I encourage my sellers to list their property for sale with a realistic price.  Even so, I inevitably get a call where my seller says I wish that I would have taken your advice two or three months ago.  That’s hindsight after we looked forward together for 60 or 90 days.

For example, I recently met with a prospective client regarding his future listing in Bethesda.  I told him that a realistic, market based price was $1,300,000.  Well, he did not want to hear my analysis or my facts about recent buyer activity for similar homes.  So we listed the property at his price, which was 1,500,000 and in 30 days after no purchasers stepped forward with an offer, he reduced his price to $1,400,000.  Another 30 days went by and still no offers.  There were a few sales in his price range however, so buyers were looking at his listing but finding better value somewhere else.  My seller reduced his price a second time to $1,350,000.  As we approached our 85^th day on the market he obtained a contract on the property.  It was not at a price he wanted, but it was market value at that point in time.

I offered my opinion on accepting the ‘ low priced ‘ contract offer or countering the offer.  I looked at sales data for the past 180 days and told him that in those 180 days 6 homes in his price range had sold and 30 homes in his price range remained on the market.  It took this seller nearly 90 days to get an offer, and it could take up to 450 days to exhaust the inventory representing his competition.  His buyers had plenty of inventory to choose from if he rejected their offer, or countered to high.  Also, the home was vacant and the carry cost was nearly $12,000 per month.  Another 90 days could cost him $36,000 plus $18,000 while we waited for the deal to close.

I had my seller do a reasonable counter offer, the buyers stayed interested and we ended with a ratified contract.  The deal settled and we were slightly below my predicted sale price due to a continuing declining housing market.  The owner was glad to be rid of the property and hindsight said he could have sold the property earlier by being more realistic, but it took nearly 90 days to learn what I was trying hard to explain when we first met.  He was satisfied that he would not get any additional money by waiting, and it could have cost him dearly.  He was quite appreciative of my no nonsense reality check.

If I can help you with your real estate questions, e-mail or call me.

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My friend, Mark, called this week to discuss his opportunities in the real estate marketplace.  Mark is a long time renter, but rents have risen over the past few years and Mark was curious about comparable purchase costs.  I mentioned recently seeing an article that might help him decide.  Take a look below:

http://realtytimes.com/printrtpages/20090410_houseafford.htm  . 

 Basically, the article was very favorable toward purchasing depending on a number of factors.

We are witnessing the next perfect storm in real estate – for buyers.  This is the time when prices are reaching new low points, mortgage financing is below 5% and the FHA program is allowing buyers to purchase property with very little money down.  In many cases, buyers are able to pay less money each month to buy a property than the purchaser currently pays in rent.  This is a trend across the country.  There are also various tax benefits such as Maryland’s first time homeowner transfer tax savings of .25%, and the federal tax credit of $8,000.

It is clear that Mark can save money as a result of these factors and the deductibility of his monthly interest payments and real estate taxes from his individual state and federal tax return.

If I can help you with your real estate questions, e-mail or call me.

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Forbes magazine mentions our area as one of the best in their Feb. 2009 article : ” TEN BEST AND 10 WORST U.S. HOUSING MARKETS”. Read the interesting piece here:

http://www.forbes.com/2009/02/24/housing-cities-ten-lifestyle-real-estate_home_prices.html

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I was invited to discuss this topic today by Bruce DePuyt (NewsTalk), at NewsChannel8. See my interview below by clicking on the link.

Tell me what you think, what are your thoughts on our local Bethesda-Chevy Chase, MD real estate market?

Link:  http://cfc.news8.net/news8/shows/newstalk/index.cfm

Have a wonderful day!

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I was talking with my client, Ken, this week about the status of the Bethesda and Chevy Chase markets versus other real estate markets across the Country.  The more Ken and I discussed the various factors affecting our market like government job stability, quality schools, public parks and other amenities, I realized how important it was to always maintain a balance perspective on real estate.  Some metropolitan statiscal areas of our nation are experiencing a downturn and other areas are seeing an increase in the median sale price of homes.  You can check out these different cities at the following web address http://realestate.aol.com/pictures/finance/strongest-markets?pg=1 .  I was surprised that some areas had gains that exceeded 8% in the 3^rd quarter of last year.  Most gains were in the 3.5% to 4.5% range.

