like to see that view and dream a little … perhaps just enough … to buy the house.

It doesn’t take an expensive camera to get good photos, but it does take paying attention. Both to the descriptions from the seller and to what we actually write. As agents, those are the things we need to emphasize in our photos. Rhapsodizing about the granite counters is one thing — showing a photo of a clean, decluttered, gleaming counter says it all. The potential buyer should say “Wow, Look at That!”

There’s value in that photo and it’s good seller representation.

 

Flood Maps Affect Home Sales and Purchases

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One of the requirements to obtaining and maintaining a mortgage or loan on your home is that it be adequately insured against unexpected disasters. It’s important to know that damage from floods or landslides are not typically included in normal homeowner insurance policies.

Evaluation of whether a home resides within a flood plain is part of the consideration in obtaining affordable homeowner’s insurance. This can affect the ability of a buyer to fulfill the terms of their purchase contract, as expensive insurance may negatively impact that buyer’s ability to qualify for the purchase of the home.

Similarly, the requirement that flood insurance be obtained can negatively impact the Seller’s ability to sell a home. A home that’s not insurable, or one that has what appear to be excessively high premiums, can be difficult to sell to anyone that must finance their purchase, limiting prospective buyers to cash only or seller-carried contracts.

In most purchase contracts in which I participate, I recommend that the buyer include a provision that their annual homeowner insurance premium be no more than 1/2 of 1% of the purchase price. Generally that’s doable, unless the home happens to reside in an area designated as residing in a flood plain — then prices skyrocket as the prospective homeowner must also negotiate flood insurance.

As geology, improvements to land, and technology change,  flood maps are updated by FEMA (Federal Emergency Management Agency). Your home, which previously was not within a flood prone area, may be now … or, conversely, perhaps it is no longer, affecting your  insurance rates.

In incorporated and unincorporated King County, those flood maps have recently been re-drawn and can now be viewed during one of the three public meetings listed below. Additionally, you can review the new King County flood maps online, obtain more information about these public meetings, and review the flood insurance studies by visiting the King County Preliminary Flood Insurance page.

City of Auburn
Wednesday, January 26, 2011
6 – 8:00 P.M.
Dick Scobee Elementary School
1031 14th Street NE, Auburn, WA 98002
253-931-4984

City of Renton
Thursday, January 27, 2011
6 – 8:00 P.M.
Renton City Hall
Council Chambers – 7th Floor
1055 S. Grady Way, Renton, WA 98057
425-430-6400

City of Kent
Monday, February 7, 2011
6 – 8:00 P.M.
Kent Senior Activity Center
600 E. Smith Street, Kent, WA 98030
253-856-5150

Additional information about flood insurance in Washington State can be found at the Office of the Insurance Commissioner.

Finally, be sure to periodically review the terms of your homeowner insurance policy. It’s critically important that you know exactly what is … and what is not … covered on your policy. Damage from flood waters, earthquakes, or extra coverage for all that nifty personal computing equipment you own, may require extra attention in the form of insurance riders.

 

For help with your homeowner insurance needs, please let me know and I’ll be delighted to refer you to an outstanding insurance professional.

Investor Alert: FHA Financing for “Flipped” Houses

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In mid-January, 2010, the Department of Housing and Urban Development (HUD) issued a temporary waiver (good until February 1, 2011, or until extended or withdrawn) to give FHA borrowers the ability of obtaining an FHA-insured mortgage on a home that was purchased less than 90 days previous. What this means is that a Buyer can use FHA financing for a home which was bought by an investor less than 90 days before, then repaired or rehabbed.

On its surface, it would seem as though this waiver would be greatly beneficial to investors. After all, an investor needs to purchase a real bargain house, do some repairs, and then re-sell the home as quickly as possible for a profit.

In my experience, most investors look for the original purchase to be no more than 70% of its repaired value, with 50-60% (or even less) preferred. Considering that the cost of buying and then selling a home can easily run approximately 10% of its resale value, that there are costs of borrowing funds for purchase, and, of course, the necessary costs of repair, an investment home must be sold for far more than 120% of the investor’s purchase price.

It’s also important to bear in mind that many buyers (if not most) are also looking for homes that are a bargain … and are using FHA financing to secure their purchase.

