Back to School Investment Opportunities

15 08 2011

As the summer comes to an end and back to school season is in full swing, shopping is on the minds of students and parents everywhere.  For many this means purchasing school supplies, uniforms and backpacks; however, parents of college-bound students might be thinking of a more substantial purchase – a rental property.  Purchasing rental properties in college towns has become a greater consideration for parents whose children are heading off on their own.

Parents are opting to purchase condos, townhomes or smaller homes for their children to live in during their college years.  A portion of the mortgage is paid for by roommates, and upon graduation they can choose to retain this investment by renting to other college students or sell the home sometimes earning a notable return.

“I had one client who bought an investment condo in Arlington, VA. She wanted an investment property and she also wanted a nice place at a reasonable cost for her daughter who was attending Georgetown University,” says Nancy Alert, a local agent. “Her daughter got a roommate and the roommate paid half of the mortgage. After her daughter graduated from Georgetown University the property was sold at a substantial gain.”

Investing in college towns has also become a growing option for new alumni interested in purchasing their first home, as well as seasoned investors looking to purchase in localities where the demand for rentals is high.  There is a strong, stable market for those who would like to target the college and graduate student renters.

“Local markets with universities or colleges can be an attractive option for many local real estate investors,” says Move, Inc., Chief Executive Officer, Steve Berkowitz. “Housing demand in college towns is generally high and vacancy rates are usually low. Combine the supply and demand ratio with rising admissions and the five percent rise in rental rates expected by the end of the year, and rental property in college towns can be a smart option for the right investor.”

According to a national survey conducted by Move, Inc., real estate investors are expected to outnumber traditional home buyers in local markets by three to one within the next two years.  Additionally, 56.5 percent of those buyers intend to put their investments to work as rental properties.

Recently Move, Inc., also released a list of the ten college towns for those investors exploring their purchasing options.  This list is based on the leading universities featured in US News Rankings and Reviews list of best colleges in 2011.

Washington DC made it into the list of the featured top five.  The top five college towns featured by Move, Inc. in this 2011 / 2012 back to school investors review include:

Boston, MA

Nashville, TN

Chicago, IL

Washington, D.C

Houston, TX

As always, consult with an experienced real estate professional that can help you to identify and explore options that will help you meet your purchasing goals.





An Ironic Twist

6 08 2011

For Sale By Owner’ founder sells his home… using a real estate broker

By David Gardner

Colby Sambrotto, who founded a website for DIY-real estate, just sold his Chelsea apartment for $2.15million

The founder of a website helping people to sell their own homes has found a buyer for his own apartment – with the help of a traditional real estate broker.

ForSaleByOwner.com creator Colby Sambrotto even paid the standard 6% commission after selling his two-bedroom New York condo for $2.15 million.

According to the Wall Street Journal, Mr Sambrotto spent six months trying to sell the apartment in trendy Chelsea through online listings and classified adverts.

But the DIY home selling guru eventually decided to turn the sale over to a professional.

Not only did broker Jesse Buckler set the price $150,000 higher than the  original asking price, he went on to lure the elusive buyer Mr Sambrotto’s self-help methods had failed to attract.

The Journal said the 2,000-square-foot apartment at The Lion’s Head building near Sixth Avenue is now under contract.

The spartment in question: Colby Sambrotto, founder of 'For Sale by Owner' sold his Lion's Head Building home via a real estate broker The apartment in question: Colby Sambrotto, founder of ‘For Sale by Owner’ sold his Lion’s Head Building home via a real estate broker
Practice what you preach? Mr Sambrotto couldn't sell his house by himself - despite making a fortune by advocating for the methodPractice what you preach? Mr Sambrotto couldn’t sell his house by himself – despite making a fortune by advocating for the method

Mr Buckler claimed the owner wasn’t asking enough for the apartment and was consequently attracting the right buyers.

Broker Jesse Buckler encouraged Mr Sambrotto to increase the asking price of the apartment as a sales strategyBroker Jesse Buckler encouraged Mr Sambrotto to increase the asking price of the apartment as a sales strategy

‘At first he wouldn’t let me increase the price,’ said Mr. Buckler. ‘I told him I know what I am doing—the market is picking up.’

Mr Sambrotto bought the apartment for $2 million in 2007, a year after he sold his ForSaleByOwner.com website at the height of the real estate boom.

