The current market is a tricky one, and depending on your circumstances you might want to list your house for sale NOW! But there are several factors to consider, and you must tread carefully if you decide to list your home for sale during the holiday season. Here are some tips and things to think about if you decide to list your home for sale now.

There’s No Place Like Home for the Holidays – But Which Holiday? Ideally we want a home to be completely neutral when it goes on the market, with no sign of the sellers or who they are–few photos, no college degrees, no religious or political items that (trust me!) only serve to distract a buyer from the main event, which is your home. We need buyers to imagine themselves there, and believe me buyers have a short attention span. We only have a few minutes to make an impression, and we don’t want that impression to be “Ugh, I can’t believe this guy has a photo with politician X…I can’t live here!” So how do we neutralize during the holiday season? Well, we probably don’t. But we try to keep it as secular as we can, and of course everything should be in good taste. No Griswold family decorating, please.

Don’t be Stale By Spring – If you’re going to try to sell, go all out. You must price aggressively and get it sold before Spring. You don’t want the days on market to be over 90 by the time the majority of buyers start peeking out from behind the winter curtain to explore the real estate market. The first thought will be “Why is This Still on the Market?” Sellers always ask me how long they must wait until the Days on Market field resets; you must be off the market for 90 days to ‘start fresh.’ There ARE buyers out there — take a look at the graph “Listings vs Sales” on my website, and look specifically at November through January…though the ‘sales’ drops a bit, the inventory drops by more in most months. That means the buyers are still out, but there’s less to choose from, and you may be at an advantage. All bets are off if you’re trying to sell a home where the buyers are likely to have school aged children though…you’re likely better off waiting until spring, as few buyers will move children during the school year if they can help it. It can happen, of course, but it’s less likely. Think about who your target market is before deciding when to list.

Lighten Up – It’s getting dark earlier and earlier…and remember many buyers are coming to see your home after work. Make sure you have adequate lighting in the house, and though it’s not eco-friendly, leave at least some lights on even when you’re not home, and especially leave the porch light on…you want your home to look warm and inviting on those cold winter nights, not to mention that you don’t want the agent fumbling with the lock while the buyer is standing outside freezing. And while we’re on the subject, make sure your walkway and steps are *always* shoveled and salted in inclement weather.

If you need help thinking through whether to sell your home, and would like advice on how to best prepare your home for sale in the Winter OR Spring, contact us for a no obligation consultation.

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The bipartisan bill, Prompt Decision for Qualification of Short Sale Act of 2010 (H.R. 6133), is sponsored by Reps. Robert Andrews (D-New Jersey) and Tom Rooney (R-Florida).

Are you a DC or Nothern Virginia homeowner considering selling your home via a short sale? I’m certified by the Home Rescue Institute and able to provide some information about the pros and cons of a short sale, foreclosure, loan mods, and bankruptcy. Don’t make an uninformed decision. Contact me for a confidential meeting.  Or read more here:  Should I do a Short Sale?

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What fees make up the buyer’s closing costs?

The fees vary by jurisdiction, broker, and settlement attorney, but a good way to categorize them would be:

• Prepaids – These are generally required by the lender, and may include prepaid insurance, prepaid property taxes, and prepaid interest. Another common prepaid item is condo/HOA fees. These vary based on the day of the month that you close, since they are pro-rated between buyer and seller.
• Points – A point represents 1% of the loan balance and are charged by lenders. This, along with the fees, can easily amount to thousands and thousands of dollars, so it’s important to discuss this with your agent and your lender.
• Fees – These are fees charged by real estate brokers, settlement attorneys, and lenders, and are the toughest to judge for “reasonableness” without experience. These vary widely, particularly among lenders. Some real estate agents will pay their broker’s fee on your behalf—be sure to ask them. For lenders, whose fees can be substantial, it’s important to know early in the process what they’ll charge.  Broker’s and attorney’s fees are scattered throughout the closing statement sections.
• Title Insurance – This is paid by the buyer and, depending on the policy, can amount to thousands of dollars. It’s a one time charge that covers you in the event of a problem with the chain of ownership. See my post on how to save some money with title insurance here. This is in the 1100 section.
• Government and Transfer Charges – Paid to the local jurisdiction. These can be quite substantial—for example, in the District of Columbia, the transfer (paid by the seller) and recording taxes (paid by the buyer) are 1.1% each. Northern Virginia sellers just had big increase (from $1 per $1000 in value to $5 per $1000) in their transfer taxes.

