*By the way, the same timeline applies for repeat home buyers looking to cash in on the $6500 tax credit, too.

*(•A tax credit of up to $6,500 is available for repeat home buyers who have owned a home for five consecutive years out of the prior eight years. The repeat home buyer tax credit applies to houses sold after November 6, 2009 and on or before April 30, 2010. In cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by June 30, 2010 will qualify.)

I want to make sure that we’re doing everything possible to find you the right house.  I fully understand what it is you want and why you’re looking in certain areas.  It’s true, though, that what you’re looking for happens to coincide with what most people are looking for.  Namely a close-in house with soul (usually means a classic style) near cool amenities.  Unfortunately, the price to play in some of these neighborhoods is rather significant. 

Like we’ve talked about in the past, buying a house is always an exercise in compromise.  Whether it’s price or location or style or size, every buyer has to compromise on something.  That’s true at every price point, too, by the way.  The trick is to figure out what’s most important and try to limit the compromise to the other categories.  It might be worth your time to jot down a wants versus needs list.  It might seem elementary and a waste of time, but I’ve found that they can often be really helpful.  I have clients who want a fireplace, but need a larger yard (they have big dogs or do a lot of outdoor entertaining).  Others need a second bathroom, but want a garage.  Obviously it’s unique to each buyer. 

In your case, your needs list might be something like:

• Cool close-in location near bars, restaurants, etc
• 3 bedrooms minimum
• At least 1 ½ bathrooms
• Price range
• Near MAX or bus line
• Style and soul
• Space for brewing and a teaching studio
• Etc

Your wants might include:

• Formal dining room
• Garage or Basement
• Walking distance to a park
• View
• Etc.

Where the exercise becomes useful is when you really put some hard, honest thought into it and decide whether a dining room, for example, is more or less important than a fireplace.  Obviously your list won’t match up exactly with Laura’s, so part of the project is merging both your lists into a final master list that will guide our search.  Sometimes it helps to kind of refocus on what’s important.  The other thing it can help with is figuring out if you can actually find what you want at a given price.  If, for example, you decide that your need is actually even more focused than living in a cool close-in location with amenities and is actually more that you only want to live in Mississippi, Hawthorne or Alberta (again, for example), then that will determine your strategy going forward.  If you want a cool close-in location, then the strategy might be to figure out what that actually means and make a list of neighborhoods that fit the bill.  There might be some neighborhoods that you aren’t currently really familiar with that, with a little exploration, you find you really like.  If, on the other hand, it really is only a handful of neighborhoods, then the strategy might simply be to laser focus on those areas and just understand that it’s going to take some time and be ready to pounce when potential listings come online.  

Also, once you come up with a list like that I can actually run a search and see if any houses that match your criteria have sold in the past six months or so within your price range.  If a few dozen sold recently, then we know that all we have to do is keep an eye out and, sooner or later, the right one will pop up.  If only a handful have sold recently, then we’ll know that it might be a long wait, but that those houses do appear on the market occasionally.  If nothing that meets your criteria has sold in the past six months, then we’ll need to reassess the list and/or price range.

Credit Score:  A credit score numerically rates a borrower’s credit worthiness and risk to the lender of default.  There are actually a number of different credit scores, but FICO (Fair Isaac Corporation) is the most prominent.  Credit scores (FICO) ranges somewhere between 300 and 900 with a higher number being better.  Lenders often use credit scores to gauge a borrower’s worthiness and to determine interest rates.

Debt-to-income Ratio: A measure of a borrower’s total income as compared to total debt.  Lenders apply a debt-to-income ratio to gauge a borrower’s risk of default and to determine how much they qualify for.

Deed: the document that transfers ownership of a property.

Deed-in-lieu:  In certain situations, in order to avoid foreclosure, a bank will allow a borrower to give the bank the deed to the home in return for forgiveness of the debt.  In these cases the borrower needs to vacate the property, but they do avoid many of the negative impacts of foreclosure.

Default:  In mortgage terms, when a borrower fails to make the required monthly payments or adhere to the terms of the mortgage.

Down Payment:  The portion of the total purchase price that the buyer pays in cash.  Very few home buyers, especially after 2007, qualify for 100% financing.  In most cases the buyer/borrower is required to contribute a certain percentage of the purchase price as a down payment.  Down payments can range from 3.5% with many FHA programs to 20% or more.  Talk to your mortgage broker to understand down payment requirements for your specific situation.

Earnest Money:  Sometimes considered “good faith” money.  It’s the money put down by the buyer which is held in escrow as the seller’s safety net against the buyer’s default.  In Oregon, earnest money is held in escrow and becomes part of the down payment if the deal closes.  If the buyer terminates the purchase in adherence to the sales contract the earnest money is returned.  If the buyer fails to perform the sales contract, the earnest money is released to the seller.

Equity:  An owner’s financial interest in a property.  Put simply, equity is what remains if one subtracts what is owed on the mortgage from the property’s fair market value. 

Escrow:  Neutral third party.  In terms of a real estate transaction, escrow acts as a neutral and disinterested third party.  Earnest money and other funds, as well as all important documents are held with escrow until the sale is ready to be finalized.

Adjustable Rate Mortgage (ARM): A mortgage in which the interest rate fluctuates based on an associated index.  There is a distinction between true ARMs and fixed ARMs, but all ARMs are tied to an index.

Amortization Schedule: In real estate related terms, amortization is the process of how a mortgage loan is paid off.  The amortization schedule shows what portion of each loan payment goes towards paying off interest and principal.  In the early years, much of each loan payment goes towards interest.  As the years go on more and more of each payment goes towards principal reduction.  Here’s a sample amortization schedule.

