DC Metro Residential Real Estate Market

Monday, July 31, 2006

Sell your house for Cash without an agent?

http://www.realestatejournal.com/columnists/housetalk/20060731-fletcher.html?mod=RSS_Real_Estate_Journal&rejrss=frontpage

Be Wary of Signs and Ads OfferingTo Pay Cash for Your Home
By June Fletcher
Question: I see a lot of offers like this: I want to buy your house, will pay cash. Is this a good deal?
-- Walter Reid, Silver Spring, Md.
Walter: Fletcher's Rule Number One for Evaluating Too-Good-To-Be-True-Sounding Deals: Don't think about what's in it for you. Think about what's in it for the other guy.
In this case, why would someone offer fistfuls of moolah to a stranger, sight unseen, for a place that could be crawling with termites, dripping with mold, or overlooking the freeway? Would it make any sense at all unless the buyer could nab the house at a huge discount and flip it for a quick profit -- or find another way to take advantage of the seller's desperation?
And desperation is crucial here, because most owners don't even notice those quick-cash-for-your-house notices posted on trees, buried in the classifieds or clogging their email inbox until they're in trouble. Perhaps they're going through a nasty divorce, have problem tenants, or face too many repair bills. Or maybe they're falling behind on mortgage payments because of illness or other financial disaster. Threatened with foreclosure, they don't have the time or funds to fix up and sell their properties the traditional way. Suddenly, a heavily discounted deal looks better than none.
And how much of a price reduction can you expect? According to one formula in "Buy It, Fix It, Sell It, Profit" by Kevin C. Myers (Dearborn Trade Publishing, 2003), investors calculate their offer by subtracting costs for purchase, rehab, holding, sales, profit and unexpected contingencies (or the "Oops Fund," as the author describes it) from the maximum retail value of the house, as determined by comparable sales. As a rule of thumb, Mr. Myers writes, skilled foreclosure investors buy properties at savings of 20% to 50% off retail value. Some may offer a slightly better deal, but only if the seller finances the cost of needed repairs.
Compare that to the 5% to 10% deduction from asking prices that real-estate agents say buyers typically seek in a balanced market (that is, one that favors neither sellers nor buyers), and you can see that wholesale investors are really only a last-ditch alternative for most homeowners.
While it may be tempting to take such an offer, know that you usually have other options. Even if you're far behind on your mortgage payments, most lenders are glad to work out a repayment schedule with you -- in fact, Fannie Mae and Freddie Mac actually require their lenders to pursue one. And if you plan to sell your house, they may even throw in a little extra money to help put it in saleable shape, especially if the upgrade will bring an outdated feature up to current building codes.
Then, check out comparable homes that have recently sold, take a deep breath, and set your home's price a bit below market value. Experienced real-estate brokers say that doing so signals to buyers that your house is a bargain, and may spark a bidding war, even in a down market.
-- June Fletcher is a staff reporter at The Wall Street Journal and the author of "House Poor" (Harper Collins, 2005). Her "House Talk" column appears most Mondays on

Thursday, July 13, 2006

YES, I'm a Realtor!

Here's my site:

http://www.angelfire.com/md3/realestate

Saturday, July 08, 2006

Interested in Foreclosures?

http://www.realestatejournal.com/buysell/markettrends/20060707-simon.html?mod=RSS_Real_Estate_Journal&rejrss=frontpage

