Newsletter Spring 2009[1]

C E N T U RY 2 1 N e w M i l l e n n i u m

R EAL E STATE N EWS INSIDE THIS ISSUE:

Selling Considerations Inventory Trends Buying and Investing Median Sales Trend Regional V. Distressed Market Statistics Lending

2nd Quar ter 2009

DEAR NEIGHBOR, Real Estate is Great...thank you for asking! Interest rates are considerably lower than a year ago. Inventory trends are becoming more balanced. Confidence is building. Values are incredible. Real Estate is indeed great! Key indicators tell us the “bottom” is behind us. Enthusiasm for this perspective needs to be tempered by a thorough understanding of an individual’s circumstance as well as where within our region a property is located. Real estate remains a local business. Media reports generally discuss national statistics. Florida, California, Nevada and Arizona continue to experience negative trending. Our firm services Northern Virginia, Maryland and the District of Columbia where the direction is quite positive. However, even within our footprint, we experience diverse trends. Market performance also varies by price range. Modestly valued homes are moving at a brisk pace while in many segments, sales in higher price brackets are lagging. Investors are very active in the lower end of markets which experienced the greatest decline in value. Navigating a real estate transaction has never been more complex. In some segments, foreclosures and short sales account for more than 80% of settled transactions. Purchasing a property involving an institutional seller adds layers of risk not associated with a private sale. We are again seeing multiple offers at lower price points and investors are beating out first time buyers by offering to pay cash rather than finance the transaction. We firmly believe the worst of this storm is behind us. There will certainly be new challenges. We are convinced that when we remain positive, understand the facts, plan thoroughly, and execute with resolve, each of us will prosper.

Sasha Kilbane Realtor®

6641-A Old Dominion Drive McLean, VA 22101

Cell: 571-276-8479 [email protected] www.c21nm.com

ARTIFICIAL STIMULUS An unprecedented amount of government money has been applied to our financial system in effort to stabilize banks and seed economic recovery. These dollars were intended to buy up nonperforming residential mortgage loans which many believe to be the root of the problem. While the money didn’t go towards the purchase of “toxic” assets, the taxpayer’s investment has accomplished a moderately positive impact on the housing sector. Artificially low interest rates are spurring demand. Tax credits are available to first time purchasers and those who have not owned a property in the last three years. Incentives for banks to modify existing loans and refinance adjustable rate loans to fixed rate product have created a somewhat limiting impact on inventory. While Government remains focused on supporting the housing sector, this focus will wane once a recovery trend is proven. Recovery is underway in our Region. The DC Metropolitan Area is typically “last in” and “first out” of recessionary periods. As dire as circumstances might seem, our trending is among the most positive in the country. With respect to housing, those waiting for the national media to declare the recession over will have missed a considerable portion of the opportunity.

703.556.4222

There exists a window of opportunity for both purchasers and sellers. Buyers benefit from a reasonable selection of property, low rates, and low prices. Sellers with equity can upgrade substantially; there is a higher demand for the price range they are selling than for the one in which they will purchase. Distressed sellers will likely find their lender more open to a negotiated payoff today than they might when government influence is retracted. Those considering a real estate transaction will be most effective by understanding the dynamics, making a five year plan, and committing to that strategy. Merely waiting may no longer be productive.

Real Estate News

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Seller’s Considerations RECOVERY TREND The Washington Post once referred to Prince William County, Virginia as “The Ring of Fire” for foreclosure activity. Prince William is now the most active market within the Region. The graph to the right demonstrates an abrupt decline in inventory while sales activity has returned to levels not seen since 2005. Most segments of our market have followed a similar pattern. However, inventory build was not as steep and recovery trends tend to be more gradual. Consistently, the direction is positive.

SELLING STRATEGIES Those considering upgrading locally have the best of both worlds. Demand for property in lower price ranges is stronger than for those in the higher brackets. It is also likely that the new purchase money will have a lower interest rate that the existing mortgage. Finally, lower price points are moving quickly while the destination property may have been on the market for a protracted period of time. Buying low and selling high is a very real opportunity. Single transaction sellers realize that prices have fallen, but many are not precisely aware of what their home might bring in the current market. At today’s value, some are not willing, or able to sell. It is our responsibility to help them structure and implement the best alternative strategy. Refinancing to a low fixed rate, renting the property, or both may be the appropriate solution. Our clients have long enjoyed the benefits of our Mortgage, Title, Property Management, and Relocation services. Typically these advantages were most visible to those on the purchase side of transactions. Increasingly, we are finding that our mortgage company and property management firm provide the most appropriate solution for prospective sellers. Helping sellers who are compelled to sell their home for less than the amount owed has become a core competency. Short selling is a very complex negotiation which involves much more than having the lender agree to clear their lien for less than the amount owed. Continued liability for the unpaid balance is variable based upon the seller’s profile. Tax consequence for forgiven amounts will vary dependent upon the purpose for which the money was borrowed and the property use. Unless resolved prior to settlement, the short seller will have no choice other than to deal with what comes down the road. In our business, providing excellent customer service to sellers goes well beyond just helping a seller clear the lien. It requires we clearly understand the client’s situation and then execute the best solution. It’s the “harder right over the easier wrong” thing. Selling a property is not always the right answer. Short selling without understanding the full consequence is never the answer; unresolved items could cost a family hundreds of thousands of dollars. Representing short sellers is not a marketing position; it is a responsibility.

