However, as most of us expected, we saw a drop in the number of pending sales of previously-owned homes by 32 percent from April (nationally, we saw a 16 percent drop around the U.S.). But because of the backlog of signed contracts, the number of existing homes sold in May rose by 10 percent.

I was reading an article on Gazette.net about how, despite the drop, the Maryland housing market is improving. Kenneth Wenhold, director of the division of national housing data and consulting firm Metrostudy, said that Maryland has one of the healthier housing markets. It also helps that we have a lower than average unemployment rate than the rest of the U.S., and a low level of housing inventory and vacant lots. Plus, mortgage interest rates are staying very low for the time being, which means owning a home is still very affordable.

If you’re thinking of moving up to a larger home, this is the time to buy. If you’re a first time home buyer, what are you waiting for? It’s time to call a Baltimore Realtor.

The average 30-year fixed-rate mortgage was 4.91 percent in the week ending Nov. 12, the lowest in five weeks. A year ago, 30-year mortgages were averaging 6.14 percent.

A 15-year fixed-rate mortgage averaged 4.36 percent in the week ending Nov. 12, remaining below one-year adjustable rate mortgages, which now average 4.46 percent.

“This [mortgage rate decline] comes at a time when house price declines are moderating and consumer demand for prime mortgages at commercial banks has picked up,” said Freddie Mac chief economist Frank Nothaft in a recent Baltimore Business Journal article.

That means these extraordinarily positive conditions for home buyers aren’t likely to last much longer.

There’s yet another reason for Baltimore home buyers to act. The economic stimulus bill that President Obama signed in February funded a $8,000 tax credit for first-time homebuyers through Nov. 30. Largely as a result, first-time buyers accounted for a record 47 percent of all home purchases nationwide so far this year, according to the National Association of Realtors.

This month, the President signed a measure to extend the credit to homes that are under contract by April 30, 2010, and to create a $6,500 tax credit for owners of existing homes who buy a new principal residence. (For details, see my recent blog posts, “Now Current Homeowners and More First-Time Buyers Can Get Tax Credit” and “12 Important Things to Know about the Home Buyers Tax Credit“)

Aided by the home buyer tax credit, the outlook for housing and the economy appears headed for a sustainable recovery, NAR said. Existing-home sales are expected to total 5.01 million in 2009, a gain of 2 percent over last year, and then are forecast to rise 13.6 percent to 5.69 million in 2010, according to NAR.

Don’t wait any longer. The 30-year fixed-rate mortgage will probably average 5.3 percent in the fourth quarter, rising gradually to 5.8 percent by the end of next year, NAR said, adding that its housing affordability index will set a record in 2009, averaging 30 percentage points higher than 2008. Affordability will decline from record highs next year but will remain at historically attractive levels for home buyers.

For first-time home buyers — buyers who haven’t owned principal residences for three years before making the purchase — the tax credit is equivalent to 10 percent of the purchase price of a home, but with a cap of $8,000. Home buyers must have a signed sales contract before May 1, 2010, but they have until the end of June 2010 to actually close the transaction. The original credit applied to those who bought a home on or after Jan. 1 and before Dec. 1, 2009.

Even better, the new law raises the annual income limits to $125,000 from $75,000 for singles and to $225,000 from $150,000 for married couples. With those income limits, it’s hard to imagine any first-time home buyer who would not be eligible for the credit.

That’s the good news. The really great news — at least to this Baltimore Realtor® — is that current homeowners are now eligible for a tax credit of up to $6,500. To claim their credit, current owners must buy a primary residence after living in their current home for five consecutive years over the previous eight years. They can claim the credit on homes purchased between Nov. 7, 2009, and the end of April 2010, which means they need a signed sales contract before May 1, 2010, but they have until the end of June 2010 to close the sale. The income limits for current homeowners are the same as those for first-time home buyers.

Both current homeowners and first-time buyers, the tax-credit program applies only to primary residences purchased for less than $800,000. Buyers who use their new property as their primary residence for three or more years after the purchase won’t have to pay back the credit. And buyers can claim the credit on their 2009 taxes, even if they bought their new home in 2010. They just have to file an amended return.

Home buyers and Realtors should note that the new law requires documentation — such as a copy of the buyers’ HUD-1 Settlement Statement — to prove that the sale has closed. In addition, it also bans anyone younger than 18 years old from claiming the credit (one article I read said a 4-year-old claimed the tax credit under the original program).

