Category Archives: Real Estate Market

LuxManor Real Estate

Wet Basements, Downspouts and Grading

Wet Basements, Downspouts and Grading

I recently went to a past client’s home who also happens to be a friend. He asked for my opinion regarding some improvements he was considering and about a few issues in his home. Before going to the basement, we walked around the outside and I noticed two downspouts (the vertical pipe that takes water from the gutter to the ground) that were not connecting well to their downspout extenders.

I recommend ensuring that the water expelled from the downspout extender is at least 10 feet from the home. While his system was designed well, the downspout had become detached from the downspout extender *photos below*. This resulted in water against the foundation wall and erosion of the soil creating negative grading. When we went downstairs, we found issues at exactly the two points that looked like they could be an issue. Fortunately for him, we caught the issue early and his fix will be very inexpensive.

Some situations absolutely require installing a sump pump and/or a french drain. That being said, I’ve found many instances where having the proper grading and downspout extenders is all the fix the home needs. You won’t hear this from many wet basement company sales associates who make enormous sums of money needlessly installing a french drain system and installing a sump pump.


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LuxManor Real Estate

Do High or Low Condo/Coop/HOA Fees Affect a Property’s Value?

Of course they do! When a buyer evaluates a property, he must factor in the monthly costs of owning a property beyond the monthly mortgage payment. Before a lender will approve a loan, the monthly fees are calculated into the debt ratio to ensure that the buyer will qualify. Even an investor paying cash for a home will look at the monthly fees to calculate his/her Return on Investment as compared to a different property.

I own 2 condos that have been wonderful investments. I have 2 others that are in a community where, when I bought, the prices were low and the fees were reasonable. Within a few years, the fees had increased substantially. The increased condo fees were a result of mismanagement and poor long term decision making by the property management company. Property values stagnated and eventually came down. I convinced the president of the condo association to go with a different property management company and thanks to their better management, the fees have leveled off and have since come back down to a reasonable amount. Property values have begun to rise again and the owners are doing much better.

There are communities where the monthly dues are higher than the mortgage of the home (especially with today’s low interest rates). Sellers must factor this in as well as any upcoming increase in the fees or a special assessment when pricing a home.

Well managed condos with solid reserves and low fees can price their homes higher than comparable listings with higher fees, all things considered.

What is the bottom line? Although there may be a lot of unit owners and the board makes the decisions about the community, everyone has a stake in making sure that sound decisions are made and there is good value for every dollar spent. Your property’s value will depend on it.

LuxManor Real Estate

Which is a more time consuming and difficult process, buying a Short Sale or a Foreclosure?

Q: Which is a more time consuming and difficult process, buying a Short Sale or a Foreclosure?

A: A Short Sale is generally much more time consuming and difficult.

Q: What is the difference between a Short Sale and Foreclosure?

A: With a Short Sale, a homeowner is asking the bank (his lender) to accept less than the amount due to pay off the loan as a part of the sale of the home. With a Foreclosure, a bank or other such lender owns the property and the previous owner is not a party to the transaction.

Q: What is the difference in expected time frames?

A: Jim Roy of LuxManor Real Estate has been involved with several Short Sales. Two of them involved situations where the bank took over 24 months to give a response. After two years, both responses came back as denials and the homes went to Foreclosure. Please note that Jim Roy is a Certified Distressed Property Expert. One of the banks was later outed as actually rewarding its employees for stringing along Short Sales for as long as possible and never getting them closed. Jim has been involved with Short Sales that did close and they took about 75 days following the date of contract ratification. 45 days would be considered quick but not impossible depending on the bank.

Foreclosures can be approved in a day and close a week later.  A standard sale (neither a Short Sale nor a Foreclosure) takes about 7 to 30 days to close depending largely on the buyer’s lender or if the buyer is paying cash.

LuxManor Real Estate

How Have Home Values Changed Over the Last Ten Years?

Q: How have home values in the the DC Metro Area changed since 2005?

A: The DC Metro region is comprised of very different areas that reacted very differently to the adjustments we saw in the market. Call it a bubble, an adjustment, or a fluctuation in property values, some areas were hit harder than others.

Lower income areas saw their values appreciate quickly but were hit the hardest. They had the most NINJA (no job, no income, no assets but you can still buy a home) loans as well as other risky loans being pushed by the government and banks. The result was as follows: these areas experienced the most foreclosures and depreciation of property values. Other areas did not fluctuate as much as far as home values during this ten year span.

Q: Does it matter if I bought a condo vs. a single family detached home?