Ken and I both know that these areas will change over time.  Today’s growth market may be related to a particular industry or government program while other declining areas may reflect movement of workers away from the city due to changes in employment opportunities.  Since most people do not move from city to city to capture the greatest housing appreciation possible, these statistics are more relevant to a consumer mindset, and investor strategies.  It is important to have a plan regarding your real estate purchase that is not linked to the increase in its value as much as to the utility of the property with respect to your shelter requirements, convenience to work, and other important neighborhood factors you deem relevant to your lifestyle.  What are the criteria for your home purchase?  How have you determined your priorities between the different criteria?

In talking to many long time property owners, I often find that they have no intention of selling no matter what the price.  They love their location and the size is just right.  They live near their favorite brother or sister, aunt or uncle, the schools are close by, the house has charm, and so on.  In other words, the home is perfect for them at this point in time and they are building memories in the home.  The importance of these factors can change later in life, but that is a long time into the future for most people..

If I can help you with your real estate decisions, please e-mail me.

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My friend, Pam, called the other night from Bethesda, Maryland.  Pam wanted to know if she should pay a point on her $300,000 loan to lower her interest rate by .25%.  The point would cost her $3,000 in additional closing costs. 

In order for me to advise Pam, I needed some more information.  In particular, I needed the loan interest rate with and without the point, and Pam’s best guess as to how long she would be residing in her home.  This information is critical to the decision about paying points because points are designed to lower the interest payment on your loan and you receive a financial benefit from the reduction for as long as you own the property.  Once Pam sells the property, her mortgage payment ends, and the financial benefit from paying points also ends.

Pam said the rate without the point was 5.5% and with the point the rate was 5.25%.  Pam also planned to live in the property for 5 years.  I did the following calculation for Pam.  On a $300,000 loan balance, one point is $3,000.  At 5.5% the PI (principal and interest) for $300,000 is $1,704 per month approximately.  At 5.25% the PI for $300,000 is $1,656 per month approximately.  The difference in the payments is $48 per month. It will take 63 payments at the lower rate to recover the $3,000 for the one point on the loan.  Pam will barely make back most of the point if she stays in the property 5 years (60 months).  If she stays more than 63 months, Pam will make money by having paid the point.

You can read more about points at www.washingtonpost.com/wp-dyn/content/article/2009/01/09/A  and www.invest-2win.com/points.html  .

If you have questions about your real estate transaction, e-mail me.

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I had lunch two days ago with a Bethesda, Maryland investor friend of mine.  Paul was trying to decide if he wanted to take an offer on one of his investment properties.  It was a nice property and Paul had it on the market for $795,000 and he had an offer from another investor for $700,000.  He was worried about the “current state of the economy” and wondered if he should take the contract and be satisfied with the gains he had made over the past 6 years, or hold on and try to earn an extra $60,000.

I immediately said to Paul, “now let’s think about this a moment”.  If you rent the property and have a $500 per month negative cash flow for the next 3 to 5 years while the real estate down-turn corrects itself, you will lose $18,000 to $30,000.  You will share this loss with the government due to favorable tax benefits so your real loss will be closer to $10,800 to $18,000 depending upon how long you keep the property.

If Paul were to sell the property today, he is sure to lose gains of up to $95,000 under the current contract.  So after taxes he would be losing potential gains of nearly $57,000.  There is such a large spread between the known loss and the potential loss, Paul can ratchet down his listing price in increments of $10,000 and possibly snag a non-investor who will love his home at a substantially higher price.

I told Paul that if there is no urgent or alternative investment need for the capital from the sale, it would be better for Paul to move his price down a little and seek a different buyer.

If you want to talk to me about your investment, e-mail at jane@janefairweather.com me or call me at my office. (301) 530- 4663

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I opened the newspaper two days ago at my favorite Chevy Chase coffee shop and began reading about the latest wall street mess.  This time, the reporters were covering a huge $50 Billion stock investment Ponzi scheme. 

