Do we have to sell our house to buy a new one? Bremerton WA

August 31, 2007 at 5:08 am · Filed under Bites of Buckwheat, Bremerton Real Estate, Mortgage Bites

Increasingly Rich and I are responding to email questions from SoundBiteBlog readers. In the past we have answered each question by return email. Because our readers are asking some very interesting and pertinent questions about real estate in Washington, we have decided to answer some of them right here on the blog. In August we received 23 different real estate related questions on a variety of subjects from “why do sellers hate va buyers” to the question below. Rich and I believe that if one reader has a question, it’s probable that other readers have the same question. So, we’ll be trying to answer as many questions as we can on SoundBiteBlog each month.

“Mark, I looked you up because I need some information I hope you can help me with. I would like more information on purchasing a new home. We still own our other house but need more spcae. We do not know if we want to keep the house we have and rent it out or if we need to sell it to buy a new home. I do not know how it works if we choose to keep our house now.”

LM — Bremerton, WA

Growing your wealth with real estate

If you can relate to this question, congratulations! You are on your way towards building a Real Estate “Portfolio”. Almost all of America’s most affluent people are heavily invested it real estate. It is a cornerstone of many asset-building strategies. Real estate investments are historically stable and safe. Kitsap County real estate in particular has shown itself to be the perfect wealth-building vehicle for many Washington homeowners.

The thought of owning two homes in Kitsap County can be exciting. The thought of having two mortgages on the other hand can be rather intimidating. One of the first questions many folks ask is “Will the bank allow me to have two mortgages at the same time?”. The answer fortunately, is “yes”. Banks are just careful about how they decide who can afford additional debt and who may be venturing too far into dangerous financial territory.

The criteria an underwriter uses to establish an approvable new loan is fairly simple. The borrower is allowed to count rental income. But they are not allowed to count all of the rental income. This creates a safety margin that keeps both the borrower and the bank out of trouble. Consider the following example to see how it works.

• The old loan balance - $155000
• The old loan payment - $1200 / month
• Taxes - $150 / month
• Insurance - $50 / month
• The projected rental income - $1300 / month
• The projected monthly loss - ($100 / month)

Many people would be happy to have real estate in their portfolio with this scenario. The annual tax benefits more than offset the negative cash flow each month. In addition, the property will continue to increase in value over time. Now take a look at how an underwriter will view this same scenario while building in a financial safety net.

• The old loan balance - $155000
• The old loan payment - $1200 / month
• Taxes - $150 / month
• Insurance - $50 / month
• The projected rental income - $1300 / month
• Less a vacancy factor of 25% - ($325 / month)
• The projected monthly loss - ($425 / month)

This “paper loss” of $425 each month is then applied against the borrowers gross income just like a car payment or student loan would be. If the borrower has enough income to handle a new mortgage payment, plus all their other financial obligations and the $425 loss, the new mortgage is likely to be approved. The 25% that an underwriter subtracts from the gross rental income is intended to compensate for any vacancies, repairs to the property, maintenance on the property and unexpected expenses. Some loan programs will allow more than 75% of the rental income to be counted, but they are uncommon (and riskier for both the bank and the borrower).

Even if this $425 per month loss raises a borrowers debt-to-income ratio too high to allow a loan approval, it may still be possible to keep the old house as a rental and buy a new home to live in. There may be a $425 car payment that could be paid off by refinancing the old home prior to making it a rental. Or credit card debt could be eliminated with a refinance. Each situation is different. If you are considering becoming a landlord, your favorite loan office will be able to compare different possible solutions for you.

Keep in mind that the underwriter will require proof that you have a new tenant. The homeowner will need to provide a copy of a lease agreement or a rental agreement as part of the loan approval conditions.

Insurance and the old lender.

There are a couple of additional items to check before making a decision like this one. The first item is to check with your insurance agent to see if the insurance policy you have on the home currently will need to be altered if the home becomes a rental. The insurance premium is likely to be higher for a rental than it was when the house was your personal residence.

If you live in a neighborhood with an active Homeowners Association, check your CC&R’s (codes, covenants and restrictions) to make sure you are not restricted from turning your home into a rental. 

And finally, it is wise to dig out the old mortgage on the property and read it carefully. It is very possible that you are required to let the lender know that you are moving out of the home. When the original loan was approved, it was approved under the belief that you would be living in the home as your primary residence. If the situation changes, the lender will probably have a clause in the mortgage document requiring you to let them know of the change. As a homeowner you have the right to do what you want with your asset (the home), but the lender also has the right to protect its investment. A loan on a rental property is riskier for the lender.