To help you get started, here are the 12 things home buyers need to know about the tax credit:

• A first-time home buyer is defined as an individual or married couple who has had no owernship interest in a principal residence in the United States for three years before making the purchase for which they plan to claim the tax credit.
• Existing homeowners are those who have lived in their current home for at least five consecutive years over the previous eight years.
• For first-time buyers, the tax credit is equivalent to 10 percent of the purchase price of a home, up to a maximum of $8,000.
• Current homeowners are eligible for a tax credit of up to $6,500.
• The tax credit applies only to primary residences purchased for less than $800,000.
• For both first-time buyers and current owners, the annual income limits for receiving the full credit are a maximum of $125,000 for singles and $225,000 for married couples. Above those levels, the credit begins to phase out. To calculate the credit for buyers making more than those maximums, subtract the amount of the initial phaseout threshold from total earned income and divide the answer by by $20,000. Then multiply that ratio times the maximum amount of the credit. For instance, an individual who earned $135,000 would get a $4,000 first-time home buyer credit ($135,000 minus $125,000 = $10,000. $10,000 divided by $20,000 = 1/2. $8,000 times 1/2 = $4,000.)
• To claim a credit, both first-time buyers and current owners must have a signed sales contract before May 1, 2010, but they have until the end of June 2010 to actually close the transaction.
• For first-time buyers, the credit applies to purchases made on or after Jan. 1, 2009. For current owners, the purchase must have been made no sooner than Nov. 7, 2009.
• Buyers won’t have to pay back the credit if they use their new property as their primary residence for at least three years after the purchase.
• Buyers can claim the credit on their 2009 taxes, even if they buy their new home in 2010. They just have to file an amended return.
• To help prevent fraud, the legislation requires taxpayers to provide documentation — such as a copy of the buyer’s HUD-1 Settlement Statement — proving that they purchased a home. It also requires taxpayers to be at least 18 years old to claim the credit.
• Members of the military get a later deadline and will be allowed to sell their home without having to repay the credit if they are deployed to another location within three years of purchasing the home.

This may seem complicated at first, but it’s something we’re dealing with every day. If you have any questions, or want some help finding your way through this maze, give us a call, and we’ll be happy to help.

Yes, if….

Yes, if you can resist the temptation to pounce on the low asking price. Yes, if you’re willing to do some additional work. Yes, if you have the patience to wait longer than usual to close the transaction. If you’re willing to work and wait, you can get a great deal by buying a short sale home.

First, ask your Realtor to call the listing agent to find out if home is a short sale. If it is, you should be aware that any offer you make must be accepted by the lender, not just the seller. You should also be aware that the seller need not be in default (i.e., to have stopped making mortgage payments). The lender may consider a short sale if the seller is current but the home’s value has fallen. The seller may owe more than the home is worth. So a discounted price might bring the price into line with market value, not below it.

With that in mind, the next step is research. Ask your agent to find out who is in title, whether a foreclosure notice has been filed, and how much is owed to the lender(s). This will help you to determine how much to offer.

Are there two loans? If so, you could have a problem. The first mortgage lender’s position is protected by the second lender, unless the second lender does not want to foreclose. If a seller owes $160,000 on the first and $40,000 on the second, offering $160,000 leaves nothing for the second. The first will need to give something to the second to gain its cooperation.

You’ll need to work with a real estate agent who has handled short sales before. If neither the listing agent nor your own agent has short sale experience, find one who does. An agent experienced in short sales will help to expedite your transaction and protect your interests.

Before a lender will agree to a short sale, they usually have to be convinced that the seller has no equity and is unable to repay the difference between your sales price and the balance of the existing loan(s). You, your agent and the listing agent need to make sure the seller provides the lender a hardship letter that details how the seller got into this financial bind and makes a plea to the lender to accept less than full payment. If the basis for the seller’s troubles is dishonesty or illegal behavior, the lender is very unlikely to agree to a short sale.

After the seller has accepted your offer, submit the offer and supporting documentation to the lender for approval. You do not have a deal until the lender accepts. Send the lender a copy of your earnest money deposit and a letter from your lender saying you’re preapproved for your loan. Your agent should send a list of comparable sales that support the price you are offering to pay.

Make your offer contingent upon the lender’s acceptance. Give the lender plenty of time to make a decision, but do include a specific deadline after which you will be free to cancel. Some lenders submit short sales to committee. Others can make a decision within three months. Get a name and phone number for the appropriate contact at the lender. Don’t send an offer blindly to a department.

The lender will probably negotiate the commission directly with the listing broker, who will then share the commission with your agent. If you have signed a buyer’s broker agreement with your agent, ask the agent to waive the difference due. Otherwise, you might have to pay it out of your pocket. Some brokers feel it is unfair to penalize the agent.

