Bend Oregon Real Estate Buying Seasons

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Bend Oregon Real Estate Buying Seasons

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Hello again and welcome to the Bend Real Estate Minute! I am Thom Gardner, principal broker at BendHomeBuyersAgency.com which is part of Bend Brokers Realty.

I want to talk to you a little bit today about the Bend Oregon real estate buying seasons. Now, we have several and they’re not always the same every year. It depends on what’s going on in the economy. As you know, we’re a very big vacation home and second-home market. Although these days, we’re a much larger primary real estate market than we used to be when I first started in the business. And that’s because we’re known worldwide.

We’re in various newspapers and magazines all the time now, and that didn’t use to be the case. We used to be a West Coast sort of known quantity.

So, let’s start with January, February, March, the winter season. So, generally, in January, we get a burst of business right after New Year’s. I call them the New Year’s resolution folks. They’ve always wanted to live in Bend. They’ve traveled here and they’re finally like, “This is the year! We’re going to do it! We’re going to call a Bend realtor and buy some Bend real estate!”

So, the first couple weeks in January are often busy and that leads to some closings in February. February, otherwise, is relatively slow. There’s not much on the market that time of year, so it makes it difficult for the Bend Oregon real estate buyer to find what they want.

Now, new Bend Oregon real estate listings start coming on the spring. The past few years, as the economy has been better, March, April and May have been huge. They’ve actually been the biggest months of the year in terms of real estate price increases.

So, you’re going to have static prices in January, February left over from the fall and then they’re going to explode in March, April and May, sometimes five percent a month during that period. We get the vast majority of our real estate price increases during that spring period. And that is also when more Bend homes come to market. So, you have more home inventory, but you are going to pay a higher price to get one.

Now, we get into summer. That’s when the inventory peaks, around June. And up through June, it’s very busy. In July we get what I call the tire kickers. Those are tourists who come to Bend and want to be shown around, but they haven’t really dug into whether they can afford a Bend home. They haven’t checked Bend mortgage lenders. And so, they’re tire kickers. They’re not often as serious as folks in other Bend Oregon real estate seasons.

August tends to start another busy period. August, September, October, that’s what I call the serious season. These are folks, sometimes senior citizens, who have been traveling during the summer and they want to get a Bend home and move here before winter. And those folks I love because they’re decisive. They come to town, they know what they want.

There’s still a lot of good stuff on the market in August and that starts to dwindle after September. You get into October, there’s often less on the market. November and December are the period that’s slowest here. That’s also the period when you can get the best deal.

You’re not going to get a deal on Bend Oregon real estate in spring. You are going to pay almost 100 percent for your home. It’s the same thing in the summer. You get into September, it gets a little bit better. Beginning of October, it gets better still. However, you’re now looking at homes that are left over on the market that nobody wanted, that maybe was priced too high or is an ugly duckling.

You can get a tremendous deal starting in October, November, December, the very best deals we have all year, but you also have slimmer inventory.

So, you have to decide what’s right for you! Am I looking for this specific Bend home and don’t mind paying a higher price for it, or do I just want a deal on something that might appreciate quickly?

If you just want a deal and you can settle for something that may not be exactly perfect, come in November, December and also in January and February. It starts to get a little better towards the tail end of that period. That’s when you’re going to get the best price for a Bend home. The rest of the year, March through September, you’re going to be paying full price for Bend real estate, but you’re going to have the best selection.  You can confirm what I say here on my Bend Oregon Real Estate Statistics page.

So, that’s a little bit of insight into the Bend Oregon real estate buying seasons. Again, I’m Thom Gardner, principal broker and pure buyer’s real estate broker with BendHomeBuyersAgency.com, part of Bend Brokers Realty. Thanks again and take care!

 

Why hire a Bend Oregon Real Estate Buyer’s Agent?

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WHY HIRE A BEND OREGON REAL ESTATE BUYER’S AGENT (AT NO COST TO YOU)?

CONTACT ME HERE if I can be of help to you in your Bend Oregon Real Estate search!

An explanation as to why a Bend Real Estate Buyer’s Agent is in your best interest.

One of the questions I often get from prospective clients is, “Why should I hire a Bend buyer’s agent instead of just a standard Bend Oregon real estate agent?”. Read more

Bend Real Estate in Review- 2014

A look back at the 30% appreciation insanity of Bend real estate 2013, and a heartfelt wish for a nice, easy, happy 15% year in 2014
There is a day on my Bend real estate specific calendar I circle each year. January 15th. Each year I wonder, will this year be the same in my mercurial business? Will there be a deluge of new clients, requests, queries as of this date, like there was last year?

This year the answer is once again, yes. And so, since I was so ridiculously busy last year to the point of no longer taking new clients as of October, I thought it wise to write a new blog, as it may be a while before I can do so again (witness, last year’s blog activity!).

2013 was . . . crazy. After a couple of very healthy years (2011 and 2012) that saw Bend real estate prices climb way up from the bottom, we were hit with the “big turn”, when people all over the rest of the Country were finally able to sell their own homes and make the move to Bend. Prices rose ridiculously from January through July, when, thank goodness, they reached a point of stability which they have mostly held since. When this ramp flattened out we found prices about 30% higher than they were a year before. Whew!

I too was caught up in this fury, as I had to sell my last Bend home due to divorce, made a tidy 50% profit in 2 years, and bought again very close by in an adjacent neighborhood filled with ponderosas, rolling streets, and large, private lots. I made several offers, was beaten out by higher offers several times, until I happened upon a home in the neighborhood I wanted, and I bought it the first day on the market at full price, so the seller could not possibly wiggle out and take a better offer! It was nuts, and gave me real insight into the emotional roller coaster my clients were experiencing in the Bend real estate market.

