Buyers Trending Toward Urban Living Over Next 10 Years

Housing researcher John McIlwain stated "the suburban century is over." He predicts that over the next 10 years economic, demographic and regulatory changes will create a "new normal" real estate environment across the country that focuses on city centers and close-in older neighborhood. As a senior fellow at the Urban Land Institute in Washington, D.C., and author of  “Housing in America: The Next Decade,”  McIlwain predicts that many central cities will experience strong demand for housing, with the strongest markets “in places that provide a vibrant 24/7 lifestyle.”Sounds like Portland! The trend is to be the highest in older baby boomers and millenials, and immigrants are 3 of the 4 main players in real estate, and they will all be aspiring for or forced to live an urban lifestyle. I have seen this in my own experience, buyers of my generation (the millenials) can't imagine living in the 'burbs, or if they do, they want to be close to mass transit to get back into the city on  a weekly basis. I'm excited to see this prediction come true, the most vibrant cities around the world have people actually living downtown, and I think Portland can be one of those.

 

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This infographic states right out that it is better to rent for 4-5 years than buy a house, which I patently disagree with! I think that if you were going to buy and own a house for a few years, then sell and rent again, it would be not such a good idea to buy. But if you want to buy a house, live in it for 2-5 years, then sell and move into a bigger house or more desirable area, then go for it! That's how people make money in real estate. The longer you own a home, the more equity builds up, unless you bought in 2007 at the top of the bubble! The more equity you have, the more cash you get back when you sell, which you can invest in a large down payment on your next home, or in a remodeling job. If you sell in less than 2 years you do have to pay capital gains tax, so unless you are flipping a home for an extremely large profit it's not really worth it. The majority of home owners are able to afford larger and nicer homes as they move up because they started with a small house, it gained equity, and then they kept moving every 2-5 years, sometimes very frequently, sometimes only 3-4 times over 40 years. The point of home ownership is too be able to do what you want in you house, which you cannot do in most rental situations. Disagree? Comment below and I'll respond!

RMLS Market Report

Last week the Market Action Report came out for May 2010, I haven't had a chance to blog about it until now. There is good news and bad news, as it is with all real estate news these days. The good news is that the inventory is continuing to drop in Portland- down to 7 months of supply, compared to 12.6 months in January of this year. The bad news is that the median home price in Portland is down 4.4% from May 2009- $239,000 compared to $250,000. My favorite part of the Market Action is the map on pg 6 which shows the median sale price by region. What is median in NE or SE is completely different than Lake Oswego or West Portland. Here's the summary along with the change from May of 2009.

North Portland: May 2010: $234,900 May 2009: $229,000 Difference: +$5,400

NE Portland: May 2010: $248,300 May 2009: $255,000 Difference: -$6,700

SE Portland: May 2010: $214,500 May 2009: $219,900 Difference: -$5,400

West Portland: May 2010: $329,500 May 2009: $367,500 Difference: -$38,000

Beaverton/Aloha: May 2010: $211,500 May 2009: $224,500 Difference: -$13,000

Tigard/Tualatin/Sherwood/Wilsonville: May 2010: $277,000 May 2009: $270,000 Difference: +$7,000

Lake Oswego/West Lynn: May 2010: 358,000 May 2009: $350,000 Difference:  +$8,000

Oregon City/Canby/Molalla/Beavercreek: May 2010: $242,000 May 2009: $220,000 Difference: + $22,000

Milwaukie/Gladstone/Boring/Clackamas/Estacada: May 2010: $260,000 May 2009: $265,000 Difference: -$5,000

Gresham/Troutdale/Sandy/Corbett/Fairview: May 2010: $206,300 May 2009: $223,400  Difference: -$17,100

10 Things Buyers Look for Today

Buyers in 2010- according to ZipRealty- are looking for these 10 things:
1. Garage or parking space: 86.8%
2. Master suite: 78.9%
3. Ample storage space: 72%
4. Large or walk-in closets: 66.5%
5. Guest bedroom: 66.4%
6. Outdoor entertainment area: 64.3%
7. Gourmet or updated kitchen: 60.6%
8. Breakfast room or eat-in kitchen: 55.8%
9. Large yard: 43.2%
10. Wood floors: 40.8%
The 3 Biggest Turnoffs:
1. Bad Oders
2. Busy Street
3. Awkward Floor Plan

Source: ZipRealty.

Seriously People, the FBI is Going to Get You if You Lie

Mortgage fraud seems like it would be really hard to pull off these days, but the FBI is gearing up for a major crackdown because it's still a huge issue. Lying about your income, debt, or falsely applying for mortgage relief programs are the main issues, and the FBI reported that they have set up 23 mortgage fraud task forces across the country. They stated that the housing bubble was caused by homes being bought with fraudulently acquired loans- brokers and banks gave mortgages without verifying income and to people with incredibly low credit scores. Read more here.