He told the Journal that he still believed in owner sales and discounted commissions, but added: ‘The apartment market in Manhattan was tightly controlled by agents.’

‘So many buyers don’t even bother to do a search online.’

Undeterred, he is now planning to launch a new sale by owner website, called USRealty.com.

Fans of the DIY method point to past successes, even in broker-controlled Manhattan.

Edgar Bronfman Jr., chief executive of the Warner Music Group, sold an East 64th Street town house four years ago for $50 million without paying any commission.

Last month, a 69th Street town house was sold by its owner for $48 million.





Aggressive Down Payment Requirements Being Considered for Mortgages

3 08 2011

As measures are being taken to correct and stabilize the distressed housing market, Federal regulators are proposing a new qualified residential mortgage (QRM) rule that would greatly impact the qualifying power of prospective home buyers.  The new rule proposes to impose a minimum 20 percent down payment, rigid debt-to-income ratio requirements and strict credit standards in an effort to restrict mortgage loans to “qualified” homebuyers.  The National Association of Realtors (NAR) has asserted that this rule would harm the economy and deny millions of Americans access to secure, low-cost mortgages.

This proposed definition of qualified residential mortgages (QRM) would impose higher interest rates and fees on mortgages that are consider non-QRM.  NAR states that this will lead to making home ownership more expensive or unattainable for many prospective home owners.  For this reason, NAR has urged regulators to withdraw the proposed risk retention rule and consider alternative options.  NAR submitted a comment letter to regulators offering a host of suggestions.  Since non-QRM loans generally consist of higher mortgage rates and fees, NAR recommends that regulators define QRM as including secure mortgages, with sound underwriting and complete documentation of income and assets, and require risk retention only for mortgages with risky product features such as teaser rates and balloon payments, or with weak underwriting.

“As the leading advocate for home ownership, NAR firmly believes Congress intended to create a broad QRM exemption—strong evidence shows that responsible lending standards and ensuring a borrower’s ability to repay have the greatest impact on reducing lender risk,” said NAR President Ron Phipps. “The proposed rule should be withdrawn, revised and republished for public comment. If not, then millions of hard-working, creditworthy consumers will not be able to achieve their dreams of owning a home.”

NAR opposes the proposed 20 percent minimum down payment rule, asserting that it ignores evidence that responsible lending standards and assuring that a borrower is qualified to repay the loan have the most decisive impact on reducing lender risk.  As a comparison they reference the low foreclosure rates among Federal Housing Administration and Veterans Administration loans, which offer the lowest down payment requirements and maintain relatively low default rates, to further reiterate that safe lending can be established through sound underwriting and documentation rather than high down payments.

If the proposed rule were to be approved, NAR estimates that it would take more than a decade for a family with a median income to save enough money to meet the 20 percent down payment requirement.  Even at a 10 percent down payment requirement, it would take a family more than eight years to save enough money.  This could severely impact the buying power of minority and first-time home buyers.

Overall there is widespread opposition to the regulators’ proposed QRM rule.  Banking, housing and consumer advocacy groups have joined forces to create the “Coalition for Sensible Housing Policy”, which includes 46 organizations and is focused on drawing attention to the proposed regulation.

If you feel strongly that this new rule could negatively impact the economy, please write a letter to your Congressional representative.





Washington, D.C. Housing Market Continues to be a Stand Out

25 07 2011

As the health of the overall U.S. economy is still at question, some sectors of the housing market are starting to show optimistic signs of recovery and the Washington DC housing market is one of them.  The Washington, D.C., metro area, shown in many house price indices as one of the few markets where values are growing, is continuing its upward and onward trend, according to one forward looking benchmark.

Numbers show that people are buying homes.  Some 5,500 new purchase contracts were signed in May, a 7% increase from the 5,170 deals that were inked in April and a whopping 43% jump from May 2010, according to figures compiled by the Metropolitan Regional Information System, the D.C. area’s multiple listing service.

The contracts signed in May are the most since May 2005.

In another positive sign, the region’s median sales price edged higher for the third consecutive month, according to the RBI Pending Sales Index produced by Real Estate Intelligence Business, a MRIS subsidiary. The median for May was $353,600, up 6% from $334,000 in April and 4% from 341,750 in the previous May.

