If you own real estate on Lummi Island, Lake Whatcom, SuddenValley, Geneva or south of Lakeway Drive in Bellingham, you recently received a notice from the Whatcom County Assessor that your property is worth more than it used to be. Since real estate in these areas was last assessed prior to 4 years of rising real estate prices, it's not surprising that the Assessor says it is worth more today than it was in 2004. On the other hand, for the last few months you have been reading that real estate values in Bellingham and Whatcom County are falling, so why has your taxable value gone up 50%, 60%, 70% or more? The next big question is - does that mean your taxes will go up by the same percentage? And the last question is - what can you do about it?
Let's start with the Why. The law requires counties to determine the "market value" of real estate on a regular basis for the purpose of levying taxes. In Whatcom County, ¼ of the county is assessed every year. This system means that if there have been major market shifts, the changes can be huge over a 4 year period. But values have gone down over the past year, right? Perhaps. Generally speaking, homes in the upper ranges and raw land have dropped over the past year. Have they dropped to 2005 levels? In some cases, yes. On the other hand, homes in the lower price ranges, particularly in some areas, may have maintained their gains. The number of homes sold has also dropped over the past year, giving assessors fewer choices of comparable sales for real estate that is somewhat atypical.
Next Question: How much will your taxes increase? At this point, no one knows. Taxes for things like bond issues, which are for specific amounts, will not increase as assessed value rises. The percentage collected will change so that the same amount is collected based on the new total assessed value of all real estate in Whatcom County. The general fund taxes are a bit more complicated. Counties are limited as to how much additional property tax they can collect in any year over the year before, not counting the additional taxes gathered from new construction and development. Theoretically, actual taxes should go up considerably less than assessed valuse, but my experience is that a jump in one typically brings a jump in the other.
Last Question: What can you do about it? You can appeal, and if you can show that comparable property sales do not support the new assessed value, it can be reduced. The first step is to call the Whatcom County Assessor's office at 360-676-6790. If the assessor's analysis of your property is incorrect, they may be able to resolve it immediately. If they can't help, you need to file an appeal petition with the Board of Equalization. Appeals must be filed on forms available at either the Whatcom County Council office or the County Assessor's office, both in the courthouse at 311 Grand Ave in Bellingham. Appeals must be filed no later than July 1 of this year or within 30 days of the date on the change of assessment notice. They must be returned to the County Council office - a phone call or letter does not constitute filing an appeal. You will be notified when your hearing date is set.
I have successfully argued before the Board and been granted a roll back in assessed value of a property. The key is to provide the Board with the tools they need to make the decision you want. They do not have the power to reduce the assessment for any reason other than evidence of real estate values which would support the value you are claiming. Comparable sales are the best because value was established by the sale. Evidence of real estate comparable to yours that is currently listed at a lower price than your assessed value could also be of help. Comparable properties need to be as close to yours geographically and in basic characteristics as possible. Your evidence needs to be in writing and to the Board at least 5 days before your hearing so that they have a chance to review it (it can be submitted separately from your appeal petition). This will be much more effective than just showing up and telling them all about it.
The Whatcom County Assessor's office has an excellent website at http://www.co.whatcom.wa.us/assessor/. It has complete instructions on how to go through the appeal process as well as explanations of how assessment values are established and taxes are determined. If you need information on properties currently for sale or sold, go to our website at www.JohnsonTeamRealEstate.com, choose Recent Home Sales, and map your neighborhood. There is even a calculator that will estimate the value of your property if you enter the address. If you still need some help in deciding whether to appeal or in putting it together, don't hesitate to contact us at info@JohnsonTeamRealEstate.com or 360-527-8766. We'll do anything we can to help.
The current Bellingham/Whatcom County housing climate has created crisis for some homeowners and opportunity for some home buyers. As in any time of instability, there is the potential for risk on both sides. The first step to managing risk is to know the terms; the second step is to have some knowledge of the process; the third step is to have some knowledge of the potential pitfalls.
Short sale and foreclosure are terms we are hearing a lot recently in discussions of the Bellingham and Whatcom County real estate market, and many people use them incorrectly, which gets everybody mixed up. Let's try to make some sense of all this...but to do that we need to add a few additional terms. We'll talk about equity, default, distressed properties, bank-owned, REO and foreclosed. Don't worry, it really isn't all that hard once you know the vocabulary.