• 

  Q&A: Emergency Preparedness for Homeowners

  HouseLogic talks to Red Cross disaster response expert Court Ogilvie about emergency preparedness for homeowners. Read
• 

  Is the Cost of Hurricane Insurance Worth It?

  Decide whether to buy hurricane insurance long before the storm clouds appear. Read
• 

  Give Your Community the Gift of Emergency Preparedness

  Creating a neighborhood disaster preparedness plan can safeguard your family, neighbors, and property, while strengthening and unifying your neighborhood. Read
• 

  Create a Home Emergency Preparedness Kit

  Having a home emergency preparedness kit could be the key to your family’s safety if disaster strikes. Read
• 

  Insuring Against Natural Disasters

  Your homeowners insurance covers many of life’s disasters, just not some natural disasters like earthquakes and floods, so consider supplemental policies. Read

Visit houselogic.com for more articles like this.

Copyright 2010 NATIONAL ASSOCIATION OF REALTORS®

What is Appraised Value?

• Appraisals provide an objective opinion of value, but it’s not an exact science so appraisals may differ.
  
• For buying and selling purposes, appraisals are usually based on market value — what the property could probably be sold for. Other types of value include insurance value, replacement value, and assessed value for property tax purposes.
  
• Appraised value is not a constant number. Changes in market conditions can dramatically alter appraised value.
  
• Appraised value doesn’t take into account special considerations, like the need to sell rapidly.
  
• Lenders usually use either the appraised value or the sale price, whichever is less, to determine the amount of the mortgage they will offer.
  
  Used with permission from Kim Daugherty, Real Estate Checklists and Systems, www.realestatechecklists.com

A Few Random Things...

Not any major real estate news today, there are just a few things that I would like to pass on.
1. RMLS-  our local multiple listing service- added a feature for the city and country entries on their listings. Now, if available, those entries have become links to the city or county's websites. If you are moving into a new area and want info on local services, news, and utilities, just click on the links for your favorite homes.

2. There is a cool blog called WebUrbanist that occasionally has real estate related posts, and I really like today's on 10 Tiny Houses. Think about how much square footage you have now, how much you really want, and how much you really need! I know I could never live in something so small, but it also confirms my belief that I don't need 5000 sq ft to be happy!

3. There is a new law in Oregon going into effect August 1st. Any home sold with a wood stove or wood stove insert must be sure that the stove was certified by DEQ at the time it was purchased. If it is not, then it must be removed and destroyed (similar to the cash for clunkers deal) before the sale is finalized. Read more about the new law here. 

ReUse Week in PDX

The week (June 9th-16th) is ReUse week in Portland, the second annual donation drive that is meant to bring attention to ReUse PDX- a network that includes Community Warehouse, Free Geek , the Habitat for Humanity ReStor, the ReBuilding Center, Schoolhouse Supplies and SCRAP. The highlight of the week will  be Saturday the 12th, when there will be a gathering from noon to 4 p.m. in the parking lot of the Rebuilding Center at 3625 N. Mississippi Ave. to educate the public about what they do. To find out more about the Saturday event, click here, and to get info about what and where to donate click here.

1st Year in Your Home? Here's What It Costs

I found a small survey and report on Realtor.com about the surprise costs first-time home owners encounter. The survey said that half of all first-time buyers were surprised at how expensive it was, even though 88% of them claimed to have done a good estimate on costs before buying.   The study for BBVA Compass, a lender based in Alabama, concluded that most lenders don’t warn buyers that there will be costs beyond principal, interest, taxes, and insurance. Among those costs are utilities. The U.S. Department of Energy reported that the typical family spends $1,900 a year – $158 per month – on things like heat, air conditioning and power. The National Association of Home Builders calculated that the typical buyer of a new home spends about $8,640 within the first 12 months for furnishings, appliances, and home repairs and fix-ups, while the typical buyer of a resale home spends $6,540. What's the main lesson to be learned? Have a lot of extra $ in the bank. This usually means saving up for your down payment (a minimum of 3.5% if you are doing FHA financing), plus closing costs if the seller isn't paying for all of them, plus several months of mortgage payments, plus a reserve for unexpected repairs.

Source: United Feature Syndicate, Lew Sichelman (06/06/2010)

What Your Agent Should Ask the Seller's Agent in a Short Sale

I have been frustrated with seller's agents many times when they cannot answer these questions, but I know what to be asking! I got this great list from a real estate agent and blogger in MA, check out the full post here.

Are you going to be negotiating the short sale for the sellers or is there an attorney or short sale specialist involved?