A customer next to me in the shop said she noticed the article too but she really did not understand what had happened.  I explained that it was alleged that a very important man who was well respected by his investor colleagues and peers had put together an investment fund and the fund manager had now appeared to have stolen the money provided by the investors.

These schemes usually work in the same manner.  An individual (A) invests his money with the understanding that he will get a high rate of return, say 10% on his invested capital.  A second individual (B) also invests his money in the same group.  The money manager pays (A) the promised interest on his funds using the money from investor (B).  This continues with investor (C), (D) and so on.  The investors begin to rave about their returns and other investors join the group with even larger sums of money.  They all continue for years to get their interest payments since there is plenty of capital regardless of the true rate of return on the investments made with the remaining amount of capital after the interest payments.  Despite their sophistication, none of the investors really investigate the investment fund. 

However, in a stock market like the one that exists today, it is just unrealistic to think that some money manager can beat the stock market year after year at the same high rate of return.  The probability of this occurring is very small.  Very few individuals can be this intelligent.

Also, the scheme falls apart if several of the investors withdraw their funds and fewer investors replace those removing their funds.  Eventually, the fund is depleted and whatever is left in the fund is not enough to return every investor’s capital.  Investors lose their capital.  In this case, investors lost huge amounts of money due to the alleged fraud.

If you have a real estate investment related question, send me an e-mail.

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Today I’ve asked my partner Kris Feldman to share how she helps her buyers in this market: “One of my prospective buyers came to me last week with this comment: “I want to buy, but I don’t have enough money!” It turns out that he did not make enough money to qualify for the townhouse that he wanted to purchase in Germantown.  He had been to his lender so he would be pre-qualified and the lender indicated that they could not make the loan to him. He was, of course, very disappointed.

I asked Steve to explain to me what the lender said and Steve summed it up by saying he was told that he did not make enough money based on all his obligations and his income.  At this point I suggested that Steve look through his checking account for the past three months and itemize all his expenses.  We met afterwards and went over these costs together.

There is a very old saying that says “expenses rise to meet income“.  The more money people make, the more ways that they find to spend that money.

When Steve and I sat down together, I explained that income can actually be augmented by a reduction in expenses.  Now some expenses like taxes, auto insurance, and rent are necessities.  However, many expenses in Steve’s budget were not essential to his day to day life.  Steve had a cell phone and a home phone with long distance through a separate carrier for $50 per month.  His cell phone could be used for long distance and he never ran over his allowable minutes.  He eliminated the home phone and the long distance service and saved money that he could then put toward his new mortgage payment.

By the end of our time together we had examined 20 such expenditures that he had incurred over the years, and we pared down his expenses by over $600 per month.  This additional income made a huge difference to the lender, and Steve was more than qualified for his home loan. 

What Steve was able to do was to examine his personal lifestyle and adjust his priorities so he could eliminate unnecessary expenses and reassign capital to something new that was very important to him and his future.”

Kris is a buyers agent with over 23 yrs. experience, she has helped thousandsof Montgomery County  buyers purchase their dream homes.

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This is the question many of my clients and customers are asking me these days. One of them, a long time client, stopped by my Bethesda office a few days ago. He wanted to discuss the current real estate market.  Greg said to me that I must know where there is an upside to this down real estate market.  I thought about it for awhile and concluded that the real upside was in being a buyer with a long term horizon before that buyer needed to become a seller.

In other words, if Greg could buy a home today at depressed prices, and remain in the home for the next ten years – the typical real estate cycle period – then Greg had an excellent chance of seeing his purchase appreciate in value and he could recapture all the historical gain that has currently been lost.

Now, this works extremely well for investors.  As a buyer in today’s market, you are going to purchase at historically low levels for real estate values.  As an investor, you will obtain a mortgage at a very good interest rate today, and be able to lease the property for a positive cash flow, or very close to positive.  This is also a great upside to the market.  This type of market also creates higher demand for rental property.

Some of the best deals will be Bank short sales and foreclosures, followed by homeowners that must sell due to personal financial issues, work related issues (transfers), and family changes due to disability and death or a partner.

If I can help you with your investment decisions or the sale of your property, please e-mail me.

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