Clark County WA Real Estate Blog

Baron Rothschild, the oft quoted banking opportunist, is said to have advised  his clients that the best time to buy is when there is “blood in the streets.” I agree.

An investor or home buyer who embraces this axiom starts looking for homes when the newspaper is full of doom and gloom about national home sales.  I guess that would be now.

Most of the news in the paper is about national trends and statistics. The reality is that the Clark County market was never impacted as much as other areas, and there are some really good deals out there. We have a window, for the next 12-18 months, when buyers will be able to take advantage of national market forces, and score some real deals.

There is a new ‘buyer bonus program’ available through Suntrust Mortgage. This program allows the seller to contribute up to 6% of the loan amount towards the buyers first six months mortgage payments. Here’s an example:

With less than 10% downpayment on a $200,000 loan, the maximum seller contribution is 3% or  $6,000. If you use this weeks interest rate of 5.875% the buyers mortgage payment would be $1183.30. If we divide $6,000 by $1,183.30,  we see that the seller can make up to 5 Buyer Bonus Payments utilizing the Suntrust Mortgage Buyer Bonus program. 

How It Helps Buyers
If you are a buyer with 3% down, this could really give you a helping hand during the first six months, as you are settling into your first home.  Since you can save mortgage payments for the first five months, you now have extra money to spend on household furnishing.

How It Helps Sellers
Anything you can do to increase the pool of buyers in today’s market is a positive.  This program should be especially attractive to first time home buyers, who could us the assistance with their mortgage payments.

First time homebuyers now have another program that they can use to get their first home.  That’s a good thing!

First time homebuyers have a friend in the Nehemiah downpayment assistance program.

What is The Nehemiah Program and how does it work?
The Nehemiah Program provides gift funds for downpayment and closing costs to qualified homebuyers who use an FHA insured mortgage or conventional loan. Gift funds up to 6% of the final contract sales price are available for the purchase of a participating home. These gift funds never have to be repaid. There are no buyer income limitations and no area restrictions. For the buyer to be eligible for the gift, the seller must make a contribution to Nehemiah Corporation of America that is equal to the gift amount, plus pay a small processing fee.

Why would a seller want to help me?
Sellers choose The Nehemiah Program to dramatically increase the number of qualified candidates that would be eligible to purchase their home. The simple factor of “supply and demand” goes to work for participating sellers to help increase their home’s market value.

What are the basic program requirements?

• Both the homebuyer and seller must agree to participate in the Nehemiah Program,
• Homebuyer must use an FHA loan or a conventional loan that allows gifts from charitable organizations
• Homebuyer must purchase a Nehemiah participating home
• Homebuyer must be the primary occupant of the property.

So, if you are a first time homebuyer, and wondering how you are going to come up with the downpayment, now you have an option. 

Once a home has been foreclosed on, and is owned by the bank, it is called REO or Real Estate Owned ‘by the bank’. These properties typically are in need of some repair, and have often been neglected by the previous owner.

Banks are not in the real estate business, and their only concern is getting it off their balance sheet. If you are an investor, or a savy buyer, this can work to you advantage.

Make sure you do your homework, and compare the REO to other sold properties in the neighborhood. I would recommend at least 3 other solds within the last 6 months. Then, take a look at how much you will have to invest in updating, repairs, and carrying costs before putting it back on the market. If you still have a good spread between comps and your costs, a property might be a good investment for you.

A few weeks ago I spent a few hours at a Trustee’s Sale, near the Clark County Courthouse gazebo. I was curious how the final step of the foreclosure process works. 

A few weeks earlier, I read the Notice of Trustee’s Sale in the local paper, and wrote down the addresses. I then went and researched all of the homes listed, noting loan balances,  late payments and fees, as well as what I thought market value was on the homes.

 How the Auction works.
The trustee goes through the list of foreclosed properties, what the opening bid is from the lender, and asks whether there will be any bidders on each property.  If anyone is interested in bidding, they must register with the Trustee, and show Cashiers Checks  greater than the opening bid. If they are the winning bidder, they will have to sign over the checks to the trustee.

 In most cases there were no bidders, as the opening bid was greater than the value of the property and the bank or lender takes possession of the property and it turns into REO, or Real Estate Owned by the bank.

About 10% of the properties at the auction actually had some equity, and there were multiple bidders for them. Although there are some good deals out there, you must be very thorough in your research.  Properties sold through auction might have underlying liens on them, so buyer beware. It is a good idea, before making any bid, to thoroughly research the property and even pay for a title search, to identify possible problems.