In our local DC and Northern Virginia area, traditionally closing costs have run about 3% anyway, so the impact will likely be minimal for most buyers in our area.  But for those buyers who are struggling to come up with cash for the down payment AND closing costs, this reduction could put a last minute wrench in their purchase.  Plan accordingly.

Read More: Buyer’s Closing Costs

Learn More: Attend a free first time home buyer class.

Read More: Will new FHA rules kill condo sales?

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We’re honored to have been nominated as one of DC’s best real estate blogs.

If you found this post interesting or helpful, even if you don’t live in the DC area, please take a moment to vote for us by clicking below and registering your vote for http://blog.wethmangroup.com Thank you!

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Many investors are already aware that  capital gains tax rates for most brackets are due to increase from 15% to 20% in 2011–so your profit is 5% less if you sell January 1, 2011 versus December 31, 2010.  5%!

But many investors haven’t yet realized that, buried in the health care bill that recently passed, for those above certain income limits, there is an additional 3.8% surcharge on real estate investment profit starting in 2013.

Of course there are ways to avoid these taxes–many investors will consider pursuing 1031 exchanges, but if you’re hoping to liquidate some of your real estate holdings, you’d be well advised to consider doing so in 2010.

Another reason to consider selling now?  Low interest rates. Buyers have more purchasing power than they’ve had in years thanks to historical low interest rates within the conforming loan level limits.  But these rates won’t last forever, and buyers are taking advantage.   A flood of inventory in the upper price ranges ($1,000,000 and up) in our area is expected in the coming years, which will create competition in those brackets for years to come, as financing remains tight.

If you own a Northern Virginia investment property and would like to keep 8.8% more profit by selling in 2010, contact Katie Wethman, CPA, MBA, Realtor for a free analysis of your home’s value.

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More Resources: Free Market Report for Your Property

Read More: About the Wethman Group and Wethman Group in the Press

Read More: Marketing Your Property

Read More: Myths About Choosing a Listing Agent

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Definitely not!  We’re still in the spring season, and there are still plenty of buyers out there.  Sellers need to price their home correctly, which means knowing the trend in your neighborhood.  Consider the advice I gave in this BobVila.com article “What’s My House Worth?”.  Sellers might also consider a pre-sale inspection so that they know what to expect in the negotiation of concessions (as I suggest in this moving.com article).  Finally, consider ALL offers.  Consider an offer the opening try by a buyer (who may be testing the waters “just to try” a low offer), and work with a potential buyer to come to an agreement.  ALWAYS make a counteroffer — you never know where it will go.

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Few people realize that buried in the recent health care legislation is a tax that affects home sales–3.8% to be exact. As most homeowners know, one of the primary benefits of selling your home is that a significant portion of any profit–$250,000 for a single taxpayer and $500,000 for a married (filing joint) taxpayer–is completely tax free if you’ve lived in the home two out of the last five years.  Yes, you read that right.  Completely tax free.  And that part  is STILL true.

The part that’s new is a tax on the profit above that exemption amount for taxpayers in certain brackets. If a single taxpayer makes more than $200,000, or for marrieds above $250,000, they are subject to a new 3.8% tax on the profit above that exempted amount starting in 2013.

Knowing the DC area has several of the highest per capita income counties in the country (four of the top ten, in fact), and given historical returns on real estate in our area (yes, even after the bubble burst), there are quite a few homeowners in our area who could get hit with this tax.

