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Wednesday, July 8

$8,000 First Time Home Buyer Tax Credit

by Estridge Group on Wed 08 Jul 2009 05:47 PM EDT

Final score: $8,000 for homebuyers

First-time purchasers get a tax credit windfall if they buy before December.

By Les Christie, CNNMoney.com staff writer

Last Updated: February 17, 2009: 12:13 PM ET

NEW YORK (CNNMoney.com) -- There's a nice windfall for some homebuyers in the economic stimulus bill awaiting President Obama's signature on Tuesday. First-time buyers can claim a credit worth $8,000 - or 10% of the home's value, whichever is less - on their 2008 or 2009 taxes.

A big plus is that the credit is refundable, meaning tax filers see a refund of the full $8,000 even if their total tax bill - the amount of witholding they paid during the year plus anything extra they had to pony up when they filed their returns - was less than that amount. But there has been a lot of confusion over this provision. Adam Billings of Knoxville, Tenn. wrote to CNNMoney.com asking:

"I will qualify as a first-time home buyer, and I am currently set to get a small tax refund for 2008. Does that mean if I purchased now that I would get an extra $8,000 added on top of my current refund?"

The short answer? Yes, Billings would get back the $8,000 plus what he'd overpaid. The long answer? It depends. Here are three scenarios:

Scenario 1: Your final tax liability is normally $6,000. You've had taxes withheld from every paycheck and at the end of the year you've paid Uncle Sam $6,000. Since you've already paid him all you owe, you get the entire $8,000 tax credit as a refund check.

Scenario 2: Your final tax liability is $6,000, but you've overpaid by $1,000 through your payroll witholding. Normally you would get a $1,000 refund check. In this scenario, you get $9,000, the $8,000 credit plus the $1,000 you overpaid.

Scenario 3: Your final tax liability is $6,000, but you've underpaid through your payroll witholding by $1,000. Normally, you would have to write the IRS a $1,000 check. This time, the first $1,000 of the tax credit pays your bill, and you get the remaining $7,000 as a refund.

To qualify for the credit, the purchase must be made between Jan. 1, 2009 and Nov. 30, 2009. Buyers may not have owned a home for the past three years to qualify as "first time" buyer. They must also live in the house for at least three years, or they will be obligated to pay back the credit.

Additionally, there are income restrictions: To qualify, buyers must make less than $75,000 for singles or $150,000 for couples. (Higher-income buyers may receive a partial credit.)

Applying for the credit will be easy - or at least as easy as doing your income taxes. Just claim it on your return. No other forms or papers have to be filed. Taxpayers who have already completed their returns can file amended returns for 2008 to claim the credit.

Lukewarm reception

The housing industry is somewhat pleased with the result because the stimulus plan improves on the current $7,500 tax credit, which was passed in July and was more of a low-interest loan than an actual credit. But the industry was also disappointed that Congress did not go even further and adopt the Senate's proposal of a $15,000 non-refundable credit for all homebuyers.

"[The Senate version] would have done a lot more to turn around the housing market," said Bernard Markstein, an economist and director of forecasting for the National Association of Homebuilders (NAHB). "We have a lot of reports of people who would be coming off the fence because of it."

Even so, the $8,000 credit will bring an additional 300,000 new homebuyers into the market, according to estimates by Lawrence Yun, chief economist for the National Association of Realtors.

The credit could also create a domino effect, he said, because each first-time homebuyer sale will lead to two more trade-up transactions down the line. "I think there are many homeowners who would be trading-up but they have had no buyers for their own homes," Yun said.

Who won't benefit, according to Mark Goldman, a real estate lecturer at San Diego State University, are those first-time homebuyers struggling to come up with down payments. The credit does not help get them over that hurdle - they still have to close the sale before claiming the bonus.

One state, Missouri, is trying to get around that problem by creating a short-term loan on the tax credit of up to $6,750. The state would loan borrowers the money so they could use it at closing as part of the downpayment. Then, when the buyers receive their tax credit from the IRS, they pay back the state. Other states may follow with similar programs, according to NAHB's Dietz.

Many may look at the tax credit as a discount on the home price, according to Yun. A $100,000 purchase effectively becomes a $92,000 one. That can reassure buyers apprehensive about purchasing and then watching prices continue falling, he added.

And it provides a nice nest egg for the often-difficult early years of homeownership, when unexpected repairs and expenses often crop up. Recipients could also use the money to buy new stuff for their home - a lawnmower, a rug, a sofa - and, in that way, help stimulate the economy.

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Washington Report: Home Valuation Code of Conduct

by Estridge Group on Wed 08 Jul 2009 05:47 PM EDT

Washington Report: Home Valuation Code of Conduct
by Kenneth R. Harney

Fannie Mae's and Freddie Mac's controversial new appraisal rules are now coming direct attack by the biggest lobby on Capitol Hill - the National Association of Realtors.

Though the association is saying nothing publicly, officials have confirmed to Realty Times that they are gearing up for a fight in Congress and elsewhere to derail the “Home Valuation Code of Conduct” (or HVCC) for 18 months.

The code, which took effect May 1, has been widely criticized for raising appraisal costs to consumers, encouraging the use of inexperienced appraisers willing to work for rock-bottom fees, and for giving too much control to unregulated “appraisal management companies,” some of them owned by major mortgage lenders.

The Realtors campaign is targeted initially at Fannie Mae's and Freddie Mac's chief regulator - James Lockhart, director of the Federal Housing Finance Agency - and New York Attorney General Andrew Cuomo.

Cuomo's office drafted the HVCC last year as part of a settlement with Fannie Mae and Freddie Mac. Cuomo threatened to subpoena Fannie and Freddie executives as part of an investigation of the companies' appraisal practices. No evidence that an investigation actually took place or turned up problems has ever been made public.

In a call to action memorandum to state Realtor association leaders last week, NAR laid out a strategy of fly-ins to lobby Congressional representatives, and said the association would pursue a legislative fix on the HVCC issue if Lockhart and Cuomo declined to go along with the idea of an 18 month moratorium.

The legislation could take the form of either a stand-alone bill or an amendment that could be attached to an appropriations bill already moving through Congress with a high likelihood of passage.

In identical letters to Lockhart and Cuomo, Charles McMillan, president of the National Association of Realtors, complained that the HVCC is causing significant problems for home sellers and agents - “delays in closings and cancelled sales, which result in artificially low existing home sales.”

In an unusual move June 23, Lawrence Yun, chief economist for the association, attributed a lower than expected increase in existing home resales in May to appraisal problems caused by the new code.

“Lenders are using appraisers who may not be familiar with a neighborhood, or who compare traditional houses with distressed and discounted sales,” said Yun.

In his letter to Lockhart and Cuomo, McMillan said the heavy involvement of lender-owned appraisal management companies leads to conflicts of interest. The association wants regulators - or Congress - to prohibit lenders from using any appraisal report from an appraisal management company where the lender, or the lender's affiliate, has an ownership stake in the management firm.

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Monday, June 29

Appraisers blamed for killing a market recovery

by Estridge Group on Mon 29 Jun 2009 05:48 PM EDT

Appraisers Blamed for Killing a Market Recovery

There's a Catch-22 that always arises when home prices start to increase near the end of a recession. Even though buyers are willing to pay more, appraisals often come in lower than the agreed-upon price because they're based on comparable sales from three to six months earlier, when prices were bottoming. Real estate agents and mortgage brokers say it's happening now, and that it's disrupting sales.

But this time they're placing the blame on new appraisal rules, the Home Valuation Code of Conduct, put into effect by Fannie Mae and Freddie Mac on May 1. At the heart of the new Code of Conduct is a rule prohibiting mortgage brokers from ordering an appraisal directly from the appraiser. They now have to go through the lender, and increasingly lenders are using third-party appraisal management companies to parcel the work out to individual appraisers.

The idea is to insulate the appraiser from pressure to inflate home values. During the housing boom, many appraisers complained that they felt pushed, directly or indirectly, by mortgage brokers and lenders to come up with home valuations that justified high sales prices. If they killed too many deals, appraisers feared mortgage brokers would take their high-volume business to someone more accommodating.

But critics say the appraisal management companies have boosted fees to consumers by around 40 percent, while drastically cutting the amount paid to the appraisers doing the actual work, and pocketing the difference. Inexperienced appraisers, often from out of town but willing to work cheap, are rushing through jobs and making costly mistakes, they say.

Earlier this week, when the National Association of Realtors released its home sales report for May, chief economist Lawrence Yun said sales volume was not as high as expected based on the number of pending home sales they had reported earlier because "faulty" (Yun's word) valuations were preventing buyers from getting loans.

"In the past month, stories of appraisal problems have been snowballing from across the country with many contracts falling through at the last moment," he said in the press release. "There is danger of a delayed housing market recovery and a further rise in foreclosures if the appraisal problems are not quickly corrected."

The Appraisal Institute fired back with its own press release: "We take offense with the notion that an appraisal is only good if it happens to come in at the sales price. That mentality helped cause the mortgage meltdown to begin with."

Ding!. End of Round One.

Round Two: I asked a few local real estate agents if appraisals are derailing sales.

Brett West, a McEnearney agent in Old Town Alexandria, said "Thus far, no." He recently had an Federal Housing Administration lender ask for a second appraisal at the 11th hour, just before closing, because of concern over declining market values. And another recent appraisal came in at $10,000 below the sales price, but the seller agreed to the lower price.

Donna Evers, president of Evers & Co. Real Estate in the District, said, "Yes, we are having trouble with appraisals. ... Lenders are pulling back too much (like the pendulum swinging too far in the opposite direction) and the appraisers are under-appraising like mad."

Jacqueline A. Thomas, a Keller Williams agent in Upper Marlboro, said, "No. More than anything, they are too high." She was trying to get the bank to approve a short sale, but the high appraisal made that more difficult.

Toni McIntyre, a Long & Foster agent in Reston, said, "Oh yeah, big time." But the worst experience she has had -- when an appraisal came in $75,000 below the sales price -- happened last September, before the new rules went into effect.

Sue Goodhart, a McEnearney agent in Alexandria, said, "I think it will be less of an issue as we get into the next few months." That's because there will be higher, recent sales prices to back up appraisals. But she complained about appraisers who are unfamiliar with the area. "They have no clue. It is extremely frustrating."

Bob Jurgensen, a Weichert agent in Manassas, said, "Local appraisers seem to have less issues than when the scheduling service assigns appraisers [from] out of the area to do appraisals in Prince William or beyond. They struggle with the comps and I get regular calls from these appraisers to verify my own listings that they intend to use for comps. But personally, of my deals, all have appraised just fine, and I've done about a dozen so far this year."

Thanks to The Post's Emma L. Carew for contributing to this post.

What are you buyers and sellers seeing out there?

By Elizabeth Razzi | June 25, 2009; 6:00 AM ET

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Friday, June 19

New Web Site Takes Mystery Out of Closing Costs

by Estridge Group on Fri 19 Jun 2009 03:40 PM EDT

New Web Site Takes Mystery Out of Closing Costs

I've just taken a spin through a new Web site, Closing.com, that looks like it's going to be really useful for home buyers trying to figure out who to choose for closing services and what their total cost will be.

With its Closing Wizard, you can just plug in a few details about the home you're buying -- Zip code, sales price, down payment, square footage and interest rate, and it will tell you how much cash you need to close the deal, including down payment and fees.

It has info on local providers of title insurance, homeowners' insurance, home inspections, termite inspections, real estate lawyers and other services. For many, it shows actual price quotes from different local providers and provide their addresses, phone numbers and Web sites so you can follow up on your own. It's especially strong right now with info on title insurance, which is one of the biggest expenses at closing. In some areas the site has info on local property taxes, and the folks backing the site promise to bulk up that information rapidly.

What I really liked about it is that it's not a lead-generator like so many other real estate sites. You don't have to enter your contact information to get the details, and so you won't be pestered by people trying to sell you their services.

By Elizabeth Razzi | June 18, 2009; 6:00 AM ET

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Tuesday, May 26

Housing Bust leaves Most Sellers at a Loss

by Estridge Group on Tue 26 May 2009 06:26 PM EDT

Housing Bust Leaves Most Sellers at a LossLocal Prices Expected to Continue Falling

By Dina ElBoghdady and Dan Keating
Washington Post Staff Writers
Monday, May 25, 2009

Never mind a profit. Breaking even would have been nice.

But Tammy and Charles Bloomer are losing more than $100,000 on their Silver Spring home, which they bought for $525,000 four years ago. The house, now under contract to be sold, lost value even though the couple had remodeled the kitchen and replaced the roof, furnace and windows.

"Unfortunately, we bought at the peak of the market," said Tammy Bloomer, a federal worker who is moving to take a job in Chicago. "The market is terrible now."

In the past six months, most Washington area sellers have lost money on houses they purchased since prices started climbing in 2000, according to a Washington Post analysis of residential sales. In the first three months of this year, 62 percent of local home sellers accepted less than they paid for their homes, in part because aggressively priced foreclosures have dragged down prices around the region.

While the drop is painful for sellers, experts say it is a necessary part of getting past the excesses of the boom years. This region experienced one of the sharpest run-ups in home prices in the nation. Those prices must be brought down in order for buyers and sellers to deal with each other on more equal footing, as they had for decades before the boom.