If I could have, I would have waited until later in the year, when things did level out, Bend homes could be bought without a fight, and there were more of them to be had. This is where we find ourselves now, for the moment. I have always counseled my clients to buy OUTSIDE of the main buying season of March through October IF they could, and especially outside the May through August period if possible, the silly season. But sometimes, as with my situation, the stars align in only one way and you have to do what you have to do.

I do not expect 2014 to be quite as bad. Dear God, I hope it is not. We are already up to an average sales price of about $360k, not all that far from the peak we reached in 2006 of $435k. At that time, many families and young people were totally shut out of our market. I do not wish to see that happen again. I have already seen many more requests for Redmond showings from buyers around $200-$250k, as they can get more there and there is very little in Bend real estate at $200,000. This gives me a bit of deja vu, as that is what happened in 2004-2005. Then, as Redmond got too high, Prineville and LaPine were the next to rotate up, and that is when the crash hit- those two places are still far from recovered.

What I do truly expect, after the 30% run up last year, is half that, about 15%. In the 90’s and early 2000’s, 15% was about what we got each year, and while that may seem high in most cities, for our area that is “normal”. I think we can look forward to several years of 10-15% property appreciation gains in Bend. Redmond has started to rise quickly. And, there are a couple of corners of the Bend area real estate market, especially the area near Sunriver called “There Rivers South”, and some rural areas, which are just starting to rise and represent good opportunities.

Good things to note- yes, prices have been flat since July. Inventory is, though just slightly, up from the low levels we went into 2013 with. Price per foot has held steady levels since July as well. And many, many homes continue to be built here as they were last year, though they are often sold well before completion. Rates are a little higher and should go higher later in 2014. The rental market has gone bananas as many people can not afford to buy and are renting instead. These are the “release valves” for the Bend real estate pressure cooker we have been living in.

There are caveats, of course. Rising rates have really not even begun to start rising. I do expect we will see rates between 5 and 6% by the end of the year, still historically very low. And the biggest wild card I see is the selling situation across the Country. How many folks will decide THIS is the year to move out of the big city and raise their kids in a nicer place, since they can NOW sell their own home and get good value here? I am nervous, based on last year, that this number is higher than I anticipate. My buyers who have bought recently from places like Tennessee, Florida, California, Hawaii, Massachusetts, Pennsylvania, D.C., and so on all tell me that when they tell people back home that they are moving to Bend, they are surprised their former neighbors already know about us and say things like “oh yeah? I have wondered about Bend, let me know how it is!”.

People know about Bend now, even East of the Rockies where we were a total unknown until a few years ago. That scares me a bit, and as the demographics of my clientele has gone from Pacific Coasters in 2007 to “everybody from everywhere” in 2014, especially from East of the Mississippi, I wonder if I have that 15% wrong, and that we are about to get hit with yet another tidal wave that pushes us inexorable up to the lofty price levels of places like Tahoe and Aspen over the next ten years. Make no mistake, our recreational opportunities (much more vast and varied than either of those), clean air, a moderate climate, a new four year college, and abundant water, lack of private property in a County 97% owned by the government, not to mention larger city amenities, will eventually push us there. Those places were unknown and relatively cheap once too, but once the jet set and the World became aware, as they have here . . .

But I hope it’s 20 years, and not 10. Let’s have a nice, smooth, easy 15% year, shall we?

Rising Rates and your Bend Home Purchase

Rising rates and your Bend Home buying power

Thom’s Real World story of how rapidly rising interest rates just squeezed him out of buying the Bend home he had chosen to purchase.
You might think that mortgage rates are still so low, hovering today right around 4%, that it’s really not a big deal that they have been rising quickly on the back of Ben Bernanke’s testimony on Capitol Hill this week. Uncle Ben mentioned that the Fed might start tailoring back MBS purchases during its next few meetings, and that sent mortgage rates up .09 basis points in one day, one of the largest one day increases on record. But here’s a real story, my story, as to why it is a nasty development if you are trying to get the most Bend home you can for your money (and who isn’t?).
I was called into my mortgage broker’s office on Thursday, which was great timing, as we had just sold the second Bend home we had to sell, and were ready to make an offer, THAT DAY, on a house we had been watching for weeks. The real estate market in Bend is excruciatingly hot, so I wanted to move fast.
His demeanor was sober as we walked in. I had just paid off a $16,000 credit card balance to allow us to get this home, and was raring to go. We sat down and he said, “I can’t qualify you guys for the mortgage.”
My smile fell right off. “But we talked about this a few days ago, and you said we could move ahead once we got this debt paid off.”
“Yes,” he said, “that was true a few days ago. But rates just spike today. I had you at a 44.5% DTI (debt to income ratio, which takes into account your mortgage payment and all other dent payments versus your monthly NET income- banks don’t want to loan if you are over 45%) a few days ago, but mortgage rates have moved so much, you’re now at a 45.4% DTI. So I can’t qualify you for the loan.”
Needless to say, I was not and am not pleased. It’s not his fault, of course, he’s just the messenger. But this illustrates the fragility of buying power due to rapidly moving mortgage rates in real estate markets everywhere, not just good ol’ Bend Oregon mortgage rates. If your DTI is close, you can literally be completely taken out of a price range you THOUGHT you were in just a day or two before. He said he had to make calls to several borrowers explaining the same thing to them.
Mortgage rates are really, really important. Often I tell my clients to worry less about the price of the Bend home they are trying to purchase and squeezing every last dollar out of negotiations when it is the mortgage rate that is much more important. Spend some time with your mortgage broker, ask them about how you can lower your rate with the Yield Spread (by buying down the rate for cash) if you plan to be in it a long time, or how you can take a higher rate and get cash back towards closing costs by “selling” a higher rate to the lender. Note that banks often will not give you this option, you need to talk to a mortgage broker to get the best deal.
And what am I doing? I am waiting for mortgage rates to drop, hoping that the large, knee jerk reaction of the last week will settle a little, and secondly, waiting for the new credit report of mine to come out hoping that my 720 score will improve to over a 740, which will instantly drop our rate by 1/8 of a point, and maybe, just maybe get us in the door of our chosen Bend home.
Fingers crossed that the Bend real estate market waits for us!