For example, let’s say a single homeowner purchased in 2001 for $300,000 in North Arlington.  That taxpayer’s home might  now be worth $600,000 (which is not unusual for someone who purchased prior to the big run-up in prices we experienced from 2003-2006).   If that taxpayer makes more than $200,000 in AGI, she will be subject to tax of 3.8% * (300,000 profit – 250,000 exemption) = $50,000 taxable profit = additional $1900 tax on the sale of her home (in addition to capital gains taxes) .

Plan those sales accordingly, especially you long-term homeowners.   If you have significant appreciation in your property, and are above those income limits, you may want to ‘cash out’  between now and 2012 to save 3.8%.

Read More: Reasons to Sell Your Investment Property in 2010

If you’re thinking of buying or selling a Northern Virginia or DC investment property, contact us to discuss how we approach real estate from a different angle.

Update 7/17/2010:  This issue is finally getting some press, sort of.  WaPo has an article entitled “Debunking Rumors of a Housing Sales Tax.“  Despite the headline, the body of the article proceeds to spell out the circumstances under which there IS a tax on home sales. Just because people under certain income limits or profit margins aren’t charged the tax doesn’t mean that the tax doesn’t exist for other people. Maybe we need to work on the definition of “rumor”??

Update 11/21/2010: Here’s a good article that clarifies the tax and how to calculate it, and gives a simple example for a “high income” taxpayer.  It states “Complicated? Yes. Let’s look at these examples. Your adjusted gross income is $150,000. You sell your house and made a profit of $400,000. There is no change in the way you determine your gain: You take your purchase price, add any major improvements you have made over the years, and subtract that number from the net sales price…..

let’s assume you strike it rich and have made a profit of $600,000. Your income is $300,000. You can exclude only $500,000 under current law, so you will have to pay capital gains tax on the remaining balance. The rate currently is 15 percent, so you will owe Uncle Sam $15,000 ($100,000 multiplied by 15 percent)…But since your income is over the threshold, you now also have to pay the 3.8 percent tax. But on what amount?

As indicated earlier, the tax is based on lesser of your profit or the difference between the threshold and your income. Your profit is $100,000. The difference between your income and the threshold is $50,000 ($300,000 minus $250,000). In our example, the lower number is $50,000, and you will have to pay an additional $1,900 to the Internal Revenue Service (3.8 percent multiplied by $50,000).”

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But today’s buyers, despite having less negotiating leverage than they did just a year or two ago, are very different than the buyers of 2005, or even the buyers of 2000; they are jaded.  They’ve seen a lot: They’ve seen friends take the plunge and lose tens of thousands, or even more, in equity very quickly.  They’ve read for years now about people getting swindled in their mortgage terms and losing their homes.  They’ve read about money pits.  And they aren’t going to make the same mistake.   They want the perfect house, and they want it in perfect condition, at a fair price. So how can sellers get into the heads of today’s changed buyers and get their home sold quickly without breaking the bank?

This was the subject of Moving.Com’s article “How to Think Like a Buyer When Selling Your Home.” The tips are basic, yet critical and the underlying theme is the same: Try not to think of the property as your ‘home’ anymore…it’s an asset that you are trying to sell for the highest price, in the shortest amount of time, with a minimum amount of hassle. Realtors are skilled in helping you think this way (why do you think we always switch from calling it “your home” to “your property” after it’s been listed for sale?)

I’m quoted in the article a few times for some of the ideas I practice with my sellers (depending on the situation, of course.)

It’s so difficult for a seller to put themselves in a buyer’s shoes. I always encourage my sellers to go with me to view the ‘competition’ – buyers are going to be comparing their home against similar ones nearby, so they need to see first hand what’s out there. Still, sellers often think “but my house is different” so one thing I recommend in that case is to hire a third party for their opinion—not theirs, and not mine as the agent’s. For example, have a pre-inspection so that an inspector can calmly describe what will be seen as defects in the house, and have a pre-sale appraisal for an independent fact-based presentation on what the home is worth versus its competition. Finally, having a professional stager brought in to describe how to ‘neutralize’ the house so that a buyer can envision themselves living there is key

If you’re thinking of selling your Northern Virginia or Washington, DC, home, and you need advice on how to get the highest price, in the shortest amount of time, with a minimum amount of hassle, call us.
More Resources:

Choosing a Listing Agent

Marketing Your Home

Automated Reports: How Much is My Home Worth?

