Q: We want to buy a home this year but my husband says he wants to wait until the economy really hits bottom.

That way we will get the best deal. In the meantime, we’re paying rent and I think that’s just wasting money. I want that money to go toward a home of our own. What do you think?

A: First, of course, is the simple fact that no one knows when we’ve hit bottom until we aren’t there anymore. Once prices start to stabilize or even start upward, it’s too late. I’ve always believed that the best time to buy is when you want a home.

We all learned, sadly and dramatically, what trying to outsmart the market will get you. If the stock market crash, the banking melt down, and the real estate disaster have taught us anything, it should be that we can’t really predict the future. We can only try to learn from the past.

The real estate market is actually changing for the better at this very moment. The news out at the end of May indicated that pending sales of homes in the US had risen three months in a row and that in April, sales jumped 6.7% the highest leap in eight years. That report, from the National Association of Realtors, also stated that in several states, bidding wars were becoming common on foreclosures as speculators and first time home buyers flood the market to find bargains.

The $8,000 tax credit for first time home buyers has also helped to turn the real estate market around. Many banks are now allowing these funds to be used as part of the down payment and closing costs. According to investment analysts, looking state by state at many economic indicators, the recession will end in Washington state by the fourth quarter of this year.

Even if these predictions don’t come true, it’s a ray of sunshine to those hoping for better days. With our inventory at an all time high and prices reduced dramatically I would say this is a great time to buy.

Q: How important is the Form 17, Seller's Disclosure Statement?

Our listing agent has asked us to fill it out so she can put it online with our listing and we want to wait until we get a buyer.

A: I agree with your agent the the Form 17 (a form put out by the multiple listing service that sellers are required to fill out) is very important. Not having it available for potential buyers is a serious mistake. It may lead buyers to wonder what the seller is hiding when the form isn't available. Having the form online shows buyers that you are willing to disclose what you know about your property up front.

You should go over it carefully and be sure you know what you want to say before you fill it out. I see these forms all the time with answers crossed out and other answers checked. That's a red flag to potential buyers. They often ask if I think you lied, changed your mind, or just didn't know anything.

You should also remember that some answers require explanation. You can add a sheet of paper with comments on it to explain any answers that require it. A good example that I saw recently was, "Has the roof ever leaked?" The sellers marked, "I don't know." The first reaction my client, who was interested in the house, had was, "Of course they should know if the roof has leaked. What are they hiding?"

I think that question is not well-worded and that the seller probably meant that he wouldn't know if the roof ever leaked in the past, before he owned it. It would have helped to explain his answer by adding language that the roof hadn't leaked during his ownership.

I saw another Form 17 today that had dozens of answers crossed out and other answers inserted. That would give a buyer pause. Did the seller not know his own mind, or was he just sloppy? Many buyers would think that he reconsidered his answers to hide defects.

So, yes, I think it is a very important document.

Q: I'm confused about this new $8,000 first time homebuyer's deal.

I owned a home five years ago but don't own one now. Can I still qualify? Where do I sign up to get the money?

A: You are considered a first time home buyer if you haven't owned a home in the past three years, so you should qualify. You don't get the $8,000 in cash. What you get is a tax credit. When you file your taxes for this year you get to deduct up to $8,000 off the top! However, if you owe less than $8,000 in taxes, the government will send you a check for the difference. So if you owe only $5,000 in income taxes the government will send you a check for $3,000!

There is an income limit of $75,000 gross income for a single person and $150,000 for a couple, but you can still get a partial credit if your income is up to $95,000 for a single person or $170,000 for a couple.

This is not a loan and doesn't have to be paid back like some programs in the past. That means that you are basically getting a gift of up to $8,000 for buying a home. You must, however, close before December 1, 2009, to take advantage of this program. If you are building a home you may still qualify but you have to occupy the home before the December 1st deadline.

This program, combined with incredibly low interest rates, gives a great boost to first time home buyers. Prices have pretty much stabilized in our region but they are still affordable and offer those who have not owned a home in the past three years a really great opportunity for home ownership.

For more details go to the IRS web site and type in: first time home buyer to credit, or try www.federalhousingtaxcredit.com. This is really too good an opportunity to pass up, in my opinion.

Q: I’ve been a renter for the last 10 years because I just don’t see the value in home ownership

when prices can be as volatile as we’ve been seeing in the last year. Plus, I don’t want to be tied down. In my business I could be transferred anytime. I assume you disagree.

A: Well I can’t speak to your fear of being tied down, but I can argue that your thinking is flawed about the value of home ownership. Let me give you an example. This is a real client of mine. I pulled him out of my files at random. Let’s call him Jack.

Jack bought a nice rambler on a large lot with a bit of a view in 1999. He paid $257,000 for it. Like all real estate on Vashon it went up in value every year. By this year, ten years later, King County has his home valued at $557,000. The home has more than doubled in value. Even with the decline of 10% in property values we saw on Vashon last year, he would still make a tidy profit if he were to sell.

Just as valuable is the tax savings he would have had each year he owned it. He was making about $50,000 a year when he bought the property and his wages went up about 3.5% every year since, so he now makes approximately $70,000 a year.

Using a spreadsheet to figure his tax saving--based on deducting his mortgage interest and property taxes every year--he would have saved over $43,000.00 in real money over the ten years! That’s money he could spend in other ways instead of giving it to the IRS. That’s impressive.

I probably haven’t convinced you, but if I have you should know that this is a great time to buy on Vashon. Interest rates are at an all time low, the government is offering an $8,000 buyer bonus this year, and real estate prices are stable. If you had your saving in the stock market, I would guess you didn’t come out half as well as Jack did.

