Real Estate Finance
County Real Estate Tax Assessments – Are They Meaningful?
September 14th, 2009 Categories: Arlington Dirt, Home Buying, Home Selling, Northern Virginia Basics, Real Estate Finance
First let me begin with a disclaimer – I don’t understand how the county approaches the subject of assessments – nor do I think I ever will. So please know that this post represents MY PERSONAL OPINION of assessments and their use and/or value… OK?
A lot of buyers and sellers get hung up on the assessed value – often confusing it with appraised value… TWO DIFFERENT ANIMALS, believe me. An appraisal is an opinion of value, rendered by a licensed appraiser, one who has presumably gone through countless hours of training to understand various methods of assessing value. Generally, upon the sale, or refinance of a property, the lending institution will order an appraisal from a (hopefully) qualified appraiser in order to substantiate value and protect their investment – but I digress, this article is not on the appraisal process.
Here in Northern Virginia, each county is responsible for somehow obtaining an idea of the value of your property so that they may impose a tax – it’s a HUGE money maker for our county – and it does go to pay for schools, roads, emergency services, the courts, etc… and, at least I can say personally in Arlington County, for the most part I am extremely pleased with how the county runs their business. One question I get asked a lot is whether or not the assessment is an accurate reflection of current market value.
According to the county, the Arlington County Real Estate Assessment is required by law to be at 100% of fair market value. Now here’s what I tell people… how do they know?
Sometimes we’re in a market where properties are selling well in excess of their assessed value – guess what – assessments usually trail the market. So when the assessor’s office sees market gains and properties selling over assessed value – assessments go up. The same things happens in reverse when the market stabilizes and then goes down… We end up with assessments in excess of actual value. And around and around it goes…
However, what I really can’t understand is how in one neighborhood, one house can increase in value, while the one next door decreases in value – with no material changes to the homes, the street, the neighborhood, etc… We see this happen all the time. With no apparent rhyme or reason.
So, do a little research before you place a lot of value on County Tax assessments – the other piece of advice I’ll dispense is to think carefully before contesting your assessment. If you’re in a neighborhood where the assessor has increased values across the board by, say, 5%. However, you know darn well you can’t sell your home for that, and let’s say, hypothetically that you contest and you win – thus lowering your value by 5% back to the value of the previous year. Now, flash forward a few years – when you go to sell and the potential buyer looks up the assessments of the neighborhood (and some do) they will wonder why yours is consistently lower – hmmmmm, do you think it might raise some questions in the eyes of that prospective purchaser? So for a few dollar savings, think ahead – think down the road – think about the possible long term affect that may have.
Bottom line – it’s ONE data point. Maybe valid, maybe not… use it to fit into the other methods of establishing value when either writing a contract or listing your home. I can help with either, you know! 
Happy, HAPPY Monday
Jennifer
Serving all of your real estate needs in Arlington, McLean and the entire Northern Virginia Region!
Contact me today for a free home valuation or buyer counseling session! And remember, there’s no time like the present! The $8,000 tax credit expires on 11/30/09 – There’s still time!
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Interest Rates are FALLING – What does that mean to ME?
December 9th, 2008 Categories: Alexandria Dirt, Arlington Dirt, Falls Church Dirt, McLean Dirt, Real Estate 101, Real Estate Finance, Reston Dirt
So it seems that everyone’s fixated on interest rates – even people who are not considering buying or selling real estate – it’s a popular water cooler subject, for sure! People ask me about rates all the time and the reality is 
that I rarely give a straight answer (good strategy, huh?) 
The reason I don’t answer those questions is the answer is: “it depends”
It depends on the applicant’s credit scores, the amount of down payment they have, the program they are choosing, the lender and/or investor that will purchase their loan, etc…
Having said all of that, I wanted to take you through a real scenario of what falling interest rates could mean TO YOU as a buyer.
SCENARIO:
Let’s say you want to buy a home and you spoke with a lender to get “pre-approved” a few months ago. They would have taken your salary history, debt information, run your credit scores, etc… and let’s say they qualified you to purchase a home for $400,000 and you have $80,000 to put towards a down payment making your loan for $320,000 – with me so far?
Let’s assume that a few months ago, the interest rate quoted was 6.5% – (for the sake of keeping things simple, let’s not add any sort of loan origination fee or points into the discussion, however, please remember it’s an important point to evaluate when selecting your lender). Let’s also assume that it’s a straight, fully amortized loan (not interest only).
So your payment (without adding in taxes and insurance) which includes principal and interest would come to $2,022.62.
So we chat and we go out looking for homes and perhaps you travel for a month and you get back last week and call me up to discuss resuming your search… guess what – (assumption here) now interest rates are 5.5% and your new estimated payment on that same loan is now $1,816.92.
WOW – this means a savings of just over $200/month. You’re SO EXCITED.
The other solution would be that if you were really within your comfort zone at $2,022, at TODAY’s rate, that amounts to a loan value of $356,227 – so your PURCHASE POWER has increased by over $36,000 and now you could write an offer on a property upwards of $435K and it would cost THE SAME as it would have a few short months ago… cool, huh?
What’s the downside? Well, if rates rise, it all happens in reverse – so when you were once approved for $400K, perhaps now it’s only $365K… that hurts.
Many lenders will offer what they call a “float down” option to allow you to take advantage of ONE rate drop during the time you’re waiting to go to settlement – that’s an excellent offering, if they have it.
Bottom line is ask a lot of questions and if you’re in the home buying process, pay attention. Be sure you are working with the BEST lender you can – it’s not all about the rate (although reading this article you’d think it was) but it’s also about costs and service. Do your homework and find someone who is truly interested in your positive outcome! It will be well worth your time invested up front!
