Green Real Estate in Idaho

This is most certainly a hot topic, and the source of much contention lately in both political and real estate circles as everyone throws in their two cents. Before I go down that road however let’s highlight what it is that we ended up with in the bill that should be signed into law today by President Obama.

The new and improved First Time Home Buyer Tax Credit is now $8000.00 (eight thousand dollars) and has become a true credit, rather than a no interest loan repaid over 15 years. This credit is still only available to first time buyers, or those that have not owned a home in the last three years. I’ve been asked if one spouse purchased the home before marriage or was the sole spouse used to qualify for the loan if the other spouse could be considered a FTHB under this new provision. The short answer is, not likely. The long answer is check with your tax preparer to see what kind of leeway they think you will have. What I know about this is that if in the past three years you have claimed your home you are out of luck. If you purchased your home prior to marriage but you did your taxes “Married Filing Jointly” then I expect that would flag your spouse as having owned a home during that time. If this were the case and you were filing seperately from your significant other… that is where I just don’t know.

I have seen a number of complaints among people (mostly online) lamenting that this measure doesn’t go far enough and should have been made to apply to ANY home buyer. While I do agree that offering incentives to all buyers, rather than just first time buyers, would be more beneficial to markets across the country; at this point I’m just happy to have SOMETHING. There isn’t going to be a magic bullet for stopping or reversing the housing crisis. Frankly, at this point I am just as interested to see what is going to happen to help home owners that are in trouble keep those homes. One of the bricks around the neck of many neighborhoods are the flood of short sale/REO property that drive down property values.

Housing will continue to be a prominent player in the state of the economic recovery here in the US. Hopefully we can get this problem under control sooner rather than later. The number of families affected is staggering.

If you would like additional information please don’t hesitate to contact me. There are fantastic First Time Home Buyer opportunity here in the Treasure Valley. With prices where they are and interest rates at such low levels it’s an incredible time to become a home owner and start building future wealth and security.

Just past in the Senate is an ammendment to the pending stimulus bill.  As a quick aside… why don’t they call this a recovery bill?  After the debacle of the TARP/Stimulus you would think they would try to seperate them as much as possible.

Back to the matter at hand.  Sen. Johnny Isakson (R) Georgia introduced an ammendment to the bill that would convert the $7,500 First Time Home Buyer Tax Credit into a $15,000 (or 10% of purchase, whichever is less) credit for ANY home buyer purchasing a home to owner occupy.  What does this mean?  Well, a few things.  The $7,500 credit to first time home buyers is GREAT, but it is only open to first time buyers that have not owned a home in at least the last 3 years.  It also has to be paid back over 15 years ($500 per year due at tax time), but it is interest free.  The new amendment not only doubles the amount but it removes any recapture after 2 years of ownership.  While not clearly outlined in the article that I read, I would expect the same income limitations to be in place.  It also makes this credit available to any home buyer shopping for their personal residence, no investment property.  Upon further inspection it also appears that this credit could be claimed on 2008 taxes.

While this passed unanimously in the Senate it would still have to go back to the house after the modifications to the bill are complete for a vote.  Something this particular ammendment does not address is relief, restructuring, or some other form of assistance to home owners that are struggling to keep their homes.  While there seems to be new issues on the economic front every day to make things look a little more gloomy (job loss, consumer spending, credit markets) hopefully we can find enough little becons of light to get everyone through.

You can read an overview of the amendment over at USNews.

This is a question that I hear quite a bit these days.  The wild misconceptions about the term and the process of the general public is to be expected and is perfectly understandable.  The scarier issue is the lack of understanding by many real estate agents who are unable to set realistic expectations, especially for buyers starting down this path to purchase a home.

A short sale is simply the sale of real estate in which the  proceeds from the sale are not adequate to satisfy the balance owed the lien holder(s).  Let’s look at an example with nice, round numbers.  So a home owner purchases a home for $200,000, & owes the same, and due to whatever circumstances must sell the property.  Based on the market conditions lets say that they market value is only $150,000.  This would be a typical short sale.

One of the problems however is that there are no typical short sales.  Every situation is different from the sellers position to the bank that holds the note.  Some banks have streamlined the process and are able to process and respond to offers in a very timely manner while others can take weeks, if not months, to respond.  Obviously the “Short” in short sale has nothing to do with the amount of time involved in making the purchase.  Usually it’s quite the contrary.

One of the biggest risks to the buyer in a short sale transaction is time.  From the moment you put forward the offer and the seller accepts, you’re under contract to purchase that property.  Unfortunately, in a short sale, you still don’t know if you will be able to purchase the property at the contract price until you receive written approval from the lien holder(s) which can take quite some time.  While you’re waiting you could be missing out on other potential candidates that come and go from the market.  Worst case you spend six or eight weeks waiting for the banks response only to find out that they wont accept your offer price and want significantly more than you are willing to pay.  What other homes did you miss during those two months?

To help lets run through a sample time line based on what I have seen lately in getting these deals together.