Annual Percentage Rate (APR): I’m going to go ahead and refer you to Vince Kingston, my trusted mortgage broker associate.  The APR can be confusing and I’d like you to understand it completely.

Appraisal: The valuation of a property as assessed by a licensed appraiser.  Appraisals generally compare the property in question with other comparable properties (comps) that have sold recently.  The appraisal sets the value that the bank will lend on.

Appraised Value: The price decided from the appraisal.

Appraiser: The licensed professional hired to complete an appraisal and to set the appraised value.

Appreciation: The increase of a property’s value over time.

Assessed Value: The property value as determined by the local tax assessor and used for the purposes of figuring property taxes.

Broker: The term “broker” can have many meanings in terms of real estate.  The real estate broker, often called the real estate agent or Realtor, represents buyers and sellers in the sale of real property.  Real estate agents work under the supervision of Principal Brokers, who are often to referred to simply as brokers.  Mortgage brokers work with buyers/borrowers to find the right financing for the home purchase.  Mortgage brokers do not actually lend money, but broker the loans to lending institutions such as banks.

Chain of Title: A list showing each transfer of title for a property over the years.

Closing: Closing is another terms that gets used for many things.  In Oregon, though, closing occurs when the new deed showing the new home owner is recorded with the county.  Keys can be released to the buyer only after this recording, closing, happens (unless negotiated otherwise).

Closing Costs: There are costs other than the purchase price associated with closing a sale.  These costs, some paid by buyer, some by seller, are called closing costs.  There are different categories of closing costs, some are considered “non-recurring” and some are “prepaids”.  Non-recurring closing costs include such items loan origination fee, document prep fee, courier services, title insurance, etc.  Prepaids refer to items such as prepaid interest, taxes, etc.

MLS – A Multiple Listing Service is an aggregator of real estate agent listed homes for sale.  Member agents, most Realtors, share information on each listing and agree to participate with cooperating brokers.

RMLS - The Portland regional MLS

Glossary is a work in progress and is by no means meant as an exhaustive list. 

At the moment, the proposal is specifically aimed at energy efficient appliances and insulation.  Details are unclear at this time, but the leaked news mentions up to $12,000 in rebates.  That’s a tidy little sum, no?

The program would be a two-pronged approach with money going to homeowners on the one side and renewable energy and efficiency businesses on the other.  The plan would create a program where private contractors could conduct home energy audits and then install the necessary upgrades.

Most likely items such as furnaces, air conditioners, windows, washing machines, refrigerators, stoves and insulation would be covered.

Again, this is simply a proposal at the moment and the specifics have not been completely written out yet.  There is no guarantee that the proposal will ever go into effect, but it is interesting to see the current thinking in Washington.

I will provide details as they emerge.

Incredible opportunity for an immaculately cared for 1906 remodeled bungalow.

Move-in ready!

Click here to view my video on the housing recovery and interest rates.

Check out that inventory!  6.5 months?  You could make an argument that we’ve reached that elusive “balanced market”.  Personally, I would like to see a inventory figure between 4 and 6 or so for a few consecutive months before I deem Portland a balanced market (as opposed to a buyers’ or sellers’), but it certainly looks like we’re well on our way. 

Pending and closed sales are WAY up versus October 2008.  When I say way up, I MEAN way up.  Pending sales were up 64%, which is the largest same month increase since February 1996, also known as Winter Quarter of my senior year at UCSB.  Yeah, it’s been awhile.  Closed sales were up a ridiculous 37% versus October last year.

The month-to-month figures aren’t quite as staggering, but they’re fairly impressive nonetheless.  Closed sales increased 11% compared to September 2009. 

Why all the activity?  I think we can safely assume that the first time buyer tax credit’s, then, expected expiration drove many buyers into making quick decisions.  It’s definitely possible that the tax credit extension will actually slow sales back down, but we won’t really know for another month or two.

In the meantime, remember that it is still an incredible time to be a home buyer.  $8000 tax credit for first time buyers.  $6500 tax credit for many current home owners.  Extremely low mortgage interest rates.  Etc.

Most likely attributable to the first time buyer tax credit, the number of signed sales contracts (nationally) rose for the eighth straight month.  In fact, the pending sales index reached its highest point since December 2006.

Industry experts expected a modest increase, but the substantial jump came as a welcome surprise to industry enthusiasts.

Much of the increase can be attributed to the first time buyer tax credit that has been responsible for between 200,000 and 400,000 home sales.  September was particularly strong due in large part to eager first time buyers rushing to get in contract before the tax credit expired in November.  Fortunately, as previously reported, the tax credit has been extended (and expanded) through June 2010.

In addition, experts expect the increased sales and pending sales trend to continue, as the market is perfectly suited for many buyers.  Prices have fallen sharply and mortgage interest rates remain at historically low levels, meaning now is an opportune time for savvy buyers to enter the market.

The current $8000 tax credit for first time buyers is set to expire November 30, meaning any first time buyer that is not already in contract has basically missed out.  While it is hard to measure the exact impact, most people agree that the tax credit has certainly buyoed the market. 

Possibly as early as next week we should see the new bill passed.  CNN’s Business Week reports the following details:

-First time buyers can continue to claim the $8000 tax credit, but now current home owners who have lived in the same residence for at least 5 years can enjoy up to a $6500 tax credit if they trade up to a more expensive primary residence. 

-Full credit limited to borrowers/buyers with an income less than $125,000 or or $225,000 for married couples.

-Home must be purchased for less than $800,000.

-Contracts must be signed by April 30, 2010 and sales must close by June 30, 2010.

As details are revealed I will happily provide them in this space.

Thank you CNN Business Week for story.