Predictions vary about when the region's prices will hit bottom. They may keep tumbling until late 2009 for close-in communities and until 2011 in outlying suburbs, according to a study by real estate research firm Delta Associates and the local Multiple Listing Service. But so much depends on whether the economy suffers some unforeseen blow and on how many more foreclosures the banks add to an already-bloated housing supply.

Of course, these falling prices are reason to celebrate for would-be home buyers, especially coupled with low mortgage interest rates and the $8,000 federal tax credit for first-time buyers.

But as long as distress sales continue to dominate, the market will not bounce back to normal, said Nicolas P. Retsinas, director of Harvard University's center for housing studies. "The norm requires that a preponderance of transactions take place between willing buyers and sellers, not sellers who would take any price to unload a property."

By that measure, Kimberly Thompson's Upper Marlboro community has not hit bottom.

In Thompson's Zip code, the proportion of homes in some stage of foreclosure is twice the national rate, according to RealtyTrac, a private company that follows those statistics. Many more homes, including her own, are listed as short sales. Those are arrangements that allow homeowners to sell for less than they owe on their mortgages.

Thompson and her husband bought their house for $564,000 in late 2007. He lost his job six months later. By then, the home's value had dropped by $100,000. This week, it is under contract for $372,000.

"We were down to one income, one kid and one on the way," said Thompson, a computer programmer. "We realized we did not have money to cover the mortgage and our other expenses."

Not everyone selling a home is doing so under duress. Many long-time homeowners with plenty of equity are making money when they sell, though not as much as they would have a few years back. Others may be losing money, but that does not mean they are on the brink of foreclosure.

Emily Lenzner, for instance, has plenty of equity in her Adams Morgan condominium. She bought the condo in 2005 for $715,000. Two years later, she moved to a house with her new husband and their four kids. She rented out her place for a while, then listed it for $849,000. No takers. It's back on the market for $674,000.

"I'm going to take a loss, but I can really use the cash," Lenzner said.

As the region's foreclosure crisis has deepened, outlying suburbs have taken a bigger hit than more established areas. That's because there was a higher proportion of recent sales in those fast-growing suburbs, leaving them more exposed to the subprime mortgages that were popular at the time.

Subprime loans catered to people with blemished credit, often allowing them to buy homes they otherwise could not afford. That helped inflate prices. But these borrowers began defaulting in record numbers in 2007. Foreclosures followed. The markets that crashed the hardest were the ones where prices had climbed the fastest.

Home prices have held steady in the District, according to The Post analysis. In the Virginia and Maryland suburbs, prices for single-family homes are down to where they were five years ago. In Prince William and Loudoun counties, a flood of foreclosures has pushed prices so low that bargain hunters have flocked there in recent months, helping to boost sales.

But while in past slumps a surge in sales has signaled the start of a rebound, this downturn is unlike any in recent times and it's premature to call a recovery, said Barry Merchant, senior housing policy analyst at the Virginia Housing Development Authority.

The encouraging signs have been offset by more troublesome ones, he said. After tapering off for a few months, foreclosures in Northern Virginia are starting to creep up again and may keep climbing now that several lenders have lifted foreclosure moratoriums.

Meanwhile, the year-over-year sales increases of the past few months are petering out in some Virginia suburbs, suggesting that interest in the fire-sale prices may have peaked, Merchant said. In April, Loudoun sales declined 12.5 percent from a year earlier.

"If sales are not increasing and foreclosures are on the uptick, then the question is: 'Is there another shoe to fall?' " Merchant said. "Maybe what we were hoping was the bottom was just a bump on the way down."

The shrinking supply of homes for sale may not be a sign of much, either. As of April, if sales continued at the same pace, the Washington region would have had a 7.7-month supply of homes. That's down from 10.9 months at the same time last year but still worse than the five- to six-month supply found in a healthy market, the Delta report said. This region had But it may be that individual sellers are pulling their homes off the market, refusing to compete with foreclosure prices.

"I can't tell you how many listing appointments my team scheduled only to have the client say: 'You know what, we're just going to just stay put and hold out on selling for a while," said Melissa Stewart, a Century 21 real estate agent who works in Fredericksburg. "We've had probably eight of those in the past month and a half."

The Bloomers did not have that luxury. When they bought their Silver Spring house, they thought they would make enough money when they sold it to buy another home and to help pay off their son's college loans. Now, they are hunting for a rental in Chicago.

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Tuesday, April 14

Annual Dump and Donate Day!

by Estridge Group on Tue 14 Apr 2009 04:55 PM EDT

It's that time of year again for our annual Dump and Donate day!

Saturday May 23rd in the Maplewood/Alta Vista Neighborhood at the corner of Alta Vista Rd. and Linden Ave.

Saturday June 6th for Chevy Chase in the parking lot of the French International School, 3200 Woodbine St. (corner of Beach and Woodbine)

9 am to 11am or until the dumpster is full. There will be a 40 cubic yard dumpster available, you may throw anything except paint cans, tires, appliances, and food garbage.

A truck will also be on site to accept your useable charitable donations as well!

For more details or questions call 301-215-6837 or email us at Melinda@TheEstridgeGroup.com

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Thursday, April 9

Bethesda Rated 2nd Most Liveable City in the US!

by Estridge Group on Thu 09 Apr 2009 04:24 PM EDT

Here is a link to the Forbes article that ranks Bethesda, MD the 2nd most liveable city in the US!

http://www.forbes.com/2009/04/01/cities-city-ten-lifestyle-real-estate-livable-cities.html

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Wednesday, April 1

What Might Be Hurting Home Values

by Estridge Group on Wed 01 Apr 2009 01:57 PM EDT

What Might Be Hurting Home Values

By Kenneth R. Harney
Saturday, March 28, 2009; F01

Are low-balled value estimates on short sales and bank-owned foreclosures artificially depressing property values in neighborhoods across the country?

Growing numbers of appraisers and consumer groups think the answer is yes Â¿ and are demanding that Congress or state regulators crack down. Their complaints focus on what are called "broker price opinions," or BPOs, which substitute for appraisals.

Unlike standard property valuations performed by licensed appraisers, which can cost hundreds of dollars, BPOs often cost $50 and are performed by real estate agents who may have minimal or no appraisal training and are subject to no regulatory oversight. Real estate agents defend BPOs, arguing that their extensive knowledge of local market trends equips them to render accurate estimates.

BPOs have become a booming business as foreclosures and short sales have risen sharply. When banks that own foreclosed houses need to put values on them for resale, increasingly they order BPOs that can be delivered quickly at rock-bottom fees.

Short sales Â¿ where a lender agrees to take less than the principal amount owed by a delinquent owner provided the property is sold Â¿ also frequently entail use of BPOs.

Online, BPOs are hawked to real estate agents as a route to quick profits in a downturn. "This is the easiest and fastest way to make big money in 2009," says one Web site that promises agents "six figures or more" a year. The same site suggests that "bad times put you in the ideal spot" to rack up income by churning out BPOs for lenders.

One problem: Selling BPOs to value houses violates the law in 23 states, according to appraisal industry leaders. In other states, BPOs may not be prohibited, but critics say they may be far off the mark in accuracy, typically coming in below appraised values. That's partly because agents who perform the BPOs may set the value extra low to ensure quicker sales.

When BPO-valued houses are listed at fire-sale prices, they pull down the values of other houses in the neighborhood because, under current lending industry underwriting guidelines, appraisers must consider recent listing prices as well as closed sale prices.

In testimony March 11 before the House subcommittee on financial institutions and consumer credit, David Berenbaum, executive vice president of the National Community Reinvestment Coalition, called on Congress to outlaw BPOs when used as appraisal substitutes in distressed property transactions. Berenbaum said that real estate agents "develop hasty and inaccurate BPOs that underestimate" the value of bank-owned and other distressed real estate. That low-balling, in turn, "is often destructive to local markets and depresses the value and equity of [lender-owned] properties."

Gary Crabtree, chief executive of Affiliated Appraisers in Bakersfield, Calif., says his company's research "shows very clearly" that BPOs frequently understate market values by as much as tens of thousands of dollars.

Why would agents low-ball their BPO valuations? Crabtree argues that there are inherent conflicts of interest: "They want to sell the property fast" to make bank asset managers "look like heroes" to their bosses. They may also want additional BPO and property listing assignments from those same bank managers, yielding them commission dollars. Many of the properties are snapped up by investors at the depressed prices driven by BPO valuations. Those sales then become "comparables" for appraisers, "which simply intensifies the downward spiral," Crabtree said.

Regulators in a number of states have expressed concern about excessive use of BPOs. The Nevada Real Estate Division warned agents that when a real estate salesperson "prepares a BPO for any reason other than listing and selling a property, and receives compensation, they have violated" state law.

Nebraska regulators issued a similar warning in December, threatening to criminally prosecute real estate agents who are not licensed to perform appraisals but who do BPOs as appraisal substitutes.

The National Association of Realtors, whose 1.2 million members include many of the agents who prepare BPOs, says it has no policy guidance on the issue, but expects to issue a statement in May. Asked whether the association would at the minimum urge members to adhere to state laws and regulations, a spokesman said "there is no policy" on the issue at present.

National appraisal groups, including the Appraisal Institute, whose members lose revenue when lenders or property owners order BPOs, are up in arms. Bill Garber, the Institute's head of government relations, said BPOs are an attempt "to pay the least to obtain something" Â¿ appraised value Â¿ "that is extremely important to get right."

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Sharing Good News!

by Estridge Group on Wed 01 Apr 2009 01:51 PM EDT

We wanted to share some good news with our family, clients and friends – Melinda Estridge and The Estridge Group once again are proud to announce their recognition for being in the top 5 agents for the Long and Foster MC/DC Region.

We are proud of our accomplishments. We draw on our years of experience and never slow down in our efforts to achieve success for our clients and thereby our group. The many agents associated with Long and Foster are some of the best in the business, a fact that makes this honor particularly noteworthy!

We accept these honors as much for you as for us – the support, encouragement and referrals from all of you help make our team what it is. Thank you!

Melinda

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Wednesday, March 25

Americans Still Eager to Buy

by Estridge Group on Wed 25 Mar 2009 08:28 AM EDT

Survey: Americans Still Eager to Buy
Nearly 25 percent of adults say they plan to purchase a home in the next five years and half of those (53.5 percent) will be first-time home buyers, according to a survey commissioned by Move Inc., operator of Realtor.com.

More than 18 percent cite the $8,000 tax credit as a motivating factor. Potential home buyers with higher incomes are more interested in the tax credit than those in lower income brackets, with 43.4 percent of potential first-time buyers who earn $50,000 or more saying they plan to use the tax credit.

According to the survey, half of all Americans (49.6 percent) are paying more attention to home values today than they were a year ago, especially those ages 25 to 34 (61.9 percent). The median age of first-time home buyers is 30 years old.

The Move survey uncovered changing attitudes toward owning a home. About two-thirds (62.5 percent) now consider their home primarily a place to live as opposed to an investment. Adults earning up to $20,000 and between $30,000 and $39,900 annually are significantly more likely to feel most strongly that a home is more of a place to live than an investment as compared to those earning $50,000 or more.

When presented with a list of amenities, home owners wanted it all–with more space leading the list (about 10 percent chose that option). Other amenities that were high on many shoppers’ lists included energy saving features (6.8 percent), bigger or nicer yard (6.1 percent), a better location (4.2 percent), or updated amenities (3.4 percent).

The Move survey also found that 18 percent plan to take advantage of the Obama administrations program to prevent foreclosures.

But even for those who are not in foreclosure, they reported the following:

21 percent of all home owners with a mortgage contacted a lender in the last 12 months to restructure their loans.
10.6 percent received help; 5 percent are still waiting for an answer.
27 percent know someone who is likely to face foreclosure.
25.6 percent know someone whose mortgage is underwater.

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30-Year Loan Rates Dip to 4.98 Percent

by Estridge Group on Wed 25 Mar 2009 08:26 AM EDT

30-Year Loan Rates Dip to 4.98 Percent

From News Services
Saturday, March 21, 2009; G02

Rates on 30-year mortgages plunged this week to the lowest level since January, and may fall further after the Federal Reserve launched a new effort to prop up the flailing housing market.

Mortgage finance giant Freddie Mac said Thursday that average rates on 30-year fixed-rate mortgages dropped to 4.98 percent this week, down from 5.03 percent last week. It was the lowest since the week of Jan. 15, when it was at 4.96 percent, the lowest point in the history of Freddie Mac's survey, which goes back to 1971.

Rates may reach 4.5 percent as the Fed's purchases progress, said Mike Larson, real estate analyst at Weiss Research in Jupiter, Fla.

The rate quotes included in Freddie Mac's survey were taken before the Fed said Wednesday that it will pump $1.2 trillion into the economy in an effort to lower rates on mortgages and other types of loans. That could drive mortgage rates down even further, perhaps past record lows. However, some mortgage brokers were disappointed Thursday, saying lenders had not pushed down rates as dramatically as had been hoped. Credit remains tight, and lenders that are not connected to banks and must rely on short-term funding are having trouble raising cash.

"The problem is: We're still not seeing the injection of capital from the private sector," said Douglas Braden, a broker with Northern Colorado Mortgage.

Plus many lenders, after laying off workers in droves, don't have the capacity to keep up with a refinancing boom.

