MSN has a great article up at the moment — What Kind of Home Should You Look For? [which they picked up from MarketWatch]. The article is a great overview, but I’d like to take a moment to expand on some of the points a bit.

The article tries to discuss the main ways a buyer can get a “deal” on buying their new home. I think, however, they gave too little attention to the traditional way people buy homes — making a purchase of a non-distressed property from a unhurried seller. The overall relative strength of the Triangle’s real estate market means that many, probably still most, of the homes sold in our market are sold just like they always have been ["at retail" some would say]. Since this is the baseline, it isn’t talked about much in the article, but it’s important to realize this is still how most homes are sold in our market.

The first big group this article talks about is Bank Owned Properties. It notes that the average discount on such homes is in the 20%-30% range. There is a reason for this: most of these homes were not cared for well before the bank took them over, and being vacant for extended periods of time only makes those issues worse. Even in the best of these homes, one should expect to do some painting, carpet replacement and basic maintenance catch-up. My two major additions;

1. Bank owned properties are almost always sold “as-is.” This puts extra risk onto the buyer as any problem becomes theirs. I strongly encourage my buyers to have bank owned property inspected promptly – sometimes even before an offer is presented to the bank.
2. Banks almost always have their own forms, which they require in any transaction. These forms usually are very slanted towards the seller. The help of a professional is always a good idea when dealing with a bank-seller.

Next up is Short Sales – a situation where a private seller is selling the home for less than what is owed, and the bank agrees to eat the difference. The issues here are simple and straightforward. The buyer will generally get a small [maybe 10%] discount on the purchase price, but they have to work through the banks process to get there. In particular, they have to accept that the process will take a long time, and that the bank may still reject everything at the end

Finally, the article talks about New Home Construction. The writer seems to feel that the time for deals on new construction has passed. I’m not convinced that is the case. During the slump, developers had plenty of land, plenty of skilled labor, and little demand. Prices normally fall in those situations, and new housing should be no exception. In fact, in some markets outside of the Triangle, new construction can be cheaper than an equivalent older home, as price drops attempt to keep people in that market.

Where we are really seeing concessions here is in upgrades and improvements. Builders are reluctant to move on the price for the frame, but those granite counter-tops, better electronics and stainless appliances are certainly easier to come by. A skilled negotiator can certainly earn his keep with strong negotiations in these areas.

I think we [the author and I] agree that deals are out there. Like anything else in life, however, getting the best deal requires work. If you’re interested in exploring any of these markets, please send me an email, and I’ll start working to find the right new home for you.

Last Sunday, the Herald-Sun had four good articles about real estate investing;

• Foreclosure business gets big at auction
• Chasing deals at the auction block
• Opportunities exist to hit it big in new housing market
• ‘Hard money’ lenders at work for the gamblers

The articles mainly focused on buying foreclosure property on the courthouse steps. Collectively, they are a good introduction to that aspect of investing in real estate — they are worth the read. It is worth noting, however, that buying houses at the courthouse is probably the most risky way to purchase property. Buying at the courthouse does not allow the purchaser to thoroughly inspect the property, and possibly leaves the new owner subject to superior liens [for example, an IRS lien stays with the property even after foreclosure].

As for the “hard money” article, it does a great job of making hard money lenders look like day traders. “Hard money” has its place as a means for investors to purchase a property and resell it in a short period of time [either as a "fix-and-flip," or to resell to another investor]. No one I know of, however, looks like Gordon Gecko while doing it.

Taken as a whole a whole page of the Sunday paper dedicated to real estate investing tells me that people see the market as having potential. Given Durham’s relative stability over the past few years, that could be especially true here. If you would like to hear more about how real estate investing can fit into your investment plans, please email me and we’ll get started.

Just a reminder that garbage collection in Our Fair City is delayed by one day this week, due to the Independence Day holiday. So tomorrow [Tuesday], Solid Waste will collect trash according to the Monday schedule, Wednesday will be according to the Tuesday schedule, and so on. By the end of the week, everything should be caught up.

