Baltimore Real Estate Blog

Spring came early in 2012 for Baltimore and its real estate market. Lack of snow, and often, higher than expected temperatures made it easy for buyers to go house hunting. This was certainly reflected in the real estate market statistics for the Baltimore Metro area, in February. Closed sales went up, somewhat significantly, on year over year and month over month basis, while home prices remained level as anticipated.

There were 1,454 closed sales in the Baltimore Metro area in February 2012 – a 9% increase from January of this year and more than 7% increase from February 2011. Baltimore County saw a 33% increase in closed sales, on year over year basis, and over 7% increase since January. A similar phenomenon occurred in Howard County, which has had a relatively stable real estate market since the downturn in the economy. Baltimore City on the other hand, experienced an 18% decline compared to February 2011 – a sign that there could be more pain in store for the City housing market.

A total of 2,489 homes went under contract last month in the Baltimore region, compared to 1,697 in January of this year and to 1,715 in February 2011. The healthy 45% increase in newly pending listings since last February is a testament not only to amicable weather this winter but also to the realization of today’s buyers that the time is now to take advantage of historically low interest rates and bottoming out prices.

Baltimore County saw a 34% increase in new under contract listings on annual basis, followed by Anne Arundel County with a 27% increase and Howard County with almost 24% increase. Baltimore City and Harford County were the only two local jurisdictions that saw declines in this statistic, with drops of 4% and 8% from previous February, respectively.

At the end of last month, there were 11,919 active residential listings in the Baltimore Metro area. At the end of February 2011, there were 14,974. The decline in available homes can be attributed to good absorption rates during 2011 as well as realization of some sellers to remain in or rent their properties due to slumping prices. Given the current sales level, the inventory of available homes in the Baltimore Metro area stood at just over 8 months compared to almost 12 months at the end of February 2011.

We should, however, be ready for an increase in overall inventory levels at the beginning of the spring as more and more sellers contribute to the cyclical nature of the real estate business.

Current data shows that the stabilization of home prices in the region is slowly materializing. Although we can still expect to see small declines in the overall price levels, they are beginning to be much slower and should be felt less than those after the initial crash of the housing market.

The average sales price in the Baltimore area stood at $243.247 at the end of February – about 2% lower than at the end of same month in 2011. In February 2010, however, the average sales price stood at $263,283 for the region and at $277,694 in February 2009. The decline over the last year is less than half of that for either of the previous two years. This trend should continue into 2012 barring a major economic event that has the power to influence interest rates and confidence levels of the American public.

Distressed properties such as short sale listings and bank-owned properties (REOs) made up approximately 29% of the total sales level. A total of 188 homes were sold by short sale realtors in the Baltimore area was the second highest total in our region.

The month that tops that list is June 2010 which was inflated by the now expired home-buyer tax credits. The number of REOs that exchanged hands in February, 228, was the second lowest total in over 2 years. In comparison, there were 377 bank-owned properties bought during the same month of 2011. A decrease in REO sales and in turn REO inventory is continually attributed to the “robo-signing” fiasco, tougher foreclosure laws enacted by the State of Maryland, and the lenders’ and borrowers’ willingness and ability to explore work out options such as loan modification or short sale.

All in all, it is this real estate professional’s opinion that we’re off to a great start in 2012. The winter season decided not to show up in the Baltimore Metro area and thus allowed us to get a glimpse of what the real estate market may look like this spring and into the summer. We know that buyers are out there and that they are looking to take advantage of the low prices and unbelievable interest rates.

We know that the today’s sellers are much more realistic in terms of sales price than those of yesteryear. We also know that there is not enough REO inventory to dilute the currently listed properties and hope that the banks are not irrational enough to release their holdings all at the same time.

We know that things are moving in the right directions and we hope that it will continue to be so. Let the spring shopping season begin!

In line with most expectations, the number of closed real estate transactions in the Baltimore Metro area, in January 2012, decreased significantly compared to a month earlier and slightly compared to January 2011.

As a practicing real estate professional, I can attest that buyer activity slows between Thanksgiving and New Year – and because closed sales reflect the activity of the prior month, January sales take a dive when compared to the December numbers.

There were 1,334 sold homes in the region in January 2012 – a decrease of almost 23% from December 2011 and almost 5% from January 2011. All six jurisdictions making up the Baltimore Metro area (Carroll, Howard, Anne Arundel, Baltimore, Harford counties, and Baltimore City) saw a decrease in closed sales on month-over-month basis.

On year-over-year basis, however, there were some significant differences between jurisdictions. Carroll County, for example, saw an increase of almost 28% in closed transactions compared to January 2011, while Baltimore City continued its decline with 26% less sales in January 2012 than a year earlier.

The health of the Baltimore Metro real estate market largely hinges on the recovery of Baltimore City and its ability to attract both investors and owner occupants to absorb the excess inventory created by the real estate market’s collapse.

Newly pending listings increased in January 2012 – a total of 2,097 homes went under contract during this period compared to 1,697 in December 2011 and 2,045 in January 2011. Although not all of these transactions will close, this serves as a good sign that the month of February should be in line with the continuing trend of stabilization in terms of units sold.

The number of new homes that came on the market in January of this year was 2,833, about 10% less than during January 2011. On January 31, 2012, there were 12,191 available homes for sale in the Baltimore Metro area, compared to 15,852 at the end of January 2011. This means that, at current sales levels, the housing inventory is at 9.1 months. By contrast, the housing inventory a year earlier stood at 11.3 months.

Despite this downward trend in the region as a whole, Baltimore City’s housing inventory has increased slightly during the previous 12 months from 12.1 to 12.6 months.
In comparison, the housing inventory in Anne Arundel County went down during the same time period from 10.2 months to 8.7. This decrease could potentially be attributed to the more stable real estate markets of Annapolis and Severna Park.

Inventory in Howard County at the end of January 2012 stood at 6.9 months – a decrease from 8.1 a year earlier. Higher average prices, more affluent residents, higher ranked public schools, in cities such as Ellicott City, Columbia, Elkridge, and elsewhere in Howard County continue to make this jurisdictions one of strongest in the state.

The median sales price remained virtually the same in January of this year compared to the same month a year earlier – $208,370 – in the Baltimore Metro area. Baltimore City, when viewed apart from the rest of the Baltimore Metro are, saw a jump of 28.9% to $93,100. This uncharacteristic increase could be attributed to an influx of investors into Baltimore City who are buying up relatively inexpensive properties in established downtown neighborhoods of Patterson Park, Canton, Federal Hill, and Fells Point.

Distressed properties made up 29% of all sold homes in the Baltimore Metro area this January. A year earlier, this figure stood at 36% due to higher prevalence of bank-owned properties during that time period.

A total of 168 short sales were closed in January of this year, compared to only 113 a year earlier. A total of 209 foreclosed homes were sold by banks last month – almost 50% less than in January 2011 when the number stood at 394 REO sales.
By the end of last month, there were 2,038 active properties listed by short sale realtors in Baltimore Metro area compared to only 494 REOs. The numbers were much greater, even a year earlier, when 1,991 short sales homes were active and 1,634 homes were bank-owned properties.

The dramatic decrease in available bank-owned inventories is not a big surprise given the recently settled robo-signing scandal as well as 2012 being an election year. Furthermore, the lenders and borrowers both benefit from engaging in a short sale rather than going through foreclosure.

Overall, the new year is off to a good start. The decreased inventory of available homes and almost non-existent bank-owned properties market should lead to stabilization of home prices. Historically low interest rates that should be prevalent during most of 2012 should allow for increased affordability for first time and move up buyers entering the market. And of course the booming rental market should force new and established investors to buy, buy, buy!

The month of December, 2011 and the year overall, ended up as a nice surprise for Baltimore Metro* area’s real estate -market participants and observers alike.

The number of closed sales in December of 2011 was just slightly lower (5% decrease) than that of December 2010 and more than 6% higher than in November of 2011. Similar phenomenon occurred in 2010.
*Note: Baltimore Metro region consists of Anne Arundel, Baltimore, Carroll, Harford, and Howard Counties, and Baltimore City.

