This is great news for anyone who had a lender that dropped the ball and couldn’t close the loan on time, and may even help out a few patient buyers of short sales who ALWAYS have delays, but unless you were already under contract by April 30, this extension does nothing for the rest of the buyers out there.

Still, better late than never–thanks Congress, for extending the deadline, even if you had to wait until the evening of June 30 to get it done.

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The House also passed legislation this week granting the Federal Housing Administration (FHA) the authority to raise the annual fees it charges borrowers to help shore up the agency’s dwindling cash reserves.  The fee is currently capped at 0.55 percent of the value of the loan. The bill raises the cap to 1.5 percent.  FHA Commissioner David H. Stevens said it wants to raise the fee for new borrowers to 0.9% next year to help raise capital and also make the fees more consistent with private mortgage insurers. FHA has certainly been a good deal for buyers recently, with very competitive rates and low insurance charges, which resulted in FHA’s share of purchase loan market from 3% in 2006 to 30% recently.   As the agency raises those fees, it plans to somewhat lower the upfront fees it charges borrowers.

Buyers:  FHA is still a great option in 2010–low rates and fees, and only 3.5% down.  If you’re interested in starting your Northern Virginia home search, contact us.

More: Attend a free first time homebuyer class in Arlington.

Search: See homes for sale in Northern Virginia and Washington, DC.

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As we tick down these last few weeks of the first time and repeat home buyer credits,  sellers are very nervous about pulling properties off the market and then having to re-list in a post-tax-credit world after a “bad” home inspection or “bad” appraisal.

On the one hand, I can’t blame them, and I would try to negotiate that for my sellers as well, but on the other, inspections and appraisals are part of the risk the parties take–after all, the would-be buyer is risking their tax credit as well if the deal falls apart! For first timers, the process is nerve-wracking enough; add to it a pending deadline, and throw in a waiver of standard buyer protections and it’s a recipe for a breakdown.

A good agent, though, can sometimes protect a buyer (or at least mitigate the risk) by using other tools in the contract, even if you find yourself in the difficult position of having to waive a contingency to win a property you love.

I hate to see this wave of “waives” …it’s very bad news for buyers, and I hope that this particular trend expires along with the tax credit in ten days…nine…eight…

* * * * *

More Resources:

Contact the Wethman Group to start your search

Search for a home in Northern Virginia or Washington, DC

Attend a free First Time Home Buyer Class

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But I CAN tell you the same thing I recently told the Washington Examiner about the upcoming expiration of the credit:  the administration and Congress are under a lot more pressure now to control spending than they were this time last year.

Last year it was all about saving the economy (read: saving the housing market) and pulling us out of our depression/recession.  This year it’s all about record deficits, massive new entitlement programs, and the threat of inflation.  Even a bill renewing the national flood insurance program and extending unemployment benefits has been held up for weeks.   How difficult do you think it would be to renew the home buyer tax credit?

My best guess right now is that the tax credit will not be renewed in its current form.  

Learn More:

Read about the tax credit.

Attend a free first time buyer class.

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Wenesday, March 3

7:00pm – 8:15pm

Arlington County Library

1015 N Quincy St 2nd Floor Mtg Room

Ballston (Orange Line)

We cover a recap of the market, current trends and market stats including days on market, average sales prices, and inventory levels. We’ll also discuss home purchase process, the tax credit, common pitfalls, financing basics and a how to get started checklist.

Specific topics covered:

- Northern Virginia, DC, and Montgomery County market analysis

- Mortgage basics: rates, points, fees

- Financing basics: FHA, Conventional, Conforming, and “Jumbo” loans

- Calculating the tax benefits of homeownership

- Short Sale, Foreclosure/REO/Bank Owned basics

- Search tips

- Fees and closing costs

- Buyer agency and choosing an agent

There’s never any cost or obligation to attend our classes.  Register for this free first time home buyer class here so that we may have materials available for you. More info at www.newhomebuyerclass.com

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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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Our first time home buyer classes are educational sessions designed to give an overview of current market conditions and the home buying process.  We cover a recap of the market, current trends and market stats including days on market, average sales prices, and inventory levels.  We’ll also discuss the impact of the banking system collapse and bailout, the home purchase process and common pitfalls, financing basics and a how to get started checklist.

Specific topics covered:

• First Time and Repeat Buyer Credit Details
• Arlington, Northern Virginia, DC, and Montgomery County market analysis (average sales prices, days on market, etc.)
• Mortgage basics: rates, points, fees
• Financing basics: FHA, Conventional, Conforming, and “Jumbo” loans
• Calculating the tax benefits of homeownership
• Short Sale, Foreclosure/REO/Bank Owned basics
• Search tips
• Fees and closing costs
• Buyer agency and choosing an agent

Details:

Tuesday, January 26th 7:00 – 8:15
Arlington Central Library
1015 N Quincy St 2nd floor meeting room
Ballston (Orange Line)

Though there is no cost to attend, you must contact us to register since seating is limited and we need to make sure that materials are available for you.

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These changes obviously made a lot of buyers very mad; those who purchased in 2009 but didn’t meet the income eligibility now look like suckers (but take heart…at least you had low prices, fantastic interest rates, and likely a lot more choice in inventory than today’s buyers have.)  And what about those souls that purchased back in 2008 when the “credit” was just a $7500 loan? (Again, take heart…low rates, low prices, and you really did have the pick of the litter on inventory.  Just look at the inventory lines on this graph of Northern Virginia Homes for Sale and compare the 2008 line to today.  What good is a big credit if everything available to buy is not worth buying?)

With inventory so tight, why do we need an extension and expansion, and on top of that a new category (the so called “move up” buyer, though in reality it could just as easily be a “move down” buyer, or even just someone who wants to convert their current residence into an investment property)?

