VARbuzz » Scott Rogers

More people are moving into Virginia than out

Scott Rogers — Tue, 31 Jan 2012 03:24:18 +0000

In another positive sign for Virginia’s economy and thus housing market, there seem to be more people moving into Virgina than out of Virginia.

Of note, Virginia is one of only 9 states where this is the case!

Source: KCM Blog

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Buyers, keep a context for price in mind when making your super-low offer!

Scott Rogers — Tue, 13 Sep 2011 15:13:16 +0000

Perhaps it doesn’t always happen with such extreme price variations, but certainly you have had a seller who priced their home very competitively and then was shocked by an extremely low offer brought from someone locally.

How Do Virginians Heat Their Homes?

Scott Rogers — Mon, 11 Apr 2011 12:19:30 +0000

Have you ever wondered how Virginians heat their homes?

The Market Leaders Over Time: Coal… Oil… Electric

And for the graphically inclined….

Source: U.S. Census

Is Homeownership For Everyone?

Scott Rogers — Tue, 14 Dec 2010 20:57:41 +0000

Several decades ago (and earlier) home buyers would wait to purchase a home until they had at least 20% of the purchase price saved up in their bank account, and they would only buy if they were going to stay in the same home and town for many years. At the time, the percentage of homes that were owner-occupied hovered between 40% and 50% (U.S. Census Bureau).

Just a few short years ago, home buyers were buying with no down payment at all (or less), even if they planned to stay in the house for only a year or two. This led to an ever increasing homeownership rate, which peaked at 69.2% of families owning their home in the early 2000′s (U.S. Census Bureau).

Why the sudden change of pace? And what is a buyer to do today?

Many of today’s first time buyers are still buying with a very small down payment, and that can be o.k. Many loan programs are available with a small down payment, such as the FHA loan program which only requires a 3.5% down payment. The risk here is that a buyer doesn’t have too much built-in equity in case they need to sell sooner than they think. Purchasing a $100,000 house with a 96.5% FHA loan results in a $96,500 loan, which has only been paid down to $95,000 one year later. With such a small down payment, it can be difficult to re-sell the home in a short time frame without bringing cash to closing.

As becomes evident, the down payment and the length of ownership are quite intertwined. As shown above, a small down payment with a small length of ownership can be financially difficult. A small down payment with a longer length of ownership can work just fine. Conversely, a larger down payment provides security and makes even a small length of ownership feasible.

What may become clear here is that homeownership is not for everyone. Even if a buyer is making great money in their current job, if there is a strong chance they will need or want to leave the area in 12 or so months, it may not make sense for them to buy. But for those with good credit, a down payment of some sort, and a solid job that will keep them employed and in the same geographic area for the next 3, 4, 5, 6, 7 years – homeownership may be a very exciting option right now. With low interest rates, lots of homes on the market, and many sellers ready to negotiate, this can be a most opportune time for buyers to act.

Owning a home is a passive savings account of sorts, with money accruing as the principal of the mortgage is paid down each month. Owning a home also provides the ability to establish oneself in a neighborhood that may be a buyer’s home for years to come. Finally, owning a home provides the ability to invest time, energy and money into the place that you live that will provide a future resale benefit – as opposed to painting, re-modeling or otherwise improving a property when leasing it.

Now being excited about buying and thus owning a home, many might look around and realize that most local real estate markets aren’t booming right now. Is it wise to invest in real estate when the market, and prices are down? Many think that it is wise, given that buyers can fix their housing costs when prices are potentially the lowest that they’ll ever be, and when interest rates are potentially the lowest that they’ll ever be. In many ways, housing costs compared to what a buyer is purchasing couldn’t be much lower than they are right now.

Buying a home isn’t for everyone, but excellent housing opportunities abound for those who plan to stay in the same geographic area for the years to come.

Home values will ALWAYS and ONLY go UP!

Scott Rogers — Wed, 27 Oct 2010 05:54:03 +0000

Here’s an interesting report from NPR telling the story of an employee of Freddie Mac who manages an online calculator that has (intentionally or unintentionally) been telling web users that home values will only go up!

Read more from NPR: Housing Guy Apologizes For Housing Bubble

It is interesting — I do wish home values would only go up — and during most years values do increase. The last few years, however, have not held that promised increase in most parts of the Commonwealth.

Let’s take a look at what has been happening in the Central Shenandoah Valley….