• Offer received from the buyer’s agent after hours ( Day 1)
• Review offer and present to client for signatures, prepare necessary addendums and return to buyers agent (Day 2)
• Receive addendum back from buyer’s agent, contract fully executed by buyer and seller (Day 3)
• Prepare packet for submission to bank, let the waiting begin (Day 3)
• Check in with Bank every day for 5 business days trying to confirm their receipt of offer (Day 4 – 10)
• Offer finally received in the system, waiting for a negotiator to be assigned from Loss Mitigation (Day 10 – 15)
• Receive call from negotiator assigned to file, spend several days going back and forth about contract price prior to submission to “the investor” and additional documents to complete the negotiators file (Day 16-19).
• File submitted to the investor, in this case Freddie Mac, for final approval (Day 20)
• Check in every other day with lien holder to inquire on the status of the file (Day 21-59)
• Receive final written approval (Day 60)

As you can see… there is a tremendous amount of hurry up and wait involved.  From the moment this particular offer was submitted to the investor there was absolutely no update on its status or any timeline given for the response.  When the offer was submitted originally I was told that the average response time was 30 days, after several weeks of follow up with no word that average was increased to 45-60 days.

Another item that eludes many regarding list price on short sales is that they are fairly ambiguous.  The list price of a short sale really doesn’t give you any insight as to what the lien holder(s) are willing to accept.  Listing agents are at a bit of a disadvantage in this regard because no bank that I have spoken with in establishing a short sale will give you any indication about what it is they would accept.  The best that you can do as a listing agent is price it at as low as possible while still being appropriate and get an offer you can present to the bank.  One misconception that seems to be very prevalent in the general public is that a short sale can be picked up for just pennies on the dollar.  This is not the case.  The lien holders will not accept an offer of $50,000 on a $300,000 home, no matter how much you wish they would.  Lien holders do not sell short to help out the sellers, they do so if and only if it makes the most sense financially to their bottom line.  There are costs associated with foreclosing on a home and costs associated with taking possession and then re-listing and making it marketable as an REO or bank owned property.  If a short sale can be achieved that outweighs these additional expenses they are more likely to proceed.  If not, the lien holder(s) will instruct the listing agent to counter the offer.  If a buyer can not be found for the short sale before the bank forecloses then the bank takes the home back.

Bottom line, if you have patience, persistence, and realistic expectations you can absolutely find some fantastic opportunities in short sale listings.  If you have a tight deadline to secure a new home and a drop dead date that you have to be moved in then you may want to steer well clear.  It’s just not possible to accurately predict when you might be able to close on the vast vast majority of short sale properties.

So, several weeks ago, January 7th to be exact, an interesting article by Deborah Orr was published by Forbes about the 25 weakest housing markets in the US. Surprising to some, Boise was named in this list, but as you may imagine, there is more to the story.

Firstly, as I am sure many of you do as well, I spend some time now and again looking around in print and online publications to see what kind of press Boise, the Treasure Valley, and Idaho are getting at any given time. For the most part, the last few years have been especially good media wise when it comes to Idaho and real estate in general. Favorable climate, affordable housing and cost of living, along with a growing economy and abundant recreation/outdoor activities were some of the items featured in these stories. Some online commentators have speculated that we’re perfectly content to bathe in the good press but unable to accept the bad. The problem however is that this article doesn’t seem to have much substance.

Outlined in the beginning are the criteria used to identify potential areas.

To find them, we asked Moody’s Economy.com to compile a list of the country’s real estate markets that are furthest from recovery. Moody’s looked at the country’s Census-defined metro areas–including metropolitan and micropolitan statistical areas–with populations over 500,000 and prepared forecasts through 2011. They then compared them with prices in the second quarter of 2008, the latest figures available, to calculate how far prices will likely fall before reaching bottom.

My biggest issue with the article is that Ms. Orr and or Moody’s (where the data came from) seem to think that Boise is a big second home market, lumping us in with Salt Lake and Provo UT as major declining ski home sales areas. Wait… What?? No one buys ski homes here in Boise or the “Boise Metro Area”. The one exception to this “No one buys ski homes in Boise” rule I suppose could be someone who buys their PRIMARY home in Boise and happens to ski. The census map of what is the Boise Metro Area is HUGE. Here locally, the Boise Metro Area (in discussing real estate) is generally accepted as Ada & Canyon County (Boise, Eagle, Meridian, Kuna, Nampa, Caldwell, Star, etc).

Tamarack, Brundage, and Sun Valley are all within a few hours drive and the skiing is fantastic. To say that these areas with such fantastic skiing are a part of the Boise Metro Area, when considering real estate, is an extreme reach. To lump their housing issues into ours is downright laughable. Tamarack and Brundage (McCall) are served by a completely separate MLS (Multiple Listing Service). They are indeed resort communities with some year round residents, but like Sun Valley, the bulk of the market is in second home sales.

Now, as a REALTOR here in the Treasure Valley I would like to point out that I am not a member of either of these outside MLS organizations, but as an Idaho native I’m fairly confident saying that McCall/Sun Valley are mostly second home markets and are probably hurting badly for buyers.

While we continue to explore the chaos and confusion that is the economic turmoil of today it would seem normal and even expected for second home markets to suffer. Tightening mortgage requirements, economic uncertainty, rising unemployment and employment uncertainty cause consumers to seriously re-think their spending habits and jumping into a half million dollar mortgage on a second home is probably the last thing on their minds.  In the end, I suppose that the article is “accurate” because they are focused on the “Metro Area”, but the problem remains that the communities that are hurting the most (second home markets) are so far removed geographically that they really don’t play any part in the real estate market in the heart of the Treasure Valley here in Idaho.

Real Estate markets are getting enough negative press these days for issues, going out of your way to make up issues to throw fuel on the fire seems irresponsible to me.  You can check out the full article here.