Remember, the lender is almost certainly losing money on the deal. So don’t expect the lender to pay for items that a seller normally would pay for, such as a home protection plan, buyer credits, and inspections for termites or other pests. You will be purchasing the property “as is,” which means no repairs. So it’s critical that you obtain a home inspection and pay for other types of inspections that may be needed. Do not waive your right to obtain these inspections, and make your offer contingent on approving them.

One reason is that Baltimore home sellers aren’t stupid. They know that most buyers will offer a lower price for a for-sale-by-owner (FSBO) house. In fact, nationally, homes sold with the help of a real estate professional in 2006 sold on average for 32 percent more than FSBO sales.

Another reason is that, unless an owner is willing to turn away prospective buyers who are already working with a real estate agent, the owner is still going to pay the buyer’s agent about 3 percent of the sale price.

So where’s the savings to sellers? The fact is, FSBO sellers can easily come away from a home sale with less money in their pockets simply because they didn’t engage a Realtor.

Here are eight more reasons for a seller of Baltimore-area real estate to work with a Realtor:

1. A Realtor knows the market and what people are paying today for homes similar to yours. He or she will work with you to set a competitive asking price for your home. A home priced too high will stay on the market too long. Priced too low and the seller won’t get what he or she could have.
2. Realtors are experts in marketing and negotiation. They focus on showing homes to qualified buyers. They know how to prepare a home, maximize value and provide broader exposure to the market, which are critical to generating multiple bids.
3. Realtors give the seller access to major online marketing resources such as www.realtor.com and other big Web sites that attract buyers. (All listings on Realtor.com must be listed with a real estate professional.) This exposure speeds the buying process by increasing your chances of finding a buyer who matches your needs and isn’t wasting your time just “window-shopping.”
4. Realtors know that the first few weeks of a home’s listing are crucial. They can set things in motion to sell the home as soon as a suitable buyer is located. They help you to close the deal as efficiently as possible.
5. Realtors bring objectivity to the search and negotiation. They act as mediators between the conflicting interests of seller and buyer, aiming to make both parties as satisfied as possible. Realtors understand that a deal has to be a win-win in order for a sale to close.
6. A Realtor can advise you as to which investigations and inspections of your property are needed. He or she can also help you find qualified, responsible professionals to do most of these investigations and provide you with written reports.
7. A Realtor will guide you through the closing process and make sure everything flows smoothly. He or she can assist with negotiating factors, including but not limited to price, financing, terms, date of possession, and often the inclusion or exclusion of repairs and furnishings or equipment. Realtors are skilled in reading contracts and will be sensitive to any fine print that you might dismiss as unimportant.
8. As members of the National Association of Realtors, Realtors must commit to a strict Code of Ethics to protect consumers.

Real estate transactions are complicated and often stressful. Something unexpected almost always pops up. Realtors are skilled at dealing calmly with the complexity of the transaction and at responding quickly to the unexpected. Those and all the other skills and resources of a Realtor can be critically important when most or all of a seller’s assets are on the line.

2.) Get pre-approved for your mortgage before you start. This helps you determine your price range, which will eliminate the heartbreak of finding out you can’t afford the dream home you’ve admired for three months. It also helps your REALTOR® find homes in your range, and gives you some serious bargaining power when you finally make an offer.

3.) Use an experienced real estate agent. See our blog post on the importance of working with an experienced realtorInterview your prospective agent and see if they’ll be a good fit. It’s important to find a REALTOR® who is experienced and will work on your behalf, not the sellers.

4.) Shop around for mortgages. There is more than one bank, more than one mortgage broker, more than one lender. Just because one won’t let you do things like folding repair costs into your mortgage doesn’t mean the others won’t. Find one that will give you the terms and conditions you need.

5.) Foreclosed houses aren’t always a good option. Many times, the previous owner took the attitude of “if I can’t have it, I’ll make sure it’s hard for the bank to sell it,” and seriously damaged the home. Foreclosed homes that are in good condition aren’t necessarily lower in price, and ones that are very low in price usually had some very extensive and expensive damage done to it. In some cases, the banks will lower the price to cover the cost of repairs. See if you can get the repair costs folded into the mortgage.

6.) Use a licensed and accredited home inspector. Don’t get your dad or your buddy to check it out. Get a licensed inspector who has experience in home inspecting and/or construction. Look for problems with plumbing, leaks in the roof, electrical problems, and any old or outdated mechanicals like the furnace and water heater.