Let's start by defining the basic terms:
•· Equity - The amount left over after you sell your house and pay off all the liens (think mortgage, taxes, etc) and costs of sale (think real estate commission, repairs to sell, Washington State and Whatcom County excise taxes, title insurance for the buyer, escrow or attorney fees, etc). Many sellers forget about the costs of sale when calculating their potential equity, which is why you should always get a "net sheet" from your real estate agent. Note: an appraisal, a listing price, an estimate of value allow you to calculate only "potential" equity - you don't know how much you really have until the check is in the bank.
•· Short Sale - A sale in which there is negative equity. In other words, the sale price does not cover all the liens and costs of sale, so the seller must bring money to the table to close. If the seller can't or won't add money to close the transaction, (s)he may ask the lender to take less than is owed. The seller cannot sell under this circumstance unless the lender agrees, because the seller cannot provide clear title to the buyer. Note: whether the seller is or is not current on the loan payments has nothing to do with whether a sale is "short".
•· Default - A borrower (property owner) is in default when they have violated the terms under which they agreed to pay back their loan. Typically, this means they are at least 30 days past due on a payment. At this point they will most likely get a call from their lender or a written Notice of Default. It is very foolish to ignore these. Note: a seller in default can have a huge potential equity or none at all.
•· Distressed Property - An owner's primary residence which is in the foreclosure process or in danger of foreclosure because the owner 1) has defaulted on the mortgage; 2) is at least 30 days delinquent on the mortgage; 3) believes that they are likely to default on the mortgage within 4 months or 4) at risk of loss due to nonpayment of taxes. This is fully defined under RCW 61.34 and holds pitfalls and additional responsibilities for buyers who offer to help a seller avoid foreclosure. This is a Washington State consumer protection law and penalties are steep.
•· Foreclosure - The process between the Notice of Default and the auction on the steps of the courthouse. After default, fees & penalties are assessed and the interest rate jumps to the "default rate" as specified in the promissory note that the seller signed when they borrowed the money. During the early part of this process the seller can "bring the loan current" by making all past due payments plus extra interest, penalties, etc. The time comes, however, when a seller's only option is to pay off the amount owed (which at that point has grown substantially due to the extra fees). This can be done by refinancing the loan (but by this time they probably can't qualify) or selling the house. The seller does not need permission from the lender to sell, so long as there is sufficient equity to pay all liens and costs. Remember, a seller can be in the foreclosure process but still have equity in the house.
•· Foreclosure Sale - The final step in the foreclosure process, when the house is put up for auction on the steps of the courthouse and is purchased, usually by the lender, but potentially by anyone. The details of foreclosure sales are an article in themselves (there a number of books available on the subject), so we won't go into them here. Suffice it to say that when it is over, the borrower no longer owns the house and has a period of time to vacate.
•· Bank Owned, REO (real-estate owned), Foreclosed - These 3 terms all mean the same thing: the foreclosure process is over and the bank (or whoever bought it at the auction) owns the house.
As you can probably tell by now, the primary confusion arises because people often refer to a home at any point in this process as "a foreclosure". What we have just seen is that the conditions which govern what can happen to that home at various times in the process are very different, which means that the impacts on a homeowner and a buyer are very different.
Let's Look First at the Homeowner
The steps and time frames through the foreclosure process are defined by Washington State law, with a typical time frame between default and foreclosure sale of around 6 months. It is to a homeowner's advantage to renegotiate their loan or sell the house rather than have the bank foreclose, and they have a considerable amount of time to explore their options. For the purposes of this article, suffice it to say that getting into any of the positions described above has a negative impact on a homeowner's credit score, but the earlier in the above list that one acts, the less the impact on both credit score and overall financial situation. The absolute worst thing a homeowner can do is to pretend that they don't have a problem. The absolute best is to take action when they think they see a problem coming.
Homeowners sometimes have the attitude that they are going to lose the house and will never be able to buy another one anyway, so what difference does it make if their credit score is bad? Tragically, they are failing to think about how many aspects of their lives are influenced by their credit score, from renting an apartment to the amount of utility deposit required to the amount they pay for insurance - not to mention what happens when they need to buy a new car.
Losing one's home, or being forced to sell it is a tragedy, but a homeowner does have some control over the amount of the damage. Particularly in recent weeks, the possibility has increased that a bank will work with a borrower who is in trouble. The key is to contact them early.