A: Yes. Between 1999 and 2005, many condos appreciated very quickly and people were rushing to get in on rapid property values. The lending market changed and banks began to foreclose on the people who took loans they could not repay. The condo owners who had not been paying their mortgages were also rarely paying their condo dues. Some condos and home owners associations (HOAs) became ineligible for certain financing due to their very high delinquency rates. This increased the number of investors which then affected their owner occupancy rates. These two factors severely exacerbated the problem for condos and HOAs and lead to more foreclosures and a further decline in values. These issues were not spread throughout all of the DC Metro Area but took their toll on certain cities and neighborhoods. LuxManor Real Estate believes the worst is long since over and that condos can make wonderful homes and investments. In fact, many condo buyers have done well over the last few years by buying and holding.

 Q: Where are home values now?

A: Some DC Metro areas have not yet returned to their peaks while others have exceeded them. This post comes from a question from an investor who bought a nice condo in a gated community in McLean, VA. Only now are we seeing the value equal to the price he paid in 2005, despite a healthy community and a new metro that opened nearby. Fortunately, he now has a lot of equity in the home and has had a great renter (yes, just one) and no vacancy all these years.

 Q: Are we likely to see another major dip in property values in the DC Metro Area in the next ten years?

A: LuxManor Real Estate does not believe so. This is based on the relatively small number of existing risky loans and therefore a low number of foreclosures is likely in the future. Banks have been very strict (perhaps too strict) for a decade as far as those eligible for financing. Provided smart decisions are made with lending standards going forward, we may never see such home value volatility again in our lifetimes.

LuxManor Real Estate

Interest Rates – September 2015

Fed Did not Move Interest Rates September 2015

Q: What does this mean?

A: The Fed (Federal Reserve Bank) has the power to increase or reduce short term interest rates in an effort to spur what they feel is a slow economy or slow down an overheated economy by making borrowing less expensive and easier. This is typically the overnight rate that banks and other depository institutions lend money to each other. Bank must keep a certain percentage of their customer’s money on reserve.

Q: Where are the rates today? 

A: .25%. They have been at this level since 2007.

Q: Will they likely raise rates in the future?

A: Many sources believe they will but they can’t increase them by much. An increase in rates will increase the government’s annual interest payments so they can’t afford to raise them too much. Hints that a raise is coming have been heard for some time.

Q: If they were to increase, would it be a rapid increase?

A: Most do not foresee a rapid increase.

Q: Does the Fed control long term rates like a mortgage?

A: The Fed has fairly direct control when it comes to short term rates but less control when it comes to long term rates like a 30 year mortgage. It is said that their actions have a domino effect and they’re the first domino in the chain.

Q: What is in store for long term mortgages?

A: Nobody knows for sure but few people predict that rates will stay where they are (near historic lows) for too much longer. A 1% increase in rates will have an impact on monthly payments and thus buying power. Interest rates are just one of many factors in home values.

Q: What if I buy now and rates go DOWN? 

A: We’re getting away from The Fed’s recent decision but the answer is you may be able to refinance, pay off the mortgage and enjoy the lower rate. There are usually closing costs involved (like lender’s title insurance) so the difference between your rate and your new rate will need to be large enough to justify a refinance. Also, you’ll need to qualify and ensure you have enough equity.

LuxManor Real Estate

Short Sales

Short Sales

Q: What is a short sale?

A: A Short sale occurs when a seller needs to sell his property  but owes more to pay off his loan than he will net when he sells the home.

Q: How is the lender involved?
A: The owner needs the lender to forgive the difference between the cost to sell the home (including the outstanding mortgage) and the sales price. There are some penalties to the seller in exchange for this “forgiveness”, particularly with the seller’s credit but it is less harmful to the seller’s credit than a foreclosure.

Q: How is this different from a foreclosure?
A: With a foreclosure, when the seller fails to make the mortgage payments, the bank will take ownership of the home through a legal process that may or may not include an eviction. With a short sale, the borrower still owns the property and gets permission to sell the home without having to pay the deficit.

Q: Does it harm the seller to sell a home through the short sale process? I don’t want to take advantage of someone like that.

A: A few years ago, I had a buyer client who did not want to even look at short sales due to a (misplaced) conviction that he did not want to take advantage of some poor seller in financial trouble. I unsuccessfully attempted to explain that the seller needs to short sale to go through to protect his credit from even more serious harm and to avoid a deficiency judgement and the taxes that come with a foreclosure. It is the seller’s choice to go through this process (in the hopes that the bank will agree to it) and buyers are actually helping in this case.

Q: Do short sales sell at a discount?
A: Generally, yes. In some cases these homes have been neglected for financial or other reasons. Many times you’ll see agents put very little into marketing because there is no guarantee the property will receive short sale approval and close. Because of these concerns, many buyers avoid these listings, which in turn decreases the value of the property and list price. Even many banks considering approving a short sale do not want short sales included in the comparables.