For more information, or to see the schedule for other holiday’s, here is the 2010 Solid Waste Holiday Schedule

Earlier today, President Obama signed legislation to extend the deadline for taking advantage of the Federal tax credit offered to home buyers.To take advantage of the credit [$8,000 for first-time home buyers, $6,500 for most everyone else], you still have to have a contract dated on or before April 30. Now, however, you have until September 30 to complete the transaction.

Why does this matter? The National Association of Realtors has estimated that 180,000 eligible buyers were not going to complete their purchase prior to the June 30 deadline. There are several possible reasons for this. With the looming deadline, many lenders were overwhelmed with applications [I know of one lender who had an internal deadline prior to April 30 for loan applications] and were simply unable to complete their paperwork in a timely manner. Also, if a home buyer was looking at a foreclosure or a short sale, the added delays could easily push a closing  out past 60 days. Now those people have another three months to finish up the transaction.

As an added bonus, the same legislation reauthorizes the National Flood Insurance Program. this ends the legal limbo some buyers were in where they were required to purchase flood insurance, but the Feds weren’t offering it. The combination of these two measures should bring some additional stability to a housing market that could certainly use it.

It’s the 1st of July — where did the first half of the year go? In any case, the sun is [really] out, so let’s see if it heated up the real estate market.

For all of Durham County there were 2,506 homes listed for sale at the end of June – again within a percent or so of last month. 468 sales closed in June, another increase about 30%. That means that it would take 5.3 months like June to work through the current housing inventory. That’s a drop of almost two months, another great improvement going into the summer.

For the 27713 zip code there were 528 homes listed at the end of June – another roughly 5% drop from May. 128 homes sold during May, an increase of close to 20%s. That huge increase in closings moved the adsorption rate to 4.1 months – another drop of a month.

Now for the bad news. As you know if you read these posts regularly, I believe a lot of the sales over the April – June period were driven by the Federal tax credit [which appears like it will be extended to allows closings past June 30]. To attempt to get a handle on that, we’ve been tracking the number of pending listings, most of which should close in the next 60 days. Here’s the new set of those numbers;

In each successive month, the number of pendings has dropped significantly. Based on the pending sales as of 7/1, I  would predict that closed sales will drop about 25 percent city-wide in July and possibly even farther in south Durham. On the other hand, a drop of even 25% would only put everything back in balance, so it’s not all doom and gloom either.

Speaking of neighborhoods, here are the ones we look at each month.

Many neighborhoods were able to take part in the strong sales in June — especially Woodcroft and Hope Valley Farms. As we all know, the housing market in south Durham is largely defined by those two subdivisions. Wynterfield contines to be the “problem child” with sluggish sales continuing in June. On the other end, Audubon Park continues its amazing run of strong months. Apparently no one told them the housing market collapsed a couple years ago.

As I noted above, I believe this may be the high-water month for the 2010 real estate market. The Federal tax credit did a great job of pulling sales from the latter half to 2010 into the second quarter. the real question now may be whether that is a short-term dip, or a larger problem. Either way, we’ll be here reporting on it next month.

Last week The Hill posted an article [Ax May Fall On Tax Break For Mortgages] reporting that lawmakers in Washington were looking at scrapping the Federal tax deduction for home mortgage interest. as you might expect, this comes in the guise of deficit reduction. Last year, President Obama proposed cutting the deduction rate for itemized expenses [which includes the mortgage interest deduction and the charitable deduction] for families with incomes above $250,000

What I find interesting about this is the change in terminology. Instead of being a deduction, mortgage interest is now being called a “tax entitlement.” “Entitlement” makes it sound like something that can’t be touched, but puts a negative connotation on it at the same time.