Bend’s move from regional to national real estate player

Bend’s Move from Regional to National Real Estate Player

An explanation of the effects of Bend’s move from regional to national real estate player on increasing home prices and low inventory and why they both should continue for many years to come

Thom’s explanation of Bend Oregon’s unique real estate market, its move from regional to national renown, and why our home prices are and should continue to increase faster than most of the rest of the country’s.

I often hear from home buying clients moving to our little Bend, Oregon from other areas of the United States, the majority of my business, that our prices scare the heck out of them. Not necessarily the prices themselves, but the rapid and constant increase in those prices. I am often hit with the question, “Do you think the run is about over?”, to which I offer an emphatic, “NO, I believe it is just beginning.” I understand that the Bend real estate market seems strange to folks from “normal” real estate markets, where people often move across town, people move in for jobs, and so on. But, there are some very real and time tested reasons why this occurs, and why it will continue into the foreseeable future. This reasoning also explains the vast difference between the rise in our market in 2004-2007, and the similar rise we are seeing now. And remember, we are not yet back to those highs, even now.

There is a phenomenon in stock market analysis known as “the transition from regional to national markets”. The largest gains in stocks often occur when a business, such as Chipotle, Krispy Kreme, Wells Fargo, and Uber, to name a few of recent years, transitions from being a regionally known and focused player, to becoming a nationally known and focused player. These gains can be hyperbolic and exponential. I have been a watcher of Jim Cramer for years, and he often says these are his favorite stories, and is constantly trying to uncover them for his viewers.

Bend’s move from regional to national real estate player makes it the Chipotle of real estate markets. Except that, unlike Chipotle, we are in the early stages of the discovery process.

Ladies and gentlemen, there could hardly be a more pertinent explanation for this Bend’s meteoric and continuing rise than this. If we were to talk baseball innings as a metaphor for where we are in this timeline, I would have to guess we are at the end of inning two. And it also provides insight into the Bend real estate market now, versus the Bend market of the early 2000’s. At that time, Bend was not well known away from the West Coast. Our real estate brokerage rarely had clients from further West than Colorado, and the vast majority came from California, Oregon, and Washington. Bend is a very small real estate market, and so the easy credit at the time combined with a relatively large amount of people- those that discovered our amazing area early- to spike Bend home prices severely. When I had the occasional client from the East, they would tell me that none of their friends or neighbors had ever heard of Bend.

Flash forward to NOW. The majority of my business now comes from EAST of the Rockies. I am told by my clients from there that their friends and neighbors most often HAVE heard of Bend, and they often tell them as they move away “Gosh, you are so lucky to be moving there!”. Bend is in newspapers on the East Coast quite commonly, and in national magazines every single month as “one of the best places to move”, “best places to visit”, “best places for business”, “best places to retire”, “best ski towns”, “best places to live”, and on and on, as the various links I have posted on my site over the past few years attest. I have begun to grimace each time I see our little town mentioned in a magazine, as I know that will bring yet more folks to our area, and as we are such a small area, there are not enough homes to go around. That was evident last year, and it is MUCH more evident this year, when it is already difficult to find a home and SECURE it here. And again, our town is SMALL, and hemmed in by Federal land. There is, and will remain, only so much to go around. Last year, Deschutes County was the SEVENTH FASTEST growing County in the United States, with a population of just over 170,000. There is a link on the front page my BENDHOMEPAGE.COM website to this story.

You might think I would be jumping for joy at this phenomenon, based upon the nature of my Bend real estate business. Actually, it is quite the opposite. It has become more difficult to find and SECURE homes for my clients, as they have to move QUICKLY ( their own markets don’t necessarily teach them to do this), and they have to come in as close to full price as possible (which is a tough pill to swallow for anyone). Large agencies I must compete with have much more ad money to spend than do I, and there is a glut of agents moving in, mostly from Southern California, who want to get rich quick, though their service quality is much lower, they don’t know the area, they haven’t been through the boom and bust cycles here, and they are often still in their early 20’s and have never even owned a home. I have many clients who have waited, and waited, and waited to purchase a Bend primary home or an investment home, and I have watched them fall further and further behind the pack, missing vast gains in appreciation, because they are not convinced that the phenomenon I speak of is real. And yet, they are seeing it with their own eyes, year after year. Some of those folks have been priced out of our real estate market and now will never be able to make the Bend home purchase they had so hoped to make.

Furthermore, the two real estate markets most often mentioned by my clients compare that Bend to others, are the Lake Tahoe area, and Aspen. These two dramatically illustrate the vast vacuum of pricing space we have above our heads, which we are quickly filling. According to the January edition of Nevada Business, Lake Tahoe’s average sales price in that month was $807,088. Contrast that with our January average of $395,000 (which as of February is up to $403,000)!!! And Lake Tahoe is still in the middle innings of the regional to national discovery process, in my opinion. Aspen, which has been the go-to mountain-play town for the East for decades, is at the top of this food chain, certainly in the ninth inning (or maybe extra innings!) of this process. And, according to the Aspen Times in February 2015, the average sales price there at this time is . . . $4 million. We are talking about a price per foot around $1000, versus Bend’s average per foot price, around $200.

