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Tuesday, July 21, 2009
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44 comments:
Weekends have been busy with actually enjoying the summer, so we're going to go look at a couple places tonight, and plan to put in an offer on one of them.
Any last minute advice? I know we need both a funding and an inspection contingency. Haven't exactly decided on a bidding strategy, but don't want to discuss that here, although your input is welcome, I won't reply to that part.
Jeff B: yesterday someone suggested you stop paying your rent if you think the house you are renting is going into foreclosure. You can discuss with the management company if there is a way to pay the rent into an escrow account (probably not). Particularly if you have a management company and stop paying your rent, they will immediately issue a five day letter which warns you to pay your rent or face eviction. Virginia is not very tenant friendly and you can be evicted in about a month and a half for a "failure to pay" rent suit. The last thing you want to do is complicate your situation by not paying rent. Fairfax Co. still has an office of tenant landlord affairs and you should contact them to "go on record" with your presumed problem rather than stop paying rent. They will also give you good guidance on current requirements and information on how other tenants have proceeded either successfully or unsuccessfully.
No advice, Cara, but good luck!
Bloomberg:
loan modifications drop your credit score too
“We view an account that has been settled or renegotiated for less than the full amount as a negative because historically consumers on reduced payment plans represent a greater risk,” said Ethan Dornhelm, a principal scientist at FICO’s San Rafael, California, office. The size of the impact may be more for borrowers with higher credit scores, he said.
gee, ya think?
“Homeowners need to focus on the mountain, not the molehill,” said McBride, the Bankrate analyst. “They get to stay in their homes and can always try to repair their credit scores.”
If you can't afford your mortgage as it is, why do you need more credit, i.e. more debt? I know they trotted out the independent contractor, but really, he did get in over his head, this is what happens when you get in over your head.
Thanks anie, we're definitely wary of stopping rent payments. The last thing we need to do is damage our credit. The management company seemed to be on the ball about finding out the situation and said they were as surprised as we were that there might be a problem. We'll wait until we hear back from them before doing anything else. They did confirm that they hold the security deposit, not the owner. So that should be safe at least.
Jeff-
I am pretty sure as long as Jeff is paying rent he is fine. I thought Obama created some law saying you can't evict a renter during the middle of their contract if they are paying. So I would just continue to pay rent and I am pretty sure you will be able to stay at leat through the end of your contract.
Cara-
I think a lot of people also make the offer contingent on a radon and termite inspection. I think you had said you are using Redfin. If this is the case they will tell you what you need to do.
Other than that goodluck. I know you are risk adverse so you probably will not like this idea, but you may want to look at 5 year ARMs. It sounds like you will still be saving a ton of money if you buy this house. If this is the case you will probably be able to pay down the house enough that after 5 years even if the rate resets higher your mortgage will be low enough that the 1% difference in rates between an a 5/1ARM and a 30 year fixed is worth it. Not to mention if you save a lot over this period you may be looking for a nicer house at that point anyways. I know its not the most risk adverse thing, but if you run it through some models my guess is that most likely you will be better with a 5/1 rather than 30 year fixed.
housebuyer,
I'm working with Jeff Royce from Frankly.
We've been debating just going with a 15 year loan for the same reason of getting a considerably lower rate, but the 5/1 does have the combination of a lower rate (even lower than the 15) but with the flexibility of the 30 year payment schedule. When the 5th year is done, does it recast to reflect any additional principle payments you've made, or does it just reset? But you're right, right now it does have a ridiculously low interest rate, such that the amount of savings, even if we ended up not moving for 10 years, might still work out better.... I don't think we should discount it without running the math.
Cara-
Basically I would also make sure that you have it contingent on something that you know it will fail. That way if for some reason you decide you want to back out you will get your earnest money. I think you said you are looking at a condo, so I am pretty sure that your contract will be contingent on you seeing and liking the condo/HOA information. You can pretty much always use this a way to back out if need be. Other than that goodluck :)
housebuyer,
yes, it's a condo so has the 3-days of document review period where you can back out for no stated reason. So, the other contingencies are there mostly because they are inspections that we want done, and we want the owner who's still living there to agree to let them be done.
