I can’t help but start this post with a kind reminder to some of the “professional” Appraisers out there
If you “serve” Northwest DC and think “Cleveland Park” is actually a Park in Cleveland, maybe it’s best to ask for help.
And no since I know many of you are wodering, “Georgetown, DC” was not named after our previous president and “The Adagio” in Downtown Bethesda is a condo, not a day spa…
Now That We’re Clear….
It is no secret that there were many different factors that contributed to our real estate economic condition, with questionable loans being awarded to potential homebuyers being at the top of the list. This, of course, leaves one to wonder how these loans were ever approved in the first place. While there were many contributing factors that helped make this possible, one is the fact that appraisers had a tendency to “error” on the high side of appraising a property’s value. The era of exuberance almost “promised” increases in home values…this put many appraisers under pressure from some lenders wanting nothing but “the deal to go to settlement”.
In an effort to prevent what many consider to be the unscrupulous practice of inflating home values, Fannie Mae and Freddie Mac have established the Home Valuation Code of Conduct, or HVCC. While the HVCC is not a law, anyone who anticipates doing business with Freddie or Fannie needs be certain to follow these guidelines, which require properties to be appraised by an “independent” appraiser.
This may seem like a good idea on the surface, but many are concerned about the timing of the recently enacted regulations. Why? Quite simply because the HVCC guidelines have added one more hurdle to the process of selling a home, which is already difficult enough in today’s economic climate. Not only does obtaining an independent appraiser make the entire home buying process take a week or two longer to complete, it also increases the costs to the buyer. This is because many lenders must go through an independent appraisal company in order to get the appraisal completed in a timely manner. And hiring an independent appraiser through an agency costs more than contacting one directly. Appraisers say that they are actually making less money, as the third party intermediaries are claiming more of their fees.
It probably also comes as no surprise that the HVCC guidelines seem to have resulted in a downward trend in appraised values. It’s yet another example of how the pendulum continues to swing too far. Rather than erring on the high side (or, as many would argue, a “conservative” side) of the value spectrum, appraisers are well aware of why the system has changed and are downgrading the values of the properties they assess. Exacerbating this problem…appraisers used by these third party companies who are unfamiliar with the markets in where they are making their appraisals. Location, location, location? Only if those evaluating a property understand the nuances of specific markets where they practice. The result? “Underinflated” appraisals and fewer deals going to settlement.
The bottom line is clear: in a time when our country needs to get its housing market moving again, putting more roadblocks on the path toward economic recovery seems to be a bad idea.
If you live in DC and believe in stimulating an especially satiated sector of the Washington DC real estate market, you now have the right to be slightly embittered. The DC City Council has passed a new co-op transfer tax that is set to go into effect on October 1 of this year. For a little background – ownership rights of condos and coops, although seemingly identical, do differ. When “buying” a unit in a coop, you are actually “buying stock” in the building. Sounds a little scary and that’s what keeps/kept many buyers away from coops. But the “stock” is “ownership interest” in your unit. Again, very similar to condo living and rights…but there were definitely some financial advantages when it came to purchasing.
Because you were purchasing “ownership interest” (hence treated like “stock”), your purchase was classified as personal property ownership. Benefits? Because the transaction was not defined as a transfer of real estate, the parties were exempt from having to pay transfer or recordation taxes that are standard with the purchase or sale of condos, townhomes, rowhouses, single family homes, etc.
Under this new tax, however, a coop has an “economic interest” tax (you got me!?), requires the standard transfer tax imposed on “ownership interests in real estate” – that is a 1.1% tax on residential properties sales that are less than $400,000, while sales of more than $400,000 will be taxed at a 1.45% rate. The recordation fee is the same amount and will also apply to all coop transactions.
Is This Stimulous?
One has to wonder about the timeliness of such a tax . Could this be penny wise and pound foolish ? After all, the economy is still struggling to get moving and the real estate market is still sluggish. With its “forgiving” taxation regulations on co-ops, DC was able to draw in buyers who were interested in taking advantage of keeping their costs down. With the changes that are set to take place in October, however, buyers might not consider a co-op transaction in DC to be such a good deal anymore.