"They're already swimming in applications," said Greg McBride, senior financial analyst with Bankrate.com. "You could keep reducing mortgage rates, but if the lender's already got a stack of files on his desk, he's not going to answer the phone."

Interest rates have drifted lower since November, when the Federal Reserve pledged to buy up mortgage-backed securities in an effort to bolster the long-suffering housing market. The Fed expanded that effort Wednesday, announcing plans to buy up to $300 billion of long-term government bonds and an additional $750 billion in mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac.

The average rate on a 15-year fixed-rate mortgage dropped to 4.61 percent, down from 4.64 percent last week, Freddie Mac said.

Rates on five-year, adjustable-rate mortgages fell to 4.98 percent, compared with 4.99 percent. Rates on one-year, adjustable-rate mortgages rose to 4.91 percent, from 4.8 percent. The rates do not include add-on fees known as points. The nationwide fee for fixed and adjustable-rate mortgages averaged 0.7 point last week.

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Wednesday, March 18

Constructing a Recovery? Housing Starts Shoot Up, but They're Still Near Historic Lows

by Estridge Group on Wed 18 Mar 2009 03:44 PM EDT

Constructing a Recovery?Housing Starts Shoot Up, but They're Still Near Historic Lows

By Renae Merle
Washington Post Staff Writer
Wednesday, March 18, 2009; D01

New-home construction jumped unexpectedly in February, rebounding from record lows but failing to shake skepticism that the housing market will remain weak throughout this year.

Economists dismissed the increase as an aberration, noting that the uptick was largely tied to multi-family construction such as apartments and condos, a traditionally volatile market. There are still far too many new homes for sale, and it could take months, if not longer, before the housing market stabilizes, they said.

But the figures helped ignite a rally on Wall Street that sent the Dow Jones industrial average up 2.5 percent, to 7395.70 -- its highest close in nearly a month.

Housing starts climbed 22 percent in February, to 583,000 units at an annualized rate, according to Commerce Department data released yesterday. That is a reversal from the continued slowdown that analysts had expected but 47 percent below the same period a year earlier.

New construction of apartment complexes and other buildings with five or more units surged 80 percent. That was probably related to a break in the weather in February, analysts said, after colder-than-normal conditions in December and January in some parts of the country. Starts for single-family houses increased 1 percent.

Construction has been depressed to such low levels that any increase can register as a significant jump in activity, said Patrick Newport, U.S. economist for IHS Global Insight. Nationally, home construction remains at the third-worst level since 1947, he said.

Based on regional data dating to 1959, it is the fourth-lowest reading in the Northeast, despite an 89 percent increase in housing starts, and the third-worst for the Midwest, which had a 59 percent increase. "These are still horrible numbers," Newport said.

Construction starts grew 30 percent in the South, which includes the Washington region. It remains at its third-lowest level.

In the West, which includes some of the hardest-hit parts of the country, such as California and Nevada, housing starts continued to decline, falling 25 percent. They are at their lowest level on record, Newport said.

More significant was a 3 percent increase in housing permits, analysts said. They were up 11 percent for single-family homes, the biggest jump since 1991 and the first increase in 10 months. That could point to another increase in housing starts in March, analysts said, noting that permit applications reflect future activity.

But they remained cautious, arguing that it would take several months for the housing market to stabilize. Home prices continue to fall, and new homes are competing against a glut of existing properties selling at a depressed prices.

"There are some nuggets of decent news in here -- the pace of deterioration is easing," said Mike Larson, a real estate analyst for Weiss Research. "But demand for new homes remain downright anemic. . . . If it's truly a trend change, we're going to need to see a few months of bottoming activity."

And builders remain anxious, according a monthly survey from the National Association of Home Builders released Monday. Expectations for sales in the next six months remain at a record low, and an index gauging traffic of prospective buyers declined, the report found.

"We're still on a bit of downward trajectory, but we may be approaching the bottom," said Bernard Markstein, senior economist and director of forecasting of the National Association of Home Builders. "Maybe this is the bottom, but it's a bit early, and I wouldn't want to get that optimistic."

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Redland Knolls - A Neighborhood of Dense Trees, Eclectic Architecture

by Estridge Group on Wed 18 Mar 2009 03:42 PM EDT

A Neighborhood of Dense Trees, Eclectic Architecture

By Susan Straight
Special to The Washington Post
Saturday, March 14, 2009; G01

Trees, large lots and the Walt Whitman High School district draw families to Redland Knolls, a mix of houses and townhouses built between 1940 and 2007.

The approximately 35 single-family houses in the Montgomery County neighborhood, once called Locust Ridge, are mostly large and on half-acre lots. Many of them back up to the sports fields at Whitman and the adjacent Montgomery County park, Whittier Woods. The 15 three-story townhouses along Bannockburn Ridge Court were built in 1998.

The dense, tall old trees, which have been cleared from all but the backyards of nearby neighborhoods, give Redland Knolls a green feel. "In the summer, this place becomes like a nature preserve," said neighborhood resident Gareth Conway, gesturing toward the woods separating the houses on the east side of Pyle Road from the high school fields.

"I've got a forest all around me," said Dick Tastet, who moved into his split level, built in 1953, with his parents in 1959. He is now married, and he and his wife, Judy, raised a daughter there. "You have to go out of your way to speak to your neighbors. You're too far from your neighbors to talk over the fence much."

Although the neighborhood isn't an easy walk to much except Whitman and the park, residents are within two miles of a major shopping area on River Road as well as the entertainment, shopping and dining of downtown Bethesda, and less than 10 minutes by bus or car from the Bethesda Metro station.

Houses are a mix of styles, including contemporary, French country, ramblers and split levels. "It's pretty eclectic here, which makes it interesting. None of them are alike," said Ilissa Flamm, a real estate agent and neighborhood resident. There's a wide range in home sizes, too, from a few thousand square feet to a 10,000-square-foot house with a three-car garage. There hasn't been a lot of turnover in the neighborhood -- the last home sale was in February 2008, for $1.275 million.

Conway was told his three-floor mid-century modern house was designed by one of Frank Lloyd Wright's students. He has not been able to verify that, but the house certainly looks as if it was influenced by the legendary architect, with its cantilevered roof eaves and large windows throughout.

Conway, a Los Angeles native, said it reminded him of houses back home. Although it suffered from a lack of maintenance when he first saw it, "I saw the potential," he said.

Conway's wife, Melissa, a Montgomery native, was not as used to contemporary-style houses. "I'd never seen anything like it. I loved it and still love it," she said. "We're big Frank Lloyd Wright fans, and there are some aspects like that to this house." Her top priority, however, was living in the Whitman school district, one of the nation's top-performing public school districts, so the architecture was just a plus.

The school district is important to families with children, but the Whitman athletic track also is used by many neighbors for walking or running, whether or not they have children in school there. "If there's a focal point, it's the high school," said Kelly Levy, who moved to the neighborhood in 2005 with her husband, Michael, and three daughters, Lauren, Jessica and Amanda.

"It's great being one minute from school," said Lauren, a Walt Whitman student, who says she can run to school if she leaves a little late.

In a pattern that's the reverse of most neighborhoods, the middle school students can also walk to their school, Pyle Middle School, but the elementary school students take a bus. Residents with young children say that's how they meet one another -- at the bus stop.

When they moved to the neighborhood in 1996, "there were no children," said Tucker Bernard, Flamm's husband. "Everyone was already retired."

Now, "kids are starting to move back into the neighborhood," said Bernard, who has a son in grade school.

The other way residents meet in this neighborhood of large houses, large lots and no sidewalks is by walking their dogs, either on the street or along the path behind the houses backing up to the high school and Whittier Woods Park. "A lot of people from the neighborhood gather every morning from 6:30 to 7 a.m. to socialize," Flamm said.

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More Mortgages Eligible for Refinancing

by Estridge Group on Wed 18 Mar 2009 03:39 PM EDT

More Mortgages Eligible for Refinancing

By Kenneth R. Harney
Saturday, March 14, 2009; F01

Fannie Mae and Freddie Mac have published the rules governing their upcoming mass refinancing campaigns, and they're more favorable for borrowers than indicated at first by the White House and Treasury, especially for owners of second homes and small investment properties.

Although initial reports suggested that the refinancing would be for owner-occupied primary residences, the guidelines sent to lenders this month by Fannie and Freddie say second homes and small rental properties are eligible, provided that their mortgages already are in the companies' portfolios or securitizations and have been paid on time.

Brad German, a spokesman for Freddie Mac, said second homes and investment properties with one to four units are important because they may "help stabilize neighborhoods and housing markets." Refinancing investor-owned rental units, he added, can "help reduce renter evictions by putting landlords in a [more affordable] refi that improves their chance of success."

Under the administration's programs, an estimated 4 million to 5 million owners whose mortgages are held by Fannie and Freddie will be eligible for refinancing to lower rates even though they would normally not qualify because of declines in property value. Applications are being taken by participating lenders now, although no loans are scheduled for funding by Fannie or Freddie until early April.

To illustrate how refinancing might work: Say you bought a house several years ago for $400,000 with a $350,000 first mortgage at 6.5 percent. Because of local property devaluation, your house is now worth roughly the amount of your loan balance, making it impossible to refinance into today's rates in the low 5 percent range.

The new programs would allow you to refinance, provided you have a solid repayment record, your loan balance exceeds your property value by no more than 5 percent, and your loan is either owned outright or contained in a mortgage bond guaranteed by either corporation.

To make their programs as widely accessible as possible, Fannie and Freddie's instructions offer a variety of concessions. On top of the list are credit scores. Both companies plan to waive their usual minimum borrower credit score requirements for most applicants. Participating lenders will still pull your scores and credit files, but generally there's no specific cutoff point below which you'll be rejected.

Equally important for some highly leveraged homeowners, the companies are setting no limits on the amounts of existing second mortgages or home-equity-line balances, as long as the secondary loan creditors agree to re-subordinate their liens behind the new Fannie- or Freddie-funded mortgage.

Both companies also are suspending their standard rules requiring purchase of private mortgage insurance coverage when borrowers' equity stakes are less than 20 percent. If loans carried mortgage insurance coverage when Fannie or Freddie first acquired them, that coverage will remain in force. But borrowers who never had insurance, and now have depressed equity stakes below 20 percent, will not be required to purchase new coverage.

Fannie and Freddie also plan to lessen the burden of other typical costs in connection with the mass refinancings, including appraisals, lender fees and closing expenses. Fannie will permit borrowers to finance those fees entirely by rolling them into the replacement loan amount. Freddie will allow financing of escrow fees, prepaid items and closing charges up to a limit of $2,500.

Both companies emphasize that their refinancings will be limited strictly to customers who have paid their mortgages on time -- people who haven't been late by 30 days or during the most recent 12 months.

One major area of difference between Fannie and Freddie involves where you obtain your new replacement loan. Freddie requires borrowers to apply to their existing lender or servicer for rate quotes and terms. Fannie, by contrast, allows borrowers to contact any of its 30,000 approved servicing and lending partners nationwide for quotes.

Fannie spokesman Brian Faith said "being able to shop their refi business can help [borrowers] reduce rates and terms." Freddie Mac's German said his company is keeping refis with the current lender or servicer because that will cut down on time and costs -- "a simpler process with no re-underwriting for most borrowers." The current servicer has the detailed files on the existing mortgage, knows the customers, and is in the best position to offer a fast and less expensive refi.

How do you know if you're one of the millions of homeowners who might be eligible? First, you need to find out if your mortgage is owned or guaranteed by Fannie or Freddie. Your current servicer can tell you, or you can visit the companies' special Web sites: http://www.fanniemae.com/homeaffordable or http://www.freddiemac.com/avoidforeclosure.

Kenneth R. Harney's e-mail address is KenHarney@earthlink.net.

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Wednesday, March 11

Some Optimistic News and Thoughts- For Once!

by Estridge Group on Wed 11 Mar 2009 05:01 PM EDT

The previous Stock market crash, which lasted from March 2000 through October of 2002, ended on October 9th 2002. On that very day, the headline on the front page of USA Today read "No End In Sight to Stock Market's Decline." Yesterday, the headline in the Wall Street Journal read "Dow 5000?" Could this represent a major turning point? We think there is reason to believe so. There are still so many negative issues to contend with, and the big concern for Stocks is the decline in earnings, which even at these levels don't make Stocks appear cheap, because of the relative Stock price-to-earnings ratio.

But there are also a few things to be optimistic about. Citigroup, an important part of the financial sector which led Stocks lower, had a significantly more positive outlook in statements made by their CEO Vikram Pandit this morning. Citigroup is boasting a strong capital base and profitability levels for the first part of the year.

Also giving Stocks a boost is Treasury Secretary Geithner, who said the US has done more in the last few weeks than other countries have done in years. FDIC head Sheila Bair, also kicked in and said that removing the toxic assets from bank's balance sheets will help restore confidence in the banking system. This positive chatter has brought a little confidence to Wall Street today, something that has been sorely lacking so far this year.

Federal Reserve Chairman Ben Bernanke spoke in front of the Council on Foreign Relations in Washington this morning, where he indicated that the recession would be over by year end if the banking situation was stabilized, and further commented that major financial institutions would not be allowed to fail given the fragile state of financial markets and the global economy. It's great to see that the mark-to-market issue is finally getting the attention it needs...Mr. Bernanke stated that mark-to-market needs to be addressed and that there has been evidence that present accounting rules have indeed made the current crisis much worse.