Cara-
I am 90% sure that you only get charged the interest rate on the principle you have left. So if you paid off 60% of the house than when it recasts in 5 years the interest rate would only impact the remaining 40%.
One thing to be careful about is that the APR is a slightly strange calculation on these loans. So make sure you know what rate you will be paying the first 5 years(this is not the APR the list) and then where it would recast based on current prime rates.
Cara-
I guess the radon test isn't that useful since I think Radon is only an issue for basements.
housebuyer,
radon is also important for granite countertops which this place doesn't have. But termites and mold are going to be key, and for this place I want an electrical inspection...
housebuyer,
Running some numbers, you may be right, I'll need to discuss this with my husband.
Basically assuming BofA's current rates of 5.5 (30 year) 4.85 (15 year) 4.35 (5/1 ARM) and paying each of them at the 15 year amoritization schedule, we don't save that much in the first 5 years over the 15 year rate ($3000), but we save quite a bit over the 30 year rate ($7000) between outlaying less money and getting more of it put towards principle. That's nothing to sneeze at, and the loan provides the combination of the flexibility to not start the higher payment amount until a bit later (after moving expenses are finished), with a really low interest rate that makes any overpayments go even further. It just has to be looked into very carefully for the maximum resetting adjustments and the maximum lifetime rate. (as well as any pre-payment penalties) If those are too onerous, it may still be worth it to lock in the historically low fixed rate, in case we end up living there over the long haul.
I concur with anielarke and housebuyer that Jeff B should continue paying the rent. It sounds like from Jeff B's comment he did the right thing -- contact management.
I would add though it's probably a good idea to look at other places you might want to rent. And maybe even try to negotiate an earlier end to the lease given the uncertainty.
Not related to our market but a good read for anyone into housing articles
Utopia at a Discount
The article is about the Disney town Celebration, FL.
Other than the corporate sponsor of Disney, Celebration actually is pretty similar to many planned communities. There are plenty of communities in Fairfax, Loudoun, and Prince William Counties that have similar planning.
TBW-
I am actually amazed at how little some of those houses have fallen. It sounds like the one they talked about went from 1MM to 750Kish which is 25%. I think most of the cities in FL are down ~40%.
Justice Dept. relocating some operations to SC
COLUMBIA, S.C. — The U.S. Department of Justice is relocating some of its U.S. attorney operations from Washington to South Carolina under a 20-year lease agreement with the state's flagship university, officials announced Monday.
...
"I think it's a good thing to get government out into the rest of the country," Ogden said.
The move will bring more than 250 high-paying jobs to Columbia, a small fraction of the roughly 100,000 who work at the Department.
...
Most of the jobs moving to Columbia will go to employees relocating from Washington, although Ogden said there will be some new hires from South Carolina.
"The people moving from Washington can do the same job for the federal government in a cheaper place, quite frankly. It takes a lot less to rent office space in Columbia, S.C., than it does in Washington, D.C. And the job that they will be performing is kind of scattered throughout Washington. They're going to put everybody in one building. ... It makes efficiency sense, it saves money."
Obviously not a big deal for our area economy but it would certainly be a big deal if more of this happens.
housebuyer,
I think the large price drops are mainly in condo buildings in Florida. That's probably where there was more bubble shenanigans (akin to PWC here).
TBW: I've been preaching this for years. I remember in the 1990s the big deal was all of the companies relocating from the North East to the South East (Carolinas, Jacksonville, heck, even Dulles) because it was so much cheaper and there no longer was a reason to be located in NYC, etc.
Likewise, I think it makes sense for the government to disperse jobs throughout cheaper sections of the US, whether it be Columbia, SC or Peoria, IL. Not only would that save the government a lot in the long run, but it also makes sense from a defense standpoint (i.e. distributed government agencies).
tbw, novawatcher,
The equity people will bring with them will just infect those housing markets with decreased affordablity. It's already happening.