Also, the average number of days on the market in May were the fewest in seven months. And in another key benchmark measure, properties also were absorbed at a quicker rate.

On average, it took 68 days from the listing date to the day a sale closed. That’s 10 days quicker than in April.  At the same time, the monthly absorption rate – the time it would take to sell all active listings at the current sales pace – slipped to 2.8 months from 3 months in April and 4.1 months a year earlier.

The RBI is a two-year moving window index that covers Washington, D.C., Montgomery County, Prince George’s County, Alexandria City, Arlington County, Fairfax County, Fairfax City, and Falls Church City.





Simple Tips to Prepare Your Home For Sale

16 07 2011

Preparing your home for sale can seem overwhelming.  Ideally, you will want to prepare your home so it appealing to as many types of buyers as possible, and also so it is move-in ready for a new owner.  When a buyer is looking at pre-owned homes they are generally hoping it will look and feel “new”, and it is has the potential to be personalized to suit their tastes.  If a buyer walks into a home that is cluttered, looks lived in and boldly contrasts their personal style, chances are they will scratch that home off their list.  Properly preparing your home can provide a great return on your time, as most likely it will increase its value and shorten the time it takes for your home to sell.

Review these few simple steps to ensuring that your home is ready to hit the market.

1.       Get a home inspection

A home inspection is a simple way to feel confident there are no hidden issues that might discourage a potential buyer.  If the home inspection reveals issues, you should immediately make repairs before putting your home on the market.  Some states do require that you disclose the results of an inspection, but this isn’t a concern if you’ve taken steps to remedy any problems.  On average an inspector will cost between $250 to $400, but it is a wise investment if it speeds up the sale of your home.

2.      Acquire repair or replacement estimates

If the home inspection does reveal repairs that you cannot afford, hold on to the estimate for prospective buyers.  Disclosing these costs will give a buyer the opportunity to properly determine whether they can afford the home along with the costs of repairs.  Providing this information will work in your favor, as you will avoid any post-contract issues.  It is also important that you provide warranties, guarantees, user manuals for your furnace, washer and dryer, dishwasher, and any other large appliances that will remain in the house.

3.      Perform minor repairs

There are many repairs that are not costly, but worth the time.  Take the time to fix minor issues – such as sticky doors, torn screens, aged caulk, dripping faucets, touchup paint where needed.  Although these may seem like small issues, a buyer may interpret them as signs that the house has not been properly maintained.  Remember you want your house to “feel” brand new.

4.      Get rid of clutter

When selling your house, a complete purge is ideal.  Clutter can make a home feel disorganized, unclean and small.  To give your home a spacious, tidy feel, start by clearing your kitchen counters of just about everything.  Clean out closets by removing all unused or rarely used items such as out of season clothing or old toys.  You may want to invest in closet organizers that will maximize space and make your closets feel even larger. Consider putting most of your furniture in storage, especially large pieces such as entertainment centers and large televisions.  Remove family photos, knick-knacks, collections, and wall hangings to give your home a more neutral feel and depersonalize it.

5.      Paint

Painting serves many positive purposes.  You will want your home to feel as neutral as possible, so the buyer can easily envision bringing their own style and décor.  You may love the bold, bright colors that highlight the walls of your home, but a buyer could have a difficult time figuring out how to work with such a color scheme.  Make it easier for more buyers to visualize this as their home, by painting the walls with neutral colors that might compliment anyone’s taste.  If your walls are already fairly neutral, it is always a good idea to give them a fresh coat of paint, again making the home feel clean.  Ideally, you could hire a professional painter; however, if you don’t want to spend the money, this is definitely something you can handle on your own.

6.      Thoroughly clean your home

If you can afford it, is well worth the investment to hire a cleaning service to thoroughly clean your home.  A clean house gives the impression that a home is well cared for and feels new.  This will go a long way in making a buyer feel comfortable in your home.  If you do not want to pay for a cleaning service, be sure to perform a few critical tasks yourself – wash windows and air out all of the rooms, clean carpets, wash drapery to eliminate any lingering odors from cooking, smoke, or pets, wash light fixtures and baseboards, mop floors, and thoroughly clean your refrigerator, stove and microwave.  Don’t forget small details such as cleaning fingerprints from light switch plates and the knobs on cabinets and doors.  Also it is very important to make sure your bathrooms are spic and span.