VALUE TREND The District of Columbia has weathered this downturn with a modest five percent decline in median home value. This is in stark comparison to the fifty-six percent decline in Prince William County over the same time frame. Within these market segments, performance can vary substantially by community and property type.

SALES VELOCITY Sales activity is trending most positively in those areas experiencing the most substantial decline in values. There are segments where sales have remained flat or even declined slightly over the prior year. The overall trend is positive and should remain so. Buyer side confidence has returned.

Real Estate News

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For Buyers and Investors

THE BUYER’S OPPORTUNITY There are segments within our market that have endured the distressed sales cycle. Within specific price ranges, property values have stabilized and are once again appreciating in value; some in a rather robust manner. The rate of sale below the median home value is significantly stronger than for those properties valued above this mark (graph above left). Months of inventory (MOI) refers to the number of months it would take to sell all currently available property if no others came on the market. The cash sale rate (graph above right) defines the increase in investor activity. This statistic has always been a valid leading indicator and without exception, this buyer profile is more active across the region. In Prince William County, cash buyers now account for twenty three percent of closed transactions; a five hundred percent increase above the statistic for 2006. Rates of return are very favorable at these values resulting from the ability to secure long term fixed rate financing. A growing portion of the inventory within our market is either Bank Owned (foreclosed) or Bank Influenced (short sale) property. These homes present a favorable value proposition, however, the process of acquisition can be difficult, frustrating, and prolonged. These transactions involve risk not typically involved in a resale transaction.

BUYING FORECLOSED PROPERTIES When making an offer to purchase a foreclosed property, the initial offer will be written on a standard Board of REALTORS® form. Initial acceptance will be verbal and the contract will be returned unsigned by the lender with the addition of a “Bank Addendum.” The terms and conditions set forth in the bank addendum will supersede any conflicting terms within the standard contract forms. The addendum is written by the bank, for the protection of the bank, and generally will not be executed by the bank if altered in any manner. When presented with the Bank Addendum, the purchaser will usually be given forty eight hours to sign and accept the addendum. Contingency periods will often run from the “verbal acceptance” date. The Addendum will offer the purchaser inspection rights but stipulate that the property is being sold “as is.” Language generally will extinguish contingency periods for financing and inspection automatically at an expiration date. The Addendum may call for an earlier settlement date than the original contract specified. In the event the purchaser delays closing, the addendum will stipulate a per diem penalty. If the bank is unable to meet the settlement date, there are typically provisions allowing them to extend settlement up to 120 days without compensation to the purchaser. During this 120 day period, the purchaser remains legally bound, and must wait patiently for the Bank to resolve the delay. The limit of liability to the bank for non-performance is the return of the earnest money deposit.

BUYING SHORT SALE PROPERTIES Acquiring a short sale property (those where the Seller’s net proceeds will not clear all liens) is considerably more challenging than acquiring a foreclosure. The purchaser and seller enter in to a contract to transfer the property at a price which is less than the amount the seller owes. There is generally no agreement in place with the lien holder to accept less than the amount owed. The contract is binding upon the purchaser, however, the current owner’s obligation to perform is conditioned upon the lien holder’s approval to accept less than the amount owed. Only when the contract is in place does the lien holder begin evaluation of the transfer. The seller’s hardship package includes a financial profile in a format very similar to a loan application. Fee appraisals are completed to assess the bank’s position in the property. The lenders primary focus will remain collection of the full amount owed. This process can take as little as several weeks and as long as several months. The lien holder and the seller may be running parallel courses toward foreclosure or loan modification. Foreclosure would render the pending short sale contract void and force purchasers to begin their home search all over again. If the seller is successful in obtaining the loan modification, the seller stays in the home and again, the purchaser returns to square one. Even when lien holder approval is obtained, the terms of the approval often alter those set forth in the contract. Lenders are just beginning to have adequate staff to manage this internal process and only a small, but growing, percentage of this transaction type are making the settlement table.

SUMMARY If you are considering a real estate transaction, thorough analysis and competent representation are essential. We are in a transitioning market. There is potential for profit, as is there risk of loss. If we understand the underlying facts, we can continue to make good business decisions; logically and without emotion. I am a real estate professional and accept responsibility for keeping my friends, neighbors and business community informed as to all aspects of things affecting the real estate portion of their holdings.

Sasha Kilbane Realtor® 6641-A Old Dominion Drive

If you are currently listed for sale, this is not a solicitation. If you have a real estate question, I will be happy to answer it, or find the answer. If you have a real estate need, I will appreciate an opportunity to compete for your business. As a CENTURY 21 Company, I can help you with real estate needs here, or anywhere in the world. Our team is very good at what we do...our results demonstrate that. Don’t settle for less. Sincerely,

McLean, VA 22101 Cell:571-276-8479 [email protected] www.c21nm.com

Sasha Kilbane Sasha Kilbane Realtor®

©2009 NM Management, Inc. Equal Housing Opportunity. Each Office Is Individually Owned and Operated. Information contained herein deemed reliable but not guaranteed.

6641-A Old Dominion Drive McLean, VA 22101 www.c21nm.com