7.) Don’t look at flaws as a reason to avoid a house. In some cases, things that need to be repaired or updated can help you get the price lowered. You can ask the seller to pay for repairs, or at least put the repair money into escrow so you can pay for them after the sale is complete.

8.) You could always include the repair costs into the mortgage. This can be important if you’re buying a foreclosed home and trying to pay for damages the previous owner made while they were moving out.

You, as the seller, are thinking, “that’s easy. It took us half a day to paint that room. Why can’t you just paint it after you buy it?”

But buyers are funny creatures (don’t believe me? Wait until you’re buying a home, Mr. and Mrs. Seller. See if you feel the same way), and they’ll drop a house from their list for something as small as the color of paint in a single room.

That’s why staging a home is crucial in the selling process. You need to make it easy for the prospective buyers to imagine themselves in your home. They need to see it as theirs, not yours. You need to stage your home in a way that shows the seller what they could get, and not tax their imagination by working around your home’s personality.

Here are a few easy ways to do this:

1) Spruce up your curb appeal.

It starts the second they pull up in the driveway. Make sure the yard is clean and free of debris. Are the bushes trimmed? Is the yard mowed? Are there little knickknacks out there, like garden gnomes or reflecting balls? You like them, but your buyer may not. And even though you’ll take them with you when you leave, the buyer thinks they’ll have to deal with them.

2) Paint the walls a neutral color.

Not everyone has your flair for the dramatic or your sense of color – but honestly, a purple bathroom? – so you’ll need to tone down some of the more vibrant colors in your home. We hate to say it, but you’ll need to paint everything in a neutral tone. This allows the buyers to imagine their furniture and their stuff in your home. Otherwise, they worry their pumpkin-colored towels and shower curtain will clash with your purple walls.

Cover everything with a primer and then a tan or an off-white finish coat. Use a semi-gloss or flat paint, which hides imperfections in the wall a lot better than gloss paints. If your walls are already neutral in color, paint them again. You may have gotten used to the occasional ding and scratch, but that’s one of the first things the buyer will notice.

3. Put away your knick-knacks.

Just like people will envision their furniture in your house, they’re also thinking about their photos, collectibles, and general stuff. If a lot of your personal things are already out, it’s like a mental roadblock. They can’t envision their family photos on the mantle if 20 of yours are up there. They can’t imagine what their collection of antique thimbles will look like if your marble collection is on display.

Put all your stuff in boxes, and put them in storage. Don’t even put them in the garage, because they’ll have the same issues out there. A lot of clutter makes a room or garage look smaller. You want your house to look as big as possible.

4. Consider hiring a professional stager.

There are professional home stagers who have that time and expertise to do the things you don’t want to or have the time for. Hire one to put your home in order, and let them do what they do best: make your home as attractive as possible to get the highest dollar possible.

One of the most important lessons I’ve learned is the importance of working with an experienced agent, whether you’re a buyer or a seller. An experienced REALTOR® has the negotiating skills needed to help you get the best value for your money.

I remember I was negotiating with a buyer, who was looking at another house with another agent. The other house was a little less expensive, but the agent didn’t know how to negotiate as well. I was able to work with the buyer, showed them the added value of this house, and we ultimately won the sale. It helped the seller sell their home, and the buyer find the home that really fit their needs.

An experienced REALTOR® makes buying a home easier, help you avoid problems, and make sure you’re getting the best value for your money. We know all the ins and outs of negotiating a contract. We have the information about the community where your house is located, including schools, shopping, churches, parks, and even the best coffee shops. We can tell you about how the assessments work, property tax rates, and financing and mortgage information.

Whether you’re moving into a development or buying a custom-built home, an experienced REALTOR® understands the home building process and can show you what separates one builder from the other. We can show you which builders are known for their quality, both behind the walls and what’s visible, which ones pay attention to the little details, and which ones have good customer service.

An experienced REALTOR® also has an extensive network of people who will make your home buying and selling process much easier. We know all the mortgage brokers in town, the title companies, the real estate lawyers, and even the moving companies.

Many people are going online to search for their new homes, which is great. Buyers and sellers are becoming more educated about their homes and the process. Just make sure you find that experienced REALTOR®. When you’re looking for a real estate agent, ask a few questions first:

• How many years experience do they have?
• How many homes do they sell each year?
• Are they part of a REALTOR® team?
• Is this a full-time or part-time business for them?
• Do they have an assistant, or do they try to do everything themselves?

Be sure to ask enough questions and that you’re satisfied with the answers. The benefit will be in the extra money you made or saved in your buying and selling process.