While he does not support suspending mark-to-market, he does feel that it needs to be modified expeditiously. As you know, this issue has been a strong rallying cry on our part for several months now, and Mr. Bernanke's statements today are exactly in line with the position we have had, which is not to eliminate mark-to-market, so as not to repeat the days of Enron, but to make adjustments to allow for alternative methods, such as cash flow valuation. There is a congressional hearing on mark-to-market coming up on Thursday, and going back to Bernanke's comments, a stabilization of the banking system would help bring an end to the recession.

One other topic that has been an MMG favorite is the Uptick Rule, and we are now hearing talk that the Uptick Rule may be reinstated, making it more difficult to aggressively short Stocks. Should both mark-to-market and the Uptick Rule be addressed shortly, Stock prices could undergo a significant rally, especially with all the cash presently on the sidelines. This could come to some degree at the expense of Bonds, so we need to be very careful as we watch how these events unfold.

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Tuesday, February 24

Melinda and Bob are now CDPE certified!

by Estridge Group on Tue 24 Feb 2009 12:24 PM EST

The Estridge Group is now CDPE (Certified Distressed Property Expert) certified!

The Developers of the Certified Distressed Property Expert Designation (CDPE) believe that in most cases the best person for a distressed homeowner to speak with is a well informed Licensed Realtor® educated and trained to find the best solution.

Foreclosure is a devastating financial and emotional process for a homeowner, and in many cases they face this process alone, without help of any kind.

An Agent who has earned the CDPE Designation has dedicated their time and effort to understanding the distressed homeowners issues. The CDPE Professional is an agent who understands the full range of solutions and is ready to help.

While experiencing financial distress is difficult for any family, the process of finding a real estate professional shouldn't. Selecting a CDPE agent ensures you are dealing with a professional ready to address your needs.

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Stimulus Plan Tax Credit for Homebuyers

by Estridge Group on Tue 24 Feb 2009 12:13 PM EST

Tax Credit for HomebuyersFirst-time homebuyers who purchase homes from the start of the year until the end of November 2009 may be eligible for the lower of an $8,000 or 10% of the value of the home tax credit. Remember a tax credit is very different than a tax deduction – a tax credit is equivalent to money in your hand, as opposed to a tax deduction which only reduces your taxable income.

The tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000. Buyers will have to repay the credit if they sell their homes within three years.

Tax Credit Versus Tax Deduction

It’s important to remember that the $8,000 tax credit is just that… a tax credit. The benefit of a tax credit is that it’s a dollar-for-dollar tax reduction, rather than a reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if a homebuyer were to owe $8,000 in income taxes and would qualify for the $8,000 tax credit, they would owe nothing.
Better still, the tax credit is refundable, which means the homebuyer can receive a check for the credit if he or she has little income tax liability. For example, if a homebuyer is liable for $4,000 in income tax, he can offset that $4,000 with half of the tax credit… and still receive a check for the remaining $4,000!

Phase-out Examples

According to the plan, the tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000.
To break down what this phase-out means to homebuyers who are over those amounts, the National Association of Homebuilders (NAHB) offers the following examples:

Example 1: Assume that a married couple has a modified adjusted gross income of $160,000. The applicable phase-out to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time homebuyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.

Example 2: Assume that an individual homebuyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.
Remember, these are general examples. You should always consult your tax advisor for information relating to your specific circumstances.

Homes that Qualify

The tax credit is applicable to any home that will be used as a principle residence. Based on that guideline, qualifying homes include single-family detached homes, as well as attached homes such as townhouses and condominiums. In addition, manufactured or homes and houseboats used for principle residence also qualify.

Higher Loan Amounts

More good news – there is an extension on the additional tier of conforming loan amounts which had been first established in 2008. This tier of home loans are those greater than $417,000, and with a maximum that depends on the area, but is not greater than $729,750. These loans will again be eligible for rates that are slightly higher than conforming loan rates, but less expensive than the standard “jumbo” loan rates.

Additional Housing-Related Provisions

Tax Incentives to Spur Energy Savings and Green Jobs — This provision is designed to help promote energy-efficient investments in homes by extending and expanding tax credits through 2010 for purchases such as new furnaces, energy-efficient windows and doors, or insulation.

Landmark Energy Savings — This provision provides $5 Billion for energy efficient improvements for more than one million modest-income homes through weatherization. According to some estimates, this can help modest-income families save an average of $350 a year on heating and air conditioning bills.

Repairing Public Housing and Making Key Energy Efficiency Retrofits To HUD-Assisted Housing—This provision provides a total of $6.3 Billion for increasing energy efficiency in federally supported housing programs. Specifically, it establishes a new program to upgrade HUD-sponsored low-income housing (for elderly, disabled, and Section 8) to increase energy efficiency, including new insulation, windows, and frames.

Expanding Housing Assistance—This provision increases support for several critical housing programs. It includes $2 Billion for the Neighborhood Stabilization Program to help communities purchase and rehabilitate foreclosed, vacant properties.

More Help for Homeowners in the FutureAnother thing to keep an eye on in the coming weeks is President Obama’s plan to help struggling borrowers before they are faced with a default on their mortgage.

According to reports, the Obama administration is discussing plans to help borrowers who are struggling to stay afloat, but who have not yet fallen behind on their payments. At this point, details are scarce; however, reports indicate that President Obama is looking to spend approximately $50 Billion to directly help homeowners before they face foreclosure and financial disaster.

While this is good news for individual homeowners, it will likely be good for the housing industry as a whole. That’s because, assisting struggling borrowers before they default should help stop the wave of foreclosures, which are estimated to top two million this year. That, in turn, will help stabilize home prices.

The Economic Stimulus Plan is huge, and impacts a number of industries. I’ve highlighted some of the major provisions that may impact you now and in the future.

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Wednesday, February 18

Distressed Properties, Short Sales and REO's

by Estridge Group on Wed 18 Feb 2009 12:13 PM EST

There’s been a lot of talk about distressed properties in the news. Are these deals too good to be true?

We are seeing more distressed property sales, as just mentioned. Short sale and REO properties account for one-fourth to one-half of our current market activity.

Describe Short Sale and REO Properties. What are they?

A Short Sale is just what it sounds like – shorting the bank. This means a seller owes more on the house than it can sell for. In a short sale, the seller must negotiate with the bank and get them to accept less money than what is owed. Not all banks will do this, but some will work with sellers to avoid the added expense of the foreclosure process.

REO properties, on the other hand, have already gone through the foreclosure process, unsuccessfully, and are now owned by the banks. REO stands for “Real Estate Owned,” and are also known as Bank Owned properties.

Both Short Sales properties and REO properties are typically priced right at (or just below) market value. These folks are motivated to sell, and buyers can get some good deals if they come to the table prepared.

What should buyers need to know?

Short sale properties have a reputation for taking a long time to close. If a buyer makes an offer on a short sale, banks can take months to respond. And if this weren’t bad enough, a bank will also solicit other offers right up to the day of closing. So buyers need to anticipate a long closing time when making an offer on a short sale property.

In the case of the REO, or bank owned homes, buyers need to understand the original seller is completely out of the picture and moved out. In this case you have a financial institution selling a house they know nothing about. So there is no property disclosure and while the buyer can (and should) have an inspection, you are most likely buying it “as is.” Another pitfall in both cases is that once a closing date is agreed upon the buyer is held responsible for that date, and charged a per diem penalty should they delay the closing.

There are some great deals on the market today if you know what to look for and have someone to help you

 navigate the nuances of a distressed property transaction.  Buyers should give me a call or email me and

set up a time to discuss.   Its not as tough as it sounds, you just need to be prepared.

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Monday, February 9

As Market Slides, Owners Are Scrutinizing Tax Assessments

by Estridge Group on Mon 09 Feb 2009 03:02 PM EST

My Home Is Worth What?!As Market Slides, Owners Are Scrutinizing Tax Assessments

By Anita Huslin
Washington Post Staff Writer
Saturday, February 7, 2009; F01

With property values dropping and personal budgets tightening, the new tax assessments arriving in mailboxes throughout the Washington region are drawing close scrutiny from homeowners. If early appeals are any indication, more people will be seeking to get a break by having their home valuations reduced.

However, assessors point out that a stumbling real estate market may not translate to lower property taxes.

Appeals are already up sharply in Maryland, officials said. Assessments were sent Dec. 31 to Maryland homeowners whose properties were up for reevaluation. They have until Friday to appeal for this year. Most Virginia cities and counties and the District will mail their notices by March 1, and they generally give homeowners 30 to 45 days to appeal.

Some of the most headline-grabbing real estate trends, such as the soaring foreclosure rate, only indirectly affect assessments. Assessors usually review home sales records neighborhood by neighborhood and examine pricing patterns to update individual home values. They disregard homes that were foreclosed on, sold at fire sale or otherwise traded hands under what is considered to be duress.

But such transactions tend to pull down values of sales around them, and that shows up. Assessors say they are well aware that real estate prices have been falling and have built that into their latest valuations. For instance, in Fairfax County, officials estimate that assessments for the 340,000 homes on the tax rolls will decline by 10 to 14 percent this year. In the Sterling district of once-booming Loudoun County, the value of existing homes dropped an average of 31.1 percent. There, the trend is so disturbing to homeowners that some who are trying to sell have been calling the county assessor's office, complaining their valuations are too low.

However, it's much more common for homeowners to argue that the values are inflated.

Appeals of current assessments are rising, and they tend to flow in greater numbers as the deadline approaches, said John Brennan, supervisor of the Montgomery County office of the Maryland Department of Assessments and Taxation. The parts of Montgomery County that just received assessments saw valuations go down 16 percent, the steepest drop in the state.

In previous years, about 5 percent of homeowners who appealed saw some reduction in their assessment. Now, "a pretty fair number of those will get market adjustments because the market has come down," Brennan said. "But what a lot of people won't understand is that even with the reduction in their values, it might not have any effect on their tax bills."

That's because assessments are only part of the tax equation. Another part is the tax rate used to calculate the total due. Budget-strapped governments are still grappling with where to set rates for tax bills when they send them out this summer.

Assessment caps are another reason tax bills might not drop as much as property values have. The District and many Maryland jurisdictions cap assessments to varying degrees; Virginia does not. The caps serve to spread out over several years the higher assessments that occur during periods of rapid real estate price inflation. That prevents dramatic upswings in tax bills in any one year but also dampens the effect of lower valuations.

Cindy Smith-Page, director of real estate assessments for Alexandria, will mail new assessment notices to about 45,000 homeowners in mid-February and is expecting a higher volume of appeals.

"People will be anticipating a greater decline in the value of their homes than we've seen already," she said. "Just with the financial constraints on so many people these days, I think everybody's paying closer attention to all their financial issues. And certainly how much they are paying in property taxes and their ability to do that is at the top of their list."

Assessors say there are several ingredients for a successful appeal:

· Arm yourself with information on fair-market comparisons by looking at sales only within the calendar year of the assessment. Sales that have taken place since then generally don't count.

· If relevant, provide evidence that the assessment office has incorrect information about your property, such as too many square feet or too many rooms.

· Show extenuating circumstances that might detract from your property's value, such as a cracked foundation, a leaky roof, fire damage or other flaws that could result in a reassessment.

"Things that won't work," said Richie McKeithen, director of real property tax administration for the District, "would be like 'My wife and I are splitting up, and I can't afford it.' Or 'I only paid $30,000 for this house in 1960. It can't be worth $300,000.' I'm very sorry, and I sympathize with you, but that's not a valid reason for a reassessment."

In the District and much of Virginia, assessments are annual and so are appeal deadlines. In Maryland, properties are assessed every three years. There, homeowners can appeal the new assessment within 45 days. If they got their reassessment in a previous year and think they have new information that could change the value of the property, they can appeal by filing a "petition for review." So-called off-cycle petitioners have until Jan. 1 to ask for a review of a current assessment.

Watching the sales prices of homes in his Silver Spring neighborhood decline last year, Kenneth Cohen decided to do just that. Last year, the Montgomery County tax assessor valued Cohen's 44-year-old home at $361,347, a 10 percent increase from his previous assessment, which set it at $328,498. He said he didn't think that reflected what has been happening in the real estate market.

"Our assessments are very high compared to real property values," said Cohen, a retired Federal Aviation Administration engineer. "The home prices are really upsetting. The last sale, which is two doors down from us, sold for $347,000 about a month ago. Others are sitting empty. It's deader than a doornail. Nothing's moving."

He hoped to persuade the state to roll back his assessment based on more recent sales prices. He is not alone. Montgomery County's off-cycle petitions for review have hit record numbers. They rose to 3,500 for 2009 assessments from about 1,200 for last year's. There were only 85 petitions for review of 2007 assessments, according to Brennan, of the Maryland assessment department. The three-person appeals board is working its way through petitions and appeals, more than a dozen a day, according to its chairman, Arnold Gordon.

Gordon recommends that homeowners review all the rules for appealing on the state and county Web sites and request what is known in Maryland as a "computer-assisted mass appraisal worksheet" on sales of comparable properties to argue their property value has declined. Those sheets can be provided for a small copying fee by the assessor's office and will list details about the condition and upgrade of comparable properties, such as swimming pools, tennis court, sheds and other structures that might help you make the case your home is worth less.