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Every night, you put on your pajamas and head to your bedroom for some shut-eye. But is the room you’re sleeping in really a bedroom? Just because that’s where you have your bed and where you drift off to dreamland doesn’t necessarily make it a bedroom, at least in the eyes of our local and state governments.

In Virginia, the minimum requirements for calling a room a “bedroom” are established by the Uniform Statewide Building Code, which follows the International Building Maintenance Code (IBMC) but offers a few amendments to that code. Throughout the Commonwealth — including our immediate areas of Arlington and Fairfax counties and Alexandria — a room must have an area of at least 70 square feet to be considered a bedroom. If more than one person occupies the room, add 50 square feet for each additional occupant. Ceiling height must be no less than 7 feet.

Emergency egress is also required, and must go directly outside. The exit (whether a window or door) must have a minimum area of 5.7 square feet, or big enough for a firefighter or other rescue personnel in full gear (including an air pack) to be able to carry you to safety. There is one exception to this rule: if the room is at grade level, the minimum size is 5 square feet. In addition, emergency exits may measure no more than 44 inches from the floor to the bottom sill. Also, bedrooms can not constitute the only means of access to other bedrooms or habitable spaces and can’t serve as the only means of egress from other habitable spaces.

In Fairfax County, at a minimum, there must be two means of exit — one of which must go directly outside — for each bedroom. So, for example, if your in-law suite in the basement is accessible by only a door leading to or from the outside, it’s not really a bedroom, but just a clever way of keeping the in-laws at a distance.

Just to make things really interesting, the IBMC also has lighting and ventilation requirements for all habitable spaces, including bedrooms. Get out your calculator and measuring tape for this:

• Every habitable space must have at least one window facing to the outside. The total glazed area for every habitable space must be a minimum of 8 percent of the floor area of the room. So, if you have a floor area of 70 square feet (the minimum required and certainly small by today’s standards) your window area must be at least 5.6 square feet.
• For ventilation, every habitable space must have at least one openable window with an area equal to no less than 45 percent of the minimum glazed area requirements. So if we use our example above, the openable area of our window must be at least 2.52 square feet.

The rules are pretty much the same in Washington, DC, as far as size and height requirements of emergency exits from bedrooms are concerned:

• emergency exit area must measure no less than 5.7 square feet
• height from the floor to the bottom of the window sill can be no more than 44 inches
• minimum size of 70 square feet

Most real estate agents and home buyers expect a closet in a bedroom, as well. But in Virginia and the District, it’s not included in the building codes. That’s right—you don’t need to be able to hang up your shirts or store your shoes to call it a bedroom. The local building codes are there mainly for safety, not to make sure you’re guaranteed creature comforts. Many older homes (and there are quite a few in our area) don’t have closets in the bedrooms but were clearly intended to be sleeping areas. Some homeowners get around this by permanently installing an armoire.

So it’s not so easy to tell if a room is indeed a bedroom. If you have any doubts, call your local codes enforcement office and ask. Or call us…we travel with tape measures and calculators.

All information deemed accurate but not guaranteed.

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The first 30 days your home is on the market is absolutely critical, because those buyers who are circling will come look—once—and if your property is not exactly right then they will just continue their circling, and likely will never return to your property. You will anxiously watch the days on market tick up, and the price tick down.  Buyers ARE buying, but they expect a property to be in pristine condition right out of the gate.

To catch the biggest buyer waves, typically you should plan on putting your home on the market in March or April. This year, however, I think there’s a very strong argument to go out early for the reasons outlined above—buyers ARE out there.  However, you can’t just throw your home into the MLS and expect the buyers to pounce.

