Stalled Luxury Home Sales

A few months ago I gave you information about the upscale housing market in the Greater Cincinnati area.  Those areas included Butler, Warren, Hamilton and Clermont counties.  We discussed the Jumbo Mortgage Market, and how tight control on the interest rates for the luxury home market may be slowing the housing market, at the “grass roots” level.

I just put together an update with closed sales stats through November 15, 2009.  I thought you might like an update.

Single Family Sales: Butler, Warren, Hamilton and Clermont Counties.
Source: Greater Cincinnati Multiple Listing Service

It’s possible that once the current 23 pending sales do close, that we the “Over $700k+” sales will not come to the anticipated 138 total.  We will just have to see if those homes, in this buyer driven market, that are priced close to the $700,000 list price, do indeed sell over $700,000

More Cincinnati real estate information can be found at RealCincy.com

When gold coins were plentiful, the princess was loved by the people. After the darkness appeared, some would even want to literally argue, challenging her to a duel, about why their castle was special, and how it had escaped the plague on the land. “But I’m next to a park” shouted one! “But I’ve just drained the swamp!” yelled the other. “Could you not see that I’ve painted the Great Hall blue, the master suite purple, and shined all the suits of armor?!” raged the next.

After the darkness appeared over the faraway land, some people decided to not sell, but perhaps re-finance their castle. Maybe take cash equity out of the castle, and dig a bigger moat or pay down some credit cards. Perhaps finance a trip to another far away land: Acapulco or the Grand Cayman Islands for instance.

If we are going to re-finance, we’re going to need an appraiser. If we have an appraiser, we have an opinion of value. The key word here is “opinion”.  I’m not here to suggest that we send the appraisers to the stockade.  Not even close. I successfully work closely with an appraisal group to assist me with our Serious Seller Program. Now, that being said, let the story telling continue.

A couple of weeks ago, someone I know gave me a copy of an appraisal, now about 6 months old.  If you can remember back with me, to January 2009, the Greater Cincinnati real estate market wasn’t exactly stellar, and the MLS stats that I posted outlining 2008 final numbers spoke to that point. As the market has continued to remain low these last 6 months, it’s possible that the future reporting will show that it was better then, than it is today!

I would love to be able to share the entire contents of this book of fiction, um, professional appraisal, but ya’ know that’s not going to happen. I will however, continue with the “fairy tale” aspect of this story, by sharing a couple of key thoughts. This was a well intentioned appraisal, I’m sure. However, the mistakes made, and the storybook effect of this tale of fiction disguised as an expert appraisal, has yet another homeowner thinking her castle may be worth a few thousand more than it is.

The point of the appraisal was, as you’ve probably gathered, for a re-finance.  The home is served by a school district with an “Excellent” rating, per the Ohio Department of Education. That school district had 207 sales in July 2008 – January 2009. In the same time period, one year prior, July 2007 – January 2008, there had been 236 sales.  I know you did the math: 29 fewer sales
Now, check out this information:
2006 – 504 Sales. Median List Price: $215,000 Median Sales Price: $209,250
2007 – 419 Sales. Median List Price: $205,000 Median Sales Price: $195,000
2008 – 387 Sales. Median List Price: $189,900 Median Sales Price: $184,500

Here’s how the fairy tale continues: this appraisal was performed the first week of January 2009, thus the appraiser would have concentrated on the 6 months prior to the report.  The appraiser would have access to the above information; however, this is not the type of sales history an individual appraiser will take the time to create or consider for one homeowner. The appraiser commented that this area had “…stable to modestly increasing property values.” I don’t know about that. What do you think?  $184,500 SOUNDS like quite a bit less to me than $195,000. A $10k drop in median value for one of Greater Cincinnati’s most popular areas in one year’s time! That’s information I might like to have if I’m selling a home, or re-financing and looking for true market value, (not pumped up re-fi value)  now that the dark cloud of slow sales has moved over the land.

Let’s consider something else in the appraisal that will cause even the sturdiest gargoyle to rock off its base. Under the “Additional Listings” section of the report, the appraiser voluntarily and arbitrarily decided to discuss a home that was being offered “for sale”, in “active” status in MLS, far above the most probable sales price, or market value, of the subject property. This home was entered into the report as an “oh, by the way” commentary. Just what did the appraiser say? Glad you asked. She noted that while “…this is not to be considered a comparable, due to the fact that it does not meet the requirements of a comparable, which is a closed sale. This listing exhibits the strength of the market in the area”.  In my book, 32 fewer sales than the year before, with a $10,000 drop in median price doesn’t sound too strong…but what do I know?   That “non-comp”  home was on the market, the day of the appraisal, January 6, 2009 at $183,500. It had first entered the market priced at $187,500. Currently, the home is still being marketed, 301 days later, and reduced to $177,500.

In some wierd way, I guess you can say the this home “…exhibits the strength of the market…” I just don’t think that was the twist the appraiser was going for.

In the meantime, there is a homeowner who has been given some “false hope” about the reality of the real estate market. Unfortunately, she has put her faith in this appraisal that is riddled with inaccuracies. I think I know a princess whose frock is about to get dirty.