He also notes that assessors look only at sales of properties within the year the assessment is done, so that even if newer sales show much lower prices, they would not necessarily be considered.

Key among all the recommendations is that homeowners pay close attention to the deadlines for filing appeals or reviews of their assessments. There is very little room under the statute to consider late appeals, Gordon said, and being busy or out of the country won't work.

Cohen found this out the hard way.

Last week, he received an e-mail from the state assessment office acknowledging his petition for a review of his earlier-year assessment. He had missed the deadline, the e-mail said. He thought he would appeal the 2009 value placed on his home when it was reassessed last year. But that deadline, which was the beginning of January, has passed. He still has one more opportunity. He has until Dec. 31 to ask the state to review the 2010 value noted on that assessment from last year. Cohen said he plans to do that.

"With our economy in such a state of shambles, it is necessary for us to avoid the overpayment of taxes," he wrote back to the state assessor's office.

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Is It in Your Best Interest?

by Estridge Group on Mon 09 Feb 2009 03:01 PM EST

Is It in Your Best Interest?Before You Join the Flock Trying to Refinance, Determine If a New Loan's Terms Fit Your Goals

By Dina ElBoghdady
Washington Post Staff Writer
Saturday, January 31, 2009; F01

On its face, deciding whether it's worth it to refinance your mortgage seems simple enough.

Shop for the lowest rate possible. Figure out what your monthly payment would be at that new rate. Compare it with what you're paying now and decide whether the savings (assuming there are any) offset the closing costs of the loan quickly enough.

But as with most money matters, nothing is that simple. Refinance applications have soared in recent weeks as interest rates hit record lows. The rush has slowed somewhat as rates have leveled off, but it may pick up again now that the Federal Reserve this week has renewed its commitment to try to push down consumer interest rates. While the gyrations in the credit market have made it tough for many people to take out a loan for a new home, it's less of a hassle to refinance, especially for owners with good credit who have built up equity over time.

If you're contemplating joining in, think about what you are trying to achieve by refinancing and how best to do so.

"It's not a one-size-fits-all type of thing. It's barely a one-size-fits-most," said Keith Gumbinger, a vice president at mortgage research firm HSH Associates. "You have to have a goal in mind."

Are you refinancing to save money by minimizing the total interest expense during the life of the loan, or are you trying to free up cash by lowering your monthly payment?

Are you rushing to pay off your loan as quickly as possible and, if so, are you short-changing your cash needs in the process or eating into your emergency fund?

Maybe you're eager to ditch an adjustable-rate mortgage before it resets, switching to a more predictable fixed-rate loan, as many consumer advocates advise. But have you considered that your loan may reset to a lower rate if it is tied to a Treasury index? Can you stomach holding on to it longer? Should you?

Answers to many of these questions are a function of timing.

Let's assume you live in Maryland and took out a new loan that saves you $50 a month. The average closing costs in that state last year were $3,117 on a $200,000 loan, according to Bankrate.com, a personal finance Web site that compiles an annual closing cost overview. It would take a little more than five years to break even on that loan. The goal is to get beyond the break-even point.

"If you're planning to sell the house within that period, it doesn't make sense to refinance," said Ric Edelman, a financial adviser in Fairfax. "But if you're planning to stay for 10 more years, it does make sense."

The same reasoning goes into deciding whether to pay points, which are the upfront fees borrowers pay to reduce the rate on the loan. A point is 1 percent of the loan amount.

Brian Ng knows all that, but he was still conflicted. He wanted to refinance and take out cash to spend on remodeling his home. A lender quoted him 4.875 percent on a 30-year fixed rate mortgage for $357,000. If he paid 1 point, he could reduce his monthly payment by roughly $54. But it would take him 5.5 years to recoup that cost.

"I plan on being in the house at least that long," Ng said. "Should I pay 1 point or keep the cash to help me pay for home improvements?"

First, find out how much that 1 point is buying, said Steve Calem, president of Capital Funding Group, a mortgage consulting and advisory firm. Typically, a point shaves an eighth or a quarter percentage point off the interest rate. Ng was offered a quarter point. But these days, a point can buy closer to half a percentage point, Calem said.

"If you're getting more than a quarter percent for the point, that's a real bargain and it's worth serious consideration," Calem said. He suggested that Ng try to have his lender increase the loan amount to accommodate the cost of the point, which would eat up only $15 of the $54 in monthly savings. "With such a low interest rate, I don't think he'll get cheaper money."

But there's another consideration for borrowers who pay high closing costs when they refinance.

"What if you want to refinance in another year because rates have dropped further?" Edelman said. "You will not have recovered the cost of the first refinance by then."

Ng concluded the same. This week he closed on a no-point loan.

For all those reasons, it is best to press your lender to waive fees and bring down the closing costs as much as possible, which some lenders are willing to do to win your business or keep it. They may fold the costs into the loan so you can avoid paying cash upfront, if you have enough equity. Even then, there may be some cash charges that are tough to duck, including an application fee of several hundred dollars.

By law, borrowers must receive from their lenders a good faith estimate of the closing costs and other charges within three days after applying for a loan. But it is only an estimate and it will not be as transparent as many consumer advocates would prefer. There's an effort underway to make these estimates less confusing.

"The lender is not required to let you know at the time of application what the estimate is, but I wouldn't sign any papers until I have a good idea of what the costs might be," said Jeff Douglas, president of Douglas Mortgage Services in Fairfax. "I would go over every line item with the mortgage loan officer so you can better understand what is being charged."

If you want to figure out some of the math up front, plenty of refinancing calculators can help you do that. But even with the numbers at hand, the best course of action depends on your goals.

Take the case of Pamela Roblyer, who has owned her Annapolis home for 21 years and has amassed plenty of equity. Roblyer refinanced into a 15-year fixed rate mortgage about five years ago at 5 1/8 percent. She pays about $2,323 a month. Roblyer has paid off a chunk of the loan and now owes $205,000.

With rates at all-time lows, Roblyer wonders whether she's leaving money on the table by not refinancing into another 15-year mortgage.

This week, the average rate on a 15-year fixed rate mortgage for $417,000 or less was 5.1 percent, according to the most recent survey by Bankrate.com. So it's unclear whether Roblyer can do better than her current rate.

Even if she does, she may not be saving money in the long run, which is probably why she should not refinance, said Don Taylor, a certified financial planner and a contributor to Bankrate.com.

"She'd restart the clock," Taylor said. "By extending her loan from 10 years to 15 years, the total interest rate expense might go up even if her rate is cut."

For instance, if Roblyer's rate drops to 5 percent, she would be paying about $1,621 a month -- $702 less than her current payment. But by adding five years to her mortgage, she would end up paying $33,957 more in interest during the life of the loan. Even at 4 percent, she would be paying $15,000 more. In effect, she would wipe out any savings she gained by securing a lower interest rate.

The cost is reduced when factoring in the income tax deduction she will get for paying the additional $33,957 in interest, Taylor said. But even so, she will still have paid roughly $22,751 more during the life of the loan.

But Edelman, the financial adviser, offers a different perspective.

He proposes that Roblyer take out a 30-year mortgage instead of another 15-year loan.

Doing that would lower her monthly payment by $1,206 a month at the same 5 1/8 percent rate, Edelman said.

"That's money she could invest and that would more than compensate for the overall cost of the loan," Edelman said. "Paying down a mortgage reduces debt, which is not the same as creating wealth."

That option appeals to Roblyer because she would like to retire in a few years. "Having the extra cash each month would help," she said.

Another option that HSH's Gumbinger suggested: If she could get another 15-year loan at a lower rate, say 4.5 percent, she could continue to pay what she's paying now to reduce the principal quickly. Doing so would pay off the loan in less than 10 years and save thousands in interest, even accounting for closing costs.

Getting the mortgage paid off as quickly as possible is Lisa Ghebresillassie's main objective.

That's why she put 20 percent down when she purchased her Waldorf house in December 2007. She's been paying extra principal on an accelerated basis.

"I hate debt. I always have," Ghebresillassie said. She has an 11-year-old stepson and a toddler. By the time her toddler is in college, she hopes to be debt-free so she can pay for the kids' schooling in cash.

To help get there, Ghebresillassie wants to get rid of her 30-year mortgage and refinance into a 20-year loan. But here's her cautionary tale: Even though she has put plenty of cash into her home, there's a good chance she may not qualify for a new loan.

She and her lender suspect that the appraisal required may determine that her house is worth less than she paid for it.

"It's not really going the way I planned," Ghebresillassie said. "But on a brighter note, I do have a house."

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Thursday, January 29

House stimulus bill contains $900M for D.C.

by Estridge Group on Thu 29 Jan 2009 03:04 PM EST

House stimulus bill contains $900M for D.C.

Washington Business Journal - by Jonathan O'Connell Staff Reporter

The $800 billion spending bill aimed at economic stimulus, passed by the U.S. House Wednesday night, contains about $900 million in spending for the District, including $376 million for transportation infrastructure improvements and $148 million for public school renovations.

D.C. Del. Eleanor Holmes Norton, D-D.C., reported that the package, as it currently stands, would also provide a bevy of tax credits, including those for public housing repairs, weatherization of some homes, school construction bonds and energy efficient building improvements. “Today, we moved one step closer to remedying this baffling and painful economic crisis, the worse we have seen since the Great Depression,” Norton said in a statement.

D.C. Mayor Adrian Fenty wrote Norton Jan. 7 with a list of priorities for stimulus spending that included school modernization, construction of a new police forensics lab, Medicaid matching funds, reconstruction of the Eleventh Street and South Capitol Street bridges, and another environmental and housing needs. D.C. faces a budget shortfall for the current fiscal year of $127 million, according to estimates by its chief financial officer.

The Senate is expected to consider the package next week.

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Some Good News from The Estridge Group

by Estridge Group on Thu 29 Jan 2009 12:12 PM EST

I wanted to share some interesting and exciting news! We put 2 houses on the market last Thursday evening, a split level on Wickett priced at 639,900 and a rambler on Acacia for $550,000. Both houses were in pristine condition, had been professionally staged and were aggressively priced. We had a ton of calls on Friday about both house, Bob and Melinda held them open and had over 50 people through each open. There were 5 contracts for both houses with multiple escalation clauses. Needless to say that both are now under contract and for over the asking price! Good news, there are a lot of buyers out there!

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World's Best Place For Real Estate Buys

by Estridge Group on Thu 29 Jan 2009 12:07 PM EST

World's Best Places For Real Estate Buys
FORBES Magazine -- Matt Woolsey, 01.21.09
Ten Cities Investors Will Target In 2009
Washington, D.C., traditionally takes a back seat to world cities like London, New York and Tokyo when it comes to real estate investment.
That's likely to change.
Thanks to a proposed $1 trillion wave government spending, investors are flocking to D.C. for opportunities in the commercial and residential real estate markets. All these new programs will need offices, after all, and their employees will need places to live.
This year, Washington leapfrogged London for the first-place ranking in the world's best cities for real estate investment. But don't count out the world's financial capitals just yet--even with massive financial troubles in London and New York, those cities finished second and third, respectively.
Why? It's the appeal of long-term stability, and fears that emerging countries are going to take a harder hit. While the U.S. property market sputters, China is poised for its worst deflation in a decade, focused heavily on property price declines, according to Deutsche Bank (nyse: DB - news - people ).
"For the U.S. and U.K., part of it is flying back to safety," says Francois Ortalo-Magne, a real estate professor at the Wisconsin School of Business. " For China and India, there's a sense that we went there and tried it, but it wasn't producing."
Behind the Numbers
Forbes' rankings come from the Association of Foreign Investors in Real Estate, a research association that tracks where member investors are finding the best opportunities around the world. AFIRE surveys its 200 members, who collectively hold $700 billion in cross-border real estate.
U.S. cities surged up this year's list: San Francisco moved to sixth from 24th last year; Los Angeles moved to seventh from 19th; Houston moved to eigth from 32nd. Cities in the Asia Pacific region dropped: Sydney fell to 11th from ninth; Hong Kong dropped to 22nd from 10th place.
This year, investors know that valuations can't be trusted. In 2008, the American residential market fell 19%, according to the Case-Shiller index; U.K. prices dropped 16% according to Nationwide, a U.K. builder. Commercial values in both countries have started to soften due to recessions on either side of the pond.
In 2008, investors to spend tried to call the bottom and gambled in emerging markets. This year, they're looking at premium locations in cities with proven track records.
"We don't feel comfortable that we are able to identify what value is," says Richard Kessler, chief operating officer of Benenson Capital Partners, a global real estate investment group. "Having said that, if an opportunity exists on Park and 57th Street, or something we've always wanted to own on Pennsylvania Avenue in D.C., or some other very strategic long-term asset, we would look at it."
That makes 2009 the year of playing it safe and not chasing exotic opportunities in far-flung locations. It's even injected a sense of humility into the investing world.
"There used to be a rivalry between New York and London," says Kenneth Patton, divisional dean of the New York University Schack Institute of Real Estate. "The subject has shifted to the fact that we're both in the same lifeboat, and maybe it's leaking."
While some investors play it safe, others are content to wait out the real estate downturn entirely.
"Most of the [usual] participants are sitting on the sidelines," says Kessler. "There's a lot of capital, but everyone is uncomfortable about deploying that capital."
For their part, the optimists think 2009 might be the year that sideline money starts to come back into the marketplace--and, especially for the cities on this list, it will come back in a flood, not a trickle.
"There's a lot of money that needs to be invested, says Ortalo-Magne. "The instant people feel an inkling of a turnaround, money is going to flow in."
Whether that inkling comes in 2009 or 2010, however, is an altogether different question.