Yes, it will be many years until Bend gets there, and I would like nothing more than if we did not EVER get there, though I think that the Tahoe numbers are not that many years away, maybe 10. But I think fighting reality is a fool’s game. The trend is as obvious as the nose on my face, and I have a rather large nose. Adapting to reality is where wisdom lies. Frankly, at this time in Bend’s life as a town we get more press than either of the other two (which occurs in the early stages of discovery, of course), we have more overall recreation than either of them (more lakes, the desert, more federal lands, rock climbing, water sports, skiing, the Pacific Crest Trail, power sports, mountain biking, mountaineering, backpacking and hiking, a well developed and growing restaurant and pub scene in the land of Beervana, a top tier regional hospital, a quality airport, some of the nation’s best fishing rivers, interesting volcanic environments, hot springs, and we are closer to the Ocean as well as the rainforests of the valley . . . need I go on?), and we have the sunshine we are famous for. We also have more water availability for the future than the drying up area of Tahoe. This year Bend is seeing more California home buyers again, people concerned with living somewhere that has readily available water stores, but will not even think of living in the dark and gloomy areas of the Willamette Valley, Portland, or Washington State. And their wholesale return promises to further compact our tiny real estate market.

It is simply a case of supply and demand. Our supply is and will always be small. Yet our demand increases dramatically every year.

Yes, BEND IS NOT THERE YET AND WON’T BE FOR A LONG WHILE. But if you think this ride is nearly over, if you think that Bend’s real estate market won’t fill at least a major portion of that massive vacuum above us, I believe you have not yet adjusted your thinking to the reality on the ground and the concept of moving from being a regional real estate player to a national real estate player. Everyone knows that real estate is all about location, and Bend has that in spades. But I am here to tell you that there is a second piece of that puzzle that is nearly as important in my experience. It is known as RELATIVE VALUE. And it is that one, more than anything else, that will continue to fuel Bend Oregon’s ridiculously hot real estate market for the foreseeable future.

So you want to reduce your property taxes?

A brief summary of my short time fighting the MAN in the Deschutes County property tax assessment protest system. A cautionary tale, indeed.

My wife and I saw the writing on the wall at the end of 2010- the market had picked up, rates were low, and the number of quality foreclosed homes was rapidly diminishing. It was time to buy, so we closed on our home in January of 2011. We got a home that had sold for $460,000 in 2006 for a paltry $200,000! The last time it sold for that was in the 90’s. Yep, we feel pretty good about it.

Over the past few years I have had many clients ask me how they could protest their property tax assessment and have them reduced. I’ve taken a class on how to do so, and you will find a sheet from the Deschutes County Tax Assessor explaining how to do so on my website. But I thought there would be nothing better than firsthand experience, so, as my appraisal and home sale price were 10-15% below the County’s RMV for my home (Real Market Value), I filled out the form in November, attached my appraisal and request to drop my RMV based upon it, and dropped it off in person at the Deschutes County Clerk’s office.

Now, the class I took made it sound sooooo easy. If you had an appraisal dated around January 15th of the year in question (taxes are assessed based on January values for the year in question), it should be a pretty good slam dunk. And of course a sale in that same month of the property in question should help as well.

So, I naively waited for my hearing, feeling my case was pretty solid. The hearing was set for March 8th, and on that day my wife and I arrived at the County building to wait for our turn. Each hearing lasts about 20 minutes, depending on the complexity of the case, and you can bring an expert witness such as a Realtor, an appraiser (better), or an attorney. As we sat in the hall, the representation for Deschutes County sat next to us, and told us how the hearing would run.

I had known that we would sit in front of a panel of 4 volunteer real estate experts, as well as a stenographer, but I hadn’t known that at this level of the process we would be opposed by an appraiser for Deschutes County Tax Assessor. We presented our case, which essentially consisted of our sale paperwork and the appraisal. They very, very briefly reviewed my materials, and then turned it over to the County’s representation.

She, of course, had prepared an entirely different appraisal. Her values were much higher, and though I disagreed a bit with some of the comps, the entire thing went so quickly that I really did not have time to review them. It was a whirlwind of figures and addresses, and part of the unfair nature of this process is that the County gets to review YOUR evidence for months, while you don’t get to see theirs UNTIL THE 20 MINUTE HEARING STARTS! How are you going to review a 40 page appraisal in that time? Guess what, you are not. The County official even told us outside the hearing room that she knew the whole process was very unfair, but she had little choice but to fulfill her role.

To make a long story short, the panel liked her comps better than those of our original appraiser. I have little faith in appraisals anymore, as EVERY SINGLE ONE I have had in my transactions over the past two years has come in EXACTLY at the sale price. EXACTLY. Not one single dollar over. It is a dirty business, in my opinion, and appraisers are too afraid of being sued to do anything but comply with the sale price. The fact that they always request and are given a copy of the sales contract BEFORE doing the appraisal, should tell you that there’s something wrong with this situation.

Now, if we wanted to we could take it to the next level, which is a hearing in Salem. Our case was not large enough to waste that sort of time, and we were told it would be many months before we could get an appointment. And of course, that we would surely lose. Lovely.

So, friends, my recommendation would be to make sure you bring an appraiser WITH YOU to your Deschutes County Tax hearing, to be sure you have a chance to beat this system. Your evidence needs to be thorough and extensive. Best of luck, you will need it!

Green Remodeling Incentives

Home Energy Audits and the financial incentives available to help pay to retrofit an older home to “Green” status, and a recommendation for my buyers that they consider an energy audit as part of our inspection when purchasing a home in Bend.
I recently became certified as an Earth Advantage Real Estate Broker, which, for those who do not live in the Northwest, is a program similar to but not quite as in depth as Leed certification. Earth Advantage certifies homes with what is called an EPS score, much like the Energy Star scores you see on appliances these days. Now, there are neighborhoods in town where these EPS scores are standard, including of course Northwest Crossing. Newer homes in our area often are “green”, meaning they have a high EPS score due to modern green building techniques.

But, if like me you own an older home, you can still participate in the “green” home boom, by retrofitting your home in various ways to save on energy costs and make your home much more liveable, AND valuable. Studies show that buyers are currently willing to spend 5% more for a green home than for a standard 20th Century style home. In order to better inform my clients, and to determine what I could do and how much it would cost to retrofit my home, I participated in an Energy Audit. The lure of free money in the form of incentives from Clean Energy Works and Energy Trust, which are closely linked, was enough to get me on board. When a Northwesterner pays their utility bills, a portion goes to Energy Trust, which then pays those funds out as incentives to retrofit older homes. Clean Energy Works operates on funds directly from Pacific Power and Cascade Natural Gas, but performs the same function, and the two often work together.