My conclusion:
Foreclosures are way overhyped. I think that better deals can be had by buying properties that are in short sale. At least that way you have the protections afforded by a real estate contract.

In today’s market, it seems everyone needs a bit of a reality check.  

For Sellers

• In a good market, where there is 6 months inventory, 2 in 12 homes are selling every month.In today’s market, it’s 2 in 19 homes selling every month.

• Only motivated sellers are selling their homes.

• If a sellers home is not priced right and in excellent condition- it will have trouble selling.

• Sellers should see their home’s competition before putting their home on the market.

• Home staging  adds  $10,000 to the value of a home

• Yard staging adds $10,000 to the value of a home

• Professional photography adds $10,000 to the value of a home (only cost $150.00)

 For Buyers

• 80% of the SW WA homes on market are covered by the FHA/Conventional loan limits of $418,500

• Interest rates are near historic lows

• There is a great selection of homes on the market and sellers are very motivated

• We are at the beginning of the next 10 year market cycle and historically, prices have always gone up from there. 

• The increase in population and other demographics point to a shortage of housing in the next 20 years, which means that price appreciation is almost a certainty.

• The upswing in the Real Estate market will start with the most affordable homes. 

• The spread between the more affordable and higher end homes will shrink, making higher end homes available to step up buyers.

 So that’s my reality for Clark County.

When I first sit down with Buyers, I always have the same questions. It really makes the whole process quicker and easier, when I know exactly what you need and want in your home.  Here’s my list of first time questions:

• Have you been working with another Real Estate Agent?
• How long have you been looking?
• Do you have a home to sell?
• What is your timeframe?
• Any special needs?
• What price range are you looking in?
• What areas have you been looking in?
• What style of home are you interested in?
• Do you want an older, classic home, or newer?
• How many bedrooms and bathrooms do you need?
• How many square feet would you like?
• How big should the lot be?
• Do you want it fenced?
• What features are most important to you?

It sounds like a whole lot of questions, but once I know the answers to these questions, I can usually find 8 or 10 candidates quickly.  And I don’t waste your time showing you homes that you don’t like or that wouldn’t work for you.

The whole process starts with our initial meeting.
This is your chance to decide if you are comfortable working with me, and helps me to identify what your needs and wants are.

After our initial meeting, I recommend you visit a mortgage broker, and get pre-approved for a loan.
It can be very frustrating when you find the perfect home, and then have a snag with the financing. The whole process is much less stressful when you get pre-approved. If you don’t have a relationship with a mortgage broker, I can recommend someone on my team.

After our initial meeting, and pre-approval, we begin the home search process.
I’ll set you up with a property tracker account on Johnlscott.com. That way you can search for homes on Johnlscott.com and save your favorites ( I will be alerted when you have marked a house as your favorite). I’ll search the RMLS, find properties that might work for you, and email you links to these properties. If you find any of them interesting, and want to take a look inside, we’ll make an appointment to view them. Once we find the right home, we will start discussing the offer.

Pre-Offer Research
Once you have found your new home, I’ll do a reverse CMA, to determine an approximate fair market value. I’ll call the listing agent, and discuss the house, how much interest they have seen, and seller’s motivation for selling. This will all help form the basis for your initial offer.

The Offer
I will meet you at the office, and we will discuss how we want to structure your Purchase and Sale Agreement. With a reverse CMA in hand, and my research, we can also set our negotiating strategy. We will take as much time as necessary to go over the paperwork, so that you understand what you will be signing. There will be Contingencies in your P&S Agreement, to protect your interest in the transaction and in case there are any problems with the house.

Typical Contingencies in the Offer
Title Contingency– To make sure the title is clean, and without liens.
Contingent Upon Selling Home– In case you need to sell your home first.
Home Inspection Contingency-To make sure there are no major defects in the home.
Septic Inspection Contingency-To make sure there are no problems with the septic system.
Well Inspection Contingency-To make sure there are no problems with the well.
Financing Contingency– To make sure you get your earnest money back, if you cannot get financing.

Before leaving, I will request an earnest money check, usually 1% or less of the purchase price. I will hold this check until both you and the seller have mutual agreement .

The Negotiation Process
Once I have your offer in hand, I will present it to the seller, via the listing agent, along with my Reverse CMA (To support your offering price). The seller and their agent will then discuss your offer, and within three days, typically one of three things will happen:
The Seller accepts your offer as is.
If they accept your offer, we have mutual agreement, and your Purchase and Sale Agreement and earnest money check will go to the Escrow Company, and the sale moves forward.
The Seller submits a counter offer
Perhaps the seller has a different price in mind, or the removal of one of the contingencies? In this case, we will discuss the counter offer, and you have three options:
A). Accept the counter offer.
If you decide to accept the counter offer, we have mutual agreement, and your Purchase and Sale Agreement and earnest money check will go to the Escrow Company.
B). Submit a counter offer to seller.
If you decide to submit a counter offer to the seller, we will wait for the seller’s response.
C). Reject the counter offer.
If you reject the counter offer, the P&S Agreement is void.
The Seller rejects your offer.
If the seller rejects your offer or does not respond, the P&S Agreement is void.