So, where do things go from here? Some of my observations/predictions

• The Federal government is spending like the proverbial drunken sailor. Because of that, it will be desperate of any source of income over the next decade
• The mortgage interest deduction is a fairly large pot of money. The White House estimates it’s proposal would increase government revenues by $208Billion over the next ten years. This combination makes change almost inevitable.
• Despite that inevitability, you won’t see Congress take action prior to the elections in November. THat would be a scary vote to make right before an election. Instead, wait for it in December when lame duck Congressmen can vote for it and people won’t notice ’cause it’s Christmas.
• This might start with people who make over $250,000, but it won’t stay there long. Tax law is one of the places that defines “slippery slope.”

I would encourage every homeowner to keep an eye on this issue and contact their Congressmen if and when this comes up for debate. After all, it’s a difference of several thousand dollars in most taxpayers’ taxable income.

[Since we talked about terminology before, it's also worth noting in the second paragraph of the Hill article, it calls an increase in your tax liability a "savings." That is an attitude in the Government we need to address -- that all money belongs to the Government, but they allow you to keep some of it.]

OK, I admit it – I can’t come up with anything catchy for this intro. Let’s go straight to the numbers, shall we?

For all of Durham County there were 2,543 homes listed for sale at the end of May – almost exactly the same number as in April. 357 sales closed in May, an increase about 40%. That means that it would take 7.1 months like May to work through the current housing inventory. That’s a drop of 3 months, which is a great improvement.

For the 27713 zip code there were 561 homes listed at the end of May – a small drop from April. 109 homes sold during May, almost double April’s numbers. That huge increase in closings moved the adsorption rate to 5.1 months – a great move towards health in the housing market

Last month we talked about the effects of the Federal tax credit. As you probably know, homes had to be under contract by the end of April, and they have to close by the end of June. You could see the effects of that in the number of pending listings, which were very inflated at the end of April. Here’s what they looked like at the end of May.

• Durham County: 490 [April 657]
• 27713 area code: 112 [April 166]

As you can see, that “tax credit backlog” started to shrink in May as those transactions from late March and April started to close. The pending sales numbers seem to support June closings at about the same level as May, which will do a long to eat through the backlog of listings in some of our neighborhoods.

Speaking of neighborhoods, here are the ones we look at each month.

While most neighborhoods reflected the general improvement in the market, some are still struggling. Wynterfield in particular is seeing a slow recovery from the lows of last winter. Woodcroft is posting some stronger numbers, although the large number of homes on the market is still making the numbers look worse than they perhaps are. On the other hand, the other two mainstays of the South Durham market – Parkwood and Hope Valley Farms – have returned to the market strength one would expect of them. And Audubon Park posted improvement on
its impressive numbers of April – turnover there is less than a month!

The numbers show that June should be a solid month for real estate in Durham. We’re starting to see a decline in the number of homes available, which should bring more price stability to the housing market. There certainly will be some turbulence in July and August as we transition frm a market propped up be Federal intervention, but I’m optimistic that we can get through that. Either way, we’ll be here at the start of July to let you know how things are going.

With the coming of Spring is an increase in the number of people putting their home on the market. Some of them decide to go it alone at first — for those people, I offer these tips [originally by John Mayfield]  for selling your home smoothly.