So .. where this gets difficult is that there is a 20% variance to the flip rule for homes being resold within 90 days of an investor’s acquisition of the property:

* If the home is being sold for no more than 120% of its purchase price, then flipping guidelines do not apply.

* If the home is being sold for more than 20% above its purchase price, then the Buyer’s lender will require an independent home inspection, selected by the lender and likely paid for by the Buyer (OUCH!), and

* The Lender must justify the loan value by acquiring support documentation of the increased value or TWO appraisals, and

* Even if an appraiser doesn’t find the need for a repair, a lender can require that any issues revealed by a home inspection be fixed prior to closing!

A home inspection in the hands of an underwriter can be problematic. Every home requires some repair–no home is perfect. In a typical transaction, Buyers and Sellers often agree to financial adjustments rather than repair. Underwriters aren’t necessarily equipped to interpret the findings presented on a written inspection report, and an transaction otherwise acceptable to a Buyer and Seller may be stalled or cancelled.

Finally, in most transactions, the Buyer pays for the appraisal of the property they wish to purchase, used to assure their lender that the value of the home is at least equal to the amount of the loan. With the requirement that a flipped home sold for more than 120% of its investment purchase price, the Buyer may be required to pay for two appraisals, which further impacts the Buyer’s closing costs. In today’s buyer-driven market, remember also, that the Seller is very frequently asked to pay all or some of the Buyer’s closing costs.

Click to read the HUD Waiver of Requirements for FHA loans, then be sure to factor in these additional requirements that may be impactful of your desire for a quick resale of your investment property.

There is NOT a 3.8% Sales Tax on All Home Sales Starting in 2013!

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Over the last several weeks I’ve had a number of clients and contacts email me with a “Is This True?” question about the rumor of a 3.8% “sales tax” to be added to the sale of a home after 2012. With the passing of President Obama’s Health Care bill, some people are digging deep for every possible reason to cause panic and mayhem.

Last night I received yet another forwarded copy of this message. I’ve copied the message in the three bordered sections that follow. My response is below.


Subject: REAL ESTATE SALES TAX TO GO INTO EFFECT 2013 (Part of HC Bill)

 

This excerpt from the Healthcare Reform bill has been grossly misstated. There is a 3.8% tax that will be imposed beginning in 2013 (if not repealed before them … and it’s under discussion) … but it’s not on the gross amount of a sale.

In fact, this provision has  been so widely misunderstood and misquoted, that the National Association of Realtors produced a Question and Answer publication to expressly discuss the matter. Be sure to expressly study questions 8-10. Click to read the publication.

Essentially, it’s like this:

A 3.8% tax will be imposed on high income earners (single earners with Adjusted Gross Income (AGI) over $200k, couples with AGI over $250k); that sell property realizing a gain over $250k (single) or $500k (joint filers). So .. if you’re married with AGI over $250k, and you sell a piece of property with a gain over $500k, you’ll pay a 3.8% tax on the gain, not the entire sales price.

I’m not a tax expert and can’t speak to computation of AGI, but I suspect that there will be some fairly extensive calculations involved to minimize AGI.


 


Sometimes a Short Sale is Just NOT the Right Answer!

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I like to consider myself a resource for sellers who are considering their options. Should they pursue a short sale? Should they just walk away? Should they just try to hang on no matter what?

Recently I had an opportunity to meet with a wonderful couple that were truly truly trying to do “the right thing,” as they phrased it. We met for a couple of hours while they showed me around their home.

Their pride was obvious. This house was their baby. They’d improved and lovingly planted almost every inch of the yard … and the inside was eat off the floor clean. Every room was polished and tidy. They were devasted that life had taken an unfortunate turn and they just couldn’t figure out how to hang on any longer.

After talking through the options, I sent them to talk to the other necessary experts — the attorney and the accountant.

Yesterday the husband called me back with an apologetic voice: “The attorney said that it would make absolutely no difference whether we let the bank just have the house, or short sale it. We’ve decided to just walk away.” He was distraught, thinking he’d “wasted my time!”

Heavens. Sometimes a short sale is just NOT the right answer. I reassured him that I was so happy to have met him and his family and wished them well.