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Wednesday, January 21

The State Of Our Market

by Estridge Group on Wed 21 Jan 2009 04:15 PM EST

In our troubled economy with continued negative press, I am asked every day “how is the market?” “Is it really as bad as we hear?” As I travel to various real estate seminars and network with many of the top agents around the country, I feel very fortunate. I am grateful because most housing markets are so much worse than ours. We do not have the same rate of foreclosures and short sales that are prevalent in other areas. Our marketing time averages 90 days while over 6 months is more common throughout the US. In fact, in the Washington Metropolitan area, most houses are selling in the first 30 days if they are priced correctly; the rest take a few months or longer, with one or more price reductions.

Although the number of buyers is less than a year ago, there are still people buying houses; there is just more competition. The consensus of the real estate community nationwide is that we will continue to have a strained real estate market until 2011. I have seen two “down” markets in my 30 years in the business and both lasted 3-4 years before properties began to appreciate again. Markets (real estate and stock) run in cycles.

If there is one lesson I have learned over the years, it is that there is no perfect time to buy and sell property; you are either in a buyer or seller’s market. Having said that, now is a very good time for 1^st time buyers, move up buyers, sellers relocating to a down market elsewhere (their market is almost assuredly worse than ours), investors and people looking to move to an upscale condo.

Buyers looking for a more expensive home will sell their home for less than they could have a few years ago, but what they purchase is, by a greater percentage, less money. If they wait for the market to come back, they will pay more for the new home.

As our seniors rapidly grow in number, luxury condos will sell at a premium as currently there are just not enough of them. Currently, many of the developers who weren’t negotiating are making all types of concessions. Investments are looking favorable because of the number of distressed properties available. We have a distressed property certification which helps us understand the ins and outs of purchasing foreclosures and short sales. People now buying investment property will ride the next wave of appreciation. The best opportunity is for first time buyers, they are in a win-win situation. The interest rates are the lowest I have seen in my career and there are many motivated sellers. By spring, there will be a lot of inventory to choose from.

Mortgage money is still readily available (even jumbo money!) and lenders have relaxed their criteria a bit in the last month. We are seeing 10% down conventional financing through FNMA/Freddie Mac up to $625K and little or no money down FHA and VA financing. New loan limits up to $625,000 and $812,500 respectively.

Some sellers may want to consider refinancing as interest rates seem on a downward trend, but it is important to have a good, experienced lender evaluate the numbers based upon how many years you have had your current loan and how long you plan to stay in your property. We are happy to provide you with experienced mortgage broker recommendations.

I watch the market closely through our real estate board statistics. I talk to the top agents in our market regularly to gauge conditions and changing market indicators. I also do a monthly podcast which can be accessed at www.estridgegroup.com to keep buyers and sellers updated about our changing market. I would appreciate any input or information you would like me to include in these programs.

We will stay positive! Experience counts to achieve successful results and we are helping buyers and sellers every day. I am happy to consult with you about making the right decision in today’s market whether you are looking to make a move now or in the future.

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Wednesday, January 14

The case for a quick recovery

by Estridge Group on Wed 14 Jan 2009 01:45 PM EST

The case for a quick recovery

Some economists think that because the current downturn has been so sharp, that sets the stage for a stronger and faster rebound than many now expect.

By Chris Isidore, CNNMoney.com senior writer

Last Updated: January 12, 2009: 4:28 PM ET

NEW YORK (CNNMoney.com) -- There is no debate that the U.S. economy is in terrible shape at the moment.

Nearly 2.6 million jobs were lost last year, with the majority of them coming in the final four months of the year. And some economists are forecasting as much as a 5% to 9% drop in economic activity during the fourth quarter, which could be the biggest drop in 50 years.

But some economists are starting to believe that there could be a much stronger and quicker recovery than is now widely expected.

They say that the sharp drop in production and inventories during this recession will force businesses that are now busy cutting back to quickly ramp up production once the economy starts to improve.

The crisis in financial and credit markets sparked by the Lehman Brothers bankruptcy in September caused businesses to slam the brakes on production much harder than justified by reduced demand alone, according to Joseph Carson, chief economist at AllianceBernstein.

"We were producing 2 million tons of steel a week prior to Lehman. Now we're producing 880,000 a week," Carson said. "The economy has slowed, but it has not fallen by half in the last three months. This kind of significant inventory liquidation is exactly why recoveries take place."

Many also believe that the significant steps being taken by the Federal Reserve and Congress to spur the economy will kick in later this year. That stimulus, coupled with low energy prices, could cause a jump in economic activity.

A V-shaped recovery?

This kind of recovery is known as a V-shaped recovery, because a chart of economic activity would look like the letter V: a steep decline followed by a quick and strong turn around.

"Generally the sharper the recession, the sharper the recovery," said Lakshman Achuthan, managing director of the Economic Cycle Research Institute.

Achuthan said he is not yet ready to call the bottom of the current economic downturn. But he said his firm's weekly index of leading economic indicators has been ticking higher in recent weeks, suggesting that the economy may finally be close to the bottom.

He added that when things start to show signs of improvement, the economy could well be helped by pent-up demand from consumers who sharply curtailed purchases in recent months.

"Consumers have been on strike," he said. "They've been holding off buying things that they don't absolutely have to have."

Of course, hopes for a quick turnaround are still faint. There are many economists, including staffers at the Fed, who worry that there will be, at best, a modest pick-up in activity later this year and continued job losses continuing into 2010.

According to a plan released by the economic team of President-elect Obamaover the weekend, the incoming administration believes the unemployment rate will continue to rise through the third quarter of this year, and top out at 8% -- even if the economic stimulus plan it is proposing passes.

Or a U-shaped recovery?

And some economists who believethere will be a sharprecovery aren't sure it will take place anytime soon.

"We're eventually going to get a strong recovery. We just can't forecast with any degree of certainty if it will be in the second half of the year," said Ed Yardeni, president of Yardeni Research, an independent market research firm.

He added that the recovery could wind up looking more like a U, i.e. the economy hovers around the bottom for awhile, than a V.

Yardeni said everything will have to go right to bring any type of recovery in 2009, including quick passage of effective stimulus by Congress and an unfreezing of the credit markets.

He added there is some evidence of improvement in the economy, including narrowing credit spreads and lower mortgages rates. But it may be too little, too late for a turnaround this year.

"Right now there's more going wrong than going right," Yardeni said.

First Published: January 12, 2009: 3:08 PM ET

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Wednesday, January 7

30-Year Rates Set Another Record Low

by Estridge Group on Wed 07 Jan 2009 12:17 PM EST

Associated Press
Saturday, January 3, 2009; Page F05

Rates on 30-year mortgages fell to a record low for the third straight week, and borrowers took advantage of the drop, translating to high numbers of new applications.

With the Federal Reserve on the verge of pouring hundreds of billions of dollars into the devastated U.S. housing market, mortgage rates have plunged to their lowest level since Freddie Mac started tracking the data, in April 1971.

Low rates are a great opportunity for refinancers with solid credit and plenty of equity. But those in danger of foreclosure are still sidelined, and defaults are expected to keep rising.

Freddie Mac reported Wednesday that the average rate on 30-year, fixed-rate mortgages dropped to 5.1 percent this week from the previous record low, 5.14 percent, set last week.

It was the ninth straight weekly drop. Thirty-year rates have plunged by about 1.4 percentage points since late October, according to Freddie Mac's data. For a borrower taking out a $200,000 loan, that means a savings of more than $170 in monthly payments, according to Frank E. Nothaft, the McLean mortgage finance company's chief economist.

Meanwhile, mortgage applications last week remained at the highest level in more than five years, the Mortgage Bankers Association said.

The trade group's weekly application index was essentially unchanged for the week ended Dec. 26. Applications surged earlier this month to the highest level since July 2003, when refinancing activity boomed at the peak of the housing market. More than 80 percent of applications came from borrowers looking to refinance at more affordable rates, the trade group said.

Interest rates have plunged since the Federal Reserve pledged last month to buy up mortgage-backed securities in an effort to bolster the long-suffering housing market.

Starting this month, The Fed will buy up to $500 billion in securities guaranteed by the government-controlled home-loan giants Fannie Mae and Freddie Mac and of Ginnie Mae, a federal agency.

"It's a huge number," said Derek Chen, an analyst at Barclays Capital, who noted that mortgage rates are still high when compared with yields on long-term Treasury debt.

With the Fed and the Treasury Department buying up a significant portion of the new mortgage securities issued by Fannie Mae and Freddie Mac next year, that gap, or spread, could narrow.

If that happens, mortgage rates could fall further, possibly as low as 4.5 percent, Chen said.

The average rate on a 15-year, fixed-rate mortgage, a popular refinancing tool, dropped to 4.83 percent this week, the lowest level since March 2004. That rate was 4.91 percent last week, Freddie Mac said.

Rates on five-year, adjustable-rate mortgages rose to 5.57 percent from 5.49 percent. Rates on one-year adjustable mortgages fell to 4.85 percent from 4.95 percent.

The rates do not include add-on fees known as points. The nationwide average fee for 30-year, 15-year and five-year mortgages was 0.7 point last week, compared with 0.5 point for one-year adjustable mortgages.

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Friday, January 2

Grabbing A Loan Lifeline In Sea of Choices

by Estridge Group on Fri 02 Jan 2009 01:36 PM EST

Charting Your Course

Saturday, December 27, 2008; F01

Since the housing market began to collapse, federal officials and the mortgage industry have launched several programs aimed at keeping homeowners in their homes. Here are highlights of some of the most high-profile programs.

HUD: Hope for Homeowners

What it does: Helps troubled homeowners refinance with 30- or 40-year government-backed mortgages. Borrower must have made at least six mortgage payments to qualify, and the loan also must have originated before Jan. 1, 2008, and must not surpass $550,440. Borrowers pay hefty fees and high interest rates to participate and must split any increased value with the federal government when the home is sold. Owner-occupied. Current and delinquent borrowers. Principal reduction.

Good option for: Homeowners whose home values have fallen below their loan amount. The program requires lenders to reduce the loan amount by at least 3.5 percent below the home's value in a principal-forgiveness program.

Contact: The company that collects your payments; for more information, see http://www.fha.gov.

Results: The program launched in October but was revamped last month after running into problems. As of earlier this month, Hope for Homeowners has attracted 312 applications.

HUD: FHASecure

What it does: Homeowners with adjustable-rate mortgages can refinance with new 30-year, fixed mortgages. Originally, FHASecure required borrowers to be delinquent because of an interest rate reset to qualify, but it is now more flexible. The program requires a 3 percent down payment paid for either by the borrower or the lender. Owner-occupied. Current and delinquent borrowers. Principal reduction or forbearance permitted but not required of lender.

Good option for: Borrowers with adjustable-rate mortgages.

Contact: The company that collects your payments; for more information, see http://www.fha.gov.

Results: Since the program was launched in September 2007, more than 473,000 borrowers' loans have been modified into new mortgages. The program expires Dec. 31.

FHFA: Streamlined Modification Program

What it does: With backing from the Federal Housing Finance Agency, borrowers with mortgages owned or guaranteed by Fannie Mae and Freddie Mac and who are 90 days or more delinquent will be eligible for a new loan with a payment that does not exceed 38 percent of their gross monthly income. Loan must have been originated before Jan. 1, 2008. Does not include current borrowers. Owner-occupied. Includes principal forbearance but not forgiveness.

Best option for: Seriously delinquent homeowners.

Contact: The company that collects your payments.

Results: The program launched Dec. 15. The FHFA would like to see the number of modifications Fannie Mae and Freddie Mac complete next year increase by 25 percent, or by about 15,000, to 75,000.

IndyMac

What it does: Delinquent borrowers with IndyMac loans can be refinanced into new mortgages with payments that do not exceed 38 percent of gross income. Includes principal forbearance but not forgiveness. Owner-occupied. Does not include current borrowers.

Best for: IndyMac customers already 60 days delinquent on their loan.

Contact: http://www.indymac.com; 877-908-4357

Results: Since the effort was launched in September, the FDIC program has modified more than 8,500 loans and 9,500 more are in the pipeline. But the program has run into problems reaching some homeowners and has found that some borrowers did not make enough to qualify for a better loan.

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Tuesday, December 23

Home sales, prices in deep plunge

by Estridge Group on Tue 23 Dec 2008 02:39 PM EST

Home sales, prices in deep plunge

Realtors: Sales of existing homes fall 8.6% - much worse than expected - as median prices suffer worst decline since Depression.

By Les Christie, CNNMoney.com staff writer

Last Updated: December 23, 2008: 11:07 AM ET

NEW YORK (CNNMoney.com) -- The number of existing homes sold during November plummeted 8.6% as prices plunged by record amounts, according to a closely watched housing industry report issued Tuesday.

The National Association of Realtors said that home sales dropped to an annualized rate of 4.49 million units. That was down from 4.98 in October and much less than the 4.93 million units projected by a consensus of industry analysts as reported by Briefing.com.