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SoundBite Spotlight

August 30, 2007 at 1:29 pm · Filed under Bites of Buckwheat, Real Estate Bites, Buyers, Sellers, Guest Writers

Sparky and I are constantly on the lookout for exceptional Consumer Real Estate Articles. When we come across articles that address today’s issues, answer everyday questions that consumers may have or simply explain the inner workings of Real Estate Transactions in a clear manner, we tell each other about them.

When we discover a writer we are not familiar with, we add them to our personal list of “Writers to Watch”. An increasing number of superlative writers are appearing on the Real Estate Blog scene. Some of them have been writing for years, but we just found them. Others are very new, yet very talented. Regardless of their experience, we watch these Real Estate Article writers. Often we lurk on their sites for a while.

This week, at our standing Thursday-coffee-at-Starbucks meeting, we got to wondering why we have been keeping knowledge of these talented writers to ourselves when SoundBiteBlog visitors are looking for the same thing we are. After some head-scratching and mumbling, we realized we couldn’t come up with a good answer!

Without any further blather, let me introduce you to several excellent real estate articles and the authors who penned them.

Be Careful of What You Say!

(Kristal Kraft - Denver, CO) 

This is one of the best articles I’ve seen illustrating why it’s is often best to leave the selling to the Real Estate Professional. Innocent comments can backfire at unexpected times. This homeowner’s enthusiasm for wildlife did not have the expected affect on the potential buyer.

Ashamed of Having A Sub Prime Mortgage?

(Rhonda Porter - Seattle, WA)

You can find a plethora of bad press surrounding Sub Prime Mortgages these days. This Seattle writer points out the (overlooked) obvious. MOST sub prime mortgage borrowers are paying as agreed! And many families have benefitted from the use of these mortgages in the past.

The $35 Crest Experiment

(Gary Bolen - South Lake Tahoe, NV)

Here’s a great tongue-in-cheek article about selling over-priced properties. Although it was written for Realtors and received over 90 comments from them, it serves as a terrific, thought provoking argument for consumers as well. The Bolen brothers clearly know what they are talking about and don’t mind sharing what they have learned about real estate.

Craigslist - Buy A Home OR A Hooker

(Lani Anglin- Unknown )

In the same category as the Gary Bolen article, this piece was not written for consumers, but for Realtors. I found Lani’s message intriguing because it had never occured to me and I know many Realtors who advertise on Craigslist. Craigslist is also quite popular for FSBO (For Sale By Owner) sellers. This article is as appropriate for consumers as it is for Realtors. It is also well written, so it got my vote.

Do You Know The Benefits Of A FHA Mortgage?

(Tony Gallegos - GA)

Here’s a subject that’s always close to my heart. Tony and I share a strong belief in the overlooked value of FHA and VA mortgage programs. They have both been around for many years, they are backed by the Federal Government, they are not likely to be directly affected by the current mortgage mess and they both have put 10’s of thousands of Americans into houses with affordable loan terms.

Well, there you have it. The first ever SoundBite Spotlight! These articles are all worth reading for one reason or another. They all deal with issues that  consumers in Washington State and around the country can relate to. These articles all share some common traits. Namely, they are well written, they are consumer relevant and they are timely. Enjoy and let us know if you found them as valuable as we did.

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“How do You Respond to Low Offers?” - Advice for Kitsap County Real Estate Sellers

August 23, 2007 at 8:04 pm · Filed under Bremerton Real Estate, Real Estate Bites, Buyers, Sellers, Sparks from Sparky

Okay, so it sounds like a loaded question, right? As a Seller, how do you respond to a low offer? Why, with an outburst of laughter, of course, how else?

Well, think again. In today’s slowing market, as it is here in Kitsap County Washington, with more and more houses listed for sale, competing for the same diminishing pool of Buyers, now is a good time to re-think your strategy for responding to low offers.

Let’s face it, this is America. Home of the Brave, Land of the Free or significantly reduced! Everyone wants a deal. Some even feel entitled to it. It’s in our nature to haggle and barter. How do you think we got this country in the first place?

And so it is, in a slowing market, that it’s only natural for Buyers to become more ‘brash’ or aggressive in their price negotiations. And with the higher levels of inventory (available homes for sale), I can guarantee that there’s a Seller or two out there who are desperate enough to strike a deal.

You have to start off by honestly evaluting and assessing your home selling goals: Why are you moving? How soon do you need to be relocated? How much equity do you have in your home? What is your bottom dollar?