How Does All this Affect a Buyer?
The impact on a buyer depends on what point in the process (s)he enters the picture. Note that the scenarios described below make the assumption that the terms of an agreement include those in forms provided by the Northwest Multiple Listing Service.
In a short sale situation, whether prior to the seller going into default or after, the buyer will be negotiating with the homeowner. However, the homeowner will be able to perform only if the lender agrees to the terms of the sale, meaning any agreement will be conditioned upon the lender's approval. This means there could be as much as a 4 month wait between agreement between buyer and seller and confirmation from the lender. This means that often a buyer must spend money on inspections and loan fees without knowing that they will be able to buy the house or what the ultimate interest rate will be on their loan.
If a house is in default and is therefore in the foreclosure process, but the seller has equity at the purchase price, there is no impact on the buyer. All liens will be paid from the seller's proceeds at closing and clear title will transfer to the buyer. The one exception to this is if the closing date falls within 20 days of a scheduled foreclosure sale. In that case, in the State of Washington, the buyer has a legal responsibility to consider the seller's interests above their own. It is critical that they talk with an attorney prior to entering into such an agreement.
If a house has been foreclosed upon, the lender (or other person who bought it at the foreclosure sale) is the owner. There are a couple of oddities in buying a foreclosed home:
•· Typically, a foreclosed home being sold by someone other than the lender is not eligible for a conventional loan within 90 days of the foreclosure sale.
•· Lender owners often have special addenda which they require to be included in any purchase and sale agreement.
•· Owners of foreclosed properties are required to provide the Washington State mandated disclosure form.
•· The deed given by a lender will not usually be a Warranty Deed, but title insurance will be provided for a buyer.
For the most part there is little impact on the buyer.
Summary
Hopefully we have given you a better understanding of the terms, the process and the potential pitfalls involved in buying and selling Bellingham & Whatcom County properties impacted by current problems in the credit markets. If you have more specific questions or need additional resources, don't hesitate to contact us at www.JohnsonTeamRealEstate.com for help.
Thanks to Gary Tice of Fairhaven Mortgage for reviewing this information for accuracy. Any errors, of course, are ours. If you would like to discuss financing or refinancing options, you can reach Gary at 360-224-1492 or gary@fairhavenmortgage.com.
The Central Business District in Bellingham, Washington is probably the most diverse neighborhood in Bellingham. The area includes a smorgasboard of businesses, services, activities and living choices. It includes the well known landmark of the Mt Baker Theatre For those interested in housing available in the Bellingham Central Business District or Downtown Bellingham, you can access the downtown Bellingham real estate opportunities offered by the Johnson Team by clicking here. There is a photo gallery & a virtual tour of the Bellingham Central Business District & Downtown Bellingham on The Johnson Team web site.
For those of you who own real estate in the Bellingham Central Business District & would like a quick on-line evaluation of value for your property, click here.
Bellingham's Central Business District includes:
This is the former site of the Roeder & Peabody saw mill built in the early 1850's. A slice of Bellingham's 
history that comes from the Central Business District's past would include the following chain of events that resulted in Henry Roeder & Russell Peabody building a saw mill. The site of the mill was on the east side of Whatcom Creek where the creek spilled over a water fall into Bellingham Bay. You might think it strange that these two entrepreneurs would choose an undeveloped site in a spot primarily known only by the local Indian tribes, but it just so happened that at this time the sailing fleet needed the perfectly formed fir trees found in Whatcom County. The fleet that supplying the California gold fields with everything from gold pans to bacon was being battered as it rounded the Horn of Africa & as a result needed a local supply of timber to re-fit the masts, spars & planking that was damaged during the trip. Roeder & Peabody supplied that need with their saw mill at Whatcom Creek, which is now the home of the Maritime Heritage Park. For those of you who would care to contribute to the section of our blog "Whatcom County Remembered", by including your memories of the area, I'd encourage you to contact us. Too many of the stories of Whatcom County history are being lost. It would be nice to create an informal forum for those past thoughts & memories to be recorded for all to share. We'd love to include your articles & photos.
From the City of Bellingham's web site you can access the Central Business Neighborhood Base map, the Bellingham Central Business District Neighborhood Circulation map, the Bellingham Central Business District Neighborhood Land Use map, the Bellingham Central Business District Current Use map & finally the Bellingham Downtown Neighborhood Zoning map.
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