Friday, October 30, 2015

Inspector Boo!

You want to scare the hell out of a local Realtor this Halloween? Knock on their door dressed as a home inspector ;) I remember when the scariest part of a real estate transactions was the appraisal. But those days are long past. The real fright is delivered on inspection day. Nearly every home sale transaction will have an inspector perform a thorough examination of the house. This is not mandated by law but it is highly encouraged by the Real Estate Commissioner here in Washington State. I agree with the state as well. There are many things that can go wrong with a home that are not readily visible to the casual observer. There are also many things that are "wrong" with a home that doesn't really matter much however.

Here in the Evergreen State, our inspectors are required to be licensed to perform home inspections. This license is not a simple contractor's license and general contractors cannot conduct home inspections without being specifically licensed to do so. These inspectors are required to follow a specific set of standards for completing the inspection and presenting the results to the client. This is all very good.

Where the problem occurs is when you get an inspector with a terrible "bedside manner". You know, Inspector Boo! This is the guy that seems to take delight in terrifying the buyer of the home over things that are really not that scary. Unfortunately many of these Halloween Fright Inspectors just tell the buyer to hire a professional to further evaluate the problem. From the buyer's perspective, they did hire a pro, "isn't that what I just paid you $500 to do"? But alas, we live in a litigious society and inspectors are terrified of lawyers.

Some of Clark County's inspectors have a great way of presenting the deficiencies of the home. These guys categorize issues into several severity classes. Things like a loose light switch cover, or a little paint peel are placed in a general maintenance class and are characterized as normal and typical homeowner maintenance issues, which they are. Then there is a moderate category of things that are not really dangerous but should be taken care of promptly by the homeowner either the buyer or seller as negotiated in the deal. Finally, there is the severe stuff that needs to be done right away either by the buyer after close or the seller prior to, but probably by a licensed professional. These are things like very severe mold, leaking roof, dry rot, water in the crawl space, etc. There are some things that have to be done before the home closes, things like a bad roof or exterior dry rot, might be picked up by the appraiser and then the mortgage lender will require a remedy before funding the loan. Buyers should be real cautious about running away from a home with minor issues, especially if they really like the house. Realtors should counsel their clients in the proper way to evaluate an inspection. They should tell their clients what to expect in advance.

All homes will receive some wear and tear over time and buyers looking at older houses should expect some 'dings and dents'. They should also remember that older homes are priced a little more reasonable than their shiny new counterparts and that is due at least in part to the expectation that there will be some additional maintenance issues. I have seen buyers walk away from two or three homes over what amounted to less than a thousand dollars in repairs because they refuse to work with the seller. Funny thing about that is they end up spending more on inspections than they would have spent to fix the problems in the first house they offered on. This is a seller's market for the most part and buyers need to be flexible if they want to find an ideal house for their needs. The old adage to 'choose your battles wisely" is most appropriate for buyers in this market.

Friday, October 23, 2015

New Lending Rules Are in Place

The dreaded new lending rules took effect earlier this month and local lenders seem to be reasonably well prepared. In general these new regulations have created a closing delay. This is no fault of the local loan officers or their staff. This is a delay that is essentially mandated as part of the legislation passed by the Congress.

It is important for both buyers and sellers to be aware that closing times are going to be extended on any transaction involving a mortgage. For the short term these could be delays up to 10 extra days. I would imagine that things will get streamlined as time wears on. The new law addresses among other things, the amount of disclosure required by the lender to the borrower, additional time for the borrower to review the lending documents and a post signing period by which the buyer can cancel the transaction. All of this adds up to additional time to close.

A thirty day closing on a home sale transaction involving a mortgage was always a tough nut to crack. Sure, it could be done and many lenders made bold promises. But often they could not be kept. The days of the thirty day close are most likely in the rear view mirror.

This is important mostly because sellers are often in contract to buy another home upon the sale of their home. If they agree to close on the new home in thirty days and the buyer of their home is unable to close on time then they have two problems that could be expensive. Real estate transactions are governed by serious contractual obligations by all parties. No matter what the lender promises on closing times, always give extra closing time on the contract. The seller is rarely obligated extend the closing date. Generally the seller will do so to keep the deal afloat, but they are not necessary contractually require to do so, with few exceptions.

The bottom line is to be patient and just write the offer with a 45 day close or maybe even a little longer. Here in Washington you can write an offer with a "on or before" closing date. This is an effective way to build in extra time to close even if your intention is to close quickly. If the buyers have challenging issues associated with the loan such as marginal credit scores or high debt to income ratios, additional time WILL be required. I spent a fair amount of time on the wholesale side of the mortgage industry and believe me, when the borrower is up tight against the minimum requirements, the underwriter looks at every little detail in that file. No matter what the optimistic loan officer says, that file will take longer to close.

The bottom line is to be prepared for a longer closing cycle and everything will be just fine.

