Upfront mortgage insurance premiums (typically financed) has been increased to 1.75% of the base loan amount.

Annual mortgage insurance for FHA loans with terms greater than 15 years (30 year fixed and adjustable rates) are now 1.2% of the base loan amount if your loan to value is 95% or lower; if  your loan to value is greater than 95%, the annual mortgage insurance premium is 1.25% of the base loan amount.

For a 15 year fixed rate FHA mortgage, if your loan to value is 90% to 78.01%, the annual mortgage insurance premium is 0.35% of the base loan amount; loan to values over 90% will have annual mortgage insurance rates of 0.60%.   NOTE:  If you have a 15 year fixed FHA mortgage and your loan to value is 78% or lower, there is no annual mortgage insurance required.

If you have what’s considered an FHA “high balance” mortgage, which in the Seattle area, would be a base loan amount of $417,001 to $567,500 for a single family dwelling, annual mortgage insurance premiums are set to go up again effective on case numbers issued June 11, 2012 or later.  HUD is scheduled to increase annual mortgage insurance premiums for FHA Jumbos/High Balance loans by an additional 0.25%.

Annual mortgage insurance is paid in your monthly mortgage payment. To determine how much your annual mortgage insurance premium will be, multiply the percentage reference above by your base loan amount and divide by 12.

**So how about those lucky folks I referenced above who may qualify for reduced FHA premiums?  HUD is dramatically reducing mortgage insurance premiums for FHA streamlined refinances IF the FHA loan was endorsed by HUD before June 1, 2009.  “Endorsed” is different than when your loan closed – it’s when HUD insured the FHA loan. This process often takes place several weeks AFTER the mortgage has closed – you may have closed your refinance on April 30, 2009 and if HUD endorsed it on June 1, 2009 (or later) you won’t qualify for the reduced rate.

Those who qualify will benefit from seeing their upfront mortgage insurance premium reduced to 0.01% and annual mortgage insurance reduced to 0.55%.  This is effective on FHA case numbers issued June 11, 2012 or later.  The good news is that you don’t have to wait to lock in your rate if your FHA loan qualifies for the reduced rate – you can start your application now!   Your local mortgage originator can probably help you determine when HUD endorsed your FHA insured loan – I’m happy to help if your home is located anywhere in Washington state.

Generally an agent calls to make an appointment and says something like: “Hello. I am planning to show your home today between 4 p.m. and 5 p.m.” The potential responses from the other end of the phone should be:

1) Thank You
2) NO…sorry, that’s not a good time.

Answers come in all forms:

1) Well I was going to go to the store, but I guess I could stay and clean up and go to the store later…

2) Can you come on Tuesday instead of today? Tuesday is a good day for me.

3) Can you call my agent because I like her to be here when agents show the home so she can tell you about all of the wonderful things about my home?

4) Is it a “serious” buyer? Because I don’t want people coming who aren’t serious buyers.

It’s a yes or no question. If your home is for sale and an agent calls to show the home, remember that is what you are supposed to WANT to happen!

Say Thank You and Yes…whenever possible.

Let’s look at a small subsection of a fairly standard looking new construction development as to variations of lots available.

Choosing the lot is likely the most critical phase of buying a new construction home that is not a spec home. It used to be a lot easier to pick the best lot…or at least a good one. A standard lot was built into the price of the home and there was a “lot premium” for the other lots. Let’s say the lot premiums ranged from $2,000 to $15,000. That gave you a gauge as to how much better than a standard lot, the lot you were selecting was.

Unfortunately those days are gone and most salespeople will tell you they are all “best” lots.

Looking at lots 1,2,3 and 4, lot 4 would usually have a premium as it sides to an “open space”. You might say the same for the corner Lot 1. But if the street to the left of Lot 1 is a very busy road…now it is a lesser lot without benefit of no neighbor to the left. In essence your “neighbor to the left” is a bunch of dirty, noisy traffic. Some people feel the same way about the drainage basin to the right if it is ugly and attracts mosquitos. Sometimes people think the drainage area is going to look like a “pond” the way it states on the site plan…and sometimes it does. But more often it looks like an unkempt ugly drainage pool.