The big winner in December was Baltimore County, where closed sales increased by almost 4% and more than 18% on year-over-year and month-over-month basis, respectively. Harford County saw a decrease in sales by over 18% followed by Baltimore City where the sales decreased by almost 15% as compared to December of 2010.

Overall, there were 22,129 homes that exchanged hands in 2011 in the Baltimore area. A year earlier, the mark was set at 23,033 and in 2009 there were 23,693 closed sales. These slight decreases from year to year following the bust of the real estate market are more gentle than was anticipated.

It is worth mentioning that the long forgotten home-buyer tax credits which expired in 2010 and the historically low interest rates could be at least partially responsible for the prevention of a massive decline.

Home sale prices continued their gradual decrease overall. For sales that occurred in December 2011, the median sales price in the Baltimore Metro area was $219,000 compared to $223,000 a year earlier and $235,000 in December of 2009. We should expect to see a continuation of this trend in 2012 given still somewhat inflated, yet stabilizing, housing inventory in the region.

At the end of December 2010, there was 9 months of inventory available in the Baltimore Metro area. At the end of December 2011, the inventory stood at 7.4 months. Depending on whether or not a flurry of home sellers decide to list their properties in the Spring, the downward trend of inventories can be a good sign of local market stabilization.

On average, it took 130 days to sell a home in the area in December 2011 with seller receiving approximately 88% of their original list price. Both of these figures improve dramatically for properties that are realistically priced by the sellers with the assistance of their real estate brokers.

Although distressed properties continued to dominate news headlines, only 27% of sold properties in the Baltimore Metro area in 2011 were either bank-owned (REOs) or short sales. This figure was at 28% in 2010.

The number of sold short sales in the region increased from 1,636 in 2010 to 1,788 in 2011, whereas the number of closed REOs dropped from 4,822 to 4,239 during the same timeframe. This could be contributed to various factors such as the robo-signing scandal that took major lenders by storm in the last couple of years and the reluctance of banks to foreclose on struggling homeowners combined with giving them better payment workout options.

At the end of 2011, there were only 541 active REOs, compared to 2,069 short sales. At the end of 2010, there were 1,746 active bank-owned properties on the market, compared to 1,947 listed by short sale realtors.
The median price for REOs during 2011, stood at approximately $100,000 while short sales were selling for about $186,000. There is no doubt that distressed properties present themselves as great opportunities for astute homebuyers and investors, and the year 2012 should be no different.

So what WILL be different in 2012? Probably not much, as we are getting closer and closer to market stabilization. We should continue to see low short- and long- term interest rates and that should prove enough for many buyers in today’s market as their affordability is directly related to the rates and already low prices. The two factors to watch out for are the influx of newly listed properties that usually occurs in the Spring and the probability of banks releasing their REO inventories. Both of these factors will play an important role in the health of area’s real estate market in 2012.

Will we, once again, have more housing inventory, including short sales and REOs, than we can deal with? Or will there be just enough homes for buyers to take advantage of in the next 11 months? We will see soon enough.

Contrary to perceived cyclical nature of the real estate market, the sales in November 2011 remained very stable compared to previous year and previous month.

The number of homes that exchanged hands, in November of 2011 in the Baltimore Metro region, was 1,626 which is 4 more than during the same month of 2010 and 15 more than in October 2011.

A similar phenomena occurred in 2010 when closed sales remained stable from October to November and then, surprisingly, jumped in December. It will be interesting to see whether the same will occur this holiday season, as interest rates remain at historic lows and prices are near the bottom by fairly every standard.

Approximately one out of every 4 homes sold in November 2011 was either a short sale or a bank-owned property (REO).

The number of properties under contract during the month of November 2011 in the Baltimore Metro area was 2,078 – slightly less than in October of this year (2,210) and about 10% more when compared to November of 2010.

Of the newly pending listings, 429 were maintained by short sale realtors and 316 were bank-owned. In total, about one third of all newly pending listings were distressed homes.

November 2011 also saw 2,500 new listings come on the market. Just a month earlier, 3,247 homes became active and 3,161 in November 2010. Of the newly active listings, 357 were short sales and 242 were REOs.

Together, short sale listings and bank-owned properties made up approximately 24% of all new homes available for sale. We can expect this trend to continue as more and more homeowners find themselves unable to maintain their mortgage payments and opt out to do a short sale or, unfortunately, simply walk away from their homes.

The average sold price in the Baltimore Metro during November 2011 was $259,355 – a very slight increase (1%) compared to previous year and October of this year.

Out of the six jurisdictions that make up the Baltimore Metro area, Baltimore County was the big winner in terms of closed units compared to previous year – an increase of 7 percent. Harford County, on the other hand, saw a decline of nearly 10 percent in the number of closed transactions compared to 2010.

Baltimore City inched closer to potential stabilization with a slight decrease (4%) in sales compared to last year and a nice jump (8%) compared to October 2011. Furthermore, Baltimore City saw its median sold price increase by almost 23% from November of last year and by over 13% from October 2011.

Overall, the Baltimore Metro region is holding fairly steady in terms of transactions and prices when compared to other areas of the state and the country as a whole. It will be interesting to see what happens in December in terms of sales and new listings. Will we be surprised again by the uptick in sold homes when we should be seeing a slowdown due to the holiday season and cold months?

Here at Kats and Associates at Keller Williams, we surely hope so.

October 2011 proved to be a surprisingly good month for Baltimore County in terms for real estate market statistics. The number of sold homes went up by 20% on year over year basis – the largest increase the Baltimore Metro area. The number of homes exchanged hands in October was 467, compared to 389 a year earlier.

The median and average prices of sold homes declined slightly since last year by 8 and 5 percent respectively.

At the end of the month, there were 3,950 active listings in the County.
Given the current sales level, that’s a housing inventory of about 8.5 months. A year ago, the inventory was 12 months. This decrease is a great sign for the market.

There were 50 short sale listings that exchanged hands in October 2011.

Short sale properties comprised about 11% of the overall sales figures for the month. At the same time, 116 new properties came on the market listed by short sale realtors compared to 866 total new listings. Sellers on the brink of foreclosure continue account for a good portion of today’s homeowners in Baltimore County.

The overall down trend of real estate activity in Baltimore County, MD continued in September with a decrease in total sold dollar volume as well as in the number of homes sold on both the year-over-year and month-over-month basis.

Data released by RealEstate Business Intelligence, a division of MRIS, Inc, showed a drop in total sales volume (in dollars) of almost 22% compared to the previous September and over 10% drop from August 2010. The number of sold homes (in units) decreased to 456 and is down over 25% from September 2009. The number of closed sales held relatively stable from August 2010. Even the all-time low interest rates currently present in the market are having little effect on buyer activity.

Interestingly, the average sold price increased by over 5% compared to September 2009. However, on month-over-month basis, the average sold price declined by almost 9% as we’re finally feeling the effects of the expired 8K tax credit.
In the meantime, the housing inventory kept growing. In Baltimore County, 1,143 new homes came on the market in September – more than double the number of newly pending sales (511). At current pace, it will take over 11 months to go through the current inventory. Experts consider 5-7 months of inventory to be a stable market.

FHA financing continues to dominate the arena with almost half of all buyers using the government insured loan. With low requirements for down payment and attractive rates, it is no surprise that buyers are choosing this option. FHA lending guidelines changed in early October 2010. Future borrowers will be faced with a higher monthly mortgage insurance premium while enjoying the decrease in the up-front MI. These changes might influence the future financing patterns.

The down market is here to stay as even the really low interest rates failed to resurrect the home buyer activity after the expired tax credits. As fewer and fewer owner occupants enter the market, we can expect the down trend of prices and dollar volume to continue into 2011. It will be interesting what fixes the current administration attempts next year as it is obvious that their involvement once again is inevitable.