Q: Why would a buyer avoid such listings if they sell at a discount?
A: Some buyers do not have the time to wait for a bank’s response. An abnormally quick turn-around could take roughly 30 days to obtain an answer from the bank, but I’ve also seen cases where it took over two years to receive an answer, and even still the answer in that case was “No, we do not approve the deal.” Motivated buyers who need to move will pay more for the ability to move and make plans on their own schedules. Plus, interest rate locks are generally good for no more than 60 days which can be important to some buyers who fear a rise in rates and want to lock into today’s rate.

Q: What happens when there are two loans? 
A: Both lenders must approve the deal. Should the home go into foreclosure, the first trust will be paid all money due on that loan before the second trust lender receives any money. This is why a second trust comes with a higher rate: the second trust lender takes on more risk. This complicates things to a much higher level. Sometimes one lender will agree to the deal and give 30 days to close, but by the time the second lender gives a response, the initial time period has expired and the process gets derailed. It’s not exactly “back to square one,” but getting both lenders to agree, at the same time, can be frustrating and sometimes impossible.

LuxManor Real Estate

Real Estate Market Report

Performance Report: How the has the real estate market evolved over the past year?

Compared to one year ago (largely due to the last few months), the market has slowed down to a very noticeable degree.

Relative to August 2013, the number of listings one year later that sold is down about 7%. Days on market have increased substantially (up 16%) but the average sales price is about the same as July 2013. Values were up slightly in June 2014 from the previous month but down in both July and August. Many buyers are not motivated to give up the very low rates they locked in over the last few years and most lenders are still quite strict with their lending guidelines.

It has been reported that applications for new home purchases have decreased 9% while the average loan size increased about 1% for August 2014.

What does this mean for sellers? Proper pricing, effective marketing and the condition of your home are crucial in getting the most money and a quick sale but patience may also be needed.

What does this mean for buyers? If you can qualify for a loan and find a home that meets your needs, you will be in a better negotiating position. You can also enjoy a mortgage at historically low interest rates.

Low-E and Argon Gas Windows Explained

Most heat is lost (or comes into the property) near windows and doors. This is why most homes have their vents or radiators near an exterior wall and specifically near a window. High performance Low-E and Argon gas windows do a great job of saving you money in your heating/cooling bills by keeping heat where you want it.

Low-E, meaning low emissivity, is a very thin layer (or several layers) of metal that block longer wave lengths (heat) visible light passes through. When Argon gas is sealed between the panes of glass, it acts as an additional insulator (heat and sound) and is non-toxic should a pane break and you inhale it into your system.

Single pane windows offer very little efficiency. You can feel the cold by touching the glass inside a home on a cold day. Single pane windows can be helped if storm windows are used but the air in between is no different from the air we breathe. High performance windows are designed to cut down on heat transfer, and subsequently, your heating and cooling bills.

Bonus tip: Ensure your weather stripping is in place around exterior doors. If you can see light between the door and the frame, air is getting through, too and costing you money.

Market Update

We have had a very interesting Spring. Nationwide, home values have generally appreciated nicely over the last year. Interest rates have increased a bit but are still near historic lows. Are we heading towards a housing bubble? Experts (including Jim Roy, Owner of Luxmanor Real Estate) think not. Why? Lenders are still not willing to lend to those most likely to default. This is very different from the lending market of 2000-2005. We saw so much demand and risky speculation that, few could argue, resulted in anything less than a (temporary) collapse in home values for most of America. Ideally politicians and lenders have learned their lessons and we’ll avoid the mistakes of a decade ago.

In many areas that have seen double digit home value increases in the last year, those homes are still below their highs. The DC Metro area is up 10% for the median price and days on market have dropped 41.51% to just 31 days. The number of transactions are up as well (12.26%). These stats are for June 2013 compared to June 2012.

While many people have made some quick money buying/flipping homes, the safest way to think about Real Estate is that it’s a marathon. Anyone buying should be ready to be in it for the long run. Historically, it’s a very safe investment over long periods of time. For most of us real estate is something even more important: our home.

Heading into the Spring 2013 Real Estate Market in the DC Metro Area

As we enter the Spring 2013 Market, we see an increase in activity typical for this time of year relative to the slower winter months.

However, compared to last year at the same time, we have had a 30% decrease in average days on market and have seen properties, on average, increase in value by almost 10%. Some areas are have seen bigger increases than others and these data cover multiple counties.

The inventory on the market at this time is extremely low. A typical market is said to have a six month supply (and the spring of 2008 had an 8 month supply). At this time, we have just under 2 months. This means that if no new listings came on the market, based on current consumption, all the current listings would be sold in just under 8 weeks.

For more info/stats and assistance with how it affects your decisions, contact Luxmanor Real Estate at 301-986-9401.