Is a Loan Modification for Me?

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A number of considerations should be made when you are either in trouble already with your current mortgage, or anticipate that you might be soon.

One excellent option might be a loan modification, which is designed to reduce the amount of your mortgage payment to no more than 31% of your gross income.

Unfortunately as of this time, it appears that most loan modifications are unsuccessful, with something less than 5% of all applicants successfully completing the loan modification program being reported by some analysts.

However, don’t be deterred! Perhaps you’ll be able to complete  a loan modification and be able to remain in your home. According to some reports, the biggest issue with unsuccessful loan modifications is that homeowners do not adequately complete the necessary application, or do not provide sufficient documentation as required by the lender. Of course, there are also reports that lenders don’t recognize that a homeowner has completely required with all requirements. In any event, it doesn’t appear to be an easy or guaranteed process.

The first step is to determine whether or not your lender will change your existing loan to more favorably meet your financial requirements. This process is formally termed “loan modification.” Under the terms of the federal program, HAMP (Home Affordability Modification Program), essentially lenders are encouraged to offer loan modifications to homeowners that are either already behind in their payments or who face the prospect of soon being so.  

Be sure to contact your lender and ask for their loan modification package. You should receive, at a minimum, a list of exactly what they require, and how to proceed and apply.

The information presented on this Site should not be construed as legal or financial advice. You are advised to seek consultation with a qualified Attorney and Accountant. ©Gabrielle Nemes, 2010

Another Transaction Closed!

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There are some transactions that are particularly satisfying when they finally close.

I have to say that this Listing is one that took exceptional effort, but after visiting the home to drop off keys to the new buyers, their palpable excitement and relief about being in their new home just left me with such a sense of fulfillment.

Now this was a transaction just overflowing with issues … big issues! Shortly after listing, there were difficulties with the weather, with leaks in the kitchen, with the estate auction (hmmmmmm, I’ll think twice, 3 times, about recommending that guy again), then with fielding call after call after call of low offers from agents informing me that the price was too high and that the place just wasn’t worth anything more than the land. And yet there were offers — eight of them. Most were close to the asking price. Others not so much. One was dreadfully low.

And then there were endless visits to the County and the City of Auburn trying to find appropriate records for permits, as-builts, well certifications, foundation requirements, and on and on. Meeting with contractors for bids and work to be done.

However, floating through all of this were these Buyers. They made three offers before the Seller felt secure that the offer was strong and solid enough to survive the remaining challenges of missing permits, foundation certification, title elimination, etc.

Finally, FINALLY, six weeks to the day after the contract scheduled closing date, it did. What a cause for celebration!

I remain grateful for my client, the Seller, who repeatedly listened to my advice and then took it. As with every client, we talked often. About how things were going, or not going, or just the general frustration of trying to get things done. At the end, about the frustration of the current lending climate where a Buyer’s approval could get challenged over the most mundane and ridiculous items. About the Department of Licensing who decided that they didn’t like the “appearance” of a notary’s stamp, and on and on.

The house sale closed! (whew)

Want to Sell Your House Fast?

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Drop the price!

The first two months of sales data in the greater Auburn, Washington tell the story perfectly — Want or Need to Sell Your Home Fast? — Drop The Price! Or at least price it within the range of those houses that are actually selling:

Granted, this little chart only shows three months of home sale activity in the greater Auburn area, but it clearly reflects that homes sell faster when they are nearer the lower end of the pricing spectrum.

Here you can see that the average home listing price is above $300,000, but the average price for home sales that actually closed (i.e., made it all the way to the exchange of keys!) was in the low-mid $200,000 range. It’s further telling that homes in those upper dollar amounts for Auburn, stay on the market longer than those than ultimately are priced in the lower $200’s — 100+ days compared to 58 days and 82 days.

It’s important to remember that “Solds” are a result of homes that went Pending 30-60 days prior.

So ……

Compare the number of days for houses that went pending in December to those that closed in February. For houses that sold in December, one would need to compare the days on market for those that went pending in October or November.

And I’m thinking that the closed prices in March will be higher too! Look at the pending $$ for February! (Yeah, I know, I get excited about these things ……………..)