Cooling Home Market SpursInterest in Foreclosure Sales
By Ruth Simon From The Wall Street Journal Online
Rising interest rates and a cooling housing market are whetting the appetite of real-estate bargain hunters and fueling interest in Web sites that list homes in, or near, foreclosure.
Economists expect delinquencies and foreclosures to increase from today's historically low levels. Nationwide, the percentage of home loans on which payments were past due fell to 4.41% on a seasonally adjusted basis in the first quarter, after rising to 4.70% in the fourth quarter of 2005, according to the Mortgage Bankers Association.
A variety of Web sites have sprung up to cater to home buyers and investors looking to purchase properties in or nearing foreclosure. They include RealtyTrac.com, which ranked seventh among real-estate Web sites in terms of unique visitors in May, according to comScore Media Metrix, a unit of comScore Networks Inc. Foreclosure.com, another popular offering, not only runs its own Web site, but also says it supplies data to more than 200 other Web sites.
You can browse the Web sites at no charge, but getting complete access requires a weekly or monthly fee, typically $40 to $50 a month. The federal government operates its own site, www.homesales.gov, that is free and provides information about foreclosed properties being sold by the Federal Housing Administration, the Veterans Administration and the U.S. Department of Agriculture.
To see how these Web sites work, we checked the government site and three for-profit alternatives, RealtyTrac.com, Foreclosure.com and Foreclosures.com, for listings in one neighborhood near Atlanta. We also looked at the information each Web site provides and talked to real-estate brokers who specialize in foreclosed properties.
We learned that novices should approach the foreclosure process -- and the Web sites that sell foreclosure listings -- with care. Finding a good buy on a foreclosed house requires hard work and can carry significant risks. Critics say that Web sites selling foreclosure listings often contain outdated information or listings on houses that aren't ready for sale; some try to direct would-be buyers to partners with whom they have a financial relationship or to seminars and other products.
"We run into a lot of problems with foreclosure Web sites because a lot of the houses can't be sold" because various legal requirements haven't yet been met or the lender hasn't readied the property for sale, says David Benham, owner of Benham Real Estate Group in Charlotte, N.C., which sells foreclosed homes on behalf of lenders.
Keeping the foreclosure listings up-to-date "is always an issue," says Brad Geisen, chief executive of Foreclosure.com. "Not every owner in foreclosure is going to want to sell their home," he adds. In the early stages, "it is a distress situation that is a possible opportunity." Alexis McGee, president of Foreclosures.com, says her site was created to "accommodate investors." The foreclosure listings "are not listed like [multiple listing service] listings," she adds. "We don't check to see if it's sold."
Investors aren't the only ones who look at foreclosure Web sites. RealtyTrac says about 20% of its subscribers say they are first-time home buyers. The company estimates that another 20% are looking for their next home or for a second home.
The federal government maintains its own inventory of the properties it owns, while for-profit Web sites gather much of their data from public records such as the county recorder, the tax assessor and the county courthouse.
The rules vary from state to state. Typically, properties first appear in the commercial databases when the lender files a foreclosure action with the local court. At this point, the borrower still has options, including working out a payment plan with the lender and selling the property to pay off the debt.
If the problem isn't resolved, the house is put up for auction. Buying at auction can be risky, in part because buyers typically must have cash in hand, can't back out of the sale, have little or no information about the interior of the house and no guarantee that the title to the property is clear.
If the property doesn't change hands at auction, the lender typically turns it over to a real-estate broker specializing in the sale of bank-owned properties, who cleans up the yard and makes repairs before putting the house back on the market. Properties are typically priced "at or just below market value," says Cindy Simpson, a vice president with Harry Norman, Realtors in Atlanta.
The federal government's Web site, www.homesales.gov, has the smallest number of listings because it covers only government-owned properties in the final stage of the foreclosure process. Buyers can search by city and by the size of the house they are looking for. For homes sold by the Department of Housing and Urban Development, listings include a photograph of the house and a detailed report on the property and its condition. HUD says it gives priority to people who want to live in the homes. The federal Web site also includes details about buying a foreclosed home from the government and links to more general information about home buying. For the most part, the site was easy to navigate.
The for-profit Web sites cast a wider net; they begin collecting information when a notice of default is filed. Buyers can search by location and by specific criteria, such as the size of the house and the price range. Unlike the government site, there's no photo and no detailed information about the home's condition. Each of the three sites offers a free seven-day trial; to take advantage of the trial, users generally must provide the sites with their credit-card information. Foreclosure.com charges $9.95 a week for an online subscription, Foreclosures.com charges $49.95 a month and RealtyTrac has a $39.95 monthly fee.
The for-profit Web sites all talk about the large number of properties they feature. Foreclosures.com and Foreclosure.com each say that they have more than 1.2 million listings; RealtyTrac says it has "over 500,000 properties -- updated daily." All three say they update their information regularly.
But even some companies acknowledge that some of the information they offer is out of date. "The most common complaint is either the property is not on the market yet or the property is already gone," says Rick Sharga, a vice president of RealtyTrac Inc. "If there are 1,000 properties in an area you are interested in, there are probably 100 that represent something of a buying opportunity. You might be able to get in touch with 10 of the homeowners and maybe make an offer on one or two."
Figuring out which site has the most accurate information would require checking out hundreds of thousands of listings. But our spot check easily turned up information that was outdated. On Foreclosure.com and Foreclosures.com, for instance, we found a three-bedroom, one-bath home priced at $101,900. Ms. Simpson, the Atlanta broker, told us the house had been under contract for 30 to 45 days.
Then there was the three-bedroom, one-bath home that has been on the market for several months. Foreclosure.com was the only one of the three sites to correctly report that the price had been cut to $145,900. RealtyTrac.com pegged the property's value at roughly $204,000, while Foreclosures.com valued it at $264,000. The Web sites say that such numbers are estimates of market value and aren't a replacement for a formal appraisal.
Foreclosure.com was the only one of the three sites to provide the name of the broker handling the sale of bank-owned properties and contact information for the broker. RealtyTrac, meanwhile, suggested we use a "local specialist" who pays the company a flat fee to be a featured agent for a particular area.
Customers who sign up for the free seven-day trial at RealtyTrac.com automatically have their email address sent to a broker, unless they opt-out. We received an email from our "personal Realtor" within hours of signing up for the service. RealtyTrac also provides links to lenders, credit-score providers, movers and other businesses that pay to advertise on the site.
The other two Web sites also had additional products to sell. Foreclosure.com listings include a link to HomeSmart.com, which pays a fee to be featured on the Web site and sells reports that detail home-purchase risks and estimate property values. The Foreclosures.com site included offers for teleconference calls, home seminars, Web seminars and personal-coaching sessions.
We found some useful information about the foreclosure process on the Web sites, such as the information about state foreclosure laws. But the content on these sites is often mixed with promotional materials.
-- Hannah Kate Kinnersley contributed to this article