First, value changes depend on the time horizon that you consider. In Harrisonburg and Rockingham County, home values decreased for 4 out of the past 10 years. That is to say that the first six years of the decade showed an increase (’01, ’02, ’03, ’04, ’05, ’06) but the most recent four years have shown a decrease (’07, ’08, ’09, ’10).

But here’s an interesting cumulative look at the value of a $200,000 home purchased in my market area in 2000:

2001: 9% increase to $218,000 (9% cumulative increase)
2002: 2% increase to $222,360 (11% cumulative increase)
2003: 8% increase to $240,149 (20% cumulative increase)
2004: 16% increase to $278,573 (39% cumulative increase)
2005: 24% increase to $345,430 (73% cumulative increase)
2006: 8% increase to $373,064 (87% cumulative increase)
2007: 1% decrease to $369,333 (85% cumulative increase)
2008: 4% decrease to $354,560 (77% cumulative increase)
2009: 5% decrease to $336,832 (68% cumulative increase)
2010: 3% decrease to $326,727 (63% cumulative increase)

Home values can certainly decline over the short term, and perhaps over the long term? Thus far, home prices are still quite solid over the 10 year horizon — showing a 63% increase. That said, 2006 through 2016 home values might tell a different story.

What are you seeing in your market?

Virginia’s New Home Warranty Doesn’t Apply If You Hire A Builder To Build On Your Own Building Lot

Scott Rogers — Mon, 11 Oct 2010 04:47:32 +0000

In Virginia, each newly constructed home must convey to the purchaser with a warranty from the builder, as outlined in the Virginia statute (55-70.1) entitled Implied warranties on new homes. In brief, the builder must warrant the construction of the house for one year, and the foundation for five years.

One important thing to note, however, is that this required warranty on new homes does not apply if you first buy a lot and then hire a builder. Here’s the first section of the statute that speaks to this:

“In every contract for the sale of a new dwelling, the vendor shall be held to warrant to the vendee that, at the time of the transfer of record title or the vendee’s taking possession, whichever occurs first, the dwelling with all its fixtures is, to the best of the actual knowledge of the vendor or his agents, sufficiently (i) free from structural defects, so as to pass without objection in the trade, and (ii) constructed in a workmanlike manner, so as to pass without objection in the trade.”

The issue, you’ll note above, is that if you hire a contractor to build a house on your own lot, you are not in a contract for the sale of a new dwelling. There will not be a conveyance of real estate — title will not transfer — you already own the real estate and are hiring someone to improve it.

From talking to a local real estate attorney, there are likely still construction quality expectations of builders of new homes when you have contracted with them to build on your own lot — but those are are not neatly summed up in a statute. They are, instead, a part of the “common law” — the aggregation of laws as defined by judges making rulings about such matters over the years.

Of note, the following statute likely applies in many cases where you hire a builder to build you a house:
http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+8.01-250

Coming In 2010: Standardized Good Faith Estimate AND Updated Settlement Statement (HUD-1)

Scott Rogers — Mon, 21 Dec 2009 05:46:57 +0000

The U.S. Department of Housing & Urban Development approved (some time ago) two updated forms that are CENTRAL to the real estate transaction. These two new forms will go into effect on January 1, 2010:

Good Faith Estimate (pdf)
HUD-1 Settlement Statement (pdf)

The new forms (and accompanying rules) are intended to help home buyers (who are obtaining mortgages) to better understand and compare their mortgage options. In theory, this will allow them to obtain better loan terms, lower interest rates, and lower settlement charges (closing costs).

The new Good Faith Estimate (GFE) is now a standard form across all lenders. In the past a borrower would receive a GFE with a different format from each lender that they visited — each having a slightly different set of disclosed loan terms, or vocabulary for referencing such terms. Now, a buyer can compare two proposed mortgage scenarios from two different lenders and be able to quickly and easily compare the exact same terms from each. I see this as a huge improvement for the financing process (for buyers), as in the past there has often been much confusion about how to determine which proposed loan program is better than the other.

Here is an excerpt from Page 1 of the new Good Faith Estimate, which (surprisingly?) is quite intelligible!

But there’s more! Beyond a buyer’s (borrower’s) loan terms and closing costs being easier to comparison shop, and easier to understand . . . there is also more accountability on the lender to make sure that those terms and costs stay intact through to closing.