The first reason is that the DC area is unique with its suddenly tight inventory.  DC has long been predicted to lead the nation’s real estate recovery given the incredibly strong job market, well above average incomes, and stimulus money flowing freely.

The second reason is that the pool of buyers has dwindled towards the end of the credit period (which was due to expire at the end of this month) so we needed to find a way to increase it again.  Why didn’t this initial rush of buyers lead us to a full recovery?  Again, it varies by area…the progress towards a stable market in DC was much more evident than in the rest of the country.  But two complicating factors: (1) the pool of entry level housing dropped too quickly and buyers were left circling and competing against other buyers for remaining homes and (2) much of the inventory they were buying were vacant, foreclosures, or short sales–meaning that those sellers were not, in turn, trading up to buy the next level of housing. So the recovery stalled at the entry level price point (in our area, I’d approximate this at $450k and below).

The extension and, more importantly, the new category attempts to address the second issue in particular.  First, now that a higher AGI buyer has an incentive, that category might be buying up inventory in the “next tier” of pricing, driving a recovery up the ladder, so to speak.  Second, by creating a new category of credit eligible buyers–the $6500 crowd–it’s likely that those trading up will also be selling their entry-level homes in order to afford their new purchase, relieving some of that inventory pressure on the first time buyer category.   So in other words, just as the $8000 stabilized entry level pricing, the hope is that the $6500 will stabilize “trade up” level pricing.

But those people are all underwater on their homes and can’t sell, you say!  Ah, the eligibility restrictions cover that: one must have owned and occupied the property for 5 of the last 8 years (meaning they purchased in 2004 or earlier), and while there will certainly be some who cashed out equity and are indeed underwater, there will be many more who have plenty of equity in their property and want to use this opportunity to move into the home more appropriate for the next stage of their lives. This last point, of course, might not play out if those owners decide to hold on to their current property as an investment, and simply buy a second property.  I suspect the people who do that will be limited though: the AGI limit, even when raised, along with the $800,000 maximum purchase price will limit people in the DC area from taking full advantage of that.

It will be interesting to see how this all plays out, but I suspect we’ll see an increase in the entry level category of inventory in early 2010, both from continuing foreclosures, trade up buyers, and simply sellers who recognize that the market at the lower price points in our area has stabilized and maybe is even on the upswing in certain neighborhoods.

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Ready to start your home search? Contact us to be notified of our next free First Time Home Buyer Seminar or to meet for a cup of coffee to discuss market conditions where you want to buy.

Thinking of selling? If you have a property priced below $450k or so and in a desirable neighborhood, there very well could be a lack of inventory.  Sell “high”, and use the proceeds (along with historically low interest rates) to buy “low” at the next pricing category.   Read more below:

Read more: How Do I Protect Myself if I Buy and Sell a Home at the Same Time?

Sign up for a free MLS Market Snapshot to see what’s been going on in your neighborhood (Northern Virginia, DC, and Maryland only)

Read more: Six Myths About Choosing a Listing Agent

Read more: Marketing Your Home

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It’s officially passed the House and Senate, and is now awaiting the President’s signature.  Along with the extension of the $8000 First Time Buyer credit (now applies to any buyer under contract by April 30, 2010 and settling by June 30, 2010), there is now a new credit category: long-time residents of the same principal residence which has been given the shorthand name of “move up buyers”–though in reality it could just as easily apply to “move down buyers.”

If a homeowner has owned and used the same residence as their principal residence for any five consecutive years in the last eight (as of the date of purchase of a subsequent residence), then they are treated as a “first time home buyer” eligible for a (up to) $6500 tax credit when they file their next return.  Other key points:

• This credit applies to purchases under contract between December 1, 2009 and April 30, 2010.
• Income limits are higher than with the previous credit: $125,000 AGI for a single individual and $225,000 AGI for a married couple (and then phases out until $145k/$245k).
• Homes with a ‘purchase price’ (as defined by the IRS) above $800,000 are ineligible.
• Thanks to all the fraudsters out there, purchasers must now submit documentation of purchase along with their tax return.

Some other restrictions apply (e.g., must keep the home for at least a year), but the key points are above.  Update 11/14: here’s a nice summary article that appeared in the Washington Post.  Some other FAQs that have since been answered:

• There is no requirement that you sell your current home.  You can rent it out, or sell it later.  BUT you must occupy the new home as a primary residence
• Many types of dwellings are eligible: new construction, existing homes, condos, mobile homes, or boats that function as a primary residence BUT in no case can it cost more than $800,000 or the property is ineligible.
• If you close between Nov 6 and Dec 31 of 2009, you can claim the credit on your 2009 return or even amend your 2008 return (important to know if your income has changed, making you ineligible in 2010!)

This is key news for our area, which has seen a dramatic drop in housing inventory, especially at the first time buyer price point–this could well create demand in the next category up (up to $800,000 that is) of homes, and will create some breathing room, inventory wise, for the continuing first time buyer demand.

This could be the ideal time for these move-up or move-down buyers:

1. Prices for inventory at the first time buyer price point are stable or even rising
2. Interest rates are still at historic lows
3. Upper end homes have dropped (and are continuing to drop) in price

Combine these three points and you get “sell high” and “buy low”. If you’re thinking of selling your home to “move up” or “move down” and want more information on the tax credit, please contact me.

Read More: Why is the $6500 tax credit important?

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Read more: How Do I Protect Myself if I Buy and Sell a Home at the Same Time?

Sign up for a free MLS Market Snapshot to see what’s been going on in your neighborhood (Northern Virginia, DC, and Maryland only)

Read more: Six Myths About Choosing a Listing Agent

Read more: Marketing Your Home

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