The audit was suggested by Clean Energy Works (I will have links at the bottom for all of my mentions), and performed by Neil Kelly associates, which is a company that started in Portland many years ago, and performs both audits and retrofit energy remodels. They performed a blower door test, in which they add negative pressure to the home to find out where the air leaks are, duct tests, infrared sensor testing to see where cold air is flowing in and heat flowing out, and a host of other tests. The whole thing took about 3 hours.

A few days later I got my report and the recommended remedies, broken down by cost per item. To summarize, the total to retrofit my home, a 1989 built structure, was $17,500. Of that, incentives from Energy Trust, Clean Energy Works, as well as State energy tax credits (Federal energy credits have vaporized, unfortunately) would kick in $4000. Interestingly enough, they offer an option to amortize your cost, and they set it up so that the amount you pay will not be more than the amount you SAVE each month on your energy bill! Quite a nice system. My monthly payment, should I choose to go this route, is $38, the minimum they expect I would save on my monthly bills. It turns out my ducts are quite leaky, with 5 times the loss from furnace to vent as in a green home, most of my windows of course need replacing (about $7500 of the total cost), and in the 1980’s they simply did not seal homes very well. Add to that the fact that there is no insulation under the floorboards but only on the stem walls, and you can see there is a lot to do here!

Now, $13,500 might seem like a lot, but with the value of my home close to $400,000, and the fact that buyers are willing to pay 5% more at the moment for a green certified home, anything under $20,000 should be easily recouped in my case.

Which brings me to my last point, one that I believe will register with my Bend home buyers, especially those in higher price brackets. One of the largest concerns my clients tend to have is in regard to energy efficiency, as we are cold in the winter and warm in the summer here. A few years ago I could order the energy bills for prospective home purchases, but that is no longer the case as they are now considered private. So, for those who are extremely concerned about energy costs and green home living, I will now recommend that they consider having an energy audit performed during our 10 day inspection period. Whereas a standard home inspection costs about $400, an energy audit costs as little as $250, and will either set your mind at ease, or keep you from making a bad investment. Well worth it, in either case, especially for costly homes. Something to consider for the 21st Century.

As promised, here are your links!

http://energytrust.org/residential/

https://www.cleanenergyworksoregon.org/

http://www.earthadvantage.org/residential/

http://www.neilkelly.com/services/energy-efficiency/

http://www.oregon.gov/energy/RESIDENTIAL/pages/residential_energy_tax_credits.aspx

The “Hold Your Nose and Buy” Bend Real Estate Market

Thom describes his analysis of the current and especially difficult market factors that led him to the choice to purchase a less than perfect home, rather than rent, wait, and perhaps end up with no home at all.
Last year I had a divorce that ended up in a demand from my ex wife to sell our Bend home so that she could get her equity into her pocket. I loved that house, and had put a ton of sweat equity into it. I bought it in a fixer condition, and knew that I had made a very large and tidy profit on it. So, after much gnashing of teeth and softly preparing my daughter for the loss, we indeed sold the house. Despite my admonitions to my ex wife that we would get much more money for it this Summer, we sold it in Spring, and it closed sale on April 30th.

Meanwhile, I had been looking. Homes in Bend that were perfect for what is rapidly becoming my new family, homes which I had seen for sale last Fall for $350,000 ish, were now $425,000. I was undaunted, as I was selling a $300,000 home, and my new Love was selling her $220,000 home, so we should be able to afford $425,000, right? Well, not exactly. Banks have actually tightened their lending standards since I bought in January 2011, and though we had a ton of money for a down payment, fluctuating self employment income and my Love’s full time student status brought us down to Earth rapidly- they would only give us enough to buy in the very low $300,000 range.

Now I had been using an MLS portal, the same type I set up for my clients, and I knew that 4 bedroom Bend homes in the $300,000 range with a large lot and a 3 car garage were almost non existent. When they did exist, they were in areas I simply would refuse to live, areas I know well to be problematic from my 23 years in the area. We could get a 3 bedroom, with no office for my business, and a 2 car garage, with no space for the ski boat or other “Bend” type recreational toys, and we could get a smaller lot. Not exactly inspiring stuff! After living for a month in my new Love’s house in a neighborhood where people can hear their neighbors’ conversations in their back yard, I wanted to get back to the sort of home I had sold; one with an idyllic, large back yard and outdoor entertaining space. I grew up in the Southwest, so outside is the way I like to live when at all possible.

After chasing down a few homes which we ended up being too late to nab (Seriously, the $300k range is about the worst in terms of inventory here, being about the mid-line of home purchases in Bend and having the largest demographic of the buying public perusing them), we had a choice to make, a choice I have seen clients wrestle with in recent months as well. Do I hold my nose and buy something less than perfect and try to fix its limitations, or do I rent and wait for several months hoping that inventory improves?

It did not take long to decide. Option 2 is out, and here are the reasons why.

Rising rates. We saw rates spike a quarter point in less than a week, and they don’t look to be stopping. A home we planned to buy at $325k is no longer available to us because of that quarter point jump. It puts us over the magic 45% debt to income ratio that banks use as their dividing line these days (It was 51% when I bought my last house). If we wait until next year, my guess is we are looking at 6% or so. Not a bad rate historically, but one’s buying power is crushed with each tiny tick up in rates.

Rising Prices. Prices rose 20% last year, and they have risen about 10% so far this year in Bend. With the low Bend Home inventory and so many buyers hearing the “ALL CLEAR” bell ring at the same time, they are going to rise more quickly the rest of the Summer and Fall, in my opinion. If we wait we risk BOTH rising rates AND rising prices crushing us to the point where we won’t be able to buy anything, a position I was in back in the 2005 era, where I had given up on buying a decent home here, as the median Bend home price was around $465,000.