Some of the costs CANNOT change from the Good Faith Estimate, others can only change by a certain percentage, and others that can change without limit. This is a big improvement from current HUD guidelines whereby there was no guarantee that any of the closing costs or loan terms from a Good Faith Estimate would be carried through to closing.

I believe the financing process will be much easier for buyers to navigate as we move through 2010!

So, what do we do, just wait?

Scott Rogers — Tue, 06 Oct 2009 21:03:35 +0000

I was chatting with a client today who asked me this question — “So….what do we do….just wait?” I am marketing this person’s property for sale, but their segment of the market is particularly slow right now, and we haven’t had much solid interest in their property in quite a few months.

So….what DO we do?

Many homeowners today likely feel this frustration — that there is only so much that can be done in trying to sell their property — and that at the end, they are just left waiting. Some homeowners, in fact, go months without a single showing of their home. It’s easy to be discouraged in times when it seems like all you can do is wait, and while I won’t try to cheer you up or encourage you that “it will all be ok”, I will offer a few suggestions of things you CAN do if you find yourself just waiting:

Stay connected to the market so that you know how the value of your property is being affected by competing listings and properties that have recently sold.
Consider touring some of the competing listings to see how they compare to your home — and even if you don’t visit the properties, at least come to understand them on paper to best prepare your property be competitive.
Is there a small subset of Realtors who typically represent buyers of your property type or properties in the area where you live? Perhaps a targeted e-mail or direct mail campaign to these Realtors could be effective.
Keep your pricing competitive, but know that if you lower your price below all other competing properties, many of them will likely follow suit and you’ll all be dropping and dropping to try to be the lowest price on the block.
Consider alternatives to selling, such as a house swap, renting your house, or other creative ways to address your transition needs.

These are but a few things to consider if you find yourself in waiting mode as a hopeful property seller. There are certainly many other marketing activities and strategies that could (and should) be explored, but many of them will vary depending on the nature of your particular property.

And to circle back around to answer the original question more simply, no, we don’t “just wait.” It is vital to be constantly re-evaluating the pricing and marketing of a property to most aggressively and proactively expose it to potentially interested buyers.

Don’t get depressed waiting — get busy brainstorming ways to actively market your property!

Fannie Mae empowers real estate investors!

Scott Rogers — Wed, 18 Feb 2009 03:42:52 +0000

Fannie Mae‘s current policies don’t allow an investor to finance any more than four properties backed by Fannie Mae. Thus, if you own the home you live in, you could only purchase three additional properties as an investment. This has directly affected several of my clients who have had to stand on the sidelines, or seek a commercial loan as they considered recent investment purchases.

THE GOOD NEWS — effective March 1, 2009, an investor will now be able to finance up to 10 properties through Fannie Mae!

Fannie Mae does, however, put some rather significant limitations on this new policy. This summary is my interpretation of the new policy, but I encourage you to talk to read the policy yourself as well:

The highest loan-to-value ratio will be 70%.
The borrower must have a minimum credit score of 720.
No bankruptcy/foreclosure during the past 7 years.
No mortgage delinquencies (30+ days) in the past 12 months.
Rental income on proposed and current properties must be documented.
Reserves must be shown for the proposed and current properties.

Again, these changes won’t go into effect until March 1, 2009, but if you meet the criteria listed above, you’ll soon have significantly greater financing options on investment purchases. This is great news for the investors who have keyed in on good opportunities in our market but who have been called back to the sidelines due to this financing restriction.

How many EarthCraft Homes are being built in your market?

Scott Rogers — Wed, 05 Nov 2008 20:29:52 +0000

Have you heard of an EarthCraft home?

EarthCraft Virginia provides a new construction certification process that serves as a blueprint for healthy, comfortable homes that reduces utility bills and protects the environment.

More specifically, EarthCraft promotes diligent airsealing and energy efficiency. Airsealing of the building envelope and its mechanical systems, while still allowing for fresh air intake, provides a tighter building envelope at little additional cost. There is less communication of air and sound between units and better indoor air quality through the use of managed fresh-air intakes. Thus, projects are more energy efficient, less costly to occupy, and more durable overall.

EarthCraft homes also make use of EnergyStar appliances.

How many EarthCraft homes are on the market in your area?

From a rudimentary search in the Harrisonburg/Rockingham Association of Realtors MLS, I’m finding 32 properties built to EarthCraft standards. That is 4% of our current inventory of 866 properties, and 15% of our new construction inventory of 210 properties.

Are you seeing more or less EarthCraft homes in your area?