However, before we start to get completely disenchanted by gloomy numbers, we must consider the flip side of the situation. With low interest rates and decreased prices, there’s never been a better time to buy than today! Furthermore, most of us buy one home in one specific area that is close to a certain school, place of work, or family member. We’re not buying an average home in the United States, in Maryland, or even in Baltimore County. We should be careful not to miss out altogether.

I also believe that we need to look at the real estate market at an even more granular level than just county. In the following months, we will delve into statistical indicators for various regions of Baltimore County in order to provide its residence and our clients with a more specific and more localized perspective.

As published on Patch.com 5-17-2011

April 2011 turned out to be yet another month of solid activity for the region’s real estate market and serves as yet another sign of highly anticipated and long overdue market recovery even as the market deal with continued declining home sale values.

In all, 512 homes exchanged hands in Baltimore County and 40 in the Essex-Middle River area in April 2011. Although these figures are dwarfed by the totals from April 2010 (681 and 56, respectively) when the homebuyer tax credits were driving the activity, it still represents a solid level of activity especially when compared to the bottom year of 2009.  In April 2009, only 469 homes sold in Baltimore County and 37 in our area.

Also, 747 properties went under contract this past April in the county and 56 in the Essex-Middle River area – the highest totals, excluding over inflated 2010, since April 2007 for both jurisdictions.  This phenomenon underscores the fact that those buyers who remained on the sidelines since the start of the downturn are now finally entering the market.

This past April, 1,217 new listings came on the market in Baltimore County and 104 in our area.  Absorption of these and subsequent new listings will be one of the major determinants of market’s recovery.

As expected, home prices in the region continued to decline despite increased level of activity.  In Baltimore County, the median price in April 2011 was $184,000 compared to $215,000 in April 2010 and $220,000 in April 2009.  We can certainly project this trend to continue at least for the near future as sellers price their homes to the current market and buyers scoop up the best deals with the best value available.

Homes sold in Baltimore County in April 2011, on average, stayed on the market for 138 days, the same as in March 2011.  In the fast moving April 2010, the average stay was only 103 days; in April 2009 it was 116 days.

The sellers received approximately 87 percent of their asking price for all properties closed in April 2011.  An interesting picture forms when we look at the sold-to-list price ratios broken down by days on the market. 

For sellers that receive an offer within the first 30 days, the ratio is about 97 percent.  Those properties that linger on the market for more than a month, the sellers can expect the ratio to drop less than 90 percent and for those on the market for more than 90 days to just around 80 percent.  Pricing the property right from the start is essential for a successful sale.

Distressed properties such as bank owned homes and short sales in Baltimore County continued to comprise a somewhat large portion of the overall sales.  Out of 512 closed transactions in the county, about 28 percent were in this category.  Out of all newly listed homes, 18 percent were either listed by REO agents or Baltimore short sale realtors.  As the economy and the Baltimore area’s real estate market struggles towardsrecovery, we can expect more distressed homes in our area.

The prevailing trend since the start of the year has been a higher level of transactions while continually decreasing average and median prices.  Although the former is welcomed, the latter, without a doubt, is causing a lot of unease in the media and in many local communities, as our personal balance sheets are, for a lack of a better phrase, getting more and more off balance.

 It is important to realize, however, that this is the normal path toward the recovery.  The prices must decrease low enough for buyers to consider them a great value and actually purchase. 

Aside from an artificial stimulus such as another homebuyer tax credit, rebounding of prices will take time and patience.  It will happen sooner or later. 

The question is: once it does happen, how long will we keep the lessons learned over the previous decade in our memories?  Or will we quickly forget and do it all over again?

About this column:

The ‘Real’ Deal will examine real estate trends in the Essex/Middle River area.

As your Annapolis area short sale expert realtor, I am looking forward to providing you with timely data on the state of the real estate market and particularly, short sale activity within the Annapolis area. 

If you or anyone you know is having difficulties making their mortgage payments, please call me at 443-660-8032 for a free, no obligation consultation.

I believe that, although somewhat isolated from the downturn in the market given its demographic and economic composition, the Annapolis area will be seeing an increased number of distressed properties in the nearest future.  This phenomenon will occur due to worsening economic conditions in the area as well as the resetting interest rates on adjustable rate mortgages (ARMs) that are anticipated later in 2011. 

Many homeowners used ARMs during the height of the market in order to get into higher priced homes all over the Annapolis region.  Once they reset at potentially higher interest rates, homeowners’ required housing payment will increase.  This change can be significant, especially for those who took out interest rate mortgages and will now need to start making principal payments with a shorter amortization period.  For many families, even in this area, this event can be of great concern and may force them into default.

In 2010, 171 short sales were listed by local short sale agents in Annapolis.  During the same time period, only 70 short sales actually closed.  This means that over 100 short sale listings are still lingering on the market with many more in the pipeline.

Just to give you an idea, another 56 short sales were listed during Q1 of 2011 while only 32 short sales went to the settlement table.

Absorption rate of short sales is an important concept to digest.  Given the more technical and specialized nature of the short sale process, it goes without saying that we can expect the success rates of short sale listings to be much lower than those of regular listings or bank-owned properties. 

According to data from MRIS, Inc, in 2010 Anne Arundel County had only about 27% of short sales listings actually close.  The success rate is even lower in Baltimore County and Baltimore City.

For a detailed explanation of difficulties encountered by short sale sellers, please read my column on the intricacies associated with short sales which appeared on patch.com.

As a short sale specialist, I am here to assist my clients in the most difficult of times.  Find out why, when it comes to short sales, my team is a cut above the rest in terms of knowledge, experience, and client service.  Call us today at 443-660-8032.  You do have options!

as published on patch.com

Market continues to adjust following expiration of federal home buyer tax credit in 2010.

With the first two months of 2011 behind us, we can only hope that the ongoing trend with the real estate market continues deep into this year and beyond.

With the last phase of artificial stimulation expiring almost a year ago, the market is showing signs of life and stabilization driven by natural factors such as low interest rates and depressed prices.

February yielded 32 sales in the Essex/Middle River area, compared to 30 during the same month in 2010. In Baltimore County as a whole, there were 319 closings, compared to 346 in February 2010—a pretty amazing feat given that last year a large part of the activity was driven by now-expired home buyer tax credits.

Even more encouraging is the number of pending sales. In Baltimore County, 975 listings went under contract in February 2011. That’s only five less than during the same period of 2010, and 69 more than in February 2007.  Yes, 2007. 

Needless to say, not all of these pending listings will close for various reasons. It does show, however, the willingness of buyers to submit offers and for sellers to accept them.

At the end of February 2011, there were 4,052 active listings in the Baltimore County and 415 in the Essex/Middle River area, resulting in almost 13 months of inventory for both regions given the month’s transaction level. Six to eight months of inventory is considered to be a stable market.

Median price for properties sold in the county as a whole climbed from January by almost 5 percent. Compared to the previous February, it slipped by almost 6 percent. It will be interesting to see how this trend develops through the year. Although we fully expect the median prices to be lower compared to last year’s roller-coaster ride, it wouldn’t be too surprising to see more stability in prices from month to month. In most areas of the county, we’re seeing price levels equaling those of pre-boom time frame.

Out of 319 sold homes in Baltimore County last month, 68 were bank-owned and 23 were short sale listings. Distressed sales made up almost 30 percent of the entire transaction level. We can expect this figure to remain steady given the large number of distressed homeowners in the region and the county as a whole. Furthermore, we can expect the distressed transactions to offer more value to potential buyers given the nature of the situation.

Average stay on the market, in Baltimore County, increased drastically in the month of February to 148 days, compared to 114 days in January 2011 and 121 days in February 2010.  Last month, sellers in Baltimore County received about 88 percent of their asking price on average.

Overall, the month of February this year looked relatively stable compared to the previous six months in terms of overall market activity and median prices.  Somewhat mild weather allowed for buyers to get out and see properties, resulting in a high level of newly pending listings in the region. 

Sellers are continuing to price their homes to market rather than their wishful thinking. And finally, the interest rates, although a bit higher than late last year, are still very low by historical standards and are forcing first-time and move up buyers to take advantage of them.

