Show notes to come; I wanted to put up the podcast of today’s show.
We got to some of the notes I prepared, but not all, and touched on quite a few more topics. I think my favorite part may be in the last 10 minutes, where I talked about how to choose a Realtor. Listen to the show here.
- New residential units in the Albemarle County pipeline.
- The Right time to Sell is Anytime
- The Home Buying Decision
- Gas Price Math, Charlottesville City vs Albemarle County
- Albemarle County moving the Courts?
- Interest rates aren’t high yet; here’s perspective.
So … I paid to have part of the radio show transcribed … forgive the errors.
Jim: Don’t use my words against me.
Rick: I’d love doing this to people though. One of my snarky things. I’m sure my wife would tell you “Stop being so snarky like that”. You had written an article about—let’s go back to Charlottesville in Central Virginia, about the bus system and the court system. Tell us about that.
Rick: Because this is projecting what would have happen?
Jim: Yeah, I mean, I think that we’re in the point now where– again. For all the years that I’ve lived here, the city of Charlottesville and the county ofAlbemarle have—I’ve written many times about how I think that they are sort of like the worst estranged parents who get along just well enough to feed the kids once in a while with the citizens being kids. It seems like they poke each other on the eye not merely for the sake of it but because they can. Buses yeah there’s—Charlottesville Tomorrow had an excellent again quick plug for Charlottesville Tomorrow one of the finest resources we have in the community.
Rick: Sean Tubbs scheduled to be on in March.
Jim: Yeah Sean fantastic, Brian, the whole staff, everybody there. Um. Now, they were a story about– the first one was about the county is now looking at seeing if they can get federal grants to develop their own bus system. And I don’t know the underlying story behind why they would choose to do what I perceived as an absurd thing because I think that it is a reasonable thing for the City of Charlottesville and the County of Albemarle to, you know, work together seeing as how we are in the same community. So I think that’s something that highlights what I perceived as a dysfunction between the city and the county. And the other one is the County of Albemarle are now in conversations, and deliberations, and evaluations and other things about whether to move the court from downtown Charlottesville to an area in the county, you know, I think it’s the courts were to move from the city to the county. I think that would be a major shift in a lot of logistics of my little ends of the world and how real estate’s transactions are closed. Attorneys right now, a lot of them are close to each other. There’s a—they’re close in the court house. So there are a lot efficiencies they’re built into the—those geographical logistics. But it’s the, you know, the courts leave downtown Charlottesville and go the County somewhere, it’s gonna be— again I think another sign of how I’d really lament the city and the county not being able to get along. And it also could be a huge positive for the county if they’re able to put together an economic development solution that’s gonna move the court to a place that’s going to spur economic development and growth, be a good thing for the county. But for me, yeah, I’ve written this for years that I just really wish that the city and the county would get along better. And now the we’ve—we’re past the point of reversion and next thing[?] and things of that nature but I’d like to see personally, not necessarily a professional perspective, to see the merge of something that affect that they can have better cooperation between them but too you have a lot of egos and s a lot of money that would get involved with that. So—
Rick: Sharing of school resources would be great place to start.
Jim: Uh hmm. Sharing of school resource would be fantastic and there’s a lot of duplicity there. So yeah I think there are a lot of efficiencies that could be realized there if we could get beyond egos for a lack of better way to frame it.
Rick: If only. If only. Jim Duncan, Matt Hodges here we talked about—we talked about impossibilities here on a Sunday morning wakeup call.
Jim: You know I think one of the question I’ll jump in Rick that I’ve gotten for years from buyers, you know, from one of our show notes leading up to this was from an underwriting perspective. When you go and apply a loan it goes through the process with Matt and his team is it easy or hard to get a loan? You know from my perspective, you know I think I haven’t applied for a loan in a number of years while looking into to my clients. It’s logistical challenge but practically, you know Matt?
Matt: Yeah. It’s harder. I wish I could say that the changes that [inaudible 32:01] have made are making it easier and more streamline for clients [inaudible 32:06] have come up with this theoretical reduction in paperwork where we’d all do things electronically and I know no lenders were actually implement that they still want to verify and come asset credit just the way they have forever. And recently, I don’t know if it’s disturbing is the right word but Freddie Mac[?] came up with a change to their self-employed underwriting where for years I’ve been in this business for 18 years they have always had a 1 year tax return policy if you’re self-employed. If you now close after March 6th and you’ve been in business less than 5 years you need 2 years of tax returns and that’s an averaging of the incomes. That’s going to harm a lot of clients who would have a [inaudible 32:64] be able to purchase and the argument I understand the other way is what if you can show consistent income as a self-employed business owner then really you shouldn’t be getting a house. So I get both sides of it but it’s a huge change that has been in existence for a long time. Interestingly, on the student loan side, because that’s really a hot button, is all the agencies have made it much more difficult to qualify with the student loan payments on the credit report. So if there’s a zero or a deferred we got to go to 1 percent of the total outstanding [inaudible 33:33] which is not going to be advertised[?] loans it’s going to be much worse. Only Freddie—
Rick: I don’t understand that. Explain that to me.
