Courtney Donato-Griffiths

As the big debate on the state of the housing market continues consumer confidence is still struggling. National and regional statistics seem to offer conflicting views on whether prices have stabilized and low inventory is adding additional challenges to those searching for the perfect home. Amongst all of these erratic factors there is one thing that everyone does seem to agree on….rates are extremely low and are certain to only increase as our hopeful recovery continues.

Buyers who are sitting on the fence should definitely be aware of a few factors that could affect their financing should they continue to wait out the market.

First of all, for those looking to move up with less cash to put down you should be thinking about the impending decrease of conforming loan limits. Currently Montgomery County residents have the luxury of a $729,750 conforming loan limit, but this is due to expire September 30, 2011. Prospective buyers in need of this product will have to settle on their new home by this date.

Secondly, for those trying to time the interest rate market to hit bottom (since rates are fluctuating nearly daily) you will need to have the investment intuition of Warren Buffet. To simplify, homebuyers need to realize that the rates they see advertised at “all time lows” are generally days old following a stock market crash and before a buyout begins. Don’t wait for stability in rates to find your perfect home because rates change constantly. It is much better to line up your financing and let your lender evaluate when to lock your rate.

Another advantage that home buyers have in our current lending market is that there are a number of different products and regulations. Coming off of years of “vanilla only” lending we are finally starting to see some differences in what the banks and investors will find desirable. Don’t get overly confident, there are still no miracle products and things are very conservative (as they should be), but there is hope for consumers with little money down and those with less than perfect credit. In my recent conversations with various lenders I am hearing of several grants that require nearly nothing from a first time home buyer, and also mortgages available for those who have needed to short sell their home within the last 2 years. Understanding that every case is unique and buyers must still be well qualified with good debt to income ratios, I am only pointing out that the lending market is not really as tight as most people believe.

With housing affordability still near peak performance and rates and prices low the current buying market really is extremely desirable for those in need of a new home. Yes, the economy is still struggling and certain parts of the country are still in decline, but I do truly believe that many potential home buyers who opt not to move forward will look back on this time with regret. Especially when they are facing the probability of 6% interest rates in the near future.

There is no question that in today's real estate market every buyer is looking for the best possible deal. Every day I get requests from clients asking about whether a short sale or bank owned property is right for them. It is not something that can easily be answered without understanding the motivation and resources of a buyer. Each type of transaction has both positive and negative sides and often times my clients are best off with a regular purchase. Here are a few keys to navigating the market of short sales/foreclosures and questions a buyer should ask themselves before embarking on this journey.

Questions a buyer must address first:

•1. What is my time frame for moving?

If you need to be in a home by a certain date then I would avoid the short sale market. Before the tax credit was extended a number of first time home buyers nearly found themselves short $8K by having faith that their short sale would close in a timely fashion. Bank sales can usually close quickly, but often times title issues can delay the process a few weeks.

•2. Can I pay cash or do I need to finance the home?

When it comes to bank owned properties cash is king. Banks do not want to risk the details associated with getting a loan to finance their property. This does not mean that it is impossible to purchase a bank owned home with a loan, it just means you will have to be prepared to pay more for it to encourage the bank to accept your offer contingent on financing.

•3. How much money am I willing to put into the home after purchase?

Both bank owned properties and short sales can be in less than perfect condition. Furthermore, they are usually sold in "as is" condition. This means that there will be little or no negotiation of repair items after home inspections. Each house is different, but if you are strapped for cash after your home purchase this may not be the right avenue for you.

•4. Am I willing to compete for the home?

One of the most difficult things to explain to a buyer looking to purchase a bank owned home is that they will most likely have to overbid on the price. Buyers who are looking to get a great deal on a foreclosed property struggle with this concept. However, the banks usually price the property well below market to encourage many buyers. Often times there are bidding wars and property sale prices escalate substantially. I would not look to purchase a bank owned property that is listed at the top of your price range unless it has been on the market for more than 3 weeks.

What are the Advantages/Disadvantages of a Short Sale?

•· If you are willing to wait, you can get a decent price on a short sale. Realize that the bank is looking to minimize the loss, not give the property away though. Your offer must be in line with comparable short sales in the neighborhood. If your market is still declining it may be difficult to get the banks to make these adjustments.

•· These days there is less competition for short sales. When the short sale market was new everyone wanted to purchase one. Now, many buyers have been burned by the lengthy process and uncertainty of the outcome and stay far away from short sales.

•· There are attorneys who will specialize in getting your short sale through....for a fee. I would look to work with agents who are experienced in short sales or insist that the deal be professionally negotiated by an attorney. This will increase your chances of success.

•· If a short sale is approved, but the previous buyer has backed out then you are aware of the price that the bank will take. However, if you try to negotiate further the process starts all over again.

•· There is still a relatively low percentage of short sales that close successfully. In some markets only 10% ever reach the closing table. Know your market and get professional advice.

•· A full offer price means nothing. Even if you offer full list price on the contract there is no guarantee that the bank will not ask for more money. The list prices are determined by the seller/agent and have not been approved by the bank(s) holding the lien(s).