There are obviously many other factors that will affect your ‘motivation’ for selling. But make sure your goals are reasonable and realistic in light of current market conditions. Some housing markets can shift rather quickly. As a Kitsap Real Estate Seller, the last thing you want is to find yourself playing the game of ’Price Reduction Catch-Up’ in a declining market.

As a licensed real estate professional, I always counsel my Real Estate Sellers that EVERY offer that comes in is a serious offer, regardless of how low it may be. It takes time and energy to draft a contract offer. As such, each and every offer should be given careful and courteous consideration. Even the seemingly ‘laughable’ ones!

Regardless of how ridiculously low it may be, try not to take the low offer personally. Some Kitsap Real Estate Sellers, especially if they’ve lived in a home for any length of time, become very offended with low offers. They take the low offer as a personal affront to their perceived value of the home - the cherished haven of fond family memories. Soon, egos become embroiled and the offer often goes unanswered or disappears!

As difficult as it may be, try as much as possible to separate the personal/emotional side of selling your house from the business aspect. Keep your goals fresh in your mind and stay focused towards achieving a successful sale. 

As a minimum, you should at least counter the offer to a price level that is acceptable to you. You’d be surprised how many Buyers appear to be fishing for a deal, but would gladly pay more. They are offering less because that’s what they’ve been told to do! In addition, there may be other elements of the offer that can be negotiated more in your favor. Price, while obviously important, isn’t the only aspect of the offer that can be of advantage to you. Your Real Estate Agent can advise you accordingly.

Many times low offers can end up being negotiated to a point of mutual acceptance. And THEN you can laugh as your transaction closes and you freely embark on the next adventure in life! 

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Condo-Mints?

August 17, 2007 at 4:23 pm · Filed under Bremerton Real Estate, Bainbridge Island Real Estate, Real Estate Bites, Buyers, Sellers, Sparks from Sparky

A recent article in our local newspaper, the Kitsap Sun, written by Josh Farley, highlighted the apparent surge of growth in the condo market here in Kitsap County, WA. In the article, Mr. Farley reports that median condo prices in Kitsap County have soared dramatically from $186,450 a year ago up to $320,075, a 72% increase (according to numbers from the Northwest Multiple Listing Service).

Let’s not forget that these numbers are heavily scewed by several upper scale projects on Bainbridge Island (over $1M on units near the marina) and some waterfront developments in Bremerton (upper $800K+).

There’s no doubt that condo sales, in general, have been on the increase, both here and in the greater Seattle area. And, as a result, the number of apartment complexes which have been converted to condos has increased as well.

I myself, have been recently representing a Seller who purchased an 8-unit apartment complex in Bremerton a few years ago and converted them to condos. She did an excellent job coordinating the remodel, electing to offer numerous upgrades and quality finishes, rather than the typical ‘band-aid’ fix one sees so often. The units were priced very aggressively, and all but one unit has sold to date.

However, one of the primary reasons for increased condo sales that was missing from the article was the fact that buying and owning a home these days has become extremely difficult, especially for first time Buyers. The current average sales price for Single-Residence homes here in Kitsap County (excluding Bainbridge Island) is nearly $340K. With the harsh reality of payscales not keeping in pace with increased valuations, condo purchases are one of the few viable alternatives for home ownership.

Just a few years ago, there was a plethora (thank you, Three Amigos!) of inexpensive, lower-end homes in Kitsap County, especially in West Bremerton. You could easily find something in ‘Move-in’ condition under $100K. Nowadays, the only thing under $100K is a pre-1978 single-wide out in Tahuya without utilities! (if you live out in Tahuya, I mean you no disrespect).

For the longest time, I’ve been somewhat mystified with the sales of the new waterfront condos in downtown Bremerton. Now, don’t get me wrong. I have the greatest respect and admiration for Bremerton Mayor, Gary Bozeman. Mayor Bozeman has almost singlehandedly lead the charge for a major rennovation and resurgence of downtown Bremerton. And, for all intents, his vision has been slowly coming to fruition.

But for someone to pay over $800K for a condo in West Bremerton? Now there is some really amazing salesmanship! That, or some really gutsy Buyer/Investors!

Look for more condo conversions here in Kitsap County in the near future. People want to have their own piece of the rock, but they don’t necessarily want to pay for ‘diamonds!’

For additional information about condos, especially in the greater Seattle area, go to The Seattle Condo Blog by Ben Kakimoto. Ben is one of the premier resources for condo real estate in the Seattle market.

P.S. This article is dedicated to Mike Mueller of Patagonia Finance in Walnut Creek CA. Had enough Teriyaki yet?