Matt: Sure. Often times on a credit report we would see a ton of student loans recently out, they’re still deferred for some period of time or even income-based repayment, IBR we call it. And that IBR can be at zero because of the industry that they’re in, they’re serving in underserved areas, they’re school teacher and literally they qualify initially for a zero repayment of their student loans eventually they’ll have to start paying it. We can’ use that, we got to use the 1 percent unless it’s Freddie Mac[?] but [inaudible 34:12] are very strict about that so—
Jim: Sorry to interrupt Matt’s flow but listening to Matt talk it highlights why I advise my buyers to go to a really good lender who knows all of these stuff. I think it’s critical when I advise people to—
Rick: Rather than going into— something Rocketnet or—
Rick: Shouldn’t I pick somebody—
Matt: I know my fellow loan officers locally. I trust, respect virtually all of them whether it’s me or somebody else please use somebody local they’ll treat you right, they’ll give you fair interest rates and they’re accountable ‘cause they’re in the market place here.
Jim: Sorry. Please continue.
Matt: Yeah. So those were 2 policies that really didn’t help us during this past year. On policies aside, we have got a slightly higher conformal loan this year so 424,100 nationwide is the new limit up from 417 we haven’t had a movement upward and since 2006 because values have not increased well there’s now recognition that values now have gone past the 2006 level. And then a small benefit for people who are out there that still have not refinanced using the harp and that’s somebody might be upside down in their house. So the government realized, if they can make the payment right now and they’re at a 5 percent interest rate but they’ve lost equity well there’ll be more likely continue to be making that payment and not go for closure if we can give them a lower interest rate even if they’re upside down, the house is worth less than the loan is. And it just makes a lot of sense. So that was extended until September of this year, fortunately, for some of those who have not refinanced yet.
Rick: So explain this to me. I’m not going to be able to give you all the answers to the situation because it didn’t involve me personally but a co-worker looking for a home, found a home that she wanted, it was upside down, what’s the proper—
Jim: Short sale.
Rick: Short Sale? She made and offer in March. It took the bank over 9, that’s not quite true, 7 or 8 months—
Matt: Yeah. Easily.
Rick: Before they accepted that. Why would a bank sit on a home and it’s receiving no money on for that extended period of time before doing something. And I mean I can see 2 months, 3 months but why would it be say—why would it keep a piece of property that is going bad, I mean she drove to by that house almost every day, no one was living in it and the house was getting worse, the grass wasn’t being cut and all of those sorts of things that you can imagine and yet the bank wouldn’t accept her money, they didn’t have any other offers on the home because she had her realtor knew. The realtor who was the person under the sale on the home and the bank didn’t do anything for months and months and months. Why does that sort of issue exist?
Jim: First, I’ll Say that we’re coming out of the [inaudible-3:47] we had a lot of short terms for closure I would say there were few and far in between but they were much much much less prominent now in our market than it were 2-3 years ago. And somewhat flip in but an honest answer to that is because 7 months is not an unreasonable amount of time for a short sale. I tell my buyers that every short sale is an adventure and that if they start to apply logic and reason to the equation they need to stop. It’s just the process that exist for the banks. It’s such that it often is, you know, I’ve not have them close in 2 months, I say I’ll have them close 15 or 16 months. So try not to apply logic to it and you’ll be okay.
Rick: I understand your answer “don’t apply logic to it” but if the bank has it as a piece of value–
Jim: You’re thinking like a logical person. You would think that you would be able to call the bank and say “you’ve got this asset and is declining in value, you have an offer for x it makes sense”.
Rick: But doesn’t a bank work under a—
Jim: Rick, I’ve read stories that it cost you know $80.000 for bank to foreclose on a property and sometimes they will not take an offer that’s $30,000 less than what is owed. So they’re looking at having an even greater loss and they will not logically accept what’s put in front of them. So not needing to be flippin’ but the system that exists for that process is profoundly inefficient and because—
Rick: Well, in the end—
Jim: Did she get it?