I have a wild idea, instead of cutting incentives that could greatly help lower both DC condos and co-op absortion rate, couldn’t we increase taxes cigarettes. Maybe give a few more tickets out to DC cab drivers who I think sometimes try to drive you off the road on purpose.
Of course, one could argue that the buyer of a DC co-op may not be deterred by this additional tax. On a $400,000 purchase, for example, the taxes would be $5,800 at the 1.45% rate. A savvy seller, however, would be wise to drop the price to $399,999, as this price would qualify for the 1.1% tax and would cost about $4,400. Dropping the price by one dollar is certainly worth a $1,400 tax savings! Therefore, once the new tax system is put in place, sellers and real estate agents should be sure to consider the value of the property and the resulting taxes when trying to determine the asking price as well as the price they are willing to negotiate down to.
**(Note: As of the time of this blog submission, the new tax was not totally a sure thing. Although it is in a budget bill passed by the DC Council, the total budget has not yet been approved…So, we’re in a “wait and see” mode on this one. The fact that this proposal has gotten this far, however, would certainly suggest that we can look forward to coops being taxed like other residential properties …. sooner or later..
A longtime Downtown Bethesda resident, I’ve had mixed feelings about The Lionsgate Condominiums at Old Georgetown and Woodmont. It never had “room to breathe” for one thing. Its tight proximity to commercial/residential buildings on one side and a garage on the other made the The Lionsgate “less urban village”, and more a towering mediocrity.
- Maybe it’s the “miniature” balconies
**note to developers – yes, you can “sell” outside space!
- Maybe it was the lack of 2000 sq ft.+ units — again, a product in downtown Bethesda I know people are crying for…but even writing this, The Lionsgate frustrates the h#ll out of me…
Developers in The Gulf Coast & Madison: They “Get It”
It seems developers in other areas of the countries “get it” – from oceanfront Gulf Shores condos to lakefront Madison condos … and beyond, the developers understand — build them big, and build them with adequate balcony space.
I know Downtown Bethesda isn’t the Gulf Coast or the lakes of Madison Wisconsin (Bethesda with a water view..hmmm!), but what all locations have in common is the concept of product comprehension — how, in this context, large condos will increasingly attract baby boomers who want to move down without sacrificing every amenity of single family home living (that’s square footage and balcony space just to make sure we’re clear!).
So this is my story and I’m sticking to it…in my humble opinion, The Lionsgate, in many ways, stands for what Bethesda condos need to strive to NOT be in the future, even when market conditions improve.
What Inspired My Lionsgate Bashing : – )
I received an e-mail today from The Lionsgate sales department today…last chance to pick up the last penthouse unit in the building. But take a peak at some of the “concessions”
“For those who’ve always dreamed of living in a luxurious penthouse, your time is running out. We now have only one remaining on our top floor—the Rodin. This two bedroom, 1580 square foot customizable floor plan already has high-end finishes throughout and stunning views of the bustling downtown Bethesda streets below, and now Lionsgate is willing to invest in additional floor plan changes and upgrades. Prices on this floor plan have recently been adjusted to under $1.2M….”
Did you see what I saw? Willing to make changes to the floor plan?
Can Bethesda Learn From The Lionsgate & This Challenging Market
I know this is a tough market so it’s really hard to say “I told you so”…but in the same sense, this difficult market teaches us all some valuable lessons. In this specific case, the Lionsgate is willing to change the floor plan because this market doesn’t allow “okay”, it demands something closer to perfection.
More importantly, I hope this market has taught (or will teach) developers, homebuilders, and Realtors (listing agents in this context), to listen, research, and listen some more. If we do this, perhaps we’ll be able to better answer this not so simple question — “what do home buyers want?”.