1. Make a “I’ll Miss List!” There are several items you’ll probably miss when you leave your house.  These items are normally excellent marketing features to promote to potential buyers.  Take time to make note of the things you enjoy and will miss when the sale is completed and you’ve moved from your house.  Items you appreciate are items someone else will enjoy too! (This also gives you a good idea of what to look for in your new home.)
2. Know the Facts! Most buyers will have questions about taxes, lot size, utility costs and other pertinent information about your property.  It’s always a good idea to know the facts and to have this information available for potential consumers looking at your real estate.  Take time to research this information and have it readily available for buyers and or real estate agents.
3. Document Recent Repairs.  Most borrowers need to know about any recent updates or repairs or additions you’ve made to your home.  For example, a new roof, furnace or central air, hot water heater are all important to note.  If so, what was the cost, when was it installed and who did the work are all note worthy features to have for buyers and agents while selling your property.  Any items of repair or newly added during your tenure should be listed on a separate sheet if at all possible.  It’s also a good idea to furnish copies of paid receipts if you choose on the items repaired or installed with the property to validate these costs.  Sometimes placing this information in a binder is a good idea and marketing feature to show buyers and agents.
4. Replace Light Bulbs. Changing light bulbs to a higher wattage can be an aid in brightening rooms and giving a more spacious feel to your rooms.  Always check the light fixture and the maximum wattage and do not add bulbs above the recommended usage.  You can also add a drop of vanilla extract to bulbs on lamps to aid in providing a fresh smell to rooms if needed. It’s a little thing, but little things mean a lot.
5. Remove Any Heirlooms or Keepsakes. Many times sellers will want to keep certain items that have sentimental value to them such as a light fixture or wall mirror that has been affixed to the real property.  If you have an items that you plan to replace so you can keep then you should do so prior to any showings.  Once buyers visit your property and begin making offers to purchase on your property it’s generally hard to negotiate these items off of the offer to purchase.
6. Clean the Gutters and Add Extensions Where Needed.  You never know when your property may be shown and if it’s a day that is raining the last thing you want to portray is a house where the water is gushing over the gutters and downspouts.  Making sure the gutters are cleaned and extensions move the water away from your foundation is always a good idea for continued maintenance of your home and shows buyers your commitment to caring for your home and keeping it in tip top shape.
7. Hire a Building Inspection.  Let’s face it, you want to sell your home.  If so, it’s probably not a bad idea to have a building inspector look at your home and make a list of repairs or items they feel need to be fixed prior to marketing your property.  After all many homebuyers will have a home inspection too so this type of pre-inspection will help to get any potential problems a future inspector might have corrected in advance.  Many buyers will also get “cold” feet if the inspection shows too many needed repairs on their report.  By fixing these issues in advance you can ward off these potential future problems. (Don’t forget to save those receipts — see #3 above)
8. Don’t appear to Anxious! Many sellers will sometimes point out too many facts or features about the home and often sound too anxious or the need to sell quickly.  This attitude can hurt you with your negotiating with the buyers and often cost you several thousands of dollars.  You might note that this is one reason many sellers feel the need to hire a real estate agent to help with the negotiations with the buyers.
9. Know your market. Homes in Parkwood sell differently than homes in Woodcroft or Hope Valley Farms. Because of that, it’s a good idea to have a third party, such as a REALTOR perform a market analysis of your home and your local market.  This way you’ll know and feel certain that you are getting top dollar for your home.  According to the National Association of REALTORS® Profile of Buyers and Sellers, 2009 Edition, most for-sale-by-owners could have sold their homes for more money if they had been assisted by a real estate agent.
10. Contact Me If You Have Questions. If you do have any questions or concerns that arise in the near future please don’t hesitate to give me a call or email.  Although I am limited on what advice or help I can provide under our state real estate license law and rules and regulations I will be glad to assist on small or minor questions that are permissible.  If you decide to list your home in the future, I would love to help there too, just contact me!

One of the bigger stories this week is the opening of the new and improved Southwest Regional Library this Monday. The new facility opens after a long wait — the old Southwest closed almost 18 months ago. It was worth the wait, however, as the new building has 25,000 square feet of space holding  just over 100,000 books. In addition, there are 30 computer stations allowing patrons to access the Internet. Like most of its neighbors, I’m looking forward to spending a good part of this summer at the new Southwest.

While we’re talking about libraries, this is a good time to start reminding BCRE readers that the Parkwood Branch Library will be closing for good on June 27. This will give the staff a month to move everything over to the new South Branch Library, which will open on July 28.

If you are a reader this summer, Durham is a good place to be!

After pounding my head against the Barnes & Noble wall for far too long, the links in the booklist have been fixed. The links now take you to the page on BarnesandNoble.com where one can purchase the book. If you haven’t looked at the booklist for a while, take a look around. There are some real gems there.