Rick: In the end, she did.
Jim: A good ending to a frustrating process.
Rick: A good ending to a very frustrating process for her. 11:41 here on the Sunday Morning Wakeup Call our guest Jim Duncan and Matt Hodges as we talk about the local economy and the real estate market even the parts we can’t understand.
Rick: And back in action today on the Sunday Morning Wakeup Call. A grey winter day the night is cold as it certainly could be. Thank you for tuning in. Next week Dan Gold will be here covering for me. Hope you’ll check in with Dan here on Sunday. Guys, as we continue to talk about the local real estate market. Jim, you had something about traffic in human settlement patterns in the area. Is this all part about the urban ring?
Jim: Yeah man. I think I’ll put up this chart up later on my site. You look at the number of houses, the residential houses that are in the approved pipeline in our county. You can draw some correlations on where people are living but my point on that was since I’ve been doing this the threshold form for most of my buyers [inaudible- 40:50] is that they want to be under 20-ish minutes from x and 15 years ago that 20 minutes was a certain distance away and now that 20 minutes is a shorter distance but them takes the same amount of time. The constant has been the 20-ish minutes from work to home or what have you but as developments have popped up you’re seeing that each regions has become a much more self-sufficient in [inaudible 41:19] remarkably self-sufficient now say for you know jobs. [Inaudible 41:24] you’ve got a number of developments that are coming up there, Brookhill at the corner polygrams road, North point will eventually come off on the other side of 29 and you know many in between. Brookmark drive is going to be opening up soon, the extension back there behind the super Walmart back there—
Jim: Sandsclub[?]. Yeah and then you look at the stuff that’s happening around Wegmans. For years we’ve been talking about the Wegmans is coming, the Wegmans is coming, and it’s here. And it’s opened up at that side of Charlottesville in a remarkable way. I mean a lot of people now don’t need to go anywhere other than Wegmans in downtown Charlottesville. A friend of mine said in the meeting months ago that he thought that Wegmans and that shopping center opening was going to have a greater impact on traffic patterns in the city in the urban ring for the county. Then did the [inaudible- 41:20] you know time will tell, but I think people are looking at where they want to be and one of the reasons that people come to the Charlottesville area is to have a better quality of life at a slightly slower pace, a commute that’s not 45 minutes or an hour each way. People want to be able to, if their kids get sick in school, could pick them up. You know a lot of localities are in the country that’s not an option. You know looking at human settlement patterns, people are choosing the where. They’re choosing the lifestyle they want to live. And then they kind of choosing the house in a lot of ways. So they’re evaluating the day to day lifestyle and then they’re choosing the house. We can almost always find a house that fits but you know your immediate surroundings beyond the four corners of the property is something that takes a lot more time to figure out.
Rick: Matt, one of the things you know the area I grew up in down on the bay, in the water, thought insurance had become a big issue there with some of the changes. You’ve put a note out about how the FHA, the recent reduction and annual mortgage insurance and its effect on affordability. Talk about that because flood insurance down in my hometown area has had—that’s a big topic of discussion. So explain your note here.
Matt: The flood insurance is really a non-actor here at all.
Rick: Right. Understood. But it’s a different—similar topic, similar issue in a different manner.
Matt: The reduction in the mortgage insurance is the annual premium is going to have a very positive affect for home buyers and it’s going to make hud[?] in FHA more competitive with the low down payment programs USTA believe it or not USTA [inaudible 44:17] the culture has a rule housing program in is rule housing meaning it can’t be used in the city. But they’ve got very low premiums, it’s 1 percent upfront that you pay typically on the loan amount FHA’s a 1.75 it’s still not as competitive. And USTA decrease their annual from 0.5 to 0.35. So Hud is trying to catch up and be competitive in the market place but if I’ve got clients that are low down payment, I’m looking very strongly at USTA because it’s a better priced program biscuit[?] for the same interest rate. It’s a positive step that FHA is doing right now. And I don’t know whether they can’t looking at the overall cost because of the size of their organization, because they can’t seem to get in front of themselves. But at least the step that they’re taking is a positive one. If you look at the numbers a $300, 000 mortgage with this reduction is $62 a month not a huge amount but still it’s—as Jim mentioned earlier it may be 2 fill ups of your gas tank. It could be another trip to Wegmans. It could be whatever. So I’m happy that Hud has moved on reduction in their cost there and I’m very hopeful that the new administration does not reverse that.
