Archive for October, 2009
Short Sale Train Wreck Coming to Northern Virginia Soon
October 31st, 2009 Categories: Real Estate Ramblings
Short sales in the Northern Virginia market aren’t new. They were around in previous down markets with a different twist. Sellers actually had to come to the money with the table to close the deal or sign a promissory note to cover the difference. Sellers sucked it up and did it in order to move on.
Today the amount of money that most sellers are upside down keeps that from being a realistic scenario. However there is a train wreck coming and it isn’t about the number of short sales or a tsunami of foreclosures but instead the way real estate agents are handling the deals.
There are a lot of agents running around Northern Virginia suggesting they are “short sale experts” when in fact that don’t even understand how a contract is written and ratified. This week while working through multiple offers for buyers I encountered not one, not two but three agents who “ratified” contracts when the buyer’s offer had clearly been countered by the seller.
In one cases the agent even wrote on the contract that instead of agreeing to our subsidy request that they would let the lender determine the amount. Say what? Anyone who works with short sales or foreclosures knows the lender will say ZERO if you give them an opportunity. This isn’t a ratified contract but a counter offer. Yet this contract went to the bank as part of a short sale package.
It doesn’t take much if you get a group of agents together to hear the horror stories of these types of examples and many far worse. There is going to be a major collision between agents who know what they are doing and agents who are unresponsive and far worse. It will be interesting to see the listing agent explain to their client when the home goes to foreclosure why the contract they thought was ratified in reality was not.
It is time for standards to be in place and enforced by the associations to keep the entire industry from getting a black eye. Otherwise the collision between the two sides that are forming among agents is not going to be pretty.
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Over the last few days hundreds of real estate bloggers and even professional newscasters have reported that the First Time Home Buyers Credit had been extended. The headlines said “Jump for Joy Tax Credit Extended” or “You Still Have Time-$8000 Credit Extended.”
Unfortunately as of the date of this post the $8000 tax credit has not been extended. In fact there are two bills that needed to be reconciled and then sent to President Obama for his signature. The posts have made me gnash my teeth and perhaps it is because I grew up in the DC area the high school government class on how a bill becomes a lawis firmly engrained in my head.
If you are a Northern Virginia buyer anxiously awaiting news on whether $8000 tax credit is extended you can track the two bills HR 3548 and S 1699 at www.opencongress.org. Set up alerts to be notified of the actions being taken on both of the bills. You could become one of the first to know when the bills are reconciled and sent to President Obama for signing.
If you are looking for a new home to buy, keeping looking. Don’t let the tax credit be the only reason you want to own your own home. With interest rates still at a historic low and prices in some areas significantly lower than they were a few years ago the reasons to buy a home go deeper than a tax credit. Now could be a good time to buy a home with or without the tax credit.
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It seemed as if it would be an easy showing. The instructions in the Northern Virginia MLS said to call the owner first so they could crate the dog. We had a pleasant conversation, gave them a timeframe and they said they would vacate the house so we could have it to ourselves. You have to love sellers who understand the process.
We arrive at our appointed time and just to make sure the owners are gone I knock on the door. From deep inside the house I hear the dog bark followed by a voice calling out "shut up". Figuring that the owners hadn't left yet I wait a bit and then knock again. The dog barks and the same voice responds "shut up." Okay this is annoying why aren't they answering the door?
So cautiously I open the door and say "hello". A voice from the back of the house says "hello" but no one appears. Alright I guess they aren't leaving and we are going to head on in. As we pass through the foyer keeping an eye out for the owners the dog barks again and when we hear the little voice say "shut up" we realize that it sounds more like a child than an adult. Now I'm worried that the parents have gone and left a child behind.
As we round the corner to the dining room we find our little voice. It is a PARROT! Sure enough the dog barks again and looking us right in the eye the parrot says "shut up." Good thing the owners don't swear like sailors or we might not have such a good laugh.
Just proves you never know what you will find when you head out to show a house.
Now about that naked guy in the shower of a vacant house?????
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Tax Credit Fraud-As If Someone Didn’t See This Coming
October 26th, 2009 Categories: Real Estate Ramblings
Sure enough if you build it someone will figure out a way to break it. In this case it is a report from the Treasury Department’s Inspector General that shows how quickly fraud can take off. The IRS has uncovered 167 criminal schemes related to the $8000 First Time Homebuyers Credit and is examining over 100,000 files for possible civil violations.
