Jana Schmidt

So the real estate news is starting to show signs of life. Headlines across the country are touting great news such as; the bottom is here, that foreclosures are stabilizing in key areas and signs that the end of the recession is near.

Alan Pope & Associates are reporting that here locally over 22% of the homes on the market are being absorbed by the market and Quadrant Homes is planning to step up construction for the first time since the real estate downturn.

So buyers in the market are finding, it's like picking through the last bin of the clearance bin, the really good deals in the lower price range (under $350,000 in South King County) and the new home options are fewer and further between.

So are there any deals left? Yes, the luxury home market is where the real deals are.

Now that we know that flipping properties should be left to those that can afford the risk and a home should be bought for what works for yourself and/or your family, it is my opinion that there has never been a better time to buy a luxury home. Why? Because in real estate it's all about percentages.

Let's look at a luxury home development, The Reserve at Newcastle. This neighborhood saw its first home built in 2004. If we look at the sales in the Reserve for the first 6 months of 2007, which was arguable, the peak of the market, we see a median home price of $1,862,995 versus a medium home price of $1,252,500 in the first 6 months of 2009, that's a savings of 33% or $610,495.

One of the homes that I am selling in the Reserve was purchased in 2005 for over $1,415,000 and upgrades well over $200,000 for a total purchase price in excess of $1,615,000. Today it's on the market at $1,350,000, over a quarter million dollars in savings.

And an even stronger argument for today's luxury home buyer is that the inventory today will be unique in what to expect from home builders in the very near and distant future. It is doubtful a builder will expose themselves to the luxury market without a non-refundable cash deposit before construction even begins.

The features that made the homes built between 2003 and 2008 will become a moment in history unlikely to be recreated on a grand scale and certainly luxury neighborhoods will be isolated to this moment in time. From beautifully landscaped yards, to high end millwork and scrollwork, to superb architecture and design, these features will be replaced with dense housing and energy conscience elements.

So if you are looking for a luxury home, this is still your time. The selection is vast, the prices are unbelievable, and the mortgage rates can be very attractive.

If you would like to know more about any luxury home or neigborhood, just give me a call at 425-432-9430 or visit my website.

Thanks,

Jana

I bought my first home in 1992. When I bought my home I was warned of two things, #1) don't buy it unless you are going to live it in for five years and #2) be prepared for the mortgage company to look at every hair on your body with a microscope.

Now I can't believe how long ago that has been and today I find myself reminding myself of that experience when working with both buyers and sellers. Buyers get it #1; real estate is a long term investment. The difficulty I find is that so many of my clients are making very subliminal decisions based on unconscious assumptions that the mortgage or refinance process is going to be easy based on recent experience.

At GMAC, I learned the three golden things that are looked at when a loan officer considers a loan approval. #1) the borrowers desire to pay, this is illustrated via a credit report and an established history of good credit practices like making your payments on time and not overextending yourself by maxing your lines of credit out. #2) the borrower's ability to pay, what is the debt to income ration, can the borrower afford what they are about to borrow? And finally #3) the condition of the collateral, is it worth securing the loan? Can the bank sell it at a profit if the borrower defaults and the collateral is reposed or foreclosed?

If you are thinking about taking a loan out for a home purchase or refinancing, these are the things you need to know in the way it relates to the credit crunch of today's mortgage market.

#1) a good credit score (also known as a FICO score) is essential. If you have questions about your credit score or would like to know how you can improve your credit score, check out this helpful site: http://www.myfico.com/CreditEducation/CreditScores.aspx it's a good idea to know what your score is before talking to mortgage brokers. That way you can tell them your score and save the hassle of running your credit report until you've decided that you want to work with that mortgage broker.

#2) your ability to pay. It's easy to determine your debt to income ratio, first add up all your monthly recurring debt like car payments and minimum credit card balances. Next add the amount of your desired new house payment. Separately add up all your household income (to include your spouse if you are married). Divide your total monthly debt by your gross monthly income to determine your ratios. See the example:

It's also a good idea to know what your ratios are before talking to mortgage brokers. And as you share with your mortgage broker what your ratios are, they can start giving you sound advice based on your individual situation.

#3) The collateral. In real estate, banks use appraisers to determine value. And today, it's likely in King County that you're appraisal is going to be much lower than you would like or expect. Also be prepared that the loan underwriter may ask for repairs be done on the home prior to giving final loan approval and if they question the value, it's not uncommon anymore in real estate to see a second appraisal ordered.

So where to start? First learn your credit score, determine your debt to income ratios and then call your mortgage broker to advise you on your particular situation. As always, if you need a good recommendation for the Renton area, please let me know.

Jana

http://www.janaschmidt.com

This weekend a good friend of mine asked my opinion on whether or not I thought Lease Options (sometimes referred to as lease-to -own or rent-to-own) were a good idea, and of course the answer is, depends. The question was dove tailed with another call where I actually recommended a lease option route to a buyer client of mine.

The first recommendation when it comes to lease options is to get a professional involved. I would recommend an experienced agent and a real estate attorney as these agreements can be complicated and possibly a tax professional.

The second comment, look at the reason why you are looking at a lease option. Typically, there is some reason that a buyer needs time before actually taking title to a home. It could be that the buyer is repairing their credit, waiting for an inheritance or some other type of lump sum of cash or perhaps rearranging debt by refinancing existing mortgages into lower rates before taking a new mortgage debt on.

Here are just a few advantages to a lease option or lease to own can include all of the following:

•1. Negotiate today's price if you feel that prices will rise before your purchase

•2. Buy time to take care of other obligations

•3. Avoid moving twice while waiting for the sale of your current home

And now for a few disadvantages to a lease option,

•1. Smaller selection of homes to choose from

•2. These terms typically allow the seller a higher purchase price or sell a property with red flags (see earlier blog on red flag checklist)

•3. You might lose out on today's really great interest rates

•4. You will typically pay for the option up front and that money is non-refundable if you don't exercise your option.

To illustrate item number 2 on the disadvantage list, today out of 639 homes available for sale through the NWMLS in Renton, only 6 are offering a lease purchase option and of those 6 the average days on market is 269 days versus average days on market of 127 for all the available homes in Renton.

In today's market, it's hard to argue for a lease option to most buyers. There are too many advantages for buyers who choose to make a purchase. The low low interest rates being offered see https://www.wellsfargo.com/mortgage/rates/ the first time buyer tax credit http://www.johnlscott.com/information-johnlscott-1.aspx and the huge selection of inventory to choose from, see http://janaschmidt.com/ . Please do be careful not to procrastinate, like any good sale, the best choices go first. And the real estate market is no exception.

Thanks,
Jana