Rising rents, fewer homes. Lastly, rents are rising very quickly in Bend as well, which is a historic change. Traditionally, rents here have been low as our economy does not support the kind of jobs that pay high rents. However, with so many people having moved to Bend in the last two years and far fewer of them buying than before, and so many others having lost their homes and no longer able to buy, the renter pool is massive these days, and since almost no new homes were built for four years here, there are fewer homes to go around. So, the same dynamic is occurring in the rental market that we see in the home purchasing market- a large demand and a tiny supply is pushing rents upward. Add to this the fact that we lose major tax benefits (both of us being self employed) by renting, and this is the last nail in the coffin of waiting to buy a home.

And so, friends, I am left with only one decision. HOLD MY NOSE AND BUY SOMETHING! And that is exactly what we are doing. We made an offer on a Bend home that needs some work (it has no furnace, just wall heaters, only 3 bedrooms when we need 4, and is only 1650 square feet, when we need well over 2000) this weekend. It came down to the same thing that ended up deciding my last home purchase- the lot. You can change a home, you cannot change (at least not in terms of size, privacy, location) the lot. This is a gorgeous lot, at the end of a cul de sac, a half acre, very private with lots of potential for gardens, greenhouses, and room for the dogs and the kids. To make it work we will have to spend a bundle to convert the garage to a real master suite, and then build a new garage next to the home. Not to mention putting in one of the new Japanese style Mini-split ductless heat pump systems.

But it does accomplish a few things. It gets me back to the West side of Hwy 97, where traffic is lighter and flows better, trains don’t stop your progress daily, and restaurants, pubs, trails, and the river are all in biking distance. It gets me back into a home like the one I had, which was very private, has gorgeous and idyllic backyard space, and has lots of quiet in the evenings and on weekends. Even better, this one is not on a busy road as was the last. And, by increasing the footage to over 2000, and bringing the 90’s styling inside the home into the 21st Century, we should have a $400,000 home by Fall, albeit with a much smaller mortgage.

So, my message is this. We are indeed in a tough market. If you are the picky type, this is not the Bend real estate market for you, though you would have loved it two years ago when my buyers (including myself) had the run of the place and could buy anything. Now, there is not much out there to buy. And time based financial pressures (rising rates, rising prices, and rising rental prices with limited availability) are all saying that if you don’t buy now, you will either get much less for your money later, or like many in the pre-boom and boom years, may be pushed out altogether. This Bend real estate market takes an open mind, a lack of fear, and a sense of creativity. Cash helps if you have it, and if you are an all cash buyer but find yourself in the same situation I am in where I can’t find what I want at my price, I HIGHLY recommend you consider a small loan at “still ridiculously low” rates, and then do like I am doing, put that cash into MAKING THE HOME YOUR OWN, MAKING IT THE BEND HOME YOU WANTED!

That way, you end up with what you want, you take advantage of low rates while they still exist, you keep the tax benefits of home ownership, and you beat the herds that will no doubt continue to come and drive our prices up for the next several years. I made 50% on my last home purchase by carefully studying the risk/reward ratio of the situation, though many did not agree with me at the time. Once again, the slight risk we are taking offers great reward, and indeed, it is a much, much lower risk than I was taking at the end of 2010. It seems a no brainer to me, and I have tried to counter argue the points above, to no avail. If you can’t either, perhaps you will agree.

Why I don’t recommend Short Sales to my Buyers

Thom explains just why he tells his buyers that short sales are most often very bad deals, if they are even legitimate deals at all!

It seems that three years ago no one had ever even heard of a short sale. Now we just wish we hadn’t EVER heard of them. Short sales are the bane of the home buying market at this moment. Most buyers really don’t understand why they are so bad, so difficult, and in the end, so infuriating. I have been involved in many, from both sides. And while I am whining about them as a buyer’s agent, I can tell you it is actually much worse to be on the listing side, at least for the agent. From the customer’s perspective, it is generally worse on the buyer’s side. This is because if you are the seller, you already know you made a very bad mistake, and you are prepared for lots of unpleasantness in trying to unwind that awful thing.

But if you are the buyer, you ostensibly haven’t screwed up, and are just trying to buy that cute house with the low price. But what you don’t know in these situations will damn near kill you. In the early days, let’s say in late 2007 and early 2008 when shorts were beginning to rise locally (I am told by those in other areas Bend has been in the very forefront of short sales, as we fell so hard, so fast, the Vegas of the NW, so many have learned from our mistakes), we eagerly took our clients to them, as none of us really understood them either. Then came the hair ripping, the screaming, the crying, and the slew of buyers running for the hills, convinced the banks were evil and liars (I am not so sure they got it wrong there), and that the whole deck was stacked against them.

So if you are a home buyer, and you are looking in an area such as Bend, Florida, Vegas, Phoenix, or California’s Inland Empire, where prices are down 50% or worse from their highs, please, for your own sake, listen up.

1) PRICING-
First of all, the price you see on a short sale may or may not be legitimate, in fact, most often it is not. “But it’s on the paper”, you say. Yes, but it means nothing. A short sale is generally begun when a homeowner misses 2 payments. The bank won’t even let a seller consider a short unless they have satisfied that little detail. Then, the Realtor comes in, gets the bank information, and most often begins the short WITHOUT ANY communication from the bank as to how much they want to get out of the property. This is not the Realtor’s fault, because most lenders will not accept any communication from the Realtor UNTIL an offer is made. Therefore, the Realtor has to get an offer before he/she knows how much the house can really sell for. So, in order to show good faith to the bank that we attempted to get their money out of the deal, we generally start them at the break even price, where the bank will get all of their money back. Then, the price is lowered, often by 5%, each week or two, until an offer comes in.