According to a New York Times article:
“The first successful I.R.S. prosecution, a tax preparer in Jacksonville, Fla., James Otto Price III, was sentenced to 30 months in federal prison for fraud in 2008. According to the Justice Department, he claimed the credit for ineligible clients, many of whom were unaware of the action, and electronically paid himself $1,000 of the credit’s value each time.”
The report comes while congress is debating whether to extend the tax credit for another 4-6 months. Previously I had written abou the Cost of the First Time Homebuyers Credit and wondering if the total cost of the program was being overlooked.
Now it will be up the Congress and the IRS to determine if the combination of the cost and fraud will kill the latest proposals to extend the credit.
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Trick or Tweet
Tommorrow is REBAR Camp DC. A fun free for all event that brings together real estate bloggers and social networking guru’s from around the eastern seaboard to discuss tools and tips.
Wednesday Dave Liniger the co-founder of RE/MAX is in town to talk about the current real estate industry and where he sees the future of real estate heading.
Thursday I am a member of a panel discussing Social Networking in real estate at the RE/MAX Allegiance Convention in Springfield.
I see a couple of tanks of gas in my future and a brain stuffed with new ideas. Look forward to seeing everyone over the next few days.
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As deadline for the first time homebuyers tax credit looms the debate as to whether to continue the credit or not is getting heated.
Trying to find answers as to whether the credit has actually created the jump in home sales is difficult. Recently a report written by Ted Gayer of the Brookings Institute provided the best look at the cost of the tax credit.
“Approximately 1.9 million buyers are expected to receive the credit, but more than 85 percent of these would have bought a home without the credit. This suggests a price tag of about $15 billion – which is twice what Congress intended – for approximately 350,000 additional home sales. At $43,000 per new home sale, this is a very expensive subsidy.”
As suggested earlier in the week in my post “Will the Market Coming to a Screeching Halt on November 30th”there are a lot of factors at work in today’s housing market that suggest lower prices and lower interest rates have played a significant role in the recent upswing in sales in Northern Virginia.
If it is costing taxpayers $43,000 for every $8000 tax credit that isn’t a very good ROI.
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The US House of Representatives overwhelming voted to extend the first time home buyers credit for an additional 12 months to anyone in the military who has served overseas for three months in 2009. In a vote of 416 to zero the bill now has to go the US Senate and the President for final approval.
This extension could give up to 350,000 military families currently deployed overseas unitl November 2010 to take advantage of the current tax credit. In addition the IRS “recapture” rules will be waived for any service member who is deployed and must sell or rent their home.
Known as the Service Members Home Owners Tax Act this bill also contains the provision to waive the income tax liability currently in the expanded Department of Defense Homeowners Assistance Program.
The next step for this bill (HR 3590) is for the Senate Finance Committee to review the bill and hopefully move it to a vote in the full Senate.
This seems to be one time that the US Congress, Senate and President should be able to agree. Extending the tax credit for our military is the right thing to do no matter what your political beliefs.
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Will the Market Come to a Screeching Halt on November 30th ?
October 11th, 2009 Categories: Real Estate Ramblings
It is interesting to see article after article suggesting that the end of the tax credit will be the end of the warming real estate market in Northern Virginia.
Since the winter is normally the slow time for home sales, the fact that the tax credit ends at the same time seems to be suggesting a cause and effect that may not exist.
Certainly the tax credit has helped some buyers to move forward on a home purchases over the last few months but was it the primary reason for a first time buyer to put pen to paper?
How about prices that are back to a point where more buyers qualify for a loan?
What about interest rates that are at “historic lows?”
What about sellers who are willing to assist buyers with closing costs helping them keep money in their pockets?
Not everyone buying a home in Northern Virginia is a first time buyer. There are plenty of buyers across the market who don’t qualify for the $8000 tax credit who are buying homes.
It is to bad that the end of the credit is coming just before the holiday season. I can see the headlines now calling December and January the “darkest months for home sales in Northern Virginia history” or something similiar.
Lets see what happens in Q2 2010 if there isn’t another new incentive in place before we say that the tax credit was the only reason we had an upswing in home sales in 2009.
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This has nothing to do with Northern Virginia real estate. But I can’t be all real estate all of the time now can I?
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