Trees? Good Drainage Issues? Can you see a green, yellow, red blinking street light from your master bedroom window? All too often someone picks the lot without standing on the lot…bring a ladder. Stand higher.

Choose the best lot and the worst lot and assign values from there. Don’t do this from a site plan like the one above without walking the entire area to see what is on the outside of those perimeters. Will there be more new homes to the North or are there existing run down homes with a few junkyard dogs.

You have to get very close to picturing the home on this lot the same way you would if you were buying an existing home on that lot. This is VERY difficult for most people.

Generally speaking only people who buy the BEST lots choose the lot and build from scratch. It makes little or no sense to build a home on a substandard lot vs waiting to see what the home looks like on that lot.

So if all of the best lots are gone…you are often better off buying a spec home or a newer resale home, than building on a substandard lot with no recourse to not “like” it once the home is put on it.

New Construction is not for everyone. If you can get the biggest and best lot in the neighborhood…go for it! The end result can be very rewarding.

Yesterday, Division I of the Washington State Court of Appeals (which handles appeals from King Co. north to Canada on the west side of the Cascades) handed down a decision that addresses the terms of the standard NWMLS Form 51 Rescission. This form is routinely used by agents to formally and definitively rescind one contract before a client enters into another. The Form, drafted by attorneys on behalf of the NWMLS, includes this rather self-serving provision:

RELEASE. The parties agree that the Agreement between them and all other agreements or undertakings between them in respect to the Property are hereby rescinded; and each releases the other and all real estate firms and brokers involved with this sale from any and all present or future liability thereunder and/or in connection with said sale, other than as set forth hereinafter, provided, that nothing herein shall be construed to terminate any existing agency relationships or agreements unless otherwise agreed in writing.

(Emphasis added.) There is no reason to include the release of the real estate firms and brokers involved in the transaction from any liability, other than of course to protect the real estate firms and brokers.

In the case of Hanks v. Grace and RE/MAX, the agent represented both the buyer and the seller. Notwithstanding the instructions from the seller to not present an offer contingent on the sale of the buyer’s home, the agent presented such an offer (albeit one without the correct addendum, the Form 22B, which specifically renders the contract so contingent; instead, buyer simply submitted an offer subject to a 22A Financing Contingency with the “contingent on sale of buyer’s home” box checked). Not realizing that the offer was contingent on the sale of the buyer’s home, seller accepted the offer. This happened in March of 2008.

Three months later, buyers having not sold their house — did I mention this was all happening in the spring of 2008? — the agent decided for reasons known only by the agent to buy the home himself. So they needed to formally rescind the prior PSA, and naturally the agent selected the Form 51 for this purpose.

Needless to say, the agent couldn’t complete the purchase either. Seller eventually sold the home two years later for $158k less than the amount of the original offer. When seller realized that the agent had attempted to get over on her by concealing the contingent nature of the original offer, seller retained counsel. Further investigation revealed a second interested buyer who expressed an interest in making a full price, non-contingent offer at the same time as the original buyers. But the listing agent never so informed the seller.

Following a jury trial on buyer’s claim of negligence against the agent, the agent was found liable and the seller was awarded $195.5k in economic losses and another $170.5k in non-economic (i.e. pain and suffering) damages.

Before the case got to trial, attorney for seller convinced the trial court that the release provision of the Form 51 was void and unenforceable as a violation of public policy. Otherwise, by having seller sign the rescission necessary for a new contract, the agent would have shielded himself from all liability to the seller arising out of his negligent representation. In a nutshell, the law should not — and now does not — tolerate an agent shielding himself unfairly in this fashion. It is not consistent with good public policy.

And the Court of Appeals agreed. It found that the release violates public policy, in part given the role of real estate agents in the purchase and sale of property.