So what generally occurs is that the house sits on the market for months as the price comes down, and that period is longer when there has been a huge drop from the boom prices, simply because the market is 50% or so below that price at the current moment. Finally, the price begins to look attractive to buyers, and an offer comes in. Then the Realtor is often allowed to speak to a negotiator at the bank. This negotiator is for the Seller, as, remember, the bank is not the owner of the home until foreclosure, and the seller still owns the house, so all negotiations on how much they will take to let the seller out of their obligation to pay the money back take place between seller and bank, not the buyer. So, the buyer sits, and sits, and waits for someone to get back to them while the lender’s negotiator negotiates with their board, their sub-lenders who really own the note, and the seller. What sometimes occurs in our market is that the bank finally comes back and says,”we won’t take that much, you have to offer more than the asking price”. So, that’s what I mean by the price often being illegitimate, as it means nothing at all until the bank says it does. And in cases where they are writing down over more than 35%, my experience says they won’t do it, and would rather foreclose. Now, this is where the price DOES get legit, as the Realtor is forced to raise it, and puts it back in the ACTIVE MLS category. These are your best bet if you want to look at shorts. I just closed one, in fact, where the previous deal fell apart, leaving a pre-accepted bank price for us to jump in and take advantage of. These are a needle in a haystack, but your Realtor can help.

2) SELLER CONTRIBUTIONS? Fahgeddaboutit.-
The majority of offers these days include what are known as seller contributions. This simply means the seller is kicking money in towards the buyer’s closing costs or down payment. As houses now require larger downs to buy, it makes sense that the buyer is putting the squeeze on the seller to help the sale come to fruition. But in a short sale, the seller is losing his or her house and accepting the mantle of years of bad credit. To even get a short sale to happen, they have to prove to the bank that they are essentially broke. Do you think they can, or will, kick in cash to help you make a purchase? Would that make any sense at all?

No, of course it wouldn’t. And, as you can’t negotiate with the bank (remember, they only deal with the seller and have no legal basis or right to negotiate with the buyer as they don’t own the house . . . yet), they also won’t help you. So contributions are exceptionally rare with shorts, and if you need one, don’t waste your time looking at them.

3) OFFERS-
So the buyer has made an offer, and is smiling thinking they are going to get this great house cheap. But not so fast. It often takes 1-4 months for the bank to figure out what the heck is going on, and it may take them that long to get back to you. You need to know this going in. Furthermore, there may be other interests involved. These include second mortgages, Home Equity Lines of Credit (HELOCs), and the worst, Private Mortgage Insurance (PMI). Now, your chances of actually getting a short sale with only ONE lender is somewhere around 25% at last check. Those chances drop significantly with each party attached to the debt. The First Mortgage has the power here, as they can legally take the whole offer and leave the sub-creditors with nothing, but of course then they really can’t do it as the sub lenders will foreclose. SO, all lenders and insurers must sign off on the deal, and IF this ever happens it will take a long, long time. There are bureaucracies in each, and therefore the slow wheels in those institutions have to deal with the slow wheels at the others, negotiations go back and forth between loss mitigation departments at each, and it just grinds to a halt. Frankly, these banks believe they have better things to do, and much of the time in these instances would simply rather foreclose than go through the mess of dealing with your offer.

My own advice would be to never get involved with a short sale if it has PMI involved, as there is very little chance it will ever happen. I also counsel against getting involved with short sales that have a second or a HELOC involved, as they also have maybe a ten percent chance of going through. Meanwhile you are wasting your time and missing good Bank Owned REO’s and traditional sales that may actually be purchaseable. Which leaves us with the single lender short sales. These are your best bet. There are certain banks which have a good track record of closing these, and others which are the kiss of death. I am not going to tell you which unless you are my client, due to legal issues, but it you have an honest buyer’s agent who didn’t just fall off the turnip truck, they should be able to as well.

3) IT AIN’T OVER UNTIL THE FAT LENDER SINGS-
But you’ve made an offer, and you are prepared to wait until something happens. Optimistic, are you? Well hold on, Kemosabe, this ride gets rougher. Now, if you make an offer on a traditional sale, or on an REO, once it is looked at by the seller and approved, which should only take a few days at worst, it is marked PENDING in the MLS system, and no one can offer on it again until the offer falls out of contract. But with a short sale, the ground is shaky as Jello, and because there really isn’t a deal until a third party lender signs off, it is marked CONTINGENT, which might just as well say “WE HAVE AN OFFER BUT IT PROBABLY AIN’T GOING TO HAPPEN- GIVE US A BETTER ONE!” Yes, “your” house stays on the market during the month or more of negotiations, and another buyer can come in behind you and get in line with a better offer (generally you are still first to get a shot these days, as banks only want to look at one offer at a time, but you know the listing agent is going to tell them that they have a better one waiting behind you . . .). Which means, you might fall in love with it, as clients of mine have in the past, and over months develop a real love for it, only to lose it at the last minute. Not a recipe for stability, is it?

4) REMEMBER AIG?
Another dynamic in place with short sales is that these lenders are insured against foreclosure risk, but often not against short sale risk. So, if they foreclose, some of that loss is made up by an insurer. If they sell a short, they often have to write it all off. This just makes negotiating the short sale even less attractive to them.

5) THIS IS/WAS SOMEONE’S HOME!
When I take young couples and families through short sales, people get bummed out. When you walk through a short sale, the pictures are still up, the kids’ toys are scattered all around, and the kitchen table has recently been used. And as you inevitably look at these things, you realize these are people just like you, who had dreams of a better life, but theirs were destroyed by the housing crisis. These people are losing their home, a home they probably love. A home they might have hoped to raise their kids in, watch one of them get married in, have family gatherings and holidays in. But now their dreams are dashed, and you really can feel the despair and sadness in these homes. Clients have walked out just crestfallen after looking at a great home, only because it hits home what is REALLY going on here. If you’re an altruistic type, a sweetheart, short sales aren’t for you, either.