Where is the Real Estate Market Going?

http://www.realestatejournal.com/buysell/markettrends/20060706-zuckerman.html?mod=RSS_Real_Estate_Journal&rejrss=frontpage

Surviving a Real-Estate Slowdown:Overinflated Areas Will Hurt Most
By Gregory Zuckerman From The Wall Street Journal Online
The real-estate market shows signs of slowing. Is there deeper weakness ahead? Fewer questions are more important to mutual-fund investors. Many own funds with real-estate-related shares -- not to mention homes and vacation properties. And many economists believe a slowdown of the housing market could hurt the overall economy.
To get a lay of the land, we tracked down Kenneth Heebner, who since 1994 has managed the $1.2 billion CGM Realty Fund. It has the best 10-year record of all real-estate-focused mutual funds, according to fund tracker Lipper Inc., up an average of nearly 22% a year during the past decade, well more than double the broader market. The fund also has one of the best one-year records, up 32% through June 30.
Mr. Heebner, 65 years old, is better positioned than many real-estate fund managers to speak about prospects for the housing sector. His fund has viewed its mission more broadly than most rivals, so he isn't shy about ditching real-estate stocks. Among big holdings for CGM Realty during the past year: coal-company stocks, a hot category that qualifies in Mr. Heebner's view because coal companies own a lot of land. He also runs three other mutual funds, including CGM Focus Fund, so he spends a lot of time looking beyond houses and hotels to other parts of the economy. These three funds have among the best five-year records in their categories.
Here is our conversation:
WSJ: How is the housing market?
Mr. Heebner: A significant decline in prices is coming. A huge buildup of inventories is taking place, and then we're going to see a major [retrenchment] in hot markets in California, Arizona, Florida and up the East Coast. These markets could fall 50% from their peaks.
WSJ: What has you so concerned?
Mr. Heebner: I'm worried that more people will default on their mortgages. Risky mortgages such as interest-only and pay-option adjustable-rate mortgages require no principal amortization and in some cases payment of only a fraction of the interest due, have been widely used in the last two years. Some people got 100% financing for their homes. It made the tech bubble look like a picnic. When housing is going up rapidly and you can buy far more than your income can support, some people are eager to make big profits by extending themselves financially.
As housing prices fall more people will be under water, and these people are just going to walk away from their homes. They are going to say, 'I'm outta here.' You're going to see increasing foreclosures over the next several years. As [home] prices come down, it will create a difficult environment for home builders.
WSJ: What data have you most worried?
Mr. Heebner: We're seeing a huge increase in inventories of unsold homes. The role of incentives in selling a home is increasing so the weakness doesn't show up immediately in list prices. Large price declines will follow in inflated markets.
WSJ: More than 25% of homeowners don't have a home mortgage because they own their property outright. Won't this keep problems in check?
Mr. Heebner: Most people won't have problems and much of the country will be fine. I don't think anything will go wrong in places like Texas, Iowa City or Minneapolis. ... But prices are being set by a minority of participants in the market, [those who have borrowed the most and used the most aggressive types of mortgages]. There will be a loud pop in inflated markets. It's where prices were artificially inflated by people buying houses with risky mortgages that we'll see problems. ... The person who feels the pinch is the person who used an aggressive mortgage and is struggling to meet the mortgage payments.
WSJ: Given the big size of some of the markets that you see as inflated, won't the regional 'pops' reverberate throughout the economy?
Mr. Heebner: The pops will reduce the growth rate of the economy, but they won't precipitate a downturn. The economy only turns down when the Federal Reserve takes aggressive action to cause a downturn. I think the current pattern of higher interest rates reflects a decision to normalize rates after taking them to abnormally low levels to stave off potential deflation. When the extent of the housing slowdown becomes apparent, I think the Fed will pause, rather than take rates to a level that threatens an economic downturn. The only real threat to the economy is an overly aggressive Fed, and not a downturn in the housing market, which won't by itself push the economy down. In fact, it provides an insurance policy against the Fed becoming overly aggressive.