Given this decision, any future attempt by a real estate agent to avail themselves of this shield from liability is likely to be unsuccessful. It remains to be seen if the NWMLS will simply revise the document to elimate the objectionable term. Certainly doing so is consistent with the role agents are supposed to fill and which they regularly hold themselves out as fulfilling, the protection of their client. That protection should not be sacrificed for the self-interest of the broker. Its simply not good public policy.

In City and not “Grandma’s House”.

Recently there have been a lot of complaints in various forums and on blogs that the homes they are viewing in the prime neighborhoods of Seattle are all “Grandma Houses”. I’ve seen this phrase used both in The Redfin Forum and on Seattle Bubble. People are asking what is meant by “Grandma’s House”.

Sunday from Noon to 3 p.m I will be at this home, which is clearly NOT “Grandma’s House”. It may be a “McMansion”…but it is NOT “Grandma’s House”.

Hope to see you Sunday.

If you ARE looking for “Grandma’s House”…I will be listing one of those in Maple Leaf near the end of April for about $120,000 less than this one.

Born yesterday after my Open House.

Savannah is now a “Big Sister” …she announced to the dog, Peaches.

This is often the case with new listings this time of year, and just because there is a crowd in the first few days does not mean the house will sell in short order. The first one I mentioned did have 5 offers by late afternoon, but the 2nd is still Active with no offers.

One of the ways to be pro-active about inventory is to identify what you want in advance. If you have seen many houses over the last 6 months to a year and know which neighborhoods you want to live in, you can contact owners to find the one or two who are planning to list their homes in the next several weeks. It could give you a leg up.

I have a client who wants to spend about $400,000 for a house in X area. The best homes at that price are in X neighborhood. Only about 50% of the homes in that neighborhood fall at that price. You should not contact ALL of the owners in that neighborhod. Rather sort by square footage and assessed value.

1) If you know the minimum size of home you want is 2,200 sf, then first eliminate all of the small homes from the list using the tax records.

2) If you know you want to spend no more than $400,000 to $450,000, and all of the recent sales in the neighborhood have been at roughly 1.13 X Assessed Value (which is about the “going rate” right now for good areas and homes) you can next sort by Assessed Value. The lower valued homes you likely already ruled out based on square footage. So in the 2nd sort you are knocking off those that will sell for more than you want to spend. If 30% of the homes are assessed at more than $450,000, you can knock those off the “pro-active” list. Doesn’t mean one might not hit the market as a short sale or REO listing. Just means they are not the “target” for pro-active contact.

Now you have a nice list of 50% of the homes in the neighborhood that should be large enough for you, and should sell at the price you want to spend. Odds are maybe at least one or two of those are thinking about selling this Spring, and will be happy to not have to worry about whether or not it will sell. They may receive your letter and be very happy to have a ready, willing and able buyer without having to list their home.

I am not saying that is the best way for a seller to approach selling their home…but for a buyer who is fed up with the waiting game, only to find 5 offers when a suitable house comes on market, this is not a bad way to jump to the front of the line.

Being Pro-Active vs Reactive also feels like you are doing something to reach your objectives, and can be a very rewarding strategy.

The numbers paint the picture of a recovering market:

1. Increasing numbers of homes sold, year-over-year…

2. … And less homes for sale…

3. … means dramatically lower inventory:

More on the Estately blog

These stats not compiled, verified or published by The Northwest Multiple Listing Service

The caption inside the photo was part of the mls photo, exclamation point too. I didn’t add it. I guess some agents don’t realize that these photos convey as advertising on the Public Sites.

Raises the question…even if the home is vacant, how late is too late to see a home that is on market? At that time the answer was 9 p.m. After this Sunday…Daylight Savings Time…the answer changes to 10 p.m.!

Before 8 am. is too early and after 10 p.m. is too late…even for vacant homes.

You can stay later than that…but you must enter by that time.