And where are people's spouses going to find work if they're not moving to an existing job nexus?
I don't know, as someone who moved around far, from extended family my entire youth and who has chosen a career-path where I was almost entirely at the mercy of others to determine where I would live, I have a strong distaste for any policy that thinks it's a grand idea to up-root people at will. It's one thing for my parents and myself to chose it as a painful side-effect of our chosen line of work, it's another thing entirely to force it on others.
NoVAWatcher,
I completely agree. Although with all the commercial real estate foreclosures occuring in this region (and soon to occur given how many offices were built on spec), the GSA could probably buy up a few nice office buildings for a steal.
Cara,
It would be interesting to see the details of this plan. This happens to be located at a university. Many universities have "spousal hire" rules that offer professional jobs so that two income families can move there. I wonder if the USDOJ asked the school this will be affiliated with to offer such a deal so that no one felt they could not move there because the spouse would not be able to find a job. Although I'll note that this is not a backwater area of the country. It's not as large as the DC area but certainly somewhere someone could find a professional job.
I can understand the desire for stability. I purposely picked a career path that I knew would both provide me with the means to live a middle class lifestyle in the DC area similar to what I grew up with (sadly this requires a lot more money than it did when I was growing up) and one where job opportunities in the DC area would always be ample. If I were working for the EOUSA I would be very annoyed at this move. I think though because they are all within the system it might be a little easier for them to transfer to another DC area fed gov't job than it is for those of us on the outside.
btw I don't think NoVAWatcher or I were making a normative argument. I think we were just saying the reality of it is that companies need to save costs and so many rethink their locations. It's a modern fact of life that one's employer may leave town. In a normal economy you don't have to move with them -- you can find employment elsewhere.
tbw,
I should have been clearer, my point about the spouse was more that the places that one could move such things to are going to be "non-backwaters" so that it's not so difficult to find a second job.
You're also right that hiring between agencies is facilitated, although I have no experience as to how easy that is.
tbw,
I just think that this "modern fact of life" is butting up hard against the realities of raising a family. Though I think everything with respect to work life balance is totally out of whack. I blame the concept of the nuclear family as the sustainable unit. We've tried that since the 50s with the middle class moving around freely for jobs, I think for most people it's failing them.
But now I'm getting way off topic. And you're right, new cities will rise up in the economy by virtue of being the new meccas for business and government.
Cara,
You might find this article interesting and perhaps on point to what you are referencing?
http://www.msnbc.msn.com/id/3079221/
Oh and this book
Strapped: Why America's 20- and 30-Somethings Can't Get Ahead
By Tamara Draut
It's hard to believe: "Today's college grads are making less than the college grads of thirty years ago." In fact, men aged 25 to 34 with bachelor's degrees are making just $6,000 more than those with high school diplomas did in 1972. This is just one of the many shocking statistics uncovered by Draut, a think-tank adviser and media pundit, in this incisive and revealing look at why today's young adults find financial independence so difficult. With catchy terms such as "debt-for-diploma" and "paycheck paralysis," Draut shows why this age group's ability to accomplish the traditional adult markers of school, career and family is stagnating...
man i wish they had a picture of the kitchen in this listing
http://franklymls.com/FX7113303
lol GT. Apparently it's a geodesic dome too.
GT,
I'm partial to the deck picture myself. i think i'm dizzy now, thanks, that was awesome.
GT-
Yeah Capital LLC takes a million pictures of all of their houses. They currently have 30ish houses on the market. Basically if you want stainless steel, new wood floors and a decent house they actually have decent prices(better than most flippers). I have no idea why they use the fish eye camera. It really distorts the view.
Cara,
Don't forget the appraisal contingency (which should be standard). If you have the funding, inspection, and appraisal contingencies, that gives you three possible outs--spread over a period of time--in case you change your mind.