**Over 2000 sq. ft. & large balconies – just wanted to get that in one more time!
It’s easy to get all hot under the collar when discussing Goldman Sachs. You remember Goldman, right? Back in 2006, the firm began to hedge its exposure to home loans and managed to get rid of all of its mortgages and mortgage-backed securities before the bottom fell out of the subprime market. As a result, Goldman actually manage to make money when the meltdown took place while countless other firms lost millions or even went bankrupt.
Although we can argue until we are blue in the face regarding whether the firm is simply filled with savvy investors with an excellent understanding of the marketplace or it played an integral roll in causing the meltdown to occur, one thing is clear: when Goldman takes action, all eyes are watching. As such, it is worth taking notice of the most recent actions the firm has started to take.
According to reports, Goldman owes $6.4 billion in commercial mortgage loans and that it is holding onto about $1.6 billion in commercial mortgage-backed securities. The interesting part? The company has recently reported that it has reduced the value of its commercial mortgage portfolio by almost half. Other banks have been far less aggressive, but the question begs to be answered – is Goldman once again a step ahead of the rest in predicting that many commercial real estate borrowers are poised to default?
Unfortunately, the answer isn’t so simple to find. After all, Goldman currently has a $950 billion balance sheet, which means it can afford to be at the helm when it comes to marking down loans. By doing so, the firm puts pressure on other lenders to do the same, which could put the firm back into position to make a significant money from commercial real estate in much the same way it did with residential real estate.
Of course, no one at Goldman is talking, so we will all just have to sit back, wait and see how it all pans out in the end.
Eric Bramlett is the broker & co-owner of One Source Realty, a boutique Austin real estate company. He has been a full time real estate professional since 2003. Eric currently works with select buyers & sellers, manages his Austin condos guide, and his Austin real estate blog.
The settlement process, from “who pays what”, to “why title insurance”, to “what documentation is needed where”, starts to become perplexing and profoundly unfamiliar. Kind of like your first day in a Mandarin 101 class? Well maybe not that tough but the settlement process has it’s own language. From HUD-1s, to “T & R”**, to Title Insurance, it takes some educating, especially for first time home buyers.
The Best Realtors Become The Source of Clarrity:
I’ve always admired Gretchen, (my Mother/Partner/DC Realtor extraordinaire), not just for her breadth of real estate knowledge, but in her seeming effortlessness in explaining most most complex and layered real estate “whys and hows.” It’s an ease and fluidity that would be impossible to teach and it’s undoubtedly one of the reasons for her professional success.
Videos New Role In Real Estate Education
However, Gretchen – may have a run for her money against the likes visual story telling companies. “Say It Visually” — “the premier creator of explanatory visual stories” (so says their website) — tells a story quite well in my opinion.
I’ll let the video speak for itself, but seeing this technology applied outside the web 4.0 business world (aka, the “Twitters” of the world) makes you wonder where visual story telling goes next. (I’d still choose Gretchen though?).
Thoughts?
**Actually most people say “Transfer and Recordation Tax” but I needed that sentence to keep a rhythm :- )
Chevy Chase is an especially unique area in that it straddles the DC line. As is the case with many DC suburbs, Chevy Chase is unincorporated. Unlike those other suburbs, though, it consists of two different places….but more about that in another post :- )
Street View of 7507 Vale Street in Chevy Chase
You can actually buy this Expanded & Updated Chevy Chase Homes
Yep, after two weeks of polishing up some marketing “stuff”, visiting friends, and knocking the soccer ball around, I will be leaving Bethesda Maryland & headed back out to the San Francisco. You can’t help but be a little more relaxed out there…and for that reason, along with the some amazing friends, I’m excited to return. Same job, different location.
I love Bethesda but these views are hard to find...
This picture was taken from one of my best friends parents house in Belvedere Island in Marin County, a “suburb” of San Francisco – it’s the Bethesda of Washington DC…that’s the best local analogy I can come up with but there truly are none! It’s had to replicate an area like Belvedere. Yes, great friends and great views make a great life.