•· Alert!!! If you are planning on buying a short sale condo then check for additional liens such as back condo fees. Many properties have additional delinquencies beyond the mortgage and all liens must be released prior to closing...not just the mortgages

What are the Advantages/Disadvantages of a Foreclosed Property?

•· Banks are not in the business of owning homes. They will price the property below market value to get a quick sale.

•· Different from a short sale, the bank owns the house already and the list price is an accurate assessment of what they will accept for a home.

•· Banks will allow for inspections periods and financing contingencies (as will short sales, but they are more difficult to time). A buyer will have sufficient time to determine whether the condition of the property is acceptable.

•· Banks will often offer discounts on title work for using their attorneys to complete the sale. Do not be late to closing though...they will charge a per Diem fee if you are late to settlement. However, there is no fee for them delaying the process.

•· Bank properties are often in very poor condition and have been vacant for a long time. The foreclosure process takes months and the property has not been lived in during this time. Some items are not even discovered during inspections since the appliances/water pipes/toilets have not been in use. Some bank owned properties will not even qualify for financing due to condition.

•· Be prepared to compete with investors and cash offers. Don't come in too low and when the bank calls for "final and best offer" use this as an opportunity to increase your bid. You must be willing to play the game if you are going to purchase a bank owned home

If your main priority as a buyer is to get a great deal and take advantage of the market, then short sales and bank sales may be the right option for you. However, if you are a nervous first time buyer with limited resources or a buyer looking to move in a certain amount of time then I would seriously think about other options. One of the unique aspects of our market is that everyone (regular sellers included) are competing with these types of properties. Of course, normal sales will still bring higher dollar and this is because buyers have an element of certainty and reassurance when purchasing directly from a home owner.

It is a bit ironic that I am writing this after an ‘on time' closing this evening....only the second one of the year though. One of the biggest changes I have noticed in the last year is that sellers and buyers have really needed to be flexible when it comes near closing time.

Lately it has seemed that the date stated on the contract is hardly ever the actual closing date. It has not been uncommon for the actual closing to happen a day or even weeks later. Despite our pleas to our clients to remain flexible, when things change (and always last minute) everyone is inconvenienced.

So as I marveled at my perfect closing today (and thanked my lender a thousand times, feel free to ask for his name), I wondered when did the real estate professionals start looking at a closing date as an estimated time. I always prepare my buyers and sellers alike that things can happen and often there are last minute items that can delay closing. This is just part of managing expectations, but when a settlement is delayed then so many parties are inconvenienced. Buyers and sellers take time off work to sign the paperwork, agents and attorneys are left shuffling already full schedules and heaven forbid there is a coinciding settlement....a total disaster.

So we are left asking why is this becoming the norm? In all honesty it not always the lenders fault. I have personally had settlements delayed for many reasons: inspection items not addressed, title issues, travel/work plans and of course...funds not arriving on time.

We can all agree that stricter lending practices contribute to many of the delays. Appraisal issues not getting resolved until the last minute are probably second on the list. Title defects (with bank owned properties not having signed paperwork, multiple owners in complicated LLC's for investors) are also near the top of the list as well. Here are some of my suggestions on how to avoid many of these issues.

•· Work only with reputable lenders. I know we have all heard this before, but ask your Realtor. They close more deals than your friend who bought a house 3 years ago. That was an entirely different era and believe me, the only thing Realtors want is a deal that closes.

•· Work only with knowledgeable Realtors. Much of the work we do is after we stop driving you around to view properties or holding your house open. Good Realtors know what questions to ask of lenders, appraisers, title attorneys, etc. Good realtors should follow up with all parties weekly and have status reports frequently. We also are on top of our contingency periods and should not miss deadlines.

•· Have the appraisal ordered right away. It used to be ok to wait until after home inspection. After all, who wants to spend money on an appraisal if the inspection doesn't look good. However, these days it can take a week or two to get an appraisal back after it is ordered. If it comes in too low then it is back to the negotiating table and loan processing stops.

•· Get your lender whatever they ask for within 24 hours. Most lender will give you a list of documents they know they will need. Others may come up at the last minute. Do not delay when they ask you for something because the entire package needs to go to underwriting.

•· If you are buying a home, be frugal with your money until after closing. It's a little secret not many consumers know about, but the bank will most likely pull your credit right before closing. Think that shopping spree on your credit card is not a big deal, think again....you may have just altered your debt/income ratio. No major purchases until you buy the house.

•· Disclose any tax issues up front. If you have not filed your taxes or owe money the bank will find out and it will be a problem. It's called a 4506-t and it has caused many deals to fall through.

•· All parties need to be honest. Chances are if you are hiding something it will come out. This goes for sellers, buyers, Realtors and lenders. Bad news must be delivered immediately. Maybe there is a fix that one of the other parties involved can help with. Nothing will frustrate everyone more than a "last minute issue". Especially if they believed it should have been picked up on or disclosed earlier.