Rick: And what are some of these things that people when you get started to buy your first home and you may start by going onto the website and putting up your mortgage calculator and looking around because you can go to the CARR, the CAAR website and look around and sort of do your own search for homes that are available.
Jim: Or you know [inaudible 46:16] .com
Rick: I wasn’t gonna turm people away—
Rick: it was just sort of—people in their first week would want to sort of get their toes wet or–
Jim: It’s mycaar.com, MYCAAR.com
Rick: and so you know you were just like “okay, so I want to go to Jim Duncan but I want to be able to tell him that this is the area that I’m interested in and I think this is what I can afford.” But then you realize, these are the things you haven’t thought about in your finances, that I need mortgage insurance and I need—and what else you have not thought of.
Matt: Yeah. I had a client the other day say “Why is [inaudible 46:56] than the online version” and she gave me the exact number. And I said “Well, that’s because that exact number are your principle interest. The online calculators are only as valuable as the data that you give it and that you receive back and analyze.
Jim: Years ago, many years ago I was doing computer stuff we would call like GIGO, Garbage In Garbage out.
Jim: If you don’t know as a buyer to put in in PITI, Principle Income[?] Tax Insurance. If you don’t know to put in annual property tax in homeowners insurance you’re going to say “Why my mortgage going to be $1200” and say “oh why is it $1800”or whatever that number is. But from my staff’s perspective, I think that a lot of my buyers and sellers, a lot of realtors might hate me for saying this but [inaudible 47:45] it’s a great place to learn the market and what’s going on in the market. From an accuracy of information, from a houses on the market right now, I would dissuade you vehemently. Well there’s one house in the market that sold 3 months ago, my buyer’s keep emailing me saying “why can I not see this house?” I keep saying “because it’s sold”. But it’s still on [inaudible 48:08] I know, It’s sold. So there’s that. But I think you start with the online stuff, we all do. We’re all going to google [inaudible 48:15]. We’re all going to find our way to their site. But I think it’s matter of finding a good realtor whom you trust. I had one yesterday say “we’ve sold over 5 houses our lifetime and you’re the first realtor who gets it”. That’s me. That’s me. It was these buyers. Every buyer I think needs a realtor who gets them. And I’m not gonna fit for everybody. No, not every realtor is. I think it’s a matter of evaluating which realtor is gonna be a good fit for that buyer. So that the buyer feels comfortable asking their dumb questions. If you haven’t done this in 20 years, a lot has changed. And the you find your way to a really good land lord, something’s that ive beaten people over the head for years. I mean having a Matt or one of the other guys I recommend to go an say “Hey Matt, what is this MI thing I keep seeing online?” “Well, it’s mortgage insurance and this is how it affects you”. So I think that having—when I go have my cough a couple weeks ago, I went to my doctor. I didn’t google it. You know if I googled, I thought I would have something horrific that would kill me in 12 minutes. But I went to a professional who was gonna be able to decide what’s wrong with me. So I think the short answer is if you’re looking to buy or sell, you find—you do your initial research, you get your basic questions answered and then you find a professional you trust and feel good with to help you walk through that. And that’s in it for a lot of people that’s more than just going to an open house and talk to the first realtor you meet. It’s evaluating people l, talking to your peers and walking through that evaluation process because you’re—it took me a couple of years to figure out the gravity of what it is that Matt and I are tasked to. For better or worse the decisions that buyers and sellers make based on the advice we give will definitely affect the rest of their lives and frequently affect the rest of their children’s lives. And I joked, I say “that’s the part I really care about is the kids, cause the parents are fairly intelligent people but the kids are helpless and that’s frankly a humbling and scary thing to understand that if you buy this house on this street in the second day of the market, that’s gonna affect the next 10, 15, 25 years of your life. So I think that buyers need to understand the gravity of the task that they’re undertaking and find a trusted professional that’s going to counsel them through that process. Because there’s a lot that goes into it and it’s more than just clicking [inaudible 50:45] and saying “if you like this, you may like this”. Maybe, that might work. But having someone to again trusted professional to answer those questions and how to pose questions back, help you work those questions you don’t know how to ask. One of those stories I wrote few months ago is what questions buyers should be asking. Cause a lot of stuff like that—if you don’t do this as a profession, you don’t know what questions to ask. And I think that it easy to say well I found a mortgage quote from 2000 things online but again for me I think having someone—if there’s an issue that comes in the process. One of the people I recommend to my clients, one of the lenders they’re going to learn[?] and they’re going to say “well this is what’s going on. We need to be prepared for this” rather than 2 days before closing get an email from a generic lender online saying “oh by the way we can’t close”. There’s one lender in particular, won’t mention her name, last year neglected to fund at least 3 loans. I mean that’s profound and I can’t even put it into words how bad that is. So I think that having trusted people you can walk into their office and look them in the eye and say “I’ve got this question, how can you help me?” And that’s one reason again I recommend people I know and trusted to do the right thing for the consumer– Matt, you know? And it’s good.