Besides seeing my college friends again, I also welcome a visit from a good friend I made through marketing conferences. Few would argue that he is one of the finest SEOs in the world (yep, seriously the world). He decided to cut his client list dramatically and start leveraging his abilities to to start search engine marketing for Denver real estate. Long story short is you’ll soon be seeing him on the top of Google’s list for that term and others. And that translates well in real estate if you’re also great with people.
And then there’s another good friend just a short car ride away, Carolyn Gjerde-Tu — a Davis & Greater Sacramento real estate agent, with who has earned the title of webmaster. She continues to help me in my real with my real estate marketing endeavors and has fun doing it. I look forward to many future marathon brainstorming “power lunches” with her : – )
My Visit Ends And Hoping Other’s Begin
And there are more so many more like-minded friends who I hope will drop in from time to time for a guest post here. From a brilliant Gulf Shores real estate agent, Cal Carter to a West coast neighbor like Carolyn, it would be fun for everyone to get a glimpse of their magic…
It’s just 9:20 PM on the on the west coast but I have a few more days in Bethesda. So “good night, Bethesda”, “Good nigh San Francisco”, “Good night Belvedere”, “Good night to Realtors (the good ones)”, “Good night, Davis”, “Good Night, Denver”, “Good night, Gulf Shores”…and “Good night good friends”…
According To My Bethesda Property Listing Sitemap Results…
The most expensive houses in Bethesda Maryland 2009 - Seen Here 10 Wissioming Court
The 11 Most Expensive Bethesda Property Listings Currently For Sale
Thanks for indulging me as I test my XML feed from my website. I spend a lot of time de-bugging programing errors like: correcting mislabeling of property addresses in this “MRIS IDX Property Feed”. Yes, programmers have funny names for stuff. Okay, enough of this terribly boring post — thanks again for indulging me. It’s late and I’m tired :- ) — here we go with data that will link directly to my website. Not trying to sell you anything (but if you’d like to buy any of these below , I’d be happy the represent :- ) Actually this is a great list of properties…enjoy taking a look at a few or them all. Of course to see do much of my work in Bethesda), just trying to making sure everything is in check in a “fun” way. So here we go! The 11 Most Expensive Property Listings in Bethesda”
Here’s The legal stuff I am required to say in this overly litigious city :- ) Ready…
The listing content relating to real estate for sale on this web site is courtesy of MRIS. Listing information comes from various brokers who participate in the MRIS IDX. Properties listed with brokerage firms other than Long & Foster Real Estate Inc. are marked with the MRIS Logo and detailed information about them includes the name of the listing brokers. The properties displayed may not be all the properties available. All information provided is deemed reliable but is not guaranteed and should be independently verified. All listing information copyright MRIS 2009. Last updated: 2009-06-03 02:57:17
Lionsgate Bethesda sales reps report 80% sold - I'm not sold on that :-) I'd venture to guess 70% is more accurate
I love Downtown Bethesda and was excited about these condos for quite some time. The developement has all the ammenities:24-hour front desk, a fully equipped fitness center, an executive center and a rooftop terrace. But in my humble opinion, many of the units are location challenged (that is, some face a parking structure). Moreover none of the units have a lot of “outside” space — even the penthouse units have small balconies. On a humid DC day like today, it may not be a draw but developers need to learn that “yes, you can sell outside space”. You can learn more about Lionsgate Condos in Bethesda on one of Bethesda real estate guides. You can also view some of the units still for sale.
The listing content relating to real estate for sale on this web site is courtesy of MRIS. Listing information comes from various brokers who participate in the MRIS IDX. Properties listed with brokerage firms other than Long & Foster Real Estate Inc. are marked with the MRIS Logo and detailed information about them includes the name of the listing brokers. The properties displayed may not be all the properties available. All information provided is deemed reliable but is not guaranteed and should be independently verified. All listing information copyright MRIS 2009. Last updated: 2009-06-03 02:57:17