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“Teriyaki Delight!” - Business Bites on the Kitsap Peninsula

August 10, 2007 at 2:53 pm · Filed under Sparks from Sparky, Business Bites

Ever since the days when I lived in Hawaii, I’ve always appreciated a good Teriyaki Plate Lunch. Here on the beautiful Kitsap Peninsula in scenic Washington State, we have our fair share of Teriyaki restaurants to choose from. But recently, a new eating establishment here in Silverdale has come onto the local scene that is head & shoulders above all the rest.

“Teriyaki Delight” is located in the Silverdale Town Center, just down from Big 5 Sporting Goods and Emerald City Smoothie.

“Teriyaki Delight‘ completely achieves & satisfies the big ”FOUR P’s” of a successful Teriyaki restaurant:

1. Palate - it’s gotta taste really good! Everything on their menu is cooked to perfection. I especially enjoy the Spicy Chicken, Gyoza, and Beef Short Ribs.
2. Price - It’s gotta be priced right. Their lunch specials start at just $4.95!
3. Portions - You might as well ask for their ‘Take-Out’ containers when you order, because there is NO WAY you’re going to be able to eat everything they pile up on your plate. The portions are incredibly generous!
4. Prompt - The friendly staff redefine ‘prompt’ and ‘attentive’ customer service. Even when the place is packed (which is quite often), your order is filled quickly and with a very polite bow.

I tried desperately to snap a shot of the owner and her most capable waitress, but both of them quickly scrambled out of camera range. The owner is very soft-spoken (I just learned that she doesn’t speak very much English!), but the food her staff prepares and the high level of excellent service they provide does all the talking for them!

Do your stomach AND your wallet a favor. Go check out “Teriyaki Delight!” soon….

“Teriyaki Delight!” 9989 Silverdale Way NW, Silverdale, WA 98383

                                                          Open Monday thru Saturday 10:30am - 9:00pm   (360) 698-6706

                                                                       teriyakidelightmenu.pdf

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Kitsap County WA Real Estate Market Report for August 2007

August 1, 2007 at 12:39 pm · Filed under Bites of Kitsap, Bremerton Real Estate, Silverdale Real Estate, Port Orchard Real Estate, Bainbridge Island Real Estate, Poulsbo Real Estate, Real Estate Bites, Buyers, Sellers, Sparks from Sparky, Gig Harbor Real Estate

Real Estate Market Report/Conditions in Kitsap County WA for 08/02/2007

The following is a quick analysis of the combined single-family home and condo market within Kitsap County, Washington, provided by Rich Jacobson of Windermere Real Estate, in Silverdale, WA (excludes Bainbridge Island).

• Properties currently active on the market: 2199 up 4.7%
• Properties closed in the last 180 days: 1652 up 5.5%
• Average Sales Price: $309,118 up 1.1%
• Average List Price: $313,008 up .09 %
• Ratio of List Price to Sales Price: 99% same
• Average Days on Market: 85 days down 4.5%
• Sales Pending this Week: 69 up 36%

Current Market Conditions: Well, as you can see from the monthly stats update, inventory continues to increase. Fortunately, so have home sales. The pendulum has clearly swung over towards the Buyers favor in most areas of Kitsap County WA. Personally, as a professional licensed agent, this is a market dynamic I much more prefer. My Buyer clients have more time to shop and make prudent/wise home purchasing decisions. As a Seller’s agent, it requires greater effort and creative marketing ability to successfully achieve a timely sale. Many newer agents who jumped on the ‘Hot Market’ bandwagon are going back to their former jobs. A slower market definitely separates the career agents from the ‘wannabes.’

Last month, I offered some practical advice to prospective Sellers. Here it is again:

• Conduct a pre-sale home inspection. Anticipate and correct any problem issues ahead of time.
• If you’re on a septic, go ahead and have it pumped and inspected. Place of copy of the receipt and inspection results in the Home Book.
• Depending on the age of your home, offer a Home Warranty Plan to prospective Buyers.
• Consider having your home staged or hire a staging consult to give you some suggestions.
• Price your home aggressively.

One of the best values on the market right now is my listing on 7236 Hillridge Place. It’s a great newer home (2005) off Bielmeier Road in Port Orchard. The 4BR (3BR septic) 2586 sq.ft. Craftsman-style home is situated on a 1/2 acre lot on a small private cul-de-sac with 5 other custom homes. Call (360) 440-4758 for more details or to arrange a private showing!

For additional information and resources concerning real estate and living in Kitsap County, Washington, access my comprehensive website, www.KitsapLife.com.

another quality consumer article by Sparky

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