I cannot wait for March’s data.

Your Maryland Short Sale Expert, Vladimir Kats, is featured as a columnist for www.Essex.Patch.com, a community-specific news and information hub providing comprehensive and trusted local coverage.

This week’s article is the first part of the analysis of differences between the two dominant types of distressed properties in today’s Baltimore area real estate market: short sale and foreclosures. 

To read the article, please copy and past the following URL into your browser: http://essex.patch.com/articles/short-sales-bank-owned-homes-similiar-in-volume-not-in-outcomes

Would you like to be featured in “The ‘Real’ Deal” Submit your real-estate related questions directly to Vladimir at Vlad@BaltimoreRealEstateExpert.com for a chance to get your question answered and published on Patch.com!

As always, please feel free to call us at (443) 660-8032 with any real estate questions, or a free, no obligation consultation. We’re here to help!

Your Maryland Short Sale Expert, Vladimir Kats, is featured as a columnist for www.Essex.Patch.com, a community-specific news and information hub providing comprehensive and trusted local coverage.

This week’s article provides a report on the state of the market in the area for November 2010.  To read the entire article, please copy and past the following URL into your browser:

http://essex.patch.com/articles/home-sales-remain-constant-in-essex-middle-river

Would you like to be featured in “The ‘Real’ Deal” Submit your real-estate related questions directly to Vladimir at Vlad@BaltimoreRealEstateExpert.com for a chance to get your question answered and published on Patch.com!

As always, please feel free to call us at (443) 660-8032 with any real estate questions, or a free, no obligation consultation. We’re here to help!

Your Baltimore Real Estate Expert, Vladimir Kats, is featured as a columnist for www.Essex.Patch.com, a community-specific news and information hub providing comprehensive and trusted local coverage.

The article below appeared in December 14, 2010 issue of the ‘Real’ Deal.  Please copy and paste the following URL into your browser for more information: http://essex.patch.com/articles/renters-should-explore-buying-in-todays-housing-market

Occasionally, Patch will research and answer readers’ questions concerning today’s real estate market.

Alex C. asked Patch: “I am currently renting. Should I consider buying in today’s market?”

Answer: Absolutely Alex. Let me explain.   The real estate craze of the last five years forced many market participants, or potential participants,  away from the basics that govern our decision making.  During this craze, we saw people who had no business owning a home, going out and buying one and those who should have staying on the sidelines paralized by the over-activity.

For first-time homebuyers, however, the decision to become homeowners should be mostly based on the results of RENT vs BUY analysis.  In a nutshell, if you have good employment history, have a down payment either through your own means or gift funds and qualify for a loan under today’s more stringent lending guidelines, you should compare your total housing payment in case of homeownership to the rental payment on a similar home.

For example, let’s assume that you finally decided to move out of your parents’ basement and pay $1,300 per month in rent for a nice townhouse in Middle River. Given today’s depressed prices and low interest rates, your monthly mortgage payment for a similar townhouse in a similar area might be right around the same amount including principle, interest, taxes, and insurance. 

This situation would warrant a much closer look at actually owning rather than renting especially given the tax advantages that come along with homeownership in form of interest and other deductions. Here’s something to consider before rushing out to get prequalified for a loan: Do you plan to stay in the area at least three years?  Are you planning on moving to New York City or to the West Coast?  Do you anticipate getting transferred for your job?  Buying and then having to sell within a short period of time can be a costly proposition given the closing costs involved on both sides of the transaction. 

So is it that simple?  It can be provided that you surround yourself with the right real estate professional and loan officer to help you  navigate through today’s turbulent real estate market.

Your Baltimore Real Estate Expert, Vladimir Kats, will be featured as a columnist for www.Essex.Patch.com, a community-specific news and information hub providing comprehensive and trusted local coverage.

Check out the latest market report for the Essex/Middle River area by copying and pasting the following URL into your browser: http://essex.patch.com/articles/home-sales-dip-in-essex-middle-river-area

As always, please feel free to call us at (443) 660-8032 with any real estate questions, or a free, no obligation consultation. We’re here to help!

Real Estate Market Report for Baltimore County – October 2010

October 2010 brought with it a continued decline, although slight, in sold prices of homes in Baltimore County along with more signs that we might be heading into further hibernation of real estate market in the Baltimore area.

Although the average sold price for Baltimore County homes decreased by less than 4% to $247,393 from October of previous year and by about 6% from September 2010, the real issue is the fact that the total number of sold units (380) decreased by almost 40% from October 2009 (620) and by over 16% from an already battered September 2010.

Average days on the market decreased to 116 from 126 days when compared to same time period of previous year, serving as a potential signal that sellers are starting to price their properties more aggressively in order to facilitate a quicker sale. About 25% of all sold units in Baltimore County went under contract in the first thirty days on the market. Over 33% of sold units lingered over 120 days as actives before going under contract. Average sold price to average list price ratio remained around 0.90.

Almost 1,000 new listings came on the market in October 2010 in Baltimore County with only about 500 units going under contract during the same time period. At the end of October, there were 5,048 active listings thus resulting in about 10 months of inventory for the County and climbing.

By the end of October 2010, there were 520 active short sales in Baltimore County compared to 307 bank-owned listings. 204 short sale listings remained under contract and 33 short sales were closed during the month. At the same time, 208 bank-owned homes were still pending and 72 were sold.

Altogether, distressed properties such as short sales and bank-owned homes comprised about 28% of total sold units in Baltimore County during the month of October 2010.

Thoughts:

The cyclical nature of the real estate industry will contribute to the continually slowing market activity. Even the interest rates around 4% is not enough to get the buyers out in droves as was accomplished by the $8K tax credit for new home buyers in 2009 and earlier this year. There are rumors of some sort of tax credit coming back. However, all it is rumors so far.

In the coming months, we can certainly expect the prices to drop a little further with the number of units taking an even bigger dive. The interest rates should continue to remain low and stable making it attractive to purchase homes and to refinance existing mortgages.

Increased presence of distressed properties (short sales and bank-owned) will continue to put a downward pressure on the prices forcing “regular” sellers to price homes correctly to the market. We should also expect short sales to continue to outnumber bank-owned homes going forward as many lenders in the country are increasingly favoring short sale process over foreclosure proceedings.

Overall, first-time homebuyers, move-up buyers, and investors of all sizes will benefit from the above mentioned trends. With low interest rates and depressed prices, there might not be a better time to own a first home, get a larger home for a growing family, or simply invest in cash flow producing real estate.

As one of the greatest investor of our time, Warren Buffet, said: “When everyone is greedy, be fearful; when everyone is fearful, be greedy.” I believe it’s time to be greedy!

The overall down trend of real estate activity in Baltimore County, MD continued in September with a decrease in total sold dollar volume as well as in the number of homes sold on both the year-over-year and month-over-month basis.

Data released by RealEstate Business Intelligence, a division of MRIS, Inc, showed a drop in total sales volume (in dollars) of almost 22% compared to the previous September and over 10% drop from August 2010. The number of sold homes (in units) decreased to 456 and is down over 25% from September 2009. The number of closed sales held relatively stable from August 2010. Even the all-time low interest rates currently present in the market are having little effect on buyer activity.

Interestingly, the average sold price increased by over 5% compared to September 2009. However, on month-over-month basis, the average sold price declined by almost 9% as we’re finally feeling the effects of the expired 8K tax credit.

In the meantime, the housing inventory kept growing. In Baltimore County, 1,143 new homes came on the market in September – more than double the number of newly pending sales (511). At current pace, it will take over 11 months to go through the current inventory. Experts consider 5-7 months of inventory to be a stable market.

FHA financing continues to dominate the arena with almost half of all buyers using the government insured loan. With low requirements for down payment and attractive rates, it is no surprise that buyers are choosing this option. FHA lending guidelines changed in early October 2010. Future borrowers will be faced with a higher monthly mortgage insurance premium while enjoying the decrease in the up-front MI. These changes might influence the future financing patters.