Also, I would recommend you put time limits on how long the seller has to respond to the offer, the inspection notice, and the notice (if applicable) that the appraisal came in low. I am in the process of buying my first house (closing Friday!) and the seller drove us crazy by taking six days to respond to the offer and six days to respond to the inspection. Granted, we had an unusual seller (a group of nuns) that had a complex and murky decisionmaking process, but you shouldn't have to wait more than three days for any one decision.
Good luck! Now might not be the perfect time to buy, but it's still pretty darned good. If you buy a house you plan to stay in for at least 10-15 years, the psychological benefits of finally getting into a house of your own will far outweigh any money you "lose" by not magically buying at the exact bottom of the market.
Todd,
Good luck! Now might not be the perfect time to buy, but it's still pretty darned good. If you buy a house you plan to stay in for at least 10-15 years, the psychological benefits of finally getting into a house of your own will far outweigh any money you "lose" by not magically buying at the exact bottom of the market.
You forget that it's not just money you can lose but the opportunity to wait and get a better home and/or neighborhood for the same amount of money. Why buy in neighborhood x (40 minutes from work) if in a few years you can buy in neighborhood y (20 minutes from work)? Or why buy a TH now when you can get a SFH in a few years?
You are forgetting that most people don't want to buy for an investment. Precisely because I want to buy and live somewhere for 10-15 years (actually I'd like to buy a home and live there until retirement and maybe beyond) I don't want to have buying a year or two early cause me to end up further out or in a TH instead of a SFH when patience would reward me with a nice neighborhood.
Also while there are positive "psychological benefits" from owning one's home there are also negative "psychological consequences" to having a paper loss of $100k.
I think some people are still in denial about the amount of losses that could come in the above $400-500k market. I mean, I'm still seeing homes in Fairfax County on the market for $600s-700s that were in the $350s pre-bubble. I'm not saying they are going all the way back down to $350k, but there's still a lot of room for heartache there.
Now if there ends up being a year where Northern Virginia prices do drop then start telling people they are slow pokes. But in this downward market there are still a lot of homes with the potential to lose six digits in price.
tbw,
I think there was a typo in this sentence:
"Now if there ends up being a year where Northern Virginia prices do drop" should be don't drop?
Todd,
good advice on the time for reply and that the appraisal contingency is separate from a funding contingency. But we're buying some place because it's cheaper than renting with more space and I like the neighborhood, commute and schools. It's not a 10-15 year home, by design, but it is more than sufficient for the next 5 years, and perfectable acceptable indefinitely.
Our main motivator keeping a lid on our upper limit in price is tbw's point, which is that a year from now, even if prices didn't go down any further, we could get more based on having saved for another year. That, and the fact that the whole point of this place is its affordability and value, which rapidly disappears if we pay too much over what I think the bottom price could easily be.
Cara -- yes typo. Good catch.
The Watergate Hotel was taken back this morning by the German bank that foreclosed on its debt-ridden owners at an auction that failed to attract any bids, despite international attention.
Article
To be fair it seems likely that someone will buy the Watergate Hotel.
I sort of wish it were gone. The buildings are pretty ugly. Also things that used to be its strengths -- physical separation from the city because of the freeway and Virginia Ave are now weaknesses now that the city has revitalized so much (particularly Foggy Bottom, Downtown, and Dupont Circle). And the Metro of course is something people want access to.
My husband works in the Watergate office building at 600 New Hampshire and walks back and forth to the Foggy Bottom Metro Station every work day, and I walk from there to his office if I meet him downtown to go to the Kennedy Center. It is less than a 10 minute walk from the station to his office and is through a nice residential area with many people around so it is safe.
good luck, cara :)
forgot to ask, on the fisheye house...how much of a discount on the price is there with that scenic view of the 95 staging area/construction site? At least I'm pretty sure that's what it is? Blech.
Meshell,
That is not the staging area for I-95, it is actually a housing development called Alban Cove. There is some construction going on at I-95 at Fullerton where Alban and Backlick meet up. That's for Ft. Belvoir's Engineering Proving Ground which is off of Fullerton.
I think this is called the House that Escher Built.
Thanks for the info, HG.
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