Taking the time to perform these simple tasks will go a long way in decreasing the stress of selling your home.  You will find that your home appeals to more buyers; in turn, your home could potentially sell faster than you would have ever imagined.  Good luck!





Mortgage Interest Deduction is at Risk of Elimination

8 07 2011

With the recent downturn of the economy, Congress is evaluating several measures to stabilize and restore economic growth.  One such measure is to eliminate the mortgage interest deduction.  This deduction is considered to be a core benefit of home ownership, so the threat of its elimination is very concerning.  Presently, individuals are able to deduct the interest on mortgage debt up to $1 million on a primary residence and a secondary one combined.  One can also deduct interest on a line of credit up to $100,000.

The mortgage interest deduction can be traced all the way back to 1894, but despite the fact that the mortgage interest deduction has been part of the federal tax code for over 100 years the deduction is suddenly considered to be part of the budget deficit problem.  Supporters suggest that reducing or eliminating the mortgage tax deduction will provide some economic relief to our country.  Historically, there have been opponents who believe that only wealthy homeowners benefit from the deduction and they now advocate that retaining the deduction is far too costly when our national debt is of such concern.  There are many, however, that don’t buy it and deliver a different story.

Several analysts have stated that claims of the mortgage interest deduction primarily benefiting the wealthy is quite a misconception. According to the chief economist for the National Association of Realtors, Lawrence Yun, 65 percent of families claiming the mortgage interest deduction earn less than $100,000 and 91 percent earn less than $200,000. These numbers support the argument that the deduction is beneficial to all homeowners, regardless of their economic classification.

The mortgage interest deduction has become a mainstay in our country. It increases the affordability of home ownership for many and could be considered a key part of housing market recovery. Millions of Americans feel more comfortable buying homes with the understanding that the mortgage interest deduction will lessen the financial burden of owning a home.

“It’s in the national interest to encourage home ownership,” stated Ron Phipps, the President of the National Association of Realtors. “Recent proposals to reduce or eliminate the mortgage interest deduction and remove government support of the housing finance market could have disastrous consequences for the economy, not to mention making it harder or nearly impossible for millions of families to own their own homes. We believe America must continue to invest in home ownership, for the future of our families and our nation.”

This issue has become an active discussion on Capitol Hill and many groups have been created to modify the existing tax system.  As several deductions are under review, there is a greater risk that the mortgage interest deduction will be eliminated or reduced.  If you currently own a home or are considering purchasing a home, and you support the continuation of the mortgage interest deduction, it is critical that you let your lawmakers in Congress know.  Write a letter or email your concerns today.





Now Is the Best Time To Buy A House

26 06 2011

If you want to buy a house but have been waiting on the sidelines for the market to bottom out, it’s time to rethink your position.  In making any decision, it’s important to consider the environment you’re operating in.  And today’s real estate market environment is on the verge of the most rapid and thoroughgoing transformation since the end of the Great Depression.  New government regulations, demographic changes and a host of other factors will totally transform the way we do business.  You can’t afford to ignore these changes!

Sale price is only part of the equation when you’re making the decision to buy.  You have to figure in the cost of the loan as well.  The historically low mortgage interest rates we’ve enjoyed for the past three years are about to vanish.  The market is poised to make gigantic changes in the coming months and if you’re blinkered by adhering to the sole criterion of “lowest price” you could miss out on a great opportunity.  The market is about to become a leaner, meaner place and it’s important to lock into lock yourself into a good, low mortgage rate now before the rates skyrocket. We’re looking at a confluence of proposed legislation and environmental changes could make housing loans smaller, harder to qualify for and much more expensive.

The Dodd–Frank Wall Street Reform and Consumer Protection Act  was signed into law by President Obama on July 21, 2010.  Dodd-Frank is the most sweeping change to financial regulation in the United States since the Great Depression.  The Obama Adminstration’s report, Reforming America’s Housing Finance Markets, is the plan for implementing Dodd-Frank by drasticly reducing the government’s role in the housing finance market and completely restructuring how the market does business.  The report can be viewed at http://www.treasury.gov/initiatives/.