Here’s a short list of things you should be doing now to get your home ready:

* De-clutter. I can’t stress this enough. If it’s not something you use every day, get it out of sight. Put away out of season clothing. No collections of knick-knacks, no personal photos, no college degrees or awards. You want the buyer to be able to imagine themselves in the property, and trust me, buyers are easily distracted by your personal items. Don’t pile things into closets and cabinets—buyers look there too. Get things out of the property and into storage if you have to. Same for extra furniture pieces. Less is more.
* Paint & Clean. A fresh coat of paint does wonders, and is cheap. And clean like you’ve never cleaned before, especially the kitchen and bath.
* Make all minor repairs. The buyer is going to make you do them anyway and it will be cheaper for you to do it now.
* Start monitoring the market, both broadly and in your specific neighborhood. Pricing is absolutely critical, and you need to be realistic. Work with an agent to start getting property updates now.

When you’re ready to put your home on the market:

* Consult a stager. I hire both an interior stager and an exterior landscape consultant for  my listings. They look at your property with fresh eyes and have extensive training in how to create a neutral, yet welcoming canvas for buyers.
* Photos, photos, photos. Buyers start their search on the internet, and if you don’t have photos they will skip your house completely. Use professional photographers, or at a minimum, a wide-angle lens if you (or your agent) insist on taking them personally.
* If your home has unique features, consider how to best market them. For example, if the house has an unusual floorplan or is bigger than it looks, consider including professionally drawn floorplans in with the photos. (I do this for some of my listings.)

If you’re interested in hearing more about how to get your home ready, or want to learn more about the home selling process, contact us for an appointment.

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The tightening of the credit markets in the past few years has been particularly hard on condos.  Even long-standing buildings in the most popular parts of the Washington area are now facing problems with financing.  This obviously matters to buyers because it’s difficult to get financing.  Many condo owners, however, don’t realize until they go to sell that it’s an equally big problem for them—if loans aren’t available at competitive market rates, then the pool of potential buyers becomes very, very small.

FHA has always been harsh on condo lending (see post here for more).  They currently require at least 51% of the units to be owner occupied as one of the many hoops they make condo buyers jump through.  New rules on the horizon call for this to be reduced to 50%.  That same set of new rules (which has been delayed in implementation several times) calls for the pre-sale requirements of new construction projects to be eliminated.  Currently, at least half of a project must be pre-sold before FHA will do loans in a building.

But in today’s climate, even conventional loans can be difficult to get in a low owner-occupant ratio building.  Many conventional loans (or rather, the investors who purchase those conventional loans) require the building to be 60% or even 70% owner occupied! If the loan is Fannie Mae or Freddie Mac eligible then certain requirements apply as well.  Who would have thought that conventional loans, with their larger down payments, would be stricter than FHA?!

So what can you do if you are a seller trying to sell (or refinance) your unit in a high investor ratio building or a buyer trying to buy one?

First, ask your lender whether the condo is subject only to a limited review, rather than a full review.  Many lenders aren’t aware of the limited review option.  In a limited review, the lender doesn’t even ask for the occupancy percentage.

Next, see if there are any REO (bank owned or foreclosed) units in your building.  Recent changes allow lenders to count REO as owner-occupied.

While these rule changes may help, if the ratio is still too high, then as a seller you have no choice but to find a buyer who has all cash or is willing to take on a non-30-year-fixed mortgage, for example a 5/1 ARM or 7/1 ARM. Rates are low enough now that you have a shot at that, especially if you are able to offer the unit at a low enough price that a buyer is willing to take the risk.  And as a buyer, the 5/1 or 7/1 is not a bad option if you don’t plan on staying in the condo very long, or as long as you have reasonable caps on the interest rate hikes going forward.

If you’re looking for a top notch lender to help you refinance or purchase in a high-investor building, please contact me.  I recently refinanced my own condo which fell in between 50% and 75% owner occupancy so faced some of these challenges.  And if you need to sell your high-investor condo, let’s talk about your options and how a marketing plan might need to be adjusted.

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We’re honored to have been nominated as one of DC’s best real estate blogs.

If you found this post interesting or helpful, even if you don’t live in the DC area, please take a moment to vote for us by clicking below and registering your vote for http://blog.wethmangroup.com Thank you!

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