"The only region where we're seeing more sales are where bargain hunters are taking advantage of distressed sale prices," said Lawrence Yun, the Realtors' chief economist. "About 45% of transactions, nationally, were of distressed properties."

Yun blamed the financial market turmoil for the devastating report. For months, sales had hovered 4.9 million to 5.1 million.

"Today's figure reflects the stock market crash that began in October," he said.

The drop took place despite bargain prices as property values continued their decline. The median existing home sold for $181,300 in November, down 13.2% from a year ago when the median was $208,800.

Yun said that price drop was the largest the Realtors had ever recorded and probably the worst decline since the Great Depression.

Meanwhile, the glut of homes unsold expanded to 4.2 million in November. That represents 11.2 months of supply, at the current rate of sales, up from 10.2 months in October. Bloated inventories have barely budged over the past 12 months; last November there were 4.27 million existing homes on the market.

"At the risk of sounding like a broken record, November was another tough month for the housing market," said Mike Larson, a real estate analyst with Weiss Research. "It's not surprising considering what happened to credit markets this fall."

Existing home sales are now the weakest they have been since July 1997, and price drops have wiped out all the previous gains back to February 2004, Larson said.

Sales of new homes fared little better. They totaled 407,000 in November, according to estimates released jointly Tuesday by the U.S. Census Bureau and the Department of Housing and Urban Development. That was down 2.9% from 419,000 sold in October and 3.1% below Briefing.com's projection of 420,000.

New home sales have dropped 35.3% from last November, when an estimated 629,000 were sold.

The median sale price of new homes sold in November was $220,400, a slight increase of 0.9% from $218,400 in October.

First Published: December 23, 2008: 10:28 AM ET

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Wednesday, December 17

6 Things You Should Know About the Fed Rate Cut

by Estridge Group on Wed 17 Dec 2008 11:17 AM EST

6 Things to Know About the Fed Rate Cut

U.S.News & World Report
Tuesday December 16, 3:32 pm ET

The Federal Reserve on Tuesday cut its federal funds target rate by more than three-quarters of a percentage point to a range of between 0 and .25 percent. The decision signals that Fed Chief Ben Bernanke is more concerned with the rapidly deteriorating economy--which has been mired in a recession since December of last year--that the prospect of stoking inflation. "Since the Committee's last meeting, labor market conditions have deteriorated, and the available data indicate that consumer spending, business investment, and industrial production have declined," the rate-setting Federal Open Market Committee said in its statement. "Financial markets remain quite strained and credit conditions tight."

Here's how the Fed's actions affect you:

1. Fixed mortgage rates: Today's rate cut will have little if any impact on 30-year fixed mortgage rates, which are determined by factors that operate largely outside of the Federal Open Market Committee's reach, says Keith Gumbinger of HSH Associates. "Any change in the rate has little to do with long-term mortgage rates," he says. But in its statement the Fed said it could expand a recently announced program to buy up debt and mortgage-backed securities from Fannie Mae and Freddie Mac that has already driven mortgage rates down to a very attractive 5.28 percent, according to HSH Associates. It also reiterated that it was looking at the possibility of buying long-term Treasury bonds. Both of these announcements could work to bring rates even lower.

2. Prime rate loans: The real impact of today's cut will be felt by consumers with loans that are tied to the prime rate, a benchmark rate that typically moves in lock step with the federal funds rate. "The only place where you would see a concrete impact at the consumer level would be things that are directly tied to prime," says Mike Larson, a real estate analyst at Weiss Research. Many home-equity lines of credit and certain credit cards with variable interest rates are tied to prime rate. As such, borrowers with these loans could see their interest rates decline.

3. Home-equity savings: Home-equity loans averaged 5.5 percent in October but dropped to 5.26 percent in November following the Fed's half-point cut. Gumbinger says he expects average rates on home-equity lines of credit to experience similar declines this time around--but not everyone will be able to take advantage of them. That's because many of the interest rates on these loans are already at their minimums, and are contractually prohibited to go any lower. So check the terms of your home-equity loan to see if you are eligible to cash in on the decline.

4. Target vs. effective: When credit markets are functioning normally, Fed rate cuts reduce banks' cost of funding, which allows them to widen profit margins and pass along savings to consumers in the form of lower interest rates. But today's credit conditions have changed all that. Although the Fed's target rate stood at 1 percent before today's cut, such funds were actually being traded in the market at much less than that--just 0.18 percent as of yesterday before the Fed's action. Although the Fed can usually control the effective rate by buying and selling government securities, the credit crisis has eroded its ability to do so. "Any juice that you would get from a funds rate cut in a normally functioning market, you're not really going to get that here," Larson says. "It's not going to lower the banking industry's cost of funds, because the banking industry's cost of funds is already below the target rate anyway." That means that interest rates tied to the federal funds rate won't decline as much as they otherwise would have.

5. Now what? Nariman Behravesh, chief economist at IHS Global Insight, expects rates to go all the way to zero in a matter of weeks. "The Fed has already cut the federal funds rate to 1 percent and is likely to take it all the way to zero by the end of January," Behravesh said in a recent report, issued before today's announcement. "Once the overnight rate is at zero, the Fed may have to engage in 'quantitative easing' [direct purchases of long-term Treasuries]." Even if it doesn't bring rates all the way to zero, the Fed signaled Tuesday that it's not about to push rates higher anytime soon. "The Committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time," the Fed said in the statement.

6. Expect more unexpectedness. With only less than a quarter of a percentage point left to cut, look for the Fed to get even more creative in its efforts to revive the financial markets. New programs to support different corners of the credit market could certainly be introduced in 2009. "The Federal Reserve will continue to consider ways of using its balance sheet to further support credit markets and economic activity," the Fed said in the statement.

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Wednesday, December 10

Plug Your Home's Costly Leaks Before Winter

by Estridge Group on Wed 10 Dec 2008 02:43 PM EST

Plug Your Home's Costly Leaks Before Winter

Pinpoint problems with an energy audit and save big bucks.

By Pat Mertz Esswein, Associate Editor

From Kiplinger's Personal Finance magazine, November 2008

About one-third of the $2,000 that a typical U.S. household spends each year on energy goes toward heating and cooling the great outdoors. And as the price of fuel climbs, that wasted energy takes a bigger bite of your budget.

This winter, the Department of Energy forecasts, the cost of natural gas will increase by some 18% compared with last year, and residential heating oil (most commonly used in the Northeast) will rise by 23%. Electricity rates will rise 10%.

One easy way to keep utility bills in check is to do a home-energy audit. Although an audit's scope depends on the age, size and design of the house, a typical audit takes three to four hours and costs $250 to $600. The resulting report can serve as a road map to improve your home's energy efficiency and comfort.

Getting personal. My husband and I ordered an energy audit for our northern Virginia house last summer. We hired Bill Gray, of Gaithersburg, Md., an energy auditor certified by Maryland's Home Performance With Energy Star program.

Gray arrived with his black bags of tools and diagnostic equipment in the company of Glenn Dickey, technical-services director of the Maryland program. The duo then inspected our house like Holmes and Watson. For the next three hours, they peered inside and out, basement to attic. They measured our home's volume, poked their flashlights into voids, and ran tests designed to measure the efficiency of our furnace and the leakiness of our home's exterior.

The "blower-door test" provided a big clue to the results of our audit. Gray covered our front-door opening with a ripstop nylon cover, into which he inserted a large fan that depressurized the house. As I stood in the basement stairwell, I felt a door-slamming breeze rush upstairs as air was sucked into the basement through gaps in our home's exterior.

Later, on the second floor, Gray held up a thermographic scanner, which translates heat and cold into color images -- from blue to black for cold, and from yellow, orange and red to white for heat. It was a hot August day, and I could see white halos around our canister lights and the attic hatch from 95-degree air infiltrating from the attic.

When we reviewed the results, we learned that, among other things, the air flow in our house was twice what was necessary for healthful living -- the equivalent of leaving a window half-open all the time.

The fix list. The top three items on our punch list, as with most audits, are to seal the house's exterior, plug the ductwork and add insulation. Gray recommended that in the basement we seal the gap between the top of the foundation wall and the framing above it with inexpensive foam insulation (such as Great Stuff Insulating Foam, $5 for a 12-ounce can), and add fiberglass insulation to the band board (or rim joist) to which the floor joists are attached.

In the attic, he found unsealed joints in the ductwork and gaps between the drywall and framing at the tops of our second-story walls -- both common problems and a likely source of dust in our house. The solution? Several hours in the attic with a $20 bucket of duct mastic, a special sealant, and more foam insulation to seal the tops of the walls.

We also need a new attic hatch ($200) to keep hot and cold air out of our living space. Or we could upgrade our current hatch for about $35 (visit www.ehow.com and search for "attic hatch"). And we need to seal the gaps where utility hoses and lines penetrate our home's exterior (cost: $3 for a 1-pound block of Duct Seal from an electrical supplier). Thermal shades for basement windows are about $100 apiece, and replacing a leaky cellar window with an Andersen window with a low-E coating would cost $103, if we do the work ourselves. New weatherstripping around our doors will run about $50. (I'm not sure how to keep the cats from destroying it this time.)

Other items on our to-do list include a furnace tune-up, at a cost of $80. Turns out the combustion efficiency of ours is less than the rated 93%. And we're losing heat from our hot-water heater. A blanket and top cost about $25; preformed foam pipe-insulation sleeves are $3. Or better yet, because the water heater is 11 years old, we should replace it with a higher-efficiency model. A GE 50-gallon natural-gas water heater costs about $800. Beginning in January 2009, you'll find Energy StarÐlabeled gas, solar and heat-pump water heaters (about $1,000 to $2,000 installed, excluding solar).

Finally, unplugging the nearly empty refrigerator in the basement will trim about $70 a year off our electric bill.

What will it cost? We're lucky, because we made the really expensive fixes -- such as replacing the heating and cooling system and windows -- when we renovated. And we're handy, so we can do most of the work.

What it will cost you depends on your house and region, says Chandler von Schrader, an Energy Star program analyst. For example, in New York, where the state's Home Performance program has closed nearly 20,000 cases, the average job has been about $8,000; in Austin, Tex., it's been about $4,500 to $5,000; and in California, where the program is just now kicking in, up to $20,000. Those are big numbers, but you needn't do everything at once, and you'll probably get the biggest bang for your buck with the least-expensive improvements.

You may be able to offset the cost with incentives from your state or your utility provider -- typically a rebate or exemption from state sales tax on the purchase of Energy Star appliances. Under New Jersey's Home Performance program, the more fixes you make, the bigger the incentive -- usually a low-interest loan and cash back combined, to a maximum of 50% of the job cost or $5,000, whichever is less.

Incentives are listed on the Web site of your utility company, your state's Home Performance With Energy Star program and your state energy office (at www.naseo.org, click on "member center"). Or check North Carolina State University's database (www.dsireusa.org). Note that federal incentives expired at the end of 2007.

Finding an auditor. Before you call an auditor, try Energy Star's Home Energy Yardstick (www.energystar.gov). Plug in your zip code and some of your utility history (check a recent bill for monthly usage over the past year), and you'll find out how your energy use compares with your neighbors'.

On the Energy Star Web site (and probably on your local utility's site), you can try a free online audit and find information and advice on saving energy.

For a rigorous evaluation, you'll need an on-site visit. Energy auditors typically come to the job with experience in home inspection, as Bill Gray did, or in heating and cooling and other building trades.

The Maryland Home Performance With Energy Star program that subsidized Gray's training and certified him is one of 26 such programs; most are co-sponsored by a utility or state energy office (to find one, visit www.energystar.gov and click on 'home improvement' and 'home energy audits').

Home Performance auditors have a vested interest in their clients making the fixes because their continued accreditation depends on it.

Or you can try the Residential Energy Services Network (Resnet), which primarily audits and rates new homes for Energy Star certification. At www.natresnet.org, click on "consumer information" and "find a certified rater").

With the slowdown in the housing market, Resnet auditors have begun auditing existing homes. Contractors who do audits and propose to do the fixes raise the question of conflict of interest. Home Performance and Resnet auditors must disclose that. Your best protection is to seek multiple bids for the work.

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Friday, November 21

CONGRATULATIONS MELINDA!

by Estridge Group on Fri 21 Nov 2008 03:43 PM EST

Long and Foster Real Estate recently celebrated Melinda's $1 billion dollars in home sales! Congratulations Melinda! Here's to a billion more!

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Wednesday, November 19

The Sky is NOT Falling!

by Estridge Group on Wed 19 Nov 2008 03:40 PM EST

The Sky is Not Falling!!

Stop believing the newspapers!! Don’t focus on morning shows with unsettling news!! It’s depressing! The Market is cyclical…but it’s not that bad. We’ve dealt with it successfully many times over the years. The Estridge Group’s experience, approach to business & success is critical to you in slower markets when you really need to sell.

In spite of the negative press, conditions for buying are quite favorable. Interest rates are still low, employment continues to be stable in the D.C. area and homes are priced favorably in most price ranges. Our approach is to recognize the realities, build on the many positives and work hard to sell homes. It works!

Our Marketing Plan, which includes our Comprehensive Internet Marketing Strategy and state of the art search property website www.montgomerycountymultiplelistings.com, gives maximum exposure for each client’s home so that many more qualified buyers find the home easily and see it in the most attractive manner possible. Try the website yourself!

