Utah Real Estate Posts

February home sales for Weber County Utah weren’t exactly steller. Lumped right in the middle of the expiration of the first tax credit (November) and the extension (April) home buyers didn’t have too much incentive to close during February.

Weber County Real Estate had just 146 residential sales during February. This is down by nearly 10% compared with February of last year. However, March and April home sales look to be especially promising.

Right now there are 468 properties in Weber County under contract. 186 properties have had accepted offers just in the last two weeks.  Most closings happen 4-6 weeks after the contract date. This means that we will be seeing large numbers of closings in Weber County next month, as people are urgent about purchasing new homes while they can still get the government tax credits and killer mortgage interest rates.

With the air getting warmer, there are also a lot of new Weber County home listings. In the last two weeks there has been 312 new home listings. In total, there are more than 2,200 homes for sale in Weber County Utah.

Home buyers are really coming out in the Weber County Real Estate market right now. They are taking action and making reasonable offers on homes for sale.

Davis County Real Estate sales for February were actually pretty slow, but April looks like it will be a huge month for home sales.

During February, just 168 residential listings in Davis County sold. This is down 6.7% compared with February home sales of 2009. The median sold price of these properties was $204,000.

In the last month more than 333 properties in Davis County have gone under contract. This is huge, as a large portion of these properties will be April Closings. There will be nearly twice as many home sales in April, as there was during February. In total, Davis County has 504 listed homes that are under contract. This increase in buyer activity can partially be attributed to the upcoming expiration of the home buyer tax credits.

The spring weather has also brought out huge number of sellers. Even with the large number of homes going under contract, the amount of total homes for sale in Davis County has actually risen over the past months. There are currently more than 2,100 listings. This is up 8% from last month.

Unlike Cache County, The number of new listings in Davis County is substantially higher than the high number of under contract homes. It will be interesting to see how many homes go off the market after the expiration of the tax credits. It will also be interesting to see what happens to summer home sales as many buyers are rushing to get their purchase in before the expiration.

This morning we were visited by America First Credit Union and an Appraiser, Brad Myers, from Myers Appraisal Group.

There is a difference between the way Realtor’s pull comparable homes, and the guidelines appraisers must use for determining appraised value of homes. Here are a few insights of the things appraisers look at in determining home values in Logan Utah.

Appraisers really work for, and are  trained by underwriters. It is the underwriter’s guidelines they must meet, so those are the standards they use in determining market value. Their job is to satisfy the underwriter, who ultimately pays them.  Real Estate Agents are looking for market value based on what buyers will consider market value.

While underwriters guidelines can be strict, sometimes they aren’t possible to meet, especially for Cache Valley Real Estate. As long as he explains different comparables, and why they were used, he can usually get away with things beyond the standard guidelines for properties that don’t have ideal comparables.

One of the big differences with how real estate agents typically determine market value, and how he determines value, is with the way basement square footage is calculated compared with main floor square footage. Basement Square footage is typically $10-15 per square feet. Main floor square footage is typically given a value of $30 – $35 square feet. Really nice homes can have appraised values of more than $45 a square foot. Each particular room is worth about $3,000 or 4,000.

For older homes, Brad doesn’t really do age adjustments for homes built between 1890-1940. He says that these type of homes are all built about the same.

Upgrades to homes don’t yield the return in value that equal the cost of the upgrades. He has a guide book that estimates values of specific home improvements, and what percentage of their cost actually improves value.

When there are good comparables of homes, the most important factors for underwriters are style, age, and square footage. He always puts two properties on it that have sold within the last three months, and then the most similar properties, the best real comparables, even if they’ve sold 8 or nine months ago. He’ll even include active listings, comparables that are for sale when there aren’t perfect comparables. This is what Realtors do too, which in the past has been one of the main differences when there hasn’t been very many homes sold over the winter.

For old beater houses in the country, similar acreage is the most important factors. For excess land in Cache Valley, the value he looks at is about $20,000 per excess acreage. In the more remote parts of Cache County $15,000 per excess acre is about the going value difference.

When homes have external obsolescence, things like busy roads, determining the reduction in value is really a guessing game. There is no way to figure out the difference of a house for sale on a busy street, vs. a quiet road. A bigger home is looking at an even bigger adjustment for thinks like busy roads or being located near a gravel pit.

Brad says that he hasn’t seen much of a drop in Cache County Real Estate Values moderate sized homes, the price drops are with the upper end homes, and vacant land values. Utah as a whole has about five to ten years worth of inventory of vacant lots.