Thoughts:

The down market is here to stay as even the really low interest rates failed to resurrect the home buyer activity after the expired tax credits. As fewer and fewer owner occupants enter the market, we can expect the down trend of prices and dollar volume to continue into 2011. It will be interesting what fixes the current administration attempts next year as it is obvious that their involvement once again is inevitable.

However, before we start to get completely disenchanted by gloomy numbers, we must consider the flip side of the situation. With low interest rates and decreased prices, there’s never been a better time to buy than today! Furthermore, most of us buy one home in one specific area that is close to a certain school, place of work, or family member. We’re not buying an average home in the United States, in Maryland, or even in Baltimore County. We should be careful not to miss out altogether.

I also believe that we need to look at the real estate market at an even more granular level than just county. In the following months, we will delve into statistical indicators for various regions of Baltimore County in order to provide its residence and our clients with a more specific and more localized perspective.

As home prices continue to decline, and with them the ability of many homeowners in distress to liquidate their homes once they can no longer afford their mortgage payments, now it is more important then ever to understand your short sale options.

As a Certified Distressed Property Expert (CDPE), I am trained in assisting homeowners in distress in Maryland and can help them understand their various alternatives in these dark times.

My ultimate objective is to help my clients avoid foreclosure and potential bankruptcy while preserving credit history and perhaps even their dignity!  

My team’s success rate is 87% and under two months from contract to short sale approval.

Here’s how my team of short sale experts was able to assist yet another local homeowner:

Do not let your home go to foreclosure. Short Sale is a great option.

3BD/1.5BA, 2-Story Single Family Home in Annapolis, MD

Listed on October 7, 2010

Contract ratified on January 10, 2011

Short sale approval received: March 8, 2011

Settlement occurred on March 31, 2011

Sales Price: $380,000

Total Time from Contract to Approval: 33 days

*Seller’s lenders agreed to take a loss of approximately $100,000 to make the transaction happen while waiving deficiencies.

If you are a homeowner behind on your mortgage, facing foreclosure, or simply wanting to learn about the short sale process, contact us today – we can help!

This week, you’ll discover how a distressed property is sold by a short sale Realtor in Maryland.  The intricate differences between these two types of distressed property transactions account for the large disparity in their respective success rates.

Understanding the Short Sale Process

A short sale may become necessary, when the current value of the home is below the outstanding debt obligations on that home, for the homeowner who is either in current or imminent default.  Before proceeding with a short sale, a homeowner should explore home retention alternatives such as loan modification.  If those options have failed or are unavailable, short sale may be the best option.

The seller, in order to qualify for a short sale, must meet the following three criteria:

1. Must have a verifiable financial hardship.  These may include unemployment or decrease in income, divorce, death in the family, military deployment, amongst others.   Doing a short sale simply because the property values dropped and the home owner no longer wishes to keep the home is significantly frowned upon and may lead to unforeseen results.
2. Must have a cash flow shortage on monthly basis.  Potential short seller will be required to provide a financial worksheet with a detailed breakdown of income and expenses.  If the home owner is still in the black after all expenses and debt obligations, even after the drop in income, the short sale might be thrown out by the lenders.
3. Must be insolvent.  During the evaluation process, home owner’s lenders will inquire about any bank and retirement accounts short sale seller has.  Needless to say that attempting to short a bank $50,000 while maintaining $300,000 IRA account will make seller’s case very difficult.

It is absolutely essential for the seller to understand and fulfill the above mentioned conditions prior to moving forward with listing a short sale with a local real estate broker.

In a typical short sale, the seller and their short sale Realtor determine the list price of the home.  The lender is not involved in the process yet and therefore has no input on the list price.  There are few exceptions, however.

If the seller has a VA or FHA loan or qualifies for a HAFA program, the short sale process works differently and the lender is the driving force behind the list price of the property.  For the purposes of this column, we’ll omit these potential differences as by far most of the short sales follow the “typical” path.

As in a normal transaction, the buyer submits an offer to the seller.  Seller is free to negotiate the terms of the offer with the buyer as needed.   Once everything is ironed out, the buyer and seller ratify the contract which must have an addendum requiring approval from a third party, seller’s lender(s).

A common mistake made by short sale sellers and their agents is to under-price the home, receive multiple offers and take them all with the notion that the bank will review them all and pick out the one they like best.  Lenders do not want to see multiple offers.  They want to see just one – the best one in the eyes of the seller.

A short sale package including the ratified contract, preliminary HUD-1 statement, seller’s hardship letter, financial information, and other documents is sent to the seller’s loan servicer(s).  It is usually done by fax and depending on the size of the institution may take up two weeks to appear in their system.  It is very important to follow up with them constantly to make sure that they indeed received it especially given the thousands of short sales that might be in the system at the same time.

Once received by the servicer, the short sale package will usually be given a processor to make sure that the package is complete.  Sending in an incomplete package will delay its processing.

A complete file then goes to a negotiator who, once again, reviews all of the documentation, and orders a broker’s price opinion (BPO).  The BPO, assigned to a real estate agent not involved in a transaction, serves as an impartial valuation of the property in the eyes of the lender.  After all, the negotiator may be located in Denver or San Diego and has no knowledge of Maryland real estate.  He will not take the seller’s or buyer’s word for what the property is worth given the existing conflicts of interest.

Provided that the BPO comes lower than, or in accordance with, the agreed upon purchase price by buyer and seller, the parties involved may breathe a sigh of relief.  If it comes in much higher, the deal is surely heading for failure.  By doing BPOs, the lenders want to make sure that the property is being sold for fair market value and is not being given away.

The process from short sale package submission through BPO receipt may take from three weeks to two months depending on the servicer.  Constant follow up on behalf of the seller and/or his real estate agent is a must on weekly basis.

If the negotiator determines that the seller qualifies for a short sale and the home is being sold for a fair market value, they will issue a short sale approval letter with stipulations imposed on both buyer and seller.  These may include the date by which the lender must receive funds, a promissory note the homeowner must sign in order to be released from the mortgage obligations, and what may happen to the deficiency resulting from a short sale.  The short sale approval letter serves as the third party approval required to move forward with settlement. 

So is it really that easy?  Absolutely not.

Short sale transaction, by nature, is very sensitive to the imperfections of its participants.  One wrong move by any of the parties involved and the deal is gone, or worse yet, can hang in short sale obscurity for months and months without concrete results so needed by both the anxious buyer waiting for their dream home and the disappointed seller potentially hanging by a thread away from foreclosure.

What are some of the mistakes made by the participants?  What can be done to overcome some of the difficulties and the delays that go along with a short sale?

First off, a seller in distress must discover all of his available options.  Short sale is not the only choice a homeowner in foreclosure has.  A real estate professional or an attorney must be consulted before it’s too late.  If short sale is the correct option, the seller should interview and hire a real estate broker who is a short sale specialist.  After all, an internist does not perform open heart surgery on her patients.  She sends them to an expert specializing in that field.  A good short sale listing agent can make a huge difference in the success of the transaction.

Incorrectly pricing the home can also lead to decreased chances of success.  Overpricing it to show the lender that an attempt was made to recover as much of the loan balance as possible can often lead to sellers chasing the market down and wasting valuable time that they might not have.

Under-pricing the home to make sure that offers come in quickly usually backfires as well.  A $100,000 offer on a $200,000 home will do no good to both buyer and seller after the servicer receives their own BPO and realizes that they are getting low-balled.  Time will be wasted with nothing to show for it.

The goal should be to price the property correctly for the market and for home’s condition.

Submission of an incomplete short sale, as mentioned above, is also a sure way to lose valuable time.   Sellers and their agents must make sure that all of the supporting documents are in place.  Short sale processors and negotiators are looking for ways to decline short sales.

Real estate agents working with short sales are constantly surprised by the differences in their own analysis of the value and in turn the listing price and that of the BPO agent assigned by the lender.  When asked “Did you meet the BPO agent at the property with information and comparables supporting your view?” the answer is usually “No”.  Performing appraisals and BPOs is not a science, it’s an art.  BPO agents must be met and shown how the list price was determined.  This is the only chance that the seller’s side gets to influence one of the most important short sale success factors.

