What might default (or standing on the precipice of it) do for the Washington, DC real estate market:

Spring sales numbers were up in many categories across the DC metro area though the combination of 120 degree heat indices, and all that hot air steaming from the Capitol Dome has resulted in a summer slowdown which I believe will be reflected in the July and August numbers. Our market tends to slow down this time every year though this year might be different.

As I write this article the weekend before the August 2nd deadline there is still no agreement in Congress about the debt ceiling, and this week GDP numbers were revised downward for the 1st quarter 2011 and were miserably low in the 2nd quarter 2011. I believe this all spells some seriously good buy opportunities this fall! According to some analysts who run numbers on these things, a .5% interest rate hike in the next couple of weeks is likely as our credit rating takes a hit - which seems likely even if the debt ceiling is lifted. If we do indeed default, an interest rate hike of 1% or more is probable.

Luckily interest rates are already very low so going from 4.5% to 5.5% isn't likely to have a long-term negative effect on the market. 5.5% is still a fantastic rate though we have been lulled into a sense of normalcy with rates in the 4% range which will cause 5.5% to seem painfully high for a little while.

I predict this fall will be somewhat challenging in the real estate markets across the country as at a minimum our confidence in the trajectory our economy (and our country) has taken a hit.

We will continue to bounce back however as fundamentals that drive real estate markets such as supply and demand and affordability are well in alignment (and in some cases downright crazy good) with "normal" trend lines.

As a Realtor, you should hit lead generation in August harder than you have all year. August is the last month you have to set up the rest of your year and those that lead generate like mad in August will have a great 3rd and 4th quarters - those that don't - won't. The choice is yours.

Newly Revised Virginia Residential Property Disclosure Statement

The Virginia Real Estate Commission has recently revised (07/11) the Residential Property Disclosure Statement. You can get the new form by clicking here.

High-Cost Loan Limits

With Congress tied up at the moment, it doesn't seem like anyone is paying attention to the fact the temporary high-cost loan limits are set to expire on September 30, 2011. When that happens, conventional and FHA loan limits will move to permanent loan limits established under the Housing and Economic Recovery Act of 2008 (HERA). The maximum high-cost county loan limit of $729,750 for 1 unit properties will be reduced to the current max loan limit of $625,500.

Now is the time to begin the dialog around the issue. We need permanent high-cost loan limits in place now or the delicate recovery will face another bump in the road. I'm already carsick and would prefer a smoother ride this winter.

How to handle tense situations

Sometimes, no matter what you do to prepare, situations occur that cause the real estate negotiation environment to sour between the buyer and seller. In addition to my role as Founder and President of Brandon Green Companies, I’m also the Managing Broker for Keller Williams Capital Properties and in that role I’ve come up with three tips for our agents that I thought I’d pass along to everyone.

1. Ask for help. If it seems like the situation is spiraling out of control, and you’re in a shouting match with the other party via email, contact someone to help you. Hopefully you have a real estate agent who is contacting his or her broker, if not, have an attorney advise. FYI, threatening to sue, rather helps.

2. Document time line of events. When you’re in the middle of a challenge, start a journal which lists who you spoke to, when, and what it was about so you can reference notes later. Your memory will fade and in particularly complex situations, there will be too many details to remember exactly.

3. Slow down the train. Rapid fire communication is generally not helpful when things are difficult. Let the situation cool down, which will allow you and the other party to think with clarity. High emotion = low intelligence. Wait until you’re less emotional about the situation.

If you’re faced with a real estate situation you find challenging, call me, let’s talk about how I can help.

Brandon Green
bgreen@kwcapitalproperties.com
202-318-1623

March & April Sales Statistics

March and April sales statistics are showing a decent bump in sales volume which is excellent news for the market in most areas of the country. We are also seeing a decrease in inventory making it extremely competitive for some classifications of properties. Take a look at this site for Washington DC homes: http://gcaar.com/toolkit_ektid1592.aspx This does not hold true everywhere of course, so look at your individual market stats to see what is happening.

Has the market turned around? There are three things to watch which will give us a better indication of where we actually are on the recovery line.

1. Foreclosure mediation initiatives. Currently many banks are forcing parties to mediate before foreclosing and this is causing a halt in inventory for buyers who want to remodel homes – causing dramatic bidding wars and price escalations in many cases. My personal belief is that mediation is simply delaying the inevitable and the majority of those homes will eventually hit the market. What happens then?
2. Price decline lines. Many markets are seeing a nice increase in activity because the prices have, and in some cases continue, to decline. We need to see that line flatten out soon, or we could spook the new pool of buyers in the market right now. Will that trend turn this summer?
3. Financing of condos and investor ratios. If you own a condo and your investor ratio is more than 50% it can be incredibly difficult to sell because you need at least 20% down. If you’re in a 1st time home buyer market, that can be difficult to find which dramatically lowers your buyer pool, pulling your values down. The issue here are mortgage insurance companies who will not insure mortgages under these circumstances. Will the MI companies relax their restrictions on investor ratios?

One thing is for sure, this summer will be one to watch in the story of the largest real estate correction ever.

Have you been wondering what's going on with the phones lately?

Clearly we have some challenges and I thought I'd take a moment away from the usual broker stuff to update you on the phones, and other initiatives.

We are working through an internet based phone system (VOIP) and when there is a small internet outage it can cause the routers to malfunction requiring a reset. Our phone issues are not easily solved without spending many thousands of dollars unfortunately.

The solutions include moving to hard lines which would cost thousands more per month, or we can move to a T-1 commercial line also costing many thousands, or perhaps create a site to site VPN connection to ensure more stability in the system with fewer outages.

Bottom line, as the company grows we will have more resources to devote to technological infrastructure and that time hasn't come yet. VOIP systems are getting better every year so look for improvements soon.

Additionally, we are fully engaged in revising the agent orientation and on-boarding process, the website, and our marketing/branding concepts company wide. Look for exciting announcements this summer!

Does the AS IS clause supercede the home inspection contingency clause?

One of our agents was involved in a transaction where the seller (agent) insisted that the AS IS clause superceded the home inspection contingency clause. That is not the case. What you need to be aware of though, is if you want to do an inspection with the "walk away" clause intact - and have it be AS IS - you need to check the "General Inspection" clause, rather than the "Specific Inspection" (the first one). This allows the property to be sold in AS IS condition - but gives your buyer the ability to walk if the inspection turns out to be a major issue.