WSJ: Do you agree with economists who have described the individual consumer as a linchpin of the economy during the past few years, using refinancings to fuel the expansion?
Mr. Heebner: Borrowing against home equity has been overrated as a source of economic stimulus. While it has been a factor in the economic expansion, I don't think it's been the most important factor.
WSJ: How are you allocating investments in your real-estate fund?
Mr. Heebner: We define real estate broadly; it includes mining companies, because of the land they use. Today we have about 25% of the fund in mining stocks. The stocks are attractive, but I also see significant opportunity in real-estate investment trusts, which comprise 69% of the portfolio. We also have 6% in commercial real-estate brokers.
WSJ: What areas of real estate are you most excited about?
Mr. Heebner: We're investing in office and apartment REITs, like Archstone-Smith Trust, Essex Property Trust Inc., SL Green Realty Corp. and AvalonBay Communities Inc. Apartment rents are going higher [as rising interest rates makes homes less affordable for many consumers, and a strong economy encourages rent increases].
In many parts of the country, like Texas, when demand goes up, companies can do more building of rental apartments. But the greatest supply constraints are in parts of the Northeast and California. And that's where the apartment REITs we own are focused.
In the office sector we like Vornado Realty Trust as well as SL Green, which have great management and are in Manhattan, one of the most supply-constrained areas in the country.
WSJ: Many apartment-REIT stocks already have climbed. Aren't rent increases baked into the stock price?
Mr. Heebner: Yes, people assume rents are going up, but the question is the magnitude of the increases. Consensus appears to assume 5% increases in the next year but I think the increases will be a lot more than that. Demand will grow, but supply of apartments won't because construction costs are increasing significantly and supply constraints will limit new developments in California and parts of the Northeast.
WSJ: What's your take on home-builder stocks?
Mr. Heebner: At the end of 2001 we bought home builders. These stocks were trading at six times earnings, and people were worried that the stocks would be hurt by an economic downturn. I became positive when I saw the growth potential created by rising demand and market share gain by the public builders. But if 20% of purchases are for investment purposes and so many borrowers are subprime, that says to me trouble is coming. We started cutting back on home-builder shares at the end of the fourth quarter of 2004 and eliminated them during the first six months of 2005.
WSJ: Why are you buying hotel REITs?
Mr. Heebner: After the 9/11 attacks, hotel construction fell, and it has only slightly recovered. But demand is growing, as the global economy strengthens and leisure travel is strong, as is business travel. You'll see more tourism with the dollar weaker. During the next several years, there will be an inadequate supply of hotels and that makes for a healthy environment for REITs. We like Host Hotels & Resorts, LaSalle Hotel Properties and FelCor Lodging Trust.
WSJ: What sectors are you favoring in your other funds?
Mr. Heebner: Energy and steel. I believe that the global supply and demand imbalance for crude oil remains in place. Robust global demand for steel is outrunning the ability of steel producers to meet demand.
WSJ: Your 10-year record includes a tough period. In 1998, the real-estate fund lost 21%, worse than the REIT index and much worse that the big gains of the broader market that year. What did that period teach you?
Mr. Heebner: In 1998 I had an aggressive position in hotel REITs. ... I anticipated that more companies would use a REIT structure to shield their earnings from taxes. But Congress changed the law, and I didn't see it coming. The market was smarter than I was. The lesson is that, if I see legislative activity that could be negative, I should pay more attention.
WSJ: How much should ordinary individual investors have in real-estate stocks and funds, given they probably own their homes?
Mr. Heebner: Commercial real estate has a totally different outlook than residential housing, [so commercial REITs] represent diversification. ... I own all the funds I manage and I own the condo I live in

DC Metro Residential Real Estate Market - MD & VA

Monday, July 31, 2006

Sell your house for Cash without an agent?

Thursday, July 13, 2006

YES, I'm a Realtor!

Saturday, July 08, 2006

Top 10 Questions to Ask Before You Hire a Real Estate Agent

Interested in Foreclosures?

Where is the Real Estate Market Going?

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