The negotiation process will continue until there is mutual agreement, or one or both of the parties is not interested in negotiating, and rejects an offer or counter offer. If we don’t have mutual agreement, the P&S Agreement is void, and I will return your earnest money check to you, and we begin the home search again.

Mutual Agreement
Once we have mutual agreement, I submit the signed around Purchase & Sale Agreement to the Escrow Company, along with your earnest money check. We begin to address all the Contingencies in the P&S Agreement. Some of them are automatically waived.
Timelines
Title Contingency-The Title Company will initiate a Preliminary Title Search, within 3 days, to make sure seller has a clean and saleable title. This contingency is automatically waived within 5 days.

Contingent Upon Buyer Selling Home-You must list your home for sale within 5 days, and must sell your home within 45 days, or this contingency is automatically waived.
Home Inspection Contingency– I will make an appointment with an inspector of your choice within 3 days, to have the home inspected for defects. You pay for this. The same day as the inspection is performed, I will file an Inspection Notice, which will allow us to:
1) Terminate the P&S Agreement based upon the inspection.
2) Request that the seller make repairs.
3) Waive the Home Inspection Contingency.
This contingency will automatically waive after 10 days.

Septic Inspection Contingency– Seller will have the septic system inspected, and if necessary, pumped. This contingency will automatically waive after 10 days.

Well Inspection Contingency– You will have 10 days to have the well inspected .You pay for this. If your lender requires it, the Seller will have to provide a health certificate from Clark County Health Dept. This contingency will automatically waive after 10 days.

Financing Contingency– You will have 5 days to apply for a home loan, and 45 days to get loan approval. If you are unable to obtain a loan, the P&S Agreement is void, and your earnest money is returned to you.

We have mutual agreement, and all contingencies are waived.

The Escrow Process begins.
The Escrow Company is a neutral third party, which makes sure the title is clean, all the paperwork has been properly filled out, the funds are in place to complete the transaction, and the transaction has been legally recorded.

  The Home Buyer’s
Ten Commandments 

1.  Thou shall not… change jobs, become self employed or quit your job.
2. Thou shall not… buy a car, truck, or van (or you may be living in it!).
3. Thou shall not… use credit cards excessively, or pay late on accounts.
4. Thou shall not… buy furniture.
5. Thou shall not… change bank accounts.  
6. Thou shall not… co-sign for a loan for ANYONE. 
7. Thou shall not… make large cash deposits with out checking with the loan officer. 
8. Thou shall not… omit debts and liabilities from your loan application. 
9. Thou shall not… spend monies set aside for closing. 
10. Thou shall not…  originate any inquiries into your credit. 

Some background:
Anytime a home is listed with John L Scott, it comes with a complementary AHS home warranty during the listing period. When I write offers for buyers, I usually try to include an AHS warranty, paid by the seller, for my buyers.

What’s so great about a home warranty?
Peace of mind. After going through the process of buying a new home, the last thing you need is a dishwasher breaking down the week you move in. What are the chances of that happening? Pretty good, actually. In the first year after you move in, there is a 68% chance that something will break down and need repair, and the average homeowner spends $900 for that repair.

How does it work?
After the home closes, during the first year, whenever a covered system or appliance breaks down, you call for service. You pay a $55.00 service fee, and the rest is covered by AHS. Sometimes, I even have coupons, and that service fee is waived. The repairman will repair the appliance if possible. If it can’t be repaired, it will be replaced.

What’s Covered?
Plumbing leaks in water lines and drain lines
Mainline drain and sewer stoppages
Water heater, Instant Hot Water Dispensers
Electrical Systems, Telephone Wiring
Dishwashers, Garbage Disposals, Microwaves, Ranges, and Trash Compactors
Central Vac Systems, Doorbells, Garage Door Openers, and Ceiling Fans

Optional Upgrades Available
Air Conditioning, Swimming Pool and or Spa, Washer/Drier, Refridgerator, Septic System, or Well Pump

So as you can see, a home warranty can really give you peace of mind.
If you own rental property, it’s even better. What landlord wants to get called on a Sunday morning with a call from a tenant complaining about the kitchen sink being plugged?