Congress is looking at eliminating the mortgage interest deduction, and policymakers are debating the desirability of requiring Qualified Residential Mortgages (QRMs) with a 20% down payment.  Fannie Mae and Freddie Mac will be gradually phased out with the expectation that private capital will take their place.  Since Fannie and Freddie originated 60-65% of mortgages from 1988-2008 and a whopping 90 percent of new mortgages since 2008, there is question of whether private capital has the capacity or the willingness to fill the void they will leave.  We can expect the phasing out of Fannie and Freddie to result in reduced liquidity and higher lending rates.

In 2012, the interest rate is expected to be 5.7 percent.  Even a half-percent increase in mortgage interest can add a hundred dollars or more to your monthly payments, depending on the amount of your loan.  MoneyWatch.com’s Carla Fried gave a hypothetical example of what a 5.7 percent interest rate would mean in terms of real money:

“If you take out a $300,000 30-year fixed rate loan today at 4.6 percent your monthly tab will be $1,537. But let’s say you instead decide to wait another year or more on the theory prices are heading lower. If during your wait the 30-year fixed rate rises to 5.7 percent you would need home prices to fall nearly 12 percent to come in at the same monthly mortgage cost as what you can get now.”

Even without the proposed new legislation, mortgage interest rates are on the rise.  This graph from the BankRate.com web site shows that interest rates are beginning to rise again.  The site explains that, “The 30-year fixed-rate mortgage, considered a bellwether home loan, rose 6 basis points to 4.71 percent from 4.65 percent.  Other mortgages followed a similar pattern. The 15-year fixed mortgage climbed to 3.86 percent, up 7 basis points. (A basis point is one-hundredth of 1 percentage point.) Another fixed-rate product, jumbo mortgages, which generally are those for more than $417,000, hit 5.2 percent, up 1 single basis point.”

If you are interested in an expensive home, be advised that the loan limit for a conforming high-cost mortgage will be decreased on October 1, so it is very much in your interest to lock into a conforming rate now.  You also should lock into a mortgage now if you are interested in a low-cost FHA housing loan.  The fees and downpayments for these loans have been on the increase.

In short, new regulations and changes in the market environment will trigger a sharp increase in mortgage interest rates and cause the actual cost of home ownership to increase dramatically.  In the words of Washington Post columnist Kenneth R. Harney, “Take a snapshot of today’s mortgage market conditions and frame it, because it’s highly likely you’ll never see anything like these favorable combinations of rates and terms again.”

Other forces that may raise costs are also in play.  The scenario of a “glut” of housing depressing values for the rest of the decade appears to be very unlikely.  Though it’s hard to imagine in today’s depressed housing market, demand for homes may soon exceed supply.  Moody’s Analytics predicts that the number of distress sales will begin to fall in 2013, and that prices will begin a slow increase.  Since home building is at a standstill, the glut problem will gradually resolve.  This reduction in excess inventory will be accelerated by a demographic trend, “household formation” which the Wall Street Journal defines as “the number of new households each year.”  Household formation, the Journal says, is on the rise, and “promises to take a bite out of the glut in coming years.”

This household formation trend reflects the fact that the majority of Americans have a strong desire to buy their own homes.  An April 12, 2011 survey by the Pew Research Center found that out of a sample of 2,142 adults, 81% agreed that buying a home is the best long-term investment a person can make.  This indicates that the demand for homes is real but pent up.  As the recovery continues, market prices will rise.

Ashleigh Leigh of Linton Hall Realtors says that indicators already point to a market that is on the mend, “The market has gone up 40% in the last two years and will continue to rise.  Now is the time to jump in and buy.  If you wait too long, you won’t be able to afford to be part of it.”  Leigh adds that since market conditions are changing rapidly, “you need to lock in on a favorable interest rate quickly.  At Linton Hall Realtors we offer a prequalification service so that you will know exactly how much you can borrow and at what rate.  Being a prequalified buyer demonstrates to sellers that you are ready, willing and able to close a deal.”

To learn more about the financing service offered by Linton Hall Realtors, visit the web site at http://www.lintonhallrealtors.com/lintonrealty/index.php?PageID=100&portal=buy&section=mortgageglossary&page=prequalify or call Ashley Leigh at 703-485-4663, ALEIGH@ACLTEAM.COM today to discuss your specific location and circumstances.








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