The appraisers job is essentially to follow the underwriters guidelines in verifying value before home loans are given. When homes are in cookie cutter neighborhoods, where there are lots of similar homes sold, it is very easy for appraisals to be accurate in the market values. When homes are old, unique, and in rural areas, determining home values can be drastically different based on the different appraisers methods of determining things.

Three years ago, at the height of the Logan real estate market, a friend and me purchased two nearly identical properties in Logan.

Even though the purchase was at the height of the market, we got a really good deal on them. These properties were not properly marketed. They were listed as a multi-family home, when in fact they were actually two completely separate homes with two different TAX ID numbers. They were built at the same time, were exactly the same size mirror images of each other, and were in about the same conditions.

The value of these properties has gone down a bit from what we could have sold them for three years ago, but we are still in pretty good shape in regards to this real estate investment. However, it looks like my approach to the real estate investment will result in a far better return on investment.

We purchased the properties at the same price and with identical down payments, loans and loan terms. We both initially rented out the properties, with positive cash flow.  I was actually able to get more rent for my property than he was because I allowed pets. I wasn’t too worried about pets destroying the shag carpet. Last year when my renters moved out I made my house available as a “lease option” I quickly found renters/buyers who agreed to a lease option price that will give me a net return on investment of $18,000.

The approach to the other unit was much different. As a building contractor, his idea was to improve the 30 year old property to make it more “sellable and valuable.” So while he was between renters, he gave the home a complete makeover by added siding, central air conditioning, new tile, carpet, cabinet stain, paint,  a deck, an external door, new lighting fixtures, sinks, toilet, trees, the works. Not counting his time, he put more than $16,000 into the property. I’ll admit, this property is really nice now, and will likely sell quickly at the right price. It’s much nicer than my unit with the wood paneling and brown shag carpet.

The problem is that the cost he put in to the improvements of the property are less than the value realized. This is how most home improvement upgrades are. The cost of the upgrades is more expensive than the value added.

Now that the property is completely fixed up, and in immaculate condition, he wants to sell it rather than place renters in it who may not treat the nice upgrades so well. If he can get full asking price for the property, (and if it will appraise at the asking price) he’s looking at a net profit of about  $10,000.

Despite what you see on TLC, adding upgrades to homes doesn’t always make a property a better real estate investment.

Another thing to consider is the loss of rental income while making the improvements to the property. If the property was un-rented for three months, That could be $2,000 - $3,000 loss in rental income, which also is subtracted from the net return on investment.

Experts are saying that the United States Housing market will recover this year. Home sales will be up, new construction will be improved, and the demand for the oversupply of homes will be met. But, this is assuming that the employment situation improves. The experts are predicting a big increase in Jobs created during march, and jobs is the ultimate fuel of the housing market. Here are some of the key points from the Bloomberg Article:

• The U.S. housing market is poised to withstand the removal of government and Federal Reserve stimulus programs and rebound later in the year, contributing to annual economic growth for the first time since 2006 according to forecasts by Dean Maki, chief U.S. economist for Barclays Capital in New York.
• Sales of new homes still are forecast to increase this year as the economy improves, according to David Crowe, chief economist for the association in Washington, probably totaling 459,000 in 2010, up from 372,000 last year, he said.
• “A lot of people moved up their purchases to meet the original deadline and that used up a lot of the pool of potential buyers,” IHS Global’s Newport said.
• The credit of as much as $8,000 stimulated only 180,000 extra sales from December to April
• Foreclosures may increase to 2.2 million this year from a record 1.7 million last year, according to a forecast by Mark Zandi, chief economist for Moody’s Economy.com
• The number of vacant homes for sale rose to 2.09 million in the fourth quarter from 1.99 million in the prior period

Let's hope job growth really happens so we can be out of this recession.

Yesterday there was an article in the Herald Journal that had a pretty negative tone about the Logan Utah real estate market. It quoted me, and apparently riled up a bunch of local real estate agents. They called the local Realtor Board, and complained about the comments I said.

Personally, I didn’t think that the article was that bad. It stated the facts, and explained some of the reasoning of why home sales in January were so low. Sometimes we have to face the reality. We can’t sugar coat everything. The article came across more negatively than I would have liked, but lets face the facts. A journalists goal is to get their articles read, and striking headlines are more often read than boring sales statistic numbers.

With that said, If you price your home right, it is actually a good time to sell for several reasons. One thing to remember is that you only need to sell your house to ONE potential buyer.

