Stellar Realty Northwest

Sponsored by Rep. Chuck Riley (D-Hillsboro), this proposed bill would cause 1031 Exchanges (tax deferred like-kind property exchanges) to become taxable events. 1031s have been very popular with investors for years, as they can increase their property investment portfolios by exchanging "up" and not having to pay taxes on the capital gains until they choose to sell the property. This law as a portion of the IRS code was enacted by Congress in 1918.

At first glance, an uneducated take on this COULD be that new taxes could stimulate Oregon's economy, but that is overly simplistic. A deeper analysis of this by economists will show that Like-Kind Exchanges are integral to the health of the real estate market, and are one of the most fundamental components of real estate investment. Passage of HB2696 will cause further harm to our struggling real estate market and would likely cause an increase in Oregon's already HIGH unemployment rate of nearly 10%.

There is a public hearing scheduled for 8am on Tuesday March 10 in Hearing Room A. Our team is vehemently opposed to this bill and are encouraging the Committee Chair Phil Barnhart and Rep. Chuck Riley to vote NO on this bill. If you'd like to contact them, the email addresses are:

Rep.philbarnhart@state.or.us and rep.chuckriley@state.or.us.

As agents, we all look forward to the monthly "Market Action" that is published monthly by the RMLS, and as much as we hope for good news, we have to take what we get and try to interpret what it means for our sellers (pricing strategies) and for our buyers (offer strategies). First we'll look at the numbers and then suggest what it means to consumers:

•· Inventory: 19.2 months, a new high in Portland (formula - divide the number of active listings by the number of closed sales for the month)

•· Closed sales: a new low of 732 sales for the month of January

•· Pending sales: up 52% over December, finally an encouraging stat!

•· Average sale price: down 13% over January of 2008

What does this mean for sellers? It means that there are more competing properties for sale, so AGAIN, yours needs to be in the best condition at a price that will encourage offers. For buyers, it means that you have more choices. It also means that since homes have been sitting on the market for longer, the notion of making a super low ball offer may seem sensible, but ask your agent to check the history of the listing. While some sellers may look at very low offers, many others are in a financially compromised financial condition and may have reduced the price to barely cover their cost of selling. Your agent may recommend a full price offer depending on how long the home has been listed and how many price reductions have occurred.

This is the question buyers and sellers (and Realtors too!) have been asking for months now. Though there are numerous way to measure market recovery, the National Association of Realtors (NAR) reported at the beginning of February that the Pending Home Sales Index rose 6.3% to 87.7 in December, up from 82.5 in December. While 5% doesn't seem like a substantial increase, when coupled with the affordability index rise of 10.9% in December, these are strong signals of recovery.

What does this mean to buyers? It means waiting to make a home purchase will likely not become any more economical than it is now, with rates at historic lows and still lots of inventory available.

What does this mean to sellers? Since there is still a year of inventory (this is measured by the amount of sales every month, and based on current sales, how long it would take to exhaust the supply of homes on the market) it means your home has to be the BEST condition, with a competitive or slightly less than competitive price. What your neighbor's home sold for 2 years ago is meaningless. "Market Value" means what a buyer is willing to pay.

Even in these tough times you have some great resources that can help you come up with a down payment, they are very different and which one is best depends on your circumstances:

· Clackamas County-This program is available to income qualified first time home buyers in Clackamas County. CHAP provides up to $14,000 in down payment and closing cost assistance to households earning up to 80% of the median area income, adjusted for household size. The assistance is structured as a zero interest second mortgage. No payments are due until the home is sold, transferred or refinanced. At that time, the principal amount is payable to the county. Check out www.co.clackamas.or.us/cd/downpayment.htm

· PDC-Portland Development Commission, check out www.pdc.us for details

· Washington County ADDI-this is a community development program and details are available at www.co.washington.or.us/deptmts/comm_dev/addi.htm

· Oregon Bankers Association (HPAP) is funded by the Oregon Housing and Community Services, and assistance is available to income qualified first time home buyers throughout Oregon. $1500 for down payment and closing cost assistance, similar plan to CHAP.

· La Hacienda CDC is a Latino down payment assistant program, check it out at www.haciendacdc.org

· Asian Pacific assistance can be found at www.APICIA.org

· AARP for 50 and over is available, we have an office in our building, give us a call for a referral.

· PCD Housing Services will be offering funds again in spring under the PAL funding program.

Please call us any time for a referral to a great loan officer who is familiar with all these programs.

As a buyer, the strategy for asking for "seller concessions" can be tricky in today's market and the "rules" are being changed everyday. In the past a buyer asking a seller to pay for their closing costs and a list of repairs from the inspection report has been common practice. What about asking a seller to update the kitchen with new countertops? Refinish the hardwood floors? Install new tile in the bathroom? These are all considered cosmetic changes and in the past would most likely not even be considered by a seller.

In todays market, however, sellers need to get creative in order to facilitate a successful sale of their home and may be willing to comply if the situation is "right." The question then remains what items are negotiable and when?

The answer: All items are negotiable and timing is critical and it all depends on the motivation of the seller.

Initially, you may be tempted to think that since there's so much inventory, that sellers will automatically bend over to accommodate a buyer, but think again! If you are approaching a seller who's already reduced their price far below what they think it's worth, possibly even below what they owe on the home, you may weaken your position as a buyer by asking for too much too soon. There is an emotional component that can't be ignored here even in this market.

As a seller, if a buyer submitted a long list of demands including a list of repairs & cosmetic updates all at once your offer would likely be rejected immediately. If however, the agent representing the buyers made an initial request to refinish the hardwood floors & install new tile in the bathroom the seller may proceed depending of course on the price of the offer & the current situation of the seller. When the inspection report came back, the buyers agent could then make the list of repairs such as the roof, faulty wiring, and the leak under the kitchen sink a point of negotiation. Typically these are repairs a seller will often consider and may have already budgeted for during the price negotiations. Sellers also would perhaps not be overwhelmed by the magnitude of the cost involved since the recommendation had come from a third party (the inspector) rather that the buyers directly.

If cosmetic updating and changes are agreed to by the seller, I strongly advise the seller to not make any changes until at least the buyer's inspection contingency has been officially removed. Also a seller may want to require a non-refundable earnest money deposit from the buyer before they proceed.