Q: I had my house on the market for a while but decided to wait a year so that I could get my price.

We already moved so the house is empty. Friends are telling us we should rent it out but I don’t want it trashed. What do you think?

A: There are a couple of issues here. The first is the issue of renting out your house. Unless you don’t really worry about money at all, you’re throwing away a lot of it by having your house sit empty. There are mortgage payments, utilities, insurance and taxes to pay, plus the cost in time and/or money to keep up the yard. Renting would get you some money to cover those costs.

If you do a proper job of screening tenants you won’t have your place “trashed”. Trust one of the property management firms on the Island to find good, responsible tenants and that shouldn’t be a worry.

The other issue is holding on to your house to “get your price”. I’ve said many times before that the price is set by what a buyer is willing to pay. You can hold out all you like but if your expectations are too high, you’ll put a lot more money into the house with little hope of recovering it.

The real estate market here on Vashon is really not bad. Sales of homes actually went up 14% in the first quarter of 2009 over the first quarter of 2008. The average price of those homes did drop, but only by about 10%. That’s well below what most markets have experienced.

It almost seems that we have only two kinds of property on the market: homes that sell in a few days or weeks, and those that have been sitting for months or even years. It’s all about price. The well priced properties have been selling quickly, some even with multiple offers.

If you don’t want to price your house to sell now, then getting a renter in there to help offset your negative cash flow would be good.

Q: I don’t know how you real estate people ever come up with the prices that you do.

My neighbor’s house is for sale and it’s a total dump! I don’t even think it could be remodeled into anything. But their real estate agent has it priced at half a million! That’s crazy. No one will pay that much for it.

A: There are many things to consider when pricing a property for sale. Certainly the listing agent would have had to come up with comparable sales of similar homes, adjusting for our dip in the market over the last year. Other things to consider are location, condition of the house and property, and the obsolescence of the style and floor plan.

Some considerations are just an issue on Vashon, like the distance from the north end ferry. But most issues are the same as elsewhere and include things like the condition of the house, number of bedrooms and bathrooms, yard or garden, size of the parcel, closeness to recreational areas, and for families with children, the closeness to schools.

It’s important to consider the value of the land. Buying land and building is a very long and frustrating process for many people and it’s often more cost effective to remodel an existing house. The land your neighbor's house sits on has a spectacular view and spacious grounds. The landscaping hasn’t been tended for awhile, but, as the landscapers say, “it has good bones.” Just the land itself would sell for close to the asking price they have on the house.

As a neighbor, possibly with different standards of neatness, this property may seem “trashed”. But the house is structurally sound, has a good floor plan and a good location. It needs to be remodeled but just cosmetically like paint, newer appliances, nicer floor covering and yard clean up. The home offers many things that buyers are looking for and I think it’s priced well and will sell quickly.

Q: I'd like your list of all the cheap foreclosures on Vashon.

I've seen ads on TV saying you can buy houses for just a few hundred dollars and that's what we want to do. We see ads for house that are only $75,000 or so on TV. Even if it's a fixer, I think my wife and I can do the work.

A: There are very few houses for sale here that are in foreclosure, but I can send you those listings. I must warn you however, that you won't be buying any house in Washington for a few hundred dollars down. That may work in Florida or Alabama, I don't know, but the banks that have foreclosed on these houses want well-qualified buyers with good credit, a reasonable down payment, and sufficient income to cover the payments.
You need to meet with a reputable lender to find out what you are qualified to spend on a house and to get pre-approved. A pre-approval letter is almost always required on all offers on properties owned by banks.

Although prices have dropped here, like elsewhere, our lowest priced homes are in the mid to high $200,000 range, but most are over $300,000. That's still a bargain for Vashon but certainly not the prices you're seeing on television.
We experienced a drop of about 8-12% over the last year, and for Vashon, that's significant. Some of the few foreclosed homes we have are listed even lower. It's possible to get a house here for well under its assessed value, but that's still likely to be over $250,000 at the lowest end.

Some of the foreclosures we have are high end homes. That means you might be able to buy a house that would have sold for $650,000 a year or so ago, but can be purchased today for $525,000. That's an incredible deal.

You should also be sure that a lender will be comfortable helping you buy a "fixer." Some fixers will need a construction loan and that's a different kind of loan with different requirements.

Q: In these bad economic time and awful real estate market I was surprised when a neighbor’s house sold in just a couple of days.

What’s going on? I thought no one was selling now? It was a real crummy place too. Are things just better on Vashon?

A: To start with, Vashon is something of a boutique market all of the time, so we don’t necessarily follow national or regional trends. However, our market has been slower over the last 10 months or so than usual and we have suffered a set back in prices and values.

What you saw with your neighbor’s property was a very well priced property for this current market. Yes, it was a “fixer”, but priced a one. It was in a prime location and had a great potential which is what a lot of buyers are looking for.

Any house will sell, even in a slow market, if it’s priced right. That has always been the secret to a fast sale. There have been more sales in the last few weeks than even at this same time a year ago, and that’s hopeful.

The listing agents have a responsibility to price the property to sell in this market and to be sure their sellers are well prepared. If the house is clean, tidy, is in a desirable location, and priced well, it will sell.

Many sellers are hoping that their particular home will be worth more than competing properties. That’s rarely the case. Their agents can take them to see their “competition” and that can help them see their home in a more realistic light.

There are lots of buyers out there, but they are looking for a really good deal. They also read the newspapers and watch the news so they expect to find a real bargain or, at the very least, a very good value for the money.

Your neighbor was well advised. It’s also good to remember that since they’ve owned it for many years, they still made a tremendous profit over what they paid for it.