Friday, October 16, 2015

Holy Rate Basement Batman! Banks are Practically Giving Money Away

Have you looked at the mortgage rates lately? Most lenders are offering qualified borrowers a 30 year fixed rate loan at around 3.5% These may not be the lowest rates ever but if not, they are very close to the lowest ever. I have discussed the notion that interest rate is far more important than purchase price especially if one intends to stay in the property for a long term period of seven or more years. Imagine borrowing $240,000 from the bank at 4.5% over 30 years fixed. By all measures this is a good loan at a great rate. The principle and interest payment (PI) would be $1,216 per month. But right now you may very well find lenders offering 3.5% 30 year fixed loans. Now the $240,000 mortgage payment looks more like $1,078. That is a whopping $138 per month less! That is a savings of $16,560 over ten years and nearly 50 grand over the life of the loan! In the heavily paraphrased words of the immortal Doctor McCoy, my God man, why aren't you buying a house!

Seriously my friends, these are truly fabulous times. Sellers will get the strongest offers when rates are low because more buyers will qualify at the higher price. Buyers will get the most bang for their buck at 3.5%. Buyers can also qualify for a lot more money. The same buyer that qualifies to borrow $240,000 at 4.5% will qualify to borrow $270,500 at 3.5%. These super low rates will allow buyers to essentially get 12.5% more money for the same monthly payment. 4.5% is a great rate, 3.5% is a OMG rate! Be sure to check with your favorite mortgage professional as there are a few variables that banks look at such property taxes, mortgage insurance, etc. But in general these are pretty accurate figures.

Yes prices have crept up and many entry level buyers have found themselves in a pickle. But there is a window of opportunity to effectively take 12.5% off the price of a house. Seller wins, buyer wins, everybody wins, except the bank. That my friends is a good scenario. Happy hunting!

Friday, October 9, 2015

A Beach House is Surprisingly Attainable

Ever think about how cool it would be to have a place at the beach? Do you think that's the stuff of millionaires and VIPs? Hold on sunshine, because Southwest Washington has a fabulous coastal area with a drive on beach and real estate prices that are stuck in the 90s. Well look at that, beach houses for the regular Joes. Take a peek at this article I wrote for Evergreen Coastal Living earlier this week.

It has been awhile since I did a beach house deals post so here I go! The Washington coast has great deals on coastal and beach property. Imagine owning a home within a 10 minute stroll to the mighty Pacific Ocean. The Long Beach Peninsula offers many opportunities to have just that and at prices you may find shocking.

Look at this great little manufactured home on a huge 0.28 acre lot. This house has 2 bedrooms and two baths with 1188 square feet of space. The lot is wooded for that classic Northwest feel but is less than 1/2 mile to the crashing waves of the Pacific. It is priced at $114,800.

The home is located in Ocean Shores on the Long Beach Peninsula.

This next home is located in Long Beach. It is situated on a 0.16 acre lot just a few doors away from the beach entrance! The house has 896 square feet with 2 beds and 2 baths. It is a short walk to the shops and attractions of Long beach and an even shorter walk to the big blue Pacific. This one is listed at $120,000.

These sub $150k homes may need some TLC but they are livable right now. This can be a getaway house or you permanent residence at these priced they will make your wallet smile.

This final home is a classic 1904 home that has been gentry cared for.  It features 1364 square feet with 3 beds and 2 baths on a gigantic 0.33 acre lot. It abuts the beach so a very short stroll through a lightly wooded area lands you on the shore. This home is fairly secluded and that makes it that much more amazing. It is priced at $229,000.

The Washington coast is the ocean bargain of America! Come pay a visit to this magnificent coastal community and take a peek at some of these fabulous home values.

There are many lots that I have found available in this area as well. You can build you own custom dream house at the beach. Whatever your passion come enjoy the coastal living!

Friday, October 2, 2015

Low Interest is keeping Upward Pressure on Home Values

The market continues to move along at a healthy pace. Here in the Portland-Vancouver Metro Area values seem to be rising at a pace of 5% to 10% year over year. Local fluctuations and market conditions can vary a bit from neighborhood to neighborhood. Low interest rates will always help drive sales in real estate and robust sales will typically lead to increased price pressure on buyers.

Inventory remains tight and many would be sellers seem to be waiting before they list. Holding out for more money? Waiting for equity position to grow so they can make their move up? Still upside down from the crash? All of the above my friends. Buyers are going to continue to feel the pinch of higher prices so they are well advised to consider whether waiting any longer will benefit them. In general this pace of say 7% price appreciation will almost certainly outpace income growth. Some people might be waiting on a career promotion which could launch them into a much higher income, but for those in a job with a steady rate of growth, buying now will make more sense than waiting.

The median price in Clark County, WA is now pushing up above $260,000 and that could easily make its way to $300,000 over the next few years if this trend continues. Sellers should also consider the benefits to selling now rather than waiting. Whatever home will replace the current home will be more expensive later. Those that are downsizing may wait to gain a larger down payment for the next house. Those that are moving up however will only get further behind the longer they wait. The three bedroom starter home is in seriously high demand right now so the move up seller should get listed now before that larger four bedroom house slips out of financial reach. No one knows what tomorrow will bring but we do know what is happening right now; that is low inventory and lot's of hungry buyers.