Happy Tuesday!
Jennifer
Serving all of your real estate needs in Arlington, McLean and the entire Northern Virginia Region!
Contact me today for a free home valuation or buyer counseling session! And remember, spring is RIGHT around the corner!
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Don’t Panic!
September 16th, 2008 Categories: Alexandria Dirt, Arlington Dirt, Falls Church Dirt, McLean Dirt, Real Estate Finance, Reston Dirt
It would be so easy to work up into a lather with all of the gloom and doom financial news. Everywhere we turn some major wall street financial institution is filing for bankruptcy or being taken over. Mortgage companies are in trouble and/or crumbling left and right. The Federal Government decided to bail out Fannie Mae and Freddie Mac in order to increase the availability of mortgage finance and to add liquidity to the mortgage bond market.
Oh and then there’s the AIG mess – the government is supposedly considering lending tens of billions of dollars to bail them out of their recent woes… YIKES… And today, if all that weren’t enough, the feds decided against lowering the fed funds rate stating that they believes the mortgage interest rates are already low enough to spur future economic growth.
It would seem that in fact we’re headed for mass destruction and dismay. In fact, that’s the farthest thing from the truth – at least from the housing perspective. Consider this –
Interest rates have tumbled beginning with the Fannie/Freddie news and are now once again below 6% – hmmm
Inventory of homes is still fairly high and there is generally a plethora of choices
For a consumer that has good credit and assets, this is the BEST TIME EVER (yes, I did say the best time ever) to make that home purchase. Can I guarantee that home prices will not continue to go down? NO Can I guarantee that home prices will appreciate at some ridiculous rate over the next 2 years bringing “flipping” back into vogue? Of course not. But I can say that conditions are actually favorable right now for the housing market to correct itself. NOW is the time rather than when buyers have to enter into bidding wars against each other. NOW is the time rather than when buyers will have to give up some of their rights in order to beat out someone else.
Every action has a counter-action. When builders realized that they would 
have home surpluses, building slowed and in some cases even ceased. When we come through the cycle, they won’t be able to gear up quickly enough to meet future demand and there begins that cycle again with higher prices and more demand. So… just stop for a moment to consider that perhaps, just maybe, now is the time to begin thinking about a change.
I look forward to your call to discuss your home needs – both selling and buying.
Happy Tuesday
Jennifer
Serving all of your real estate needs in Arlington, McLean and the entire Northern Virginia Region!
Contact me today for a free home valuation or buyer counseling session! Fall is here!
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The Ins and Outs of Loan Approval, Pre-Approval, Loan Commitments and so forth…
September 2nd, 2008 Categories: Alexandria Dirt, Arlington Dirt, Falls Church Dirt, McLean Dirt, Real Estate Finance, Reston Dirt
As a general rule, one of the very first things I do when working with a new buyer (whether they are a first time buyer or even an experienced buyer) is to recommend they speak with a lender and obtain loan approval.
The reason for this is simple: Let’s say they’ve used an internet loan calculator to guess at their loan amount – did someone explain to them the tax relief they will benefit from? Or perhaps they actually talked with a lender and did some sort of preliminary approval where they provided their salary information and debt information, but perhaps they didn’t discuss more detailed financial matters like alimony (either being given OR received), investment properties owned, etc… These factors can have a HUGE impact on a buyer’s ability to actually obtain a mortgage.
I usually like to have someone talk with a contact of mine – for no reason except that keeping the communication lines open during this process is HUGE. It doesn’t matter to me who originates a loan for my clients in the end, as long as they get as good of a program as they can – good rates, good terms, and the RIGHT program fit for them. But during the process, questions can arise – here’s one that happened lately:
I have a client who wants to purchase a condo – he has his preliminary loan approval in place for a particular amount – and the lender is out of state. So we set out looking at properties in a particular range that we are estimating will work with his loan amount and the amount of cash he has set aside for this purchase. However, pretty soon, some questions came up:
What condo fees were used for the approval? (Usually a lender will put in some sort of estimate)
What about property taxes?
Oh, and since the lender is out of state, how were they able to complete a good faith estimate perhaps not knowing what our usual and customary charges are here in Virginia to the buyer?
At this point, since we were unclear on the answers, my client agreed to talk with one of my local lenders, and we’re in the process now of understanding exactly how much home he can afford. At least we’ll know what the range is and negotiate the best deal on a property with confidence that he can afford it.
So perhaps I digressed a little from the title of this article – here are some brief descriptions of different terms you’ll hear from the lending world:
Pre-Approval – this means some basic information has been provided to the lender, probably without verification in order to establish a baseline of affordability. Sometimes lenders will even issue pre-approval letters, but they all state that they are subject to income/asset verification, so really, they’re not particularly strong.
Loan Approval – this usually means that all income/asset verification has been done as well as a credit check. This is a much stronger term and generally is used when submitting a contract. Sometimes, depending on the lender, the application has even made it through the underwriting process already. Barring any issues with the property, it’s smooth sailing from here.
Loan Commitment – this is when the loan has not only been approved, but the bank has already earmarked the funds to consummate the transaction. This is the strongest level of approval that exists.
So there you have it – a lesson on loan approval types, terminology and the like – and also some reasoning as to why I’ll ask you to speak with a lender and why it’s important! It’s a much smoother process when this is done in advance and we can start out with the best foot forward not wasting any time at all in finding that dream home.
If you’d like to talk about the process or get started, call me today! I have some great local lenders I can refer you to – with a great team around you’ll be in great shape for a successful outcome!
Happy Tuesday
Jennifer
Serving all of your real estate needs in Arlington, McLean and the entire Northern Virginia Region!
Contact me today for a free home valuation or buyer counseling session! Fall is right around the corner!
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