Buying a short sale property can also be improved by buyers and their brokers learning about the transaction before submitting an offer.  Is the listing agent an expert short sale realtor?  Is buyer’s agent familiar with the short sale process?  How many and what kind of mortgages does the seller have?  Is the home correctly priced?  If these questions are fully answered and to buyer’s satisfaction, this might be a good opportunity to buy a short sale.  If not, beware of the consequences.

Even with all of the difficulties accompanying short sales, it is clear that they are here to stay given the struggling economy and declining real estate market.  Increasing the ratio of successful outcomes is a priority for everyone involved: the seller whose priority is to avoid foreclosure, the lender who understands that in a short sale the recovery rate is higher, and the buyer who simply wants the property for primary residence or as an investment.  In today’s market, this is a natural win-win-win scenario and with proper education and correct processes in place success can and will be achieved.

After all, do we really have a choice?

Do you have any real estate or distressed property related questions? Do want them answered by an expert Maryland short sale realtor? Email them to Vlad@BaltimoreRealEstateExpert.com.  Selected questions and answers will appear monthly.

The number of closed listings in the Baltimore Metro area in October 2012 held relatively steady compared to the same time period last year and, as expected, was lower than in September 2011. 1,611 homes exchanged homes in October 2011 as opposed to 1,620 in October 2010. There were 1,873 sold homes in the region in September of this year.

Baltimore County was the only jurisdiction in the Baltimore Metro area that saw a significant increase in sales on year over year basis with over 20% rise in closed sales. Other areas either held steady or saw a drop in activity.

Newly pending listings increased dramatically in the Baltimore Metro area. Whereas there were only 1,839 homes that went under contract in October 2010, there were 2,210 newly pending listings this October. This phenomenon could be attributed to the rock bottom interest rates causing the buyers to enter the market.

There were 3,247 new listings that came on the market in October 2011 compared to 3,769 during the same month of 2010 and 3,234 in September of this year. The housing inventory decreased from 11.2 months to 9.5 months since October 2010 and given the high numbers of currently under contract listings should continue to slide over the winter months.

Median sold price decreased by about 8% in the Baltimore Metro area compared to October 2010 and by over 3% since September to $219,000. Out of the six jurisdictions comprising the Baltimore Metro area, only Carroll County did not see a decrease in the median sold price in October 2011 (0.8% increase). Anne Arundel County saw the biggest decrease at 8.3% year over year.

182 properties listed by short sale agents closed in October 2011 – the highest level since June 2010 – while 375 short sale listings went under contract. 2,313 new short sale properties came on the market last month in the Baltimore Metro region. This figure represents the highest number thus far of newly listed short sales in the area.

We can expect this trend to continue as this type of distressed transaction gains more and more popularity and acceptance with both the homeowners facing foreclosure and with their lenders. If you’re a homeowner in distress and would like to learn how to qualify for a short sale, please contact us today.

Short sales continued to be a relatively small portion of overall real estate activity in Howard County, including Ellicott City and Columbia, during 2011.

According to data from MRIS, Inc, out of 1,996 sold homes in Howard County through September, 151 of them, or 7.5%, were listed by short sale realtors. During the same time period, 166 homes were taken through foreclosure and sold by the lender for about 8.3% of the total sales numbers.

There are many homeowners in Howard County who are in need of short sale help in order to avoid foreclosure and the dire financial circumstances that go along with it.

With the average home’s sales price in the neighborhood of $400K, even a small decline in average prices can force many homeowners under water. Combine that with a financial hardship such as a divorce or unemployment and we have a recipe for a disaster regardless of the demographic composition of the area. Even a small pay decrease or increase in other life expenses can force a homeowner in areas such as Ellicott City, Columbia, and even Clarksville, to seek short sale help.

As an expert short sale Realtor, I am here to help home owners in Howard County and throughout the state of Maryland to evaluate their options in a potential pre-foreclosure situation. My team and I will educate you on the short sale process, will help you understand your negotiating leverage, and help you learn everything you need to know about how to do a short sale . We have the short selling expertise and know how to deal with the lenders to arrive at a quick and efficient solution.

If you are a homeowner in distress and would like to learn more about how to short sale your property, please contact us right away. Do not delay this conversation. It can save you thousands and thousands of dollars and hours of worrying and anxiety that comes with pre-foreclosure uncertainty. Our main goal is to keep you out of the 8.3% and the ranks of the foreclosed.

Don’t wait, contact us today!

What is behind the recent wave of contract cancellations in the real estate market?

Although there is a myriad of potential reasons behind many of today’s buyers not following though on their promises to buy, most of them are legit and are probably unavoidable.

As your Maryland Short Sale Realtor, I will be presenting the major reasons for contract cancellations in today’s real estate market, in a three-part series right here on my Maryland Short Sale Expert blog.

The first major cause of contract cancellation is the Buyer failing to obtain financing.

There is still a large gap between the prequalification for financing process and the actual financing approval process. It is true that the lending guidelines have changed drastically in the past 3 years and that only the truly qualified borrowers are given loans. However, there are still loan officers and mortgage brokers that issue prequalification letters without verifying income, employment history, assets, etc. Most of the time, they take a verbal verification and perhaps run a credit report.

A pre-qualification letter is enough to submit an offer on a home and is enough to get it accepted. When the loan underwriter review the file and finds, for example, that the buyer, although is a W-2 employee, wrote off a “few” unreimbursed employee expenses thus reducing buyer’s overall income required for mortgage qualification, the situation changes significantly.

In most cases, the buyer still wants to buy the home and the seller wants to sell but without a mortgage, it’s simply not feasible. Financing contingency in the contract of sale usually prevents the seller from holding buyer’s feet to the fire.

Although somewhat isolated from the downturn in the economy, Annapolis area still has a fair share of distressed properties including short sales.

In the first 6 months of 2011, there were 43 homes, according to data collected from MRIS, Inc, sold by Annapolis short sale realtors with 61 currently active on the market.
In comparison, there were 190 closed short sales during the same timeframe in Baltimore City with well over 500 actively marketed by short sale agents.

The drastic differences between Annapolis and Baltimore are not surprising given the concentration of housing and differences in demographics. The short sale process in itself is somewhat different between the two as well.

When considering a short sale, homeowners in Annapolis must discuss their options with a short sale specialist who knows and understands the Annapolis area.
Contact me today and I will help you make an informed decision.

For short sale buyers considering a purchase, in both the Annapolis and Anne Arundel County as a whole, short sales make up about 8% of total sales level – this is expected phenomena for a relatively stable region.

When looking at the sales price differences between short sales and traditional transactions, it is clear to see that short sales, at least in the Anne Arundel County, do pose good buys and are sold at a discount.

For example, the average sales price in June 2011 for a non bank-mediated (traditional) sale was almost $380,000. Whereas, the average prices for a short sale was just over $265,000. That’s over 30% difference.

Regardless of whether you’re looking to buy or sell a short sale property in Annapolis or anywhere else in Anne Arundel County, it is important to work with a successful short sale expert who understands the nuances involved on both sides.
Contact me today and let my short sale knowledge and experience work for you!

As published on patch.com

Plan provides $40 million in federal assistance to continue fighting foreclosures in Maryland.

Dear Vlad,
I just received my Baltimore County property tax reassessment and my home’s value went down by over 20%!! What does that do to my home’s value? Especially considering the fact that I was thinking of selling my home in the near future. Will my tax payments go down now?

Thanks,
Greg from Pikesville

Thank you for your questions Greg.  There are thousands of homeowners in our State that I am sure are wondering the same thing.  Both of your questions are somewhat “loaded” and will require some in-depth explaining on my part.  Let me tackle your last question first.

Will your tax payments go down?

It depends…

The State of Maryland re-assesses the value of each home every three years and the new value determines the amount of subsequent property tax bill.  That valuation will be attached to your home for the next three years unless you choose to appeal it in during that timeframe.

