Dulles Diaries

I wish I could give a straight answer (an Yes or a No). The real estate activity at this time definitely suggests that the worst is behind us (in Northern Virginia). There are a lot of buyers in the market and on the other hand, less number of listings. This situation puts the buyer at a disadvantage. However, the coming few months are the typical slow winter months and some buyers are waiting to see if the market cools off a little bit so that they can jump in without having to be part of the current frenzy. Yes..I used the word “frenzy”. What else can I say when an offer I wrote was rejected because the listing agent received 27 offers. While 27 is on the high side and can be considered an exception, several properties are receiving multiple offers today. The less number of listings combined with the “still low” interest rates are causing these multiple offers and escalations. I haven’t done an escalation in about 3 years and in the past month, had to put an escalation on almost every offer I wrote.
The new home builders in the area are also with the mindset where they think things can’t get any worse and in the past few months, they have actually either increased their prices or reduced their incentives/options. If they can sustain the winter, one cannot stop them next spring.

On March 28, 2009 at 8:30 p.m., join millions of people around the world in making a statement about climate change by turning off your lights for Earth Hour, an event created by the World Wildlife Fund.

“World Wildlife Fund is asking individuals, businesses, governments and organizations around the world to turn off their lights for one hour – Earth Hour – to make a global statement of concern about climate change and to demonstrate commitment to finding solutions. Earth Hour invites people around the world to turn off their lights for one hour – from 8:30pm to 9:30pm local time on Saturday - whether at home or at work, with friends and family or solo, in a big city or a small town. On this day, cities around the world, including Copenhagen, Chicago, Melbourne, Dubai, and Tel Aviv, will hold events to acknowledge their commitment to energy conservation. More than 100 cities across North America will participate, including the US flagships - Atlanta, Chicago, Phoenix and San Francisco, and Ottawa, Montreal, Toronto and Vancouver.

I wrote an offer (on behalf of my clients) on a home in Loudoun County (South Ridnig) this past week. That was a short sale and as is happening with a good number of such short and bank sales, I had to compete with multiple offers..(in this case more than seven). The property seems to be going more than 10% higher (no way to tell for sure at this time, though) than the list price, and we dropped out of the race.

At this time of the year, it is quite normal to see more buyers. But the problem now is that there are not many homes on the market. Inventory is low. Atleast not as we expected to be, for this time of the year. We need more listings NOW.

Today, I got a call from someone I know in California, who is looking to buy a house there shortly. During the discussion, he mentioned that they are considering making an offer with a builder this coming weekend. And when he went into some specifics, he said they are writing an offer based on their monthly mortgage payment. Meaning..they are going to write a offer saying ‘the purchaser’s total monthly mortgage payments should not exceed $4200 (including Principal, Taxes, Insurance and PMI). How does it sound? Would you want to go that route?? What do you think?

I spent a long time with him on the phone explaining him things. Monthly payment has several variable factors in it and can be easily tweaked. A couple of discount points can bring the monthly payment down by an amount equal to the reduction if the loan amount is reduced by $35K (using $600K as the amount of loan). What if the interest rate goes up between today and Monday? Will the builder pay additional points to keep the monthly payments same or will he reduce the purchase price? Smaller factors like Home Insurance premiums also will be major factors in such a scenario. If some home insurance provider is offering a rate of $30/month less, then the builder can quote that premium and jack up the price by $5K (resulting in the same total monthly payments).

I personally do not think the builder’s Sales Manager or this buyer’s Realtor will have such wording in the verbage. It’ll probably be a situation where the real estate agent or the sales manager will breakdown the monthly payments and explain that at a particular sales price and today’s rates, the payments are going to be such and such. But this buyer is thinking about the monthly amounts only and not the purchase price. He thinks the monthly payment figure will be the main number in the offer.

While one needs to come up with a comfort level based on one’s finances, negotiating a monthly payment as opposed to purchase price (in my opinion) is a strict no-no.

Have you ever been to an auction before? If so, it is easy for you to visualize the bidding for the groceries. Others may have a hard time imagining the scenario…and most of them may not even believe this. But here is an Associated Press News item published in Yahoo! News.

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