Were you denied a mortgage and/or put through the ringer as a potential borrower?  The drag on the housing recovery as a result of the uncertainty and insanity of current mortgage underwriting cannot be overstated.  If the current administration wanted to do one thing to jump start the housing recovery (and by extension the US economy), it would provide clarity to the rules and regulations going forward for Fannie Mae and Freddie Mac.  Without clarity, lenders are terrified they will be forced to buy back a non-performing loan for some obscure reason.  Private mortgage-backed security investors also need clarity before they will be willing to return to a market that has shrunk by some 95% from its peak.

I frequently work with buyers who have the capacity to stroke a check for cash for the property they are attempting to purchase.  These are high net worth, high credit score individuals who should be able to obtain swift financing approval, but who instead are being subjected to overzealous scrutiny and supporting documentation requests that make them wish they had never even thought about purchasing real estate.  Why don’t they stroke a check for cash?  One of the reasons they are well off financial is because they are savvy about financial matters and understand the extraordinary value of obtaining 30 year fixed rate loan <5.0%.  In fact, for many of these buyers, availability of the mortgage money is just as important as the real estate they want to purchase.

If you know someone in Washington who can influence Fannie Mae/Freddie Mac policy (and who would love to be known as the architect of the US housing sector recovery), please tell them to take action.  We don’t need radical change to prevent another mortgage meltdown like we saw in 2007; we do need a little common sense.

More good reading: Outlook for Mortgage Market

Effective September 1, Fannie Mae and Freddie Mac are requiring all new appraisals to be subject to the new UAD format.  Government agencies certainly love using acronyms.  UAD stands for Uniform Appraisal Data which is an attempt to standardize appraisals so that the information in appraisals is more consistent across the board.

Bathrooms will be coded differently in this new format.  If the house has one full bath and one half bath, the appraisal will not show the property as having 1.5 baths. It will be listed as 1.1 baths. The number to the left of the decimal will be the number of full baths and the number to the right of the decimal will be the number of half baths.  If the house has 2 full and 2 half baths, it will be shown on the report as having 2.2 baths.

For property condition, previously property was listed as good, average, or poor.  The new condition rating will be coded as C-1 (the best) to C-6 (the worse).  I’m told that lenders will mostly like not finance properties rates C-5 and C-6 but we won’t know for sure until we have some experience with this new coding.

The type of home will be more specific on the new reports.  Old descriptions like “single story” or “two-story” will be replaced with more specific types of design like ranch, colonial, contemporary, etc.  This will make it clearer that the appraiser is comparing the subject property to comparable homes that are, well… comparable.

Appraisers will be required to report the square footage of basements whether they are finished or not.  I’m glad to see this as I think it will help with consistency across reports.

I expect there will be an adjustment period as appraisers get used to completing these new reports and bank underwriters get used to reviewing them.  I anticipate there will be some potential updates and revisions bank underwriters will require of the appraisers and this might add some extra time to get loan approved.  If your home financing requires an appraisal, it would be wise to plan on the approval process to take a little longer as everyone learns to work this this new appraisal format.

Larry Saunders

Mortgage Loan Originator

Mahone Mortgage, LLC

Office: 434-293-5200

Mobile: 434-466-5662

larrys@mindspring.com

Charlottesville Virginia real estate isn’t flying off the shelf the way it used to and neither are Albemarle County farms and estates or Wintergreen vacation and resort real estate. Many of the Albemarle homeowners with whom I work are in an enviable position of being able to hold on to their second home and/or investment property for a couple more years while waiting for the buyer’s market to shift back to a more neutral and balanced market. But is it really a good idea to postpone a sale? Their thinking, of course, is that they will make more money by holding off for a couple of years. The unfortunate reality of selling a Charlottesville home is different.

Selling Your Charlottesville, VA Home Today By the Numbers

Whether you are selling your primary Charlottesville home or Wintergreen Resort vacation property, consider this example: You own a property that your real estate agent believes will realistically fetch $500,000 in today’s repressed market. This leaves you feeling frustrated because just 24 months ago, you researched the value of your home and felt it would have sold in the $625,000 range. To make matters worse, your current Albemarle County real estate tax assessment is $565,000!! If you have the option, one of your thoughts might be to wait until the market improves. So, let’s say the Charlottesville Virginia real estate market has improved two years from now and you end up selling your home for $540,000 (about 7% more than today). In the interim two year period, let’s suppose you paid $3,000 per month on your mortgage ($72,000 over two years) and $8,196 in real estate taxes (two years worth) for a whopping $80,136 in essential carrying costs to which you may want to add utility and insurance costs. Your personal income tax environment will change the final picture, and if you are living in the property or generating rental income, that will help to. But, even factoring in those benefits, it is likely that at best, by waiting two years you will come away with the same net as if you sold the property today, and there is a good possibility that you will be worse off (lose more money later) by waiting to sell.

Compelling Reasons to Sell Your Charlottesville Real Estate Today

One more thing to consider which makes pricing right and selling your Charlottesville real estate, Albemarle County farms and estates, and Wintergreen Resort real estate today even more compelling is the time value of money. In addition to the out-of-pocket carrying costs outlined above, you also need to consider the revenue that you could generate with the net proceeds of a sale. To give you a round number example, let’s say you sold your property for $500,000, paid off the $300,000 mortgage, and invested the remaining $200,000 in a certificate of deposit for two years earning 5% interest… There’s another $20,000+ in income that you would be without had you help on to your property (assuming it was a second home or investment property).

The Bottom Line – Why Wait?

The bottom line: Waiting is very unlikely to be beneficial. You are bettor off contacting a professional Realtor® today, finding out what the market value of your Charlottesville real estate is, and getting your property on the market.

Questions/Comments?

Be the first to make a comment. If you’re not sure when is the best time to sell your Abemarle property, ask your question. We will provide you the best answer based our market experience and local real estate knowledge.

Until my next post,

Brian
Your Charlottesville Real Estate Resource