Real Estate

Georgetowner • December 1, 2010

Dear Darrell,

Is there any advantage in my trying to buy a property before the end of the year, rather than waiting for early Spring of next year?

Bill E

Dear Bill,

From a tax standpoint, there might very well be an advantage for you to buy and close before the end of the year. But each person’s financial situation is unique to that person and is something you should discuss with your accountant or financial advisor.

From a real estate standpoint, there are a couple of useful things to keep in mind:

– If you look at a newly built property, it’s very possible that the builder will be offering end of the year incentives.

– Certain owners may be facing tax consequences of one kind or another, which would be ameliorated by selling before the end of the year. These sellers might be more flexible than usual.

– Prices and interest rates are low—interest rates, historically low. No one knows how these two will change between now and spring of 2011.

Many economists predict that we will see a slow, steady improvement in the economy over the next year or two. If this does happen, it is likely that prices and interest rates will rise. So, the question is: do you want to bet that the economy will be better or worse come spring? Prices already seem to have stabilized in DC. We’ve been fortunate in that regard. Whatever your decision, I encourage you to be in touch with a local Realtor who has a view into our local market. Most of what one hears in the news is based on the national market. To make informed decisions, you need to know what is happening locally.

Darrell Parsons is the Managing Broker of the Georgetown Long & Foster Office. Darrell@LNF.com or 202.944.8400. He blogs at: www.GeorgetownRealEstateNews.blogspot.com

Georgetowner • November 17, 2010

A couple of years ago, if a homeowner was offered a jumbo-sized mortgage for a home in Washington for 4.375% they would beg for the loan to be locked. In fact, the customer would probably think the mortgage loan officer was misquoting his or her rate sheet. But that was 2009. Today clients sometimes let greed take over. A lot of borrowers are taking their time in making the decision to move forward in anticipation of even lower rates.

Remember 2008 – 2009? The sky was falling. Banks were failing by the hundreds. The Treasury Department headed by Henry Paulson, formerly of Goldman Sachs, launched the TARP program under President George W. Bush in order to stabilize the financial system.

Fast forward to the recent midterm elections. Democrats lost the House to the Republicans because many voters believed that among other things that the Democrats were the architects of TARP and that TARP did not work. TARP did pass with the help of Democrats and TARP did salvage the banking system. In fact the Government may make a profit from TARP.

The country is climbing out of the deep recession slowly. The recovery is proving to be a slow one that will take time. In reaction to the slow pace of the recovery, the Federal Reserve Bank announced “Quantitative Easing 2,” or “QE2,” which entails the buying of $600 billion dollars of Treasury bills in order to stimulate the economy by keeping Treasury prices at lower levels. With the stimulus program, the Feds also are attempting to keep interest rates down.

In early November, before the Treasury started its pre-announced buyback, rates reached the lowest levels that the markets have seen since the 1950s.

Unfortunately, even when interest rates hit new lows, perspective mortgage clients can let greed take over. Some folks are always hoping for still lower rates. There are a few reasons why rates have moved higher since the Treasury buyback was announced.

First, everyone on Wall Street and elsewhere knew what the Federal Reserve and its Chairman Ben Bernanke were planning on doing. The prices of the 10-year Treasuries and those of the mortgage market reflected the anticipated program. Others are talking about the potential inflationary effects of a devalued dollar.

Since the buy back program was announced, the rate on the 10-Year Treasures has gone up and interest rates have also ticked up.

Interest rates should stay in a relatively narrow range for the near term. If you can save hundreds
of dollars now, go ahead and pull the interest rate trigger. Your next worry will be how to spend the money you will be saving.

Bill Starrels lives in Georgetown and is a mortgage loan officer. He can be reached at 703 625 7355 or by email, bill.Starrels@gmail.com

Georgetowner •

Dear Darrell,
I am working with a Realtor to buy a house. He keeps asking me for more and more of my financial information. I like working with him and think he is a good agent, but am a little put off by having to give my financial particulars. I also don’t want to be rude by telling him this is private and that I don’t want to share it. Is it common for agents to request this sort of thing?

Amanda R.

Dear Amanda,

Without knowing exactly what the Realtor is asking you for, it’s a bit hard to answer your question. But assuming the Realtor is asking questions related to the resources you have available for purchasing a property, these are legitimate questions. Part of the work of a good Realtor is to educate his client. There are a couple of ways to go about this when discussing financial information. One is for the agent to ask the questions (as is happening in this case). Another is for the agent to encourage you to talk with a mortgage broker who can tell you about a wide variety of loan programs which might be suitable for you. Either way, it is important for you to understand the costs of buying a home—the immediate costs and the long term costs. As evidenced by the huge number of people who have gotten into trouble because they were overextended financially, it is critical that you be certain that you have both the cash (down payment and closing costs, etc.), and the income to support the monthly mortgage cost. If you are uncomfortable giving this information to your agent, you can certainly give it directly to a mortgage broker, and that person can counsel you on financial matters. If you don’t know a mortgage broker I suggest you talk with friends or ask your agent for a recommendation or two. One other very important aspect of this process is that in light of the recent systemic financial problems, lenders are being far more cautious. This makes the process longer, and requires a fair amount more documentation and review. Your agent no doubt knows this and is probably trying to help you get your ducks in a row early on, so that when you find the property you want, you will be prepared to make an offer and move forward.