So if your assessment decreased, as you say by over 20 percent, you should expect your property tax bill to decrease as well.  However, it does not mean that your property tax payment will go down.

Let me explain further.

Let’s say that you purchased your home in 2008 when the market was still somewhat strong and at that time, the State assessed your residence at $500K.  Let’s also assume that you live in Baltimore County with a property tax rate of about 1.2% and you’re on well and septic and are not required to pay additional water and sewer fees that are included on the property tax bill for those of us that use these public services.

In that case, your 2008-09 property tax bill would be for approximately $6,000 ($500K x 1.2%).  So if this year, your value in the eye of the State is only $400K, your corresponding tax bill that will come out in early July will about $4800.  If this is the situation that you find yourself in, your property tax payments will actually decrease.

Now let’s assume that you bought your home in early 2005, right before the real estate boom, and at that time your home was valued by the State at $300K (please notice that we’re not discussing your purchase price in any of these scenarios).  That means that at that time, your tax bill was approximately $3600.

Between 2005 and 2008, you, just like the rest of the homeowners in the region, enjoyed significant appreciation of their real estate and probably when the $500K assessment came out in 2008 had no objections that your home was indeed worth that kind of money. 

Did your property tax bill increase from $3600 to $6000 in 2008?  It did. 

Your payments, however, did not go up due to the infamous Homestead Property Tax Credit that limits the amount our property tax payments can rise for owner occupied properties and phases in the increases over a period of time.  It’s very likely that, although your assessment almost doubled, your actual payments went up only slightly in 2008 and in the following three years due to the Credit.

In this situation, your new assessment of $400K might not reduce your actual payments at all since you might only be paying property taxes on a lower, phased-in amount.  In some cases, depending on the effect of the Credit and the valuation fluctuations, you might be paying more than you did last year.

Now let’s look at your first part of the question.
What does that do to my home’s value? Especially considering the fact that I was thinking of selling my home in the near future.

The value of your home, Greg, is an elusive concept.  Homeowners are constantly bombarded with different “valuations” from appraisers, the State, real estate brokers, websites such as Zillow, etc.  Most homeowners, furthermore, tend to overestimate the value of their own properties given their intricate knowledge of the home.

My determinant of value is simple: it is how much a buyer is willing to pay for it at any given time.

Thus, it is the buyer’s opinion of your home’s value that you, as a potential seller, should be concerned about and that value directly translates to an objective standard – currency.

The question is how much influence does the State’s assessment of your home have on a potential buyer’s opinion of value.

An astute buyer, and seller for that matter, will understand that employees of the State, when re-assessing your home, did not actually come inside the property during the process.  They might have only looked at the tax records for the size of your home and compared it to other homes in your area that have sold over the past year.  They might have adjusted for the square footage difference and the fact that you might have more garages than your neighbors do.

They probably did not take into consideration that you just replaced your kitchen and put in brand new stainless steel appliances or finished your basement and added a full bathroom there.  In the eyes of the State, your home might be worth the same as your next door neighbors that has no updates but is identical in size.

In the eyes of the buyer, however, your home is worth more than the neighbor’s.  You see Greg, the buyers will go from home to home and actually pay attention to the differences between homes beyond the square footage and number of garages.  They will be able to determine the true value of your home because they will have a lot more in depth knowledge about it than the State.

Furthermore, the State looks at a year of sales at once.  As we saw in 2010, there could be three different markets in the same year – hot, not so hot, and really slow.  Buyers tend to look back less than a year and at much more recent comparables.  Also, the buyers will look at active competition whereas the State only looks at closed sales.  At the end of the day, it is possible for the State to overestimate the value of your home given the downward market.

What’s to prevent a buyer from using a lower State assessment in negotiations with the seller?  Nothing!  It can be a great tool for a buyer.  You as the seller would need to point out the logic proposed above to preserve your bottom line.

I hope that I answered your questions to your satisfaction Greg.  If you have any additional ones, let me know.  As your Baltimore realtor, I am here to help!

In 2009, Annapolis short sale agents listed 197 homes in the area.  Out of those, only 67 have gone to settlement at the time of this blog entry for a success rate of only 34%.

Given the nature of the short sale process, it is too early to evaluate the entire 2010.  However, we can at least look at the first six months of the past year.

From January through June of 2010, 82 short sale sellers put their homes on the market.  To date, only 25 of them settled, or 30%.

There were 923 total sales in the Annapolis area in 2009 with short sales accounting for over 7% of the transactions.

Through the first six months of 2010, 529 transactions occurred in the area with short sales making up just under 5% of the total.

I expect the short sales in Annapolis to increase, despite the somewhat affluent population, in 2011 given the current state of the economy and resetting ARM mortgages.  Although the actual interest rates might remain relatively stable, many of homeowners that stretched to buy their expensive homes in the area and got themselves into interest-only loans might see their required mortgage payments go up as much as 30% with the mandatory repayment of principle.

For those who simply can not afford the new or current payment, short sale can be a great option.  There are many benefits of doing a short sale rather than walking away from a home.

If you’re a homeowner in distress, please call us today at 443-660-8032 for a free, no obligation consultation to learn about your options.  You can not afford to wait!

Source of data: Multiple Listing Service of MRIS, Inc

The following column detailing the short sale process and REO transaction appeared in the January 4, 2011 edition of Essex.Patch.com.  To go directly to the source, please copy and paste this URL into your browser: http://essex.patch.com/articles/process-plays-role-in-success-of-short-sale-bank-owned-home-sales

As we discussed in the last week’s column, short sales and bank-owned homes, although similar in overall listing volume, differ significantly in their respective outcomes. 

In 2009, according to the data from MRIS, Inc, only 14 percent of bank-owned homes that hit the Multiple Listing Service (MLS) failed to get to settlement, where as, 67 percent of short sales, met the same fate and likely contributed to even more bank-owned inventory in 2010 and beyond.

Why such a big discrepancy in the failure rates?  Why are bank-owned homes settling quickly and easily while most short sales are doomed from the start?

Short sale process differs significantly from that of a bank-owned property on the market and, when combined with the inability of market participants to properly adjust to these differences, likely accounts for the increased pain for both short sale buyers and sellers.

Bank-Owned Property Sales Process

Typically, when a homeowner defaults on a loan and is successfully taken through the foreclosure proceedings by the lender’s trustee, the property’s first defining moment occurs at the foreclosure auction that takes place on courthouse steps.  There, anyone can bid on the property and lender’s sole goal is to recover as much of the outstanding loan amount as possible.  In today’s market, however, it is not an easy feat given the fact that most homeowners that default now are upside down on their mortgages.

Most properties do not sell at the auction and the lenders are forced to take them back.  The home now becomes a part of lender’s real-estate owned (REO) portfolio and, once the foreclosure is ratified by a judge, is physically owned by the lender.

Bigger, national lenders are not equipped to handle their swelling REO portfolios and usually hire third-party vendors known as asset managers whose specialty is the disposition of bank-owned inventory.

Once the home is transferred to an asset manager, he assigns a local real estate broker to handle the property.  The broker is usually responsible for evicting anyone who might still be residing in the property; for hiring contractors to do clean up and needed repairs; and pricing and marketing the new asset.

Before a bank-owned home is listed on MLS, it goes through a vigorous evaluation process.  The assigned real estate broker will prepare a broker-price opinion (BPO) based on property’s condition, recent sales, and current competition.  The asset manager may request a separate valuation from other local brokers or licensed appraisers to validate listing broker’s assessment of current fair market value.

Although the lenders would like to recover as much of their losses as possible, the fair market value is usually the driver behind the initial list price of an REO property when it hits the MLS.

Once on MLS and syndicated to hundreds of Internet sites, it is available to buyers and their real estate agents.  A prospective purchaser and her agent can now make an appointment to see the property just like they would any other available home.

The offer process is also fairly similar to a non-distressed transaction. The buyer’s side submits a standard contract to the listing agent with any necessary bank addenda who in turn submits the offer, usually via an online portal, to the asset manager.