6) CONCLUSION:

In my book, there are only certain short sales worth looking at, and they represent maybe 20% of those on the market. Here are your criteria for a Short Sale you may actually be able to buy:

A- Look for a short sale with ONLY ONE LENDER! More than that and your chances drop dramatically.

B- THAT LENDER BETTER BE A GOOD ONE! There are good banks, and bad banks. The worst in terms of getting these closed was once the industry darling. I think you can guess that one. I wouldn’t get involved with them, they supposedly close only single digits percentage-wise. And that monster that swallowed a big NW bank is not much better. You’ll do better with small banks. They need the money. The big guys are too cash rich these days to care. Caveat- Wells Fargo has proven to be very good and conscientious about closing these, one reason I have switched to them for my own banking needs.

C- Better yet, find one that HAS ALREADY HAD A SALE FAIL AFTER MONTHS ON THE MARKET. This one may have the rarest of items- a legitimate price.

D- BE PATIENT! Constantly emailing or calling your Realtor won’t help. All he/she’ll do is call the other Realtor, and get the “I haven’t heard anything and they won’t talk to me” line we always get. If you are getting involved with a short, that’s your choice, and you must be prepared to wait and be ignored.

E- BE REALISTIC! If the price looks too good to be true, it almost always is. And don’t go looking at short sales if you need to close a house in the next two months or so, chances are it won’t happen, and then you will have only yourself to blame, NOT your Realtor (unless that Realtor hasn’t told you all of this, and in that case, you have my permission to yell at them).

F- Looking for the perfect home? Is the most important thing to you getting the right house? THEN DON’T EVEN LOOK AT THEM! Short Sales are for the buyer who wants to get the best price and doesn’t care if it is an ugly process after which they might never even get the house. They are not for people who are at all emotional about their home purchase. These are brutal, ugly, faceless deals, and if you are looking for the perfect place for your family or get emotional about homes, do yourself a favor, look only at REO bank owned homes, and at traditional sales. You will thank yourself, and so will your Realtor!

Free Money For Saving Energy

Thom points out Federal and State tax credits for efficient energy systems and appliances
Well, the very dark cloud of the economic De-Cession we have all lived through for the past three years has a silver lining. Energy prices. When economic activity dies and products being manufactured, shipped, and distributed slow from their frenetic pace of the early 2000’s, energy prices fall, and fall they have. Automobile gas is currently about 60% of what it was at its peak, Natural Gas is about a third of what it ran up to, and crude oil is at approximately half its former cost. What does this have to do with Real Estate, you ask?

When fossil fuel prices drop, a similar phenomenon occurs in the renewable, or green, energy industry. Prices on many renewable energy systems go up when more people are rushing to buy them to stave off the specter of high fuel prices, and they also go down when prices in non-renewable energies fall, and people become complacent about buying what is the easiest to get- fossil fuels. However, as we have seen with the stock market since the March 2009 bottom, the best time to buy is not at the peak, but in the trough of prices.

Furthermore, homeowners who install energy efficient systems in their homes in 2010 can cash in on government programs, put in place when energy was expensive and it seemed the Saudis would own the entire World, and get some real money back on their taxes both this year, and for years to come. Everything from Solar electricity systems, so perfect for our High Desert and loads of year-round sun, to wind systems, also perfect for our climate, to simple energy saving appliances has a financial benefit to install and use in your home.

After all, do you REALLY think that low energy prices are here to stay? T. Boone Pickens, who is an oil and wind energy titan, claims that oil will once again double this year to well over $150 a barrel (that means $4 plus gallons of gas to you and me). Now, he is an OIL man, so we can take that with a grain of salt, however, he made similar predictions in 2004, and he proved correct then. And he is not the only one making such claims, as the economic recovery in China charges ahead, while ours begins to start chugging along here in America. Once we get our economy cranked up and join the current booms in Latin America and Asia, and then Europe follows, we could be looking at another massive problem with energy prices right here at home.

Now, the tax credits. The Federal Government has several tax credits, CREDITS, NOT DEDUCTIONS, for homeowners in place for 2010. Through this year, homeowners who install energy efficient products in their homes can get 30% of the total cost of the products back as a tax credit on this or next years’ taxes, UP TO A MAX OF $1500. The items must be in your principal residence, must have been put in service between January 1 2009 and December 31 2010, and include the following items:

Biomass Stoves, HVAC (heating, ventilation, or air conditioning), Insulation, Roofing, Water heaters, and Windows and Doors.

Folks, this is a no brainer. I know many of you have bought fixer uppers in the past year or two as prices have dipped, and if you need a new roof, new vinyl windows to replace old aluminum ones, or a new furnace, NOW is the time to do it. Free money from the government is not just for Big Banks (though yes, it’s a LOT less!)

AND EVEN BETTER, there are some items which HAVE NO UPPER LIMIT, and not only do they qualify for the 30% credit without a limit, they also run through 2016! These items include:

Geothermal Heat Pumps, Solar Energy Systems, Wind Energy Systems, and the new up and comer, Fuel Cells.

Now that’s a credit! Always wanted a solar electricity system on your home, but balked at the cost? Take advantage of lower prices than you will probably find in a a years’ time at the source, and let the government pay 30% of your costs! It’s a great situation for those that need to do some work, and have the seed money to do it.

And, of course, the State of Oregon has a very messy and extensive list of credits for homeowners who install energy efficient appliances and systems as well. It is too sloppy to summarize here, so I am including this link to a page which summarizes them: http://www.oregon.gov/ENERGY/CONS/RES/RETC.shtml , OR, I have included a great chart on the bottom of my “Tax Information” page, HERE.

Lastly, here is a link to the Federal Governments informational site on their tax credits: http://www.energystar.gov/index.cfm?c=tax_credits.tx_index

Now, go save some money!