Matt: Thank you for [inaudible 52:16]
Rick: Again our guest today, Jim Duncan, realtor, broker, partner with [inaudible 52:21] realty and Matt Hodges, Charlottesville sales manager with presidential bank mortgage. It is 11:55, just a few minutes left with our guys today as we talk about the local economy and real estate. Jim, you and I talked a bit about this upfront before Matt got here. The growth in the percentage of the family dollars that are—that is being spent in the house, whether that’s the purchase of the house, the mortgage that—what did you call it? PIT-Y?
Jim: PITI. The PITI payment, the percentage of income going to houses, whether it’s renting or owning.
Rick: And how’s that has changed over the last 20 years and how that increases for certainly a percentage of people moving from elsewhere to the Charlottesville Albemarle area. I’m just—we always talked about how Charlottesville Albemarle is an extensive place to live. We are—people who live here are giving up other parts of their life to live here. Correct?
Rick: Mean if you choose to live here and you are paying more for your house then you have less less money to spend in other things and whether that’s in savings for the future or less money to send your kids to independent private school or wherever you might you know less family vacation or you can’t just go to Wegmans say you need to go to Food line across the street. How do you—each of you—I would think that these questions come up at my gosh I was just paying such and such. What that 2 bedroom house cost is this? What are the conversations that you have?
Jim: Naturally, I wrote a story about this few years ago and it was why is real estate in Charlottesville more expensive than where I’m from. In the—the easy answer and it’s not cop out is because I look at my buyer and say “because you’re here”.
Rick: Didn’t you use that same answer for the bank?
Jim: Many times. You know—it’s the—
Rick: Very efficient with your answers.
Jim: Yeah. I like that. You know I think the demand. People choose to come to Charlottesville Albemarle area and if you have more demand than you have supply that’s going to cause prices to go up. And we’ve been a—I think I started practicing real estate in ’01. And I think we’ve got the best place to live in North America in 2004. And ever since then through, again through my [inaudible 55:38] we’ve been a high demand place to be. So you have people who love living in Charlottesville, they target Charlottesville where they want their job to be. And they come here. And I think that It’s just we, you know, simple answer: supply and demand. More demand than there is supply.
Matt: And I actually want to say something about the influx of homeowners coming from different areas: California, Silicon Valley, DC. From New York City they’re actually finding bargains based on what they’re used to and they still have their salary because they’re telecommuting so what Jim said earlier about “Hey, if you’re within that broadband range and it’s somewhat limited, so their search criteria is limited”. They’re going to find something that is effective and its cost is within their realm. And in fact, what I see is them not pushing their debt income ratio which [inaudible 56:37] will allow you to go 45 percent of your gross income. They’re in the thirties so I’m actually seeing people being more conservative about what they’re buying and what their debt income ratios. I’m not worried about that future—
Jim: And I’m having a lot more, my buyers are finally able to—you know, I have not been saying these for years but for the last few years they’ve actually been doing this and their qualifying for the mortgage based on one income.
Rick: Real quick because I got to go. Debt income ratio was 45 percent what was it 20 years ago it was allowable?
Matt: Well it was 28, 36. 28 percent of reverse income to your house, 36 to all of your debts including the house. But it was a more of a guideline rather than a hard rule.
Rick: All right gentlemen. Thank you so much for being with here us today.
Jim: Thanks Rick!
Matt: Thank you!
Dick: You can find Jim Duncan’s blog realcentralva.com. These guys will be back on in the future.
Jim: Again? Thanks Rick.
Rick: It’s part of the requirement. Call the– Call the police.
Speaker: This has been Sunday Morning Wakeup Call on 94.7 the programs of voice in Charlottesville. The wakeup Call is brought to you by Tiger Fuel and the markets of Tiger Fuel, production assistance and engineering from Sean Mccord[?] and [inaudible 57:46]. Be sure to join Rick next Sunday morning at 11 am for the Wakeup Call. Only on WPVCLP Charlottesville.