More Cincinnati real estate information can be found at RealCincy.com

The FHA 203K is for owner occupied properties only. There is a down payment minimum of 3 ½%. Sorry, no investors will qualify for this specific program.  If you are shopping in the foreclosure market, be sure to address this with your lender during your pre-approval process. Now that you’re ready to home shop, let’s break it down so that if you find “the one” but it could use some sprucing up, you’ll be ready.

1. Get your pre-approval. Know your loan limits and comfort zone. View homes that may interest you, and identify which home is “the one”.
2. Prior to writing your purchase contract, you need to determine the following:
• The extent of the work necessary.
• Approximate costs
• Impact on market value.  After the work is complete, you want to make sure that the price you pay for the home, plus the costs of repairs, makes sense.  The two should add up to current market value (if in good condition) or less.  Certainly never more!
3. Make your best offer.  Be sure your agent writes in the financing section of the contract you will be applying for a 203K.  The contract should be contingent upon loan approval, and you, the buyer’s, acceptance of any additional required improvements as determined by the lender or HUD.
4. Prepare your write-up and cost estimate.  You’ll want a plan reviewer to assist you with the paperwork.  You’ll receive a HUD Case # and move onto appraisal and inspection.
5. Meet the plan reviewer and contractor if applicable, to make sure the plans are acceptable. The program requirements and all the paperwork is prepared accurately.
6. Appraisal is performed
7. The lender reviews the application, including the appraisal, to determine the maximum amount they will lend.  The issuance of Conditional Commitment/Statement of Appraised Value is issued.
8. You will now need to provide to your mortgage consultant all final documentation she requests to obtain full loan commitment: bank statements, paycheck stubs, W-2’s, etc.  Your employment will be verified. Once that is reviewed and accepted, the lender issues full loan commitment.
9. Day of Closing!  It’s yours!  The documents are drawn up stating the conditions the lender will release the funds for improvement from the Rehabilitation Escrow Account (REA).  You will be required to start making monthly payments on the entire principle amount of the mortgage, including the amount in the REA that has not yet been disbursed. There will be a 10%- 20% contingency reserve of the total remodeling costs. This is used to cover any extra work not originally included in your proposal.
10. Construction begins.  You have 6 months to complete the work.  Some lenders will require less than 6 months, depending on the amount of work to be performed.
11. Funds are released from the REA after work is inspected and approved by the HUD approved inspector.  There is a maximum of 4 draws plus a final inspection draw in that 6 month period.
12. Enjoy your new home, and start realizing the benefits of home ownership, and feel free to admire your handiwork.

I broke down the process into pretty easy steps.  There are more details that you need to know.  Not just single family homes will qualify, but 1 – 4 family units.  Condominiums will qualify with certain specifications.  There is a $5000 minimum requirement for eligible improvements.  Cosmetic repairs like replacing that ugly orange shag carpet and shiny wallpaper from the disco era don’t qualify under the rules of 203K.  If they need to be replaced as part of the total re-hab, they can be considered.  Structural alterations and repairs, like that block basement wall, do qualify. So do chimney repairs, roofing and gutters.

I’m going to send you to The Department of Housing and Urban Development’s website, so that you can get more detailed information. Read up on the 203K process, in detail, and you’ll be a more confident buyer as you move through the foreclosure market.  As always, if you see any homes that interest you, and you want to explore them, give the RealCincy Group a call. We’ll be glad to assist!

More Cincinnati real estate information can be found at RealCincy.com

If you are considering listing your home, you have to see this!  Do you need to more fully understand the power of the RE/MAX name? Are words just fine for you, but visual proof is even more important? Do you need to see how working closely with your favorite RE/MAX Unlimited agent gives you exposure to not just the buyers across town, but across the country?  Fair Enough……Then read on!!

What you are about to see, in real time, are all of the consumers logged into remax.com, in the continental US, 48 states.  Click the following link to see what I’m talking about:  RE/MAX Map

All of the white lights represent people currently logged in, looking at homes on www.remax.com. You will see yellow dots appear.  Those yellow dots represent a consumer that has just asked for more information about a home! Wow!

A listing agent is, right now, in real time, being sent an email that is letting him know, that someone is interested in a particular home. If the home is  not listed by a RE/MAX agent, then a qualified local RE/MAX  agent is being notified that there is a potential customer that would like to know more about a home on the market. And yes! We can help!

You also need to know that the RealCincy Group with RE/MAX Unlimited has developed an outstanding system to make sure that your home listed with us is receiving more than it’s share of this attention! We have received email inquiries from all 50 states, and from outside of the US, including Japan, England and Germany! 

I think this is a pretty powerful testimony to the power of the RE/MAX name. By the way, in case there was any doubt, your favorite RE/MAX Unlimited agent is a member of the RealCincy Group. Give us a call today. We’ll do our best to make sure we light up the Cincinnati and N. Kentucky portion of the map with YOUR home!

More Cincinnati real estate information can be found at RealCincy.com