1. Buyers Have Urgency - There are lots of potential buyers out there who have a sense of urgency to buy. The home buyer tax credits require that homes go under contract by the end of April. Mortgage interest rates are likely at the lowest they will ever be. Many people realize this, and want to take advantage of mortgage savings.
2. Great Time to Upgrade - There are lots of deals out there if you are looking to upgrade. The deal you get on the house you upgrade to can far exceed the loss you would take on the sell of your house. If you lose $5,000 on the sell of your house, but get $25,000 in equity on the home you purchase you have a net gain of $20,000. The low interest rates and great deals on homes for sale in Logan have personally tempted me into possibly upgrading.
3. Spring is in the Air – Spring is traditionally a huge season for looking for homes for sale in Cache Valley. New potential buyers are starting their home search every day. Remember, they are only going to be buying one house. There are also lots of buyers out there who have seen everything currently on the market that matches their criteria and are looking for something better. They know that lots of new listings are coming out each day and are waiting to find the best home possible.
4. It is NOT a Buyers Market for Starter Homes - Homes priced below $161,000 are actually selling at balanced market paces. Many have multiple offers. It is not a buyers market at all for the less expensive properties for sale in Cache County. Cache Valley home prices between $160,000 and $180,000 are also selling at almost balanced market paces.

There are many good reasons to sell right now. Another reason, especially for those really high end homes, is that home prices might keep dropping. You may be able to get more out of your home now than you will be able to next year. We just don't really know for sure.

In this video Robert discusses what closing costs are when buying a home.

When buying real estate, your closing costs are primarily associated with the fees of getting a mortgage loan. These fees include a mortgage origination fee, processing and underwriting fees, the cost of the appraisal, and the cost of title insurance for your lender.

Another thing that can be considered with the closing costs are pro-rations. Lenders require that property taxes and homeowners insurance are collected and payed by them. They require that the escrow account has some money in it at closing. This amount will vary depending on the time of the year, and whether or not the seller has already paid property taxes for that year.

You will also have a small closing fee from the Title Company you close with. In Cache Valley, this closing fee is usually around $100. If you buy a home with cash, the actual Title company closing fee may be the only fee you actually have to pay.

One thing many buyers do to reduce the closing fees they will actually have to pay is to ask the sellers to pay for their closing costs. Essentially, this just wraps the closing costs into the mortgage loan so they can be paid over an extended period of time. This is beneficial for buyers who don’t have a lot of extra cash on hand when they purchase a home.

A rule of thumb is to expect closing costs of about 3%. Of course, these costs will vary based on the lender you’re using, the amount of your down payment, and the time of year you buy.

One thing to note in the different closing costs is that there is no fee for using a real estate agent. That’s right, when buying real estate, most agents don’t charge you anything. Their commissions are paid by the sellers.

When selling real estate your primary closing cost is your Real Estate Fee. Another big fee you have to pay is for title insurance. You are required to buy a policy of title insurance for the new buyer.

There is another new Federal Government program out their designed to reduce the consequences and liability of people trying to avoid foreclosure by selling their homes as short sales, or else voluntarily giving up their homes with a Deed in Lieu of Foreclosure. This program is called the Home Affordable Foreclosure Alternatives Program. Say that five times fast.

This program will be implemented on April 5th. It is supposed to “streamline” the  short sale process, and remove the ability for banks to seek a deficiency judgement for the amounts they are actually owed from the borrowers. According to the official HMPadmin website:

The Home Affordable Foreclosure Alternatives (HAFA) Program provides additional options to avoid costly foreclosures and offers incentives to borrowers, servicers and investors who utilize a short sale or deed-in-lieu (DIL) to avoid foreclosures.

With either the HAFA short sale or DIL, the servicer may not require a cash contribution or promissory note from the borrower and must forfeit the ability to pursue a deficiency judgment against the borrower.

HAFA simplifies and streamlines the short sale and DIL process by providing a standard process flow, minimum performance timeframes and standard documentation.

More details are available at this the official site: HMPadmin: Foreclosure Alternatives.

In some ways I like the sounds of this program. As a real estate professional, anything to reduce short sales would be awesome, and would be especially beneficial to buyers. There are currently a lot of homes for sale in Utah that need short sale approval. It is also good for sellers in financial distress, and can help many of these to avoid actually having a foreclosure.

However, I don't like the fact that government is telling people that they can get a free ride. That they are no longer responsible for the debt they willingly took on.