Lending in today's market

August is traditionally a month of vacation and that's evident by my lack of posts! But Fall is about to begin and the market is starting to pick up. As I get ready to wade back into the market, let's talk about lending. It's the most important part of any deal.

One thing I wanted to address are the changes occurring in the lending market. A year ago, I had a client close on their condo with no down payment and a rate of 6.1%. Today, you must have a minimum of 10% down payment and the rates vary dramatically day to day. (Currently, the rate for a 30 year fixed rate loan is 6.4% and that's a drop from last week). Your credit has to be impeccable. There is no automatic underwriting.

Underwriting requirements are the rules that the lenders impose to make sure that the loan will be paid off. Before the current lending meltdown, if your credit was good, you were approved automatically and off you went to home ownership. As I noted earlier, a minimum of 10% down payment is required and some banks are implementing requirements of 20% down. Your credit needs to be in the 700's for a good rate and you have to fully document your income. There a no zero down loans anymore except from the Department of Veterans or VA loans. VA loans are the loans available only to veterans of the Armed Forces.

Another option available to new buyers is the FHA loans (Federal Housing Authority). Instead of 10% down, they allow a 3% down payment. This is the direction a lot of buyers in DC are going. There is one glaring problem with FHA loans: they're best with single family homes not condos. If the condo project isn't FHA approved, you can't use an FHA loan. A lot of the older building in DC are not FHA approved. What I am seeing in the market is a lot of the new condo projects getting FHA approval. For example, Madrigal Lofts and the Floridian are two new condo projects that recently received FHA approval.

My advice to a buyer is to talk to a lender ASAP! There's a lot of things happening in the lending world. You need to make sure you have the correct qualifications for a loan before you can make a purchase.

I'm on a roll!

This is what I'm talking about in my previous post. This is a photo of my friend Jennifer Landgraff's loft style condo. It was recently featured in the Washington Post Express in an article about loft living. Jennifer has a great eye for detail and for making her place stylish but comfortable. Notice the lack of porcelain dogs.

Photo by Abby Greenawalt. http://www.abbygreenawalt.com

Selling your property

In Saturday's Washington Post real estate section, there was an excellent article about sellers who are successful because they think like buyers. This is SOOOOO important! All sellers are emotionally attached to their places. In my own case, our condo is the first place my husband and I purchased. We were engaged when we bought it and it's where we'll reside for the first years of our marriage. It's SPECIAL. OK..not that special but it does have meaning to us. But none of our memories matter to a buyer. They're more interested in what they're going to change and how their furniture is going to fit into the space. They don't care if your favorite color is blue and that you're unable to throw away your collection of porcelain dogs. Buyers want what they see on HGTV and those other home shows. To help your property sell, throw away the knick knacks. Paint. Take down your photos. Clean up and hide the toys. Put an air freshener..PLEASE. Bad smells are a big turn off. Not everybody loves how Zazu's litter box smells. If you make it look like a spread in the Pottery Barn catalog, you're more likely to sell your place.

To read the article in the Post, http://www.washingtonpost.com/wp-dyn/content/article/2008/07/24/AR2008072403625.html

Pesky taxes!

Watch out real estate owners! The DC Council has voted to DOUBLE the tax rate on vacant properties. OUCH.

Starting in October 2008, the tax rate is going from $5 per $100 of the assessed value to $10 per $100 of the assessed value for vacant properties. (It still has to be approved by Fenty and Congress to become a permanent increase but STILL!) DC Gov implemented this "temporary" change early this year to increase it's coffers .

For the last several months, DC agents have been keeping a close eye on the legislation. Why do we care about this factoid? Because it can really mess up a closing! For example, if I'm representing any new construction condos, houses that have been renovated or sellers that have moved into their new property and are selling their old property, they can be hit with this vacancy tax. Non vacant properties are taxed at $.85 per $100 of the assessed value. That's a BIG difference. There are many exceptions to the rule BUT that means you have to gather paperwork and take the time to interact with DC Gov. Booo.

Check out the article from The Washington Business Journal: http://washington.bizjournals.com/washington/stories/2008/06/02/daily36.html?surround=lfn

The low ball offer

There's a great article today in the Real Estate section of the Post: "The Art of Lowballing": http://www.washingtonpost.com/wp-dyn/content/article/2008/05/30/AR2008053001502.html

I can't tell you how many of my clients have tried this tactic this year. It's a frustrating process for an agent because we know how it's going to be received by the seller...they're going to be pissed! It also might ruin the chances of the deal being successful. I think all buyers need to realize that the sellers are emotionally attached to their property. They love their place. That's why they bought it. That's why they are selling it for "x" amount. "Don't insult me by offering 100K less than the listing price."

Realistically, these offers are happening A LOT in this market. As I mentioned, I've written a few. Since I work with sellers and buyers, I know the emotions and logic behind the writing of the low ball offer and the rejecting of a low ball offer. It's tough to negotiate this type of situation on either side.

The article has several great points:
1. The low ball is NOT going to work in a popular neighborhood with a lot of competition. (Yep..that neighborhood is popular for a reason and they will laugh at your offer. Loudly.)
2. The low ball WILL work if the property has been on the market for a lot of days and the seller is becoming desperate. It will work with new construction projects in SOME instances.
3. If you're employing the low ball strategy, count on writing a number of offers before you're successful. And listen to your agent. We do actually know what we're talking about when it comes to these situations.

The Team

Yep..this is the Murphy Team. Aren't we a distinguished bunch? I joined the Murphy Team in 2006 and it was a very good decision. Tom, our fearless leader in the front, has been in the real estate business for over 25 years. He knows EVERYTHING. It's always nice to have that kind of guy in your corner.

The whole point of this blog is discuss what's happening in DC real estate market. If you read the newspaper, any respectable website or blog, you know there's considerable upheaval happening in the housing market. I've gotta admit..this year has been tough. Not one deal has been easy. Don't even get me started on the lenders. But more on that later.