89% of home buyers start their search on the Internet and with our unique Internet marketing, those buyers will find your home first!

We have sold over 65 properties in 2008 in an average of 38 days for 99% of the asking price!

Experience & Success Count Now More Than Ever!
Call 301.215.6837 or email melinda@theestridgegroup.com

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Wednesday, November 12

Change You Won't See

by Estridge Group on Wed 12 Nov 2008 08:07 AM EST

Change You Won't See

Elections Don't Do Much to Local Home Market

By Maryann Haggerty

Washington Post Staff Writer
Saturday, November 8, 2008; Page F01

A new president, new administration, new political appointees -- all that has to have an effect on the Washington area real estate market, right?

"Not much," said John McClain, a senior fellow at the Center for Regional Analysis at George Mason University, which dissects local economic statistics.

"We've never been able to pick up a change in administration at the metropolitan scale."

It's a matter of numbers. The population of the Washington area is about 5 million, with about 3 million jobs.

For perspective: The government-published "plum book," a listing of legislative and executive branch positions outside the civil service, contained about 7,000 jobs in both its 2000 and 2004 editions. Those include an estimated 3,300 presidential appointees.

Not all those people will work in the Washington area. And of those who do, not all will be newcomers -- for instance, John D. Podesta, one of the team that will oversee the transition, is a former Clinton White House staffer who has held jobs here for three decades, most recently at a D.C. think tank.

They're not even a large slice of the federal labor force -- there are 345,000 federal workers in the region, McClain pointed out.

But what about closer in? In what most people would consider the inside-the-Beltway areas -- the District; Montgomery and Prince George's counties in Maryland; Arlington and Fairfax counties, plus the cities of Alexandria, Fairfax and Falls Church in Virginia -- the population last year was 3.74 million.

The last administration changeover followed the election of George W. Bush in 2000. Home sales in the close-in area rose 7 percent in 2001, to 62,266, from 58,106 in 2000, according to Metropolitan Regional Information Systems, the region's multiple listing service. (That number isn't comprehensive -- it doesn't count sales outside the system -- but it shows the trend.)

However, sales also rose 6 percent the following year, and 7 percent the year after that as the housing boom picked up speed.

In the 2006 election, control of Congress passed from the Republicans to the Democrats. Again, broader trends muffled any effect on the local market. Home sales in 2007 fell 21 percent from 2006 as the boom busted.

It may be possible to see effects in some neighborhoods, said Dan Fulton, president of Fulton Research and Consulting in Fairfax. That might, he speculated, include parts of Alexandria or the District, "especially the rental market," and such emerging neighborhoods as the area around Nationals Park and the cluster of new high-rise buildings in the NoMa neighborhood on the edge of downtown.

On balance, though, he said, "I think you'll probably see a minimal effect."

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Saturday, November 8

In Times Like This, Only the Freshest Comps Will Do

by Estridge Group on Sat 08 Nov 2008 02:24 PM EST

In Times Like This, Only the Freshest Comps Will Do

By Kenneth R. Harney

Saturday, November 8, 2008; Page F01

How fresh are your "comps," the comparable sales of properties used as benchmarks in home real estate appraisals? Buyers and sellers rarely had to be concerned about such a question -- or even understand it -- when values were on the upswing.

But in soft and declining markets, lenders are making comps a big deal. Some sellers are forced to renegotiate lower prices with buyers, even after they have a signed contract.

Rather than accepting sales of similar properties that closed as much as six to 12 months ago, lenders and mortgage investors are demanding that appraisers include only the freshest comps, ideally those closed within the previous 90 days, to support their valuations.

They're also pushing for more extensive data on local listings, pending sales and listing-price-to-selling-price ratios before they agree to fund a mortgage.

As a result, growing numbers of sales transactions are being complicated, even knocked off track, as buyers demand that sellers lower agreed-upon contract prices to reflect the lower loan amounts lenders are offering.

"Appraisals have become a real hassle," said Steve Stamets, a loan officer with 20 years of experience at Nationwide Home Mortgage in Rockville. "Some sellers are taking a beating," he said, citing a recent transaction where the appraisal came in thousands of dollars below the signed contract price. Had the seller not agreed to eat the difference -- take a lower price than the buyer had agreed to in the contract -- "the whole deal could have fallen through," Stamets said.

Major lenders and investors such as Fannie Mae and Freddie Mac are "beating down on the appraisal" by demanding 90-day comps or fresher, he said.

In Richmond, appraiser Perry Turner of P.E. Turner & Co. said his firm has seen numerous cases where using newly mandated 90-day or more recent comps, as opposed to those six months or older, has contributed to valuations lower than the price on the sales contract.

"In 95 percent of those cases," he said, "the [listing and selling] agents have gotten together and renegotiated the contract" rather than lose the deal.

In Woodland Hills, Calif., appraiser Kerry Leiman, owner of Leiman Appraisal, defends the tougher standards as producing valuations that are much more finely tuned to short-term changes in local prices.

"Shorter is far better," Leiman said, even if sometimes there are not enough comparable closed sales that fit the lender's tighter time requirements. In those instances, he said, appraisers can look to current listings and use time adjustments based on local market pricing trend data to come up with appropriate estimates.

Turner said that when there are not enough 90-day comparables, he can sometimes persuade real estate agents to disclose in confidence the prices on pending sales, which otherwise are not reported or listed until closing. Pushed by lenders for the freshest possible data on properties, Turner also can tap into the local multiple listing service and statistically derive adjustment indexes for small geographic areas based on the percentage difference between original asking prices and selling prices.

That, in turn, allows him to adjust estimated prices for current listings that are comparable to the property he's appraising. If the listing is for $400,000 and the index suggests that houses in the area are selling for an average of 4 percent below the original list or asking price, the appraiser can estimate the probable value of the unsold comparable house at $16,000 less, or $384,000.

Tim McCarthy, an appraiser in Tinley Park, Ill., agrees that requirements for fresher comps generally improve valuation accuracy for lenders' purposes, but pointed out that they are not foolproof. To the extent that appraisers have to focus on listing-price-to-selling-price and time-on-market indexes, they may miss some of the games that sellers and agents can play, he said.

For example, McCarthy said, a seller with a current listing at an unreasonable price that hasn't sold for months might pull the house off the market, then come back with it as a "new" listing with the same excessive price. As long as the listing date is at least three months from the date the house was pulled off the market, the listing will be counted as new under some multiple listing service rules, and the high asking price may get factored into new appraisals.

In that case, the whole push for fresh data "just totally misses the mark," McCarthy said.

Kenneth R. Harney's e-mail address isKenHarney@earthlink.net.

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Wednesday, October 22

Why Buy Now...?

by Estridge Group on Wed 22 Oct 2008 02:52 PM EDT

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Thursday, October 9

Deed the House to Your Child or Put It in Your Will? First, Do Your Homework.

by Estridge Group on Thu 09 Oct 2008 04:39 PM EDT

By Benny L. Kass

Saturday, October 11, 2008; Page F03

Q. Is it a good idea to deed our house to one of our children, or would it be better to just put these instructions in our wills? What is the downside to doing this?

A. There may be serious tax consequences if you transfer your property to your children while you are living. You might not be doing them a favor.

Let's take this example: You bought a house many years ago for $75,000. It is now worth $500,000. You have added $25,000 of improvements. Your basis for tax purposes is $100,000.

You want to be nice to your daughter and decide to give her the house. Because the basis of the person giving a gift becomes the tax basis of the recipient, your daughter is now the proud owner of a house with your low tax basis.

You downsize to a smaller property and move out.

Now, your daughter has several choices. She could immediately sell the house, for $500,000. She pays a real estate commission and other closing costs of $30,000. For tax purposes, because her tax basis is only $100,000, she would make a profit of $370,000 ($500,000 minus $30,000 minus $100,000).

If property is held for less than one year before it is sold, the seller cannot claim capital gains treatment. Instead, the profit is taxed as ordinary income. If, for example, your daughter is in a 30 percent tax bracket, she would have to pay as much as $111,000 in federal income tax. However, because she received a gift from you, the time in which you owned the property is added to her holding period. Assuming that you have owned the property for more than one year, your daughter would be taxed at 15 percent, which is the current rate for capital gains. Even so, she would still have to pay the IRS $55,500, plus any applicable state and local tax.

She could instead decide to move in and make the house her principal residence. If she owns and lives in the property for two out of the five years before it is sold, she can exclude up to $250,000 of any profit (or up to $500,000 if she is married and files a joint tax return). Again, that profit is calculated using your low tax basis. While we all hope that property values will appreciate in the years to come, even if she gets only $500,000 for the house, she might still have to pay some tax on her gain, especially if she is not married. And clearly, if she sells the house and makes a profit of more than $500,000, she would owe money to the IRS.

If your daughter decides not to move in, she could consider a Section 1031 exchange, also known as a Starker or like-kind exchange. This is a way to defer taxes on profit from the sale of investment property. Once again, there is a big risk. To have a successful exchange, the property being exchanged (called the "relinquished" property) must have been held for investment. If she immediately put the property on the market after taking title from you, the IRS would take the position that the house was not "held" for investment and would reject the exchange transaction.

Finally, your daughter could rent out the house and become a landlord. Under this scenario, while she could later do a Starker exchange, she would have lost the opportunity to claim the up-to-$500,000 gain exclusion.

Now, let's change the facts. You decide to leave the property to your daughter after you die. Your daughter would be able to take advantage of what is known as the "stepped-up basis." In simple terms, this means that the value of the property on the date of your death becomes the basis for the person who inherits the house.

So if the house is appraised at $500,000 at the time of your death, your daughter could sell it for that price and pay no capital gains tax. If she sold it for more than the valuation at death, she would have to pay some tax on that profit.

To take advantage of this stepped-up basis, you have to receive the property by "bequest, devise or inheritance." That's legal language meaning that you inherited the property when the previous owner died.

The answer to your question is not easy. Much depends on your daughter's plans. If she wants to live in the house and you are definitely planning on moving out, then it might be a good idea to give her the house.

But there are other options. Talk with your tax and financial advisers about selling her the house and taking back a mortgage. She would make monthly payments to you. If she cannot afford those payments, you have the right to give her (completely tax-free for both of you) up to $12,000 a year. This gift would help to reduce the value of your estate while at the same time assisting your daughter with the mortgage payments. She can even offset $1,000 a month to reduce her mortgage obligations to you.

There is one catch to all of this. Unless Congress changes the law, as of Jan. 1, 2010, the stepped-up-basis rules will no longer be in effect. Instead, Congress has replaced them with a modified carryover basis. This means that if you die after the target date, your daughter's tax basis would be the lower of your adjusted tax basis (which in our example was $100,000) or the fair market value on the date of your death.

The bottom line: Should you die after Jan. 1, 2010, your daughter's basis would be the same as yours, $100,000. As that time approaches, you might as well consider giving her the house or selling it to her.

There is one additional issue you should consider. Make sure all your children understand your rationale for wanting to give the house to just one of them. You don't want your other children angry at you or each other, now or after your death.

For more information, go to the IRS Web site ( http://www.irs.gov) and click on "Publications" to get Publication 523, "Selling Your Home."

Benny L. Kass is a Washington lawyer. For a free copy of the booklet "A Guide to Settlement on Your New Home," send a self-addressed stamped envelope to Benny L. Kass, 1050 17th St. NW, Suite 1100, Washington, D.C. 20036. Readers may also send questions to him at that address or contact him through his Web site, www.kmklawyers.com.

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Thursday, October 2

Bethesda Artist Market

by Estridge Group on Thu 02 Oct 2008 10:03 AM EDT

September, Oct. 11, 10am-5pm The Bethesda Artist Market will feature fine art and craft for sale by 25 local artists including painting, photography, jewelry, wood, glass and mixed media. Live entertainment will be featured throughout the day. Artist markets are held in the Bethesda Place Plaza, located in the elevated plaza at the corner of Old Georgetown Road and Woodmont Avenue.

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Wednesday, October 1

Taste of Bethesda

by Estridge Group on Wed 01 Oct 2008 09:56 AM EDT

Saturday, Oct. 4 from 11am-4pmThe 19th annual Taste of Bethesda returns on Saturday, Oct. 4th from 11am-4pm. Bethesda's famous food and music festival brings 50 restaurants and four stages of entertainment to Bethesda's Woodmont Triangle.

Admission is free. Taste tickets will be sold on-site in bundles of four tickets for $5. The event is located along Norfolk, Fairmont, St. Elmo, Cordell, Del Ray Avenues in Bethesda's Woodmont Triangle. Free parking is available in downtown Bethesda's public parking garages and lots.

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Wednesday, September 24

The Estridge Group's Annual Client Party

by Estridge Group on Wed 24 Sep 2008 11:59 AM EDT

To all of our good clients and friends – our annual Client Party is scheduled for Wednesday, October 8^th from 7-10 pm and we need your response! In case for any reason you didn’t see our invitation, this year we have again reserved the AFI silver Theatre at 8633 Colesville Road, Silver Spring, MD 20910. We have arranged to show “How to Murder Your Wife” a hilarious farce starring legendary funnyman Jack Lemmon and Virna Lisi. Of course the Beer, Wine and Popcorn will be provided as well.

We truly hope to see you there so give us a call or email us back, SEE YOU AT THE MOVIES!

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