If the answer coming back on this one is the Realtor is going to be representing the seller you MUST find out if they have ever successfully completed a short sale transaction before. If the sellers Realtor has never done a short sale before you might as well have your buyer move on to another home! The probability of the sale ever getting to the closing table is slim. If they have completed a short short sale before ask them their success rate. In other words of the short sales they have listed, how many did not close?

Have you requested the short sale package from the lender and has the seller filled it out?

In order to complete a short sale every lender requires various documents that must be filled out and returned to them. They include:

• A completed authorization form allowing communication directly with the lender.

• The lenders name, account numbers, and customer service phone number.

• A hardship letter discussing the exact reasons why you are not able to pay the mortgage going forward. This letter must be dated and signed.

• A copy of the listing agreement from the Real Estate agent.

• Proof of income ~ The lender is going to require a financial statement including copies of your two most recent bank statements, copies of your last 4 pay stubs, or if you are self employed, a copy of your most recent profit and loss statement. Lastly, you will need copies of your last two tax returns.

• Also are there any other debts on the home or condo such as past due water and sewer bills, condo fees, outstanding taxes, IRS or other liens.

Who are the lender/lenders servicing the loan?

This is a basic question that they better know the answer too. You need to ask them their experience with this particular lender. There are some lenders that are very difficult to deal with most notably Bank of America (BOA). If BOA is servicing the loan you expect to be on the longer side of getting to the closing table. It is not crazy to think the transaction could take 6-12 months. I know you are probably thinking to yourself how is this possible? Believe me it is!

How many loans are on the property?

If there is more than one loan the transaction is more than likely going to be harder to complete. The agent is now going to need to have negotiation skills beyond just dealing with one lender. When there are two lenders both need to be satisfied. There are some lenders that will only allow a 2nd mortgage holder to get X amount of dollars. The agent representing the seller needs to know how to get past any difficulties that could arise between disagreements with the two lien holders.

How is the listing agent going to handle submitting offers to the bank?

This is an extremely important question to ask. The correct way to handle a short sale transaction is to have the seller sign an offer that makes sense and submit that to the lender. It should be no different than any other sale. The seller owns the home and they either accept or reject an offer that comes in.

If the listing agent tells you that they will be collecting offers and submitting all of them to the bank you might as well tell your buyer client not to get involved. This is a very big red flag! It shows that the agent is clueless and has no idea how to correctly represent a seller in a short sale. Without a signed offer neither the seller or the buyer has a contract. There is no obligation on the buyers part and the seller could be left with nothing. The bank does not want to be in a position of reviewing multiple offers either.

The other mistake I see short sale sellers agents making is submitting any offer to the lender for approval whether it makes sense or not. One thing you need to understand is the lender is not going to accept a short sale if the accepted sale price by the home owner is way under market value. The offer amount submitted to the lender needs to make sense! The lender will send out an appraiser to verify the value and if it does not meet the parameters it will be rejected.

How far away is the owner until foreclosure proceedings?

You obviously need to find this out for the sake of your buyer. There is no point in them spending money on inspections, lenders fees and other things if the sale is going to end up in foreclosure. Someone representing a seller in a short sale is going to need to make sure that foreclosure proceedings are put on hold.

These are just a few but very important questions that could help you determine if you have a shot at getting short sale approval. Ideally I would tell you that if an attorney with short sale experience or other type short sale specialist is handling the sale you probably have a better shot at getting the deal done.

5 Tips for Buying a Brand New Home

New construction is a great choice for buyers who want to be able to have input on the finishes in their home, and that want to have a house that will not need upgrades or major repairs for many years. New home sizes and prices are coming down, and builders are eager to woo buyers with financing deals and quality construction. If you are thinking of buying a home before or while it is constructed, here are 5 tips for you. 
1. Choose a Realtor Who Has New Home Sales Experience  The builders agent or sales rep will not be representing you or your best interests. Everything you tell them will be communicated to the builder, so to make sure you are protected get your own agent, preferably one that has worked with buyers on new construction before. 
2. Carefully Evaluate the Seller’s Lender before Committing  Even though the mortgage interest rate may seem better than any other lender you have met with, be sure to compare the APR, and all fees and terms to make sure you are getting a good deal. Any experienced and qualified builder will let you use your own lender.
3. Check out the Builder’s Reputation Walk around the current and previous developments, and talk with people who live in the homes. Get your agent to call other agents who have worked with the builder to see how the experience was.
4. Hire a Home Inspector Even though the city will have inspectors checking to make sure everything is up to code, hire your own home inspector to look for issues before closing. City inspectors miss things, or the builder or subcontractors may have changed or missed things too. A full home inspection is the best $400 buyers ever spend.
5. Obtain Legal Advice before Buying a Brand New Home Have a real estate attorney look over the contract and addenda if they are not the customary ones used in your state. Anything that seems to good to be true probably is, and it is cheaper to hire an attorney for a few hours now then to go to court later.
Read more new home construction advice here.