Hopefully as we get used to this new market we will be able to iron out the wrinkles and close on time...most of the time. Until then Realtors need to counsel your clients early on that "things can happen". Buyers and sellers need to understand that some flexibility may be necessary when it comes to closing dates. Every party involved truly wants to close on time, as delays cause huge inconveniences. Above all else professionals need to remember to act in businesslike manners at all times. Screaming at lenders, attorneys, processors and the other agent will only put a sour taste in the mouth of everyone....including the client's.

Well I guess it would depend on who you ask and whether they are a purchaser or are listing their home. In Montgomery County it also depends on where you live or are looking to buy.

Bethesda and Chevy Chase are leaning towards a strong sellers market due to lack of inventory and relatively low prices. Low interest rates are helping their situation as well. Other areas such as East Silver Spring and Clarksburg may disagree though. Many of these homes are still underwater and short sales/bank sales are prevalent.

Poor buyers who have specific needs may be having a difficult time filling their requirements. Although inventory has dramatically picked up in the last two weeks, there are still few exceptional houses in some areas of the county. Buyers for homes in certain areas can find themselves competing with multiple offers and escalation clauses. However, some sellers may be wondering where any offer is in their neighborhood.

Sellers will believe it's a seller's market and buyers believe it's a buyer's market. How do we bridge the gap? It seems to be getting increasingly more difficult to get both sides to agree on value. Both want the best deal and misperceptions can add to the interference.

What we have is in fact a normal market with certain pockets in our county leaning more toward one end than the other. In times like this it is crucially important to evaluate the long term goals of our sellers and buyers. For those looking to move up into larger homes this is a great time to commit to the sale of your current home and take advantage of a lower price on your new one. Have realistic expectations in regards to your offers on your new home and think about what potential buyers may present you with on your current home. Those looking to purchase for the first time need to focus on investing in an asset that is sure to appreciate and take advantage of some excellent incentives. Sellers who have owned their homes for more than ten years have already made (and lost some) of their profit and should be thankful that they can move on without being upside down.

I suppose that the point I am trying to make is that those entering or revisiting the real estate market in 2010 need to have a longer term plan. Unless you are a savvy investor there will be no more quick turnovers for substantial profit. However, there will also be less risk of depreciation than in the previous few years. Stay logical and realistic and you will be a happy homeowner or seller. Personally I have never had a client tell me five years down the line that they feel that they overpaid (or under-received) five thousand dollars. Homeownership is about lifestyle and realizing a dream...not about nickel and diming.

Want to live near DC but undecided about where to locate in Maryland or Virginia? Montgomery County, Maryland has a lot of similarities to Fairfax County, located across the border in the state of Virginia.

These two communities are often compared and advertise themselves as the "best place to live" in the Washington, D.C. area. What's the better location? A recent report from the Office of Legislative Oversight compares these two counties as being very similar. Both are pleasant upscale communities with a enthusiastic population of supporters. So how do they compare?

Population

Montgomery has fewer residents which equates to more space for its residents and less congestion. 1,015,302 people live in Fairfax, 950,680 live in Montgomery.

Land

Montgomery County is larger than Fairfax Country-497 square miles compared to 395 square miles. It also uses its land differently than Fairfax with a higher percentage (38% to 15%) of parks and open land. Both are lovely but if you like less congestion and more green space, Montgomery County has the edge.

Income

Both counties have similar incomes. Residents in Fairfax County make on average $67,909 and Montgomery County residents average $67,525. Not much difference here!

Expenditures per Resident

Montgomery County spends more on its residents per capita. Montgomery spends $4,706 per resident while Fairfax only spends $4,316. City services are pretty good in both places.

Economic Factors

There is a higher amount of homeless people in Fairfax County. Fairfax reports there are 181 people homeless for every 100,000 people and in Montgomery there are 121 people homeless per 100,000 people. Both communities reach out to its disadvantage citizens.

The foreclosure rate is higher in Fairfax County. The foreclosure rate in Fairfax is 3.3% and only 2.4% in Montgomery.

Taxes

Property and business property taxes are lower in Montgomery County, ranging from $0.975 to $2.835 per $100 in assessed value as opposed to $1.066 to $1.443 per $100 in Fairfax County. If you are starting a business, Montgomery County has the edge.

Commute Time

Both areas experience congestion and long commutes. The average commute time from Fairfax is 30.5 minutes, the average from Montgomery is 32.9 minutes. Here's the killer. A half hour doesn't sound like much but the drive can be intense. If you already have a job, drive the route to both locations to help you zero in your search for a home.

Given that both of these counties are very similar and continue to compete as the best place to live, a lot of what is "best" is subjective. The bottom line is living in Montgomery County is similar to living in Fairfax County--you just get more green space. Your best choice depends on what's convenient to your job and how you like the area.

Need some good resources to help you decide? Aside from the websites for Montgomery and Fairfax Counties, a handy online forum can offer responses to your questions from others who have lived in the area.

Courtney Donato-Griffiths can also show your the perfect house in Potomac, Gaithersburg, Rockville, Kensington, Bethesda, or other Montgomery County locations and is ready to discuss all the scenarios of the new home buyer's credit and current interest rates with you. Whether you are buying a Montgomery County home or selling one, Courtney is your local Montgomery County specialist.