The asset manager reviews the offer and evaluates it based on the net to seller, type of financing, settlement date, and the amount of earnest money deposit, amongst other factors.  Buyers of REO properties should keep in mind that although the bottom line to seller is a very important factor in lender’s decision to accept or decline an offer, it is not the only one.  There are other variables in play.

Once the offer is accepted and the contract is ratified, the parties move toward settlement in almost the same manner as in a regular transaction: buyer secures financing, goes through the home inspections, if any, all while title-work is prepared by an attorney. 

There are two main reasons for a potential derailment of an REO transaction. 

First, if the foreclosure paperwork was not prepared properly by the trustee when taking the property through foreclosure process, clean title might not be able to pass from seller to buyer.  Given the high number of foreclosure filings, more and more properties are mishandled by foreclosure attorneys working on behalf of lenders.  

Often times, title defects force the lenders to cancel the contract with the buyer and take the property back to auction.  Needless to say, it is essential for any buyer of a bank-owned property to work with a title company that’s knowledgeable and experienced in handling REO transactions.

And then there is the home inspection.

Bank-owned homes are always sold as is, possibly with inspections.  Neither the lender nor its representatives have ever occupied the property and thus can not attest to the property’s condition.  The lender is also exempt from providing the buyer with either a property disclosure or disclaimer – a task mandated by Maryland law for other sellers.

Many buyers of REO properties, however, go into the transaction with the notion that once the home inspection is done, they will be able to ask the seller to do repairs or compensate the buyer based on the findings.  That happens very rarely and, based on my conversations with local REO listing agents, accounts for most of the failed deals. 

Buyers should be prepared to take the property in its current condition or, if the inspection reveals serious structural or mechanical issues, to walk away from the deal.

Even with the two main hurdles, potential title defects and negative results of the home inspection, buying a bank-owned home is a fairly straight forward process that mimics that of purchasing a regular home from a conventional seller.  Thus, it is safe to expect a high success rate when involved in this type of transaction.

Unfortunately, it is not the case when it comes to the short sale process which we will dissect in the next week’s article.  Stay tuned.

Do you have any real estate or distressed property related questions? Do want them answered by a Maryland short sale expert? Email them to Vlad@BaltimoreRealEstateExpert.com.  Selected questions and answers will appear monthly.

Title: The 7 Most Dangerous Short Sale Myths

Synopsis: This free report sheds light on the recent myths that have developed about the Short Sale process. These myths range from your bank wanting  to foreclose on your home, buyers not being interested in Short Sale properties, and dispelling the stigma associated with listing your house as a Short Sale.

Title: Understanding HAFA: New Alternatives Are Available

Synopsis: This free report explains the federal government’s current initiative to combat millions of foreclosures sweeping the nation by putting into effect the Home Affordable Foreclosure Alternatives Program, or HAFA. Written exclusively for the homeowner, this report provides a straightforward explanation of HAFA and what it means to you.

Have More Questions?

Your Baltimore Real Estate Expert, Vladimir Kats, is featured as a columnist for www.Essex.Patch.com, a community-specific news and information hub providing comprehensive and trusted local coverage.

This week’s article dispells common myths against listing your home during the holidays, as well as reasons why you should keep your house on the market during the year’s later months. For more information, please copy and paste this URL into your browser: http://essex.patch.com/articles/to-list-or-not-to-list

To List or Not to List?

With the holiday season 2010 officially upon us, many home sellers are grudgingly withdrawing their homes from the market with the idea of relisting them in January or perhaps in the spring, while many others are making a conscious decision to delay the initial listing of their homes until after the holidays.

After all, who buys during the holidays anyway, right?

Wrong.

Here are just some of the reasons why, as described in the seminar series “Thriving in a Shifting Market” by Keller Williams Realty, Inc, it is beneficial to keep your home on the market or to go ahead and hire a real estate broker right now:

• Selling your home during the winter months should allow you the luxury of being a non-contingent buyer during the spring when more homes will hit the market. If the pricing trends continue, you should be able to purchase a new home for less money given your newly discovered negotiating leverage

• If you live in an area affected by BRAC (Base Realignment and Closing), listing now makes even more sense. A lot of transferees heading to Fort George G. Meade or Aberdeen Proving Grounds start their jobs in January and must have housing beforehand. You need to be on the market in order to capture that buyer segment.

• Some buyers must be in their new homes by end of year for tax purposes. This is especially true for investors who need to spend their money before Dec. 31.

• Buyers have more time to look for a home during the holidays than they do during the workweek.

• Buyers are more emotional during the holiday season and are more likely to pay your price.

• Homes show better during the holidays.

• The supply of homes tends to increase in January and thereafter. Given the anticipated decline in overall real estate activity in 2011, it will mean less demand for your home after the holidays.

• Serious buyers have fewer houses to choose from during the holiday season.

• Finally, people who look for homes during the holidays tend to be more serious buyers in general.

Desperate attempts by home sellers to time the market usually backfire. 

In my professional experience, and especially in a down market like we are currently experiencing, I have seen some of the highest sales within certain subdivisions occur during the winter. 

In the spring, when many of the home owners decide to list at the same time, they end up chasing the market down while competing amongst themselves for that elusive buyer. 

Delaying to list your home during the holiday season may end up costing you tens of thousands of dollars.   Can you afford it?

Do you have any real estate related questions? Do want them answered by a Baltimore real estate expert? Email them to Vlad@BaltimoreRealEstateExpert.com.  Selected questions and answers will appear monthly in this section of Essex.Patch.com.

Here are some insider ideas and suggestions to increase the probability of selling your home on today’s market!

Tips include using plants in transitional areas, creating a “game plan” to get out of the house for last-minute showings, creating a mood through decorating tips, and increasing your home’s curb appeal with minor exterior touches.

Please read our report on 47 Easy Ways To Make Your Home Sell Faster to get the entire list and let’s get it SOLD!

As always, feel free to give us a call at (443) 660-8032 with any and all of your real estate related questions!

Mdshortsaleexpert.com offers many free reports for people looking to learn more about the real estate market and short sales, in the Baltimore region and Maryland. Here’s one of our free reports.

Title: Foreclosure vs. Short Sale: Homeowner Consequences

Synopsis: This free report offers an easy-to-read table comparing Short Sales and Foreclosures as options for your financial future. I would suggest printing this table out and referring back to it when considering your own situation.

For more details, please download our free Foreclosure Vs Short Sale Report.

Have More Questions?

Call (443) 660-8032 to discover if a short sale is right for you. We offer a free, no obligation consultation to help you get back on the road to financial recovery, today.

Title: Short Sale and Deed-In-Lieu of Foreclosure : Dignified Solutions

Synopsis: This free report will define a foreclosure, short sale, and deed-in-lieu of foreclosure. Along with these important definitions, the report goes on to explain the tax implications with each option, the quickest solution, aspects of these options homeowners should look out for, as well as qualifications for each option.

Have More Questions?

Mdshortsaleexpert.com offers many free reports for people looking to learn more about the real estate market and short sales, in the Baltimore region and Maryland. Here’s one of our free reports.

Title: Short Sale vs. Foreclosure

Synopsis: In a short sale, the lender agrees to accept the sale amount for the property, even if it is for less than the amount owed on the mortgage. The consequences of a foreclosure far outweigh the consequences a short sale in regards to procuring future loans, the effect on your credit report and future employment, as well as possible deficiency judgments.

A short sale offers an opportunity to strengthen your future financial stability as well as provide you with some peace of mind.

For more details and to view the full report, please follow this link.

Have More Questions?

Call (443) 742-1595 to discover if a short sale is right for you. We offer a free, no obligation consultation to help you get back on the road to financial recovery, today.

Thank you for your visit and comments. My goal is fill this blog with useful information about the real estate market including news and events, stats and market updates, and of course my good ol’ opinions. This task will be imposible to accomplish without feedback and comments from my visitors. You’re not just an audience, you’re contributors as well!!!