Exciting Development for Downtown Bothell

Because I specialize in Bothell real estate, I am in downtown Bothell all the time and keep up on all the exciting development underway with the new downtown redevelopment, but in case you aren’t, I thought I’d give you a quick peek at the exciting work underway.  First of all, I think it is admirable that the city of Bothell purchased the Nortshore School District property for $20.67 million with mostly cash they had by not spending one-time revenues, but instead they saved them.  It is also exciting that the city has partnered with the McMenamin family, famous for its brew pubs and hotels, but also its commitment to preservation in the midst of development, so the Anderson School Building will be incorporated into a 70 room hotel, not torn down and replaced by one.  Additionally, there will be a swimming pool that will be free to Bothell residents for 15 years! 

As for the civic campus, there will be a new city hall, expanded park at Bothell Landing with connections to downtown including playgrounds, bike trails, boat rentals for the river, and tons of fun activities for families to enjoy.  Intermingled will be housing with retail stores to add a rich flavor to the area already strong due to a growing economically stable population, strong neighborhoods, and an employment base grounded in biotech, telecommunications, and two outstanding institutions of higher education in Cascadia Community College and the UW Bothell Campus.  Local businesses are in strong support of the redevelopment and new life it will bring to the area.  Owners of business such as Bothell Furniture and Hillcrest Bakery know more people and more retail to downtown Bothell will be good for their businesses, which is good for Bothell.  City officials expect new energy and investments on Main Street as well as nearby Highway 527 once it is redesigned and becomes “The Boulevard.”  Designers believe this will attract retail, entertainment and restaurants, with an added incentive that the environmental paperwork is all complete, so developers can get started right away.  (Some specific information gleaned from “Bothell Teams with McMenamins for Visionary Urban Redevelopment,” by Lance Dickie, published in “The Seattle Times,” June 24, 2010.)

Some Credit Score Basics

With the economy in its recessed, or recovering state, depending on which reports you read, people are more concerned about their finances and in turn credit than in recent years.  There are seems to be a lot of mystery behind credit reports and myths people believe about their credit scores that I hear in talking to people about their real estate decisions and loans, so I thought it might be helpful to dispel some of them here.  First, your credit score is referred to as your FICO score, what does FICO stand for?  FICO is an acronym for Fair Isaac Corporation.  The score range is from 300 to 850, and this is not golf, so higher is better.  The second question I am asked most often is, “what goes into my score?” 

                35% of your credit score is based on your payment history

                30% of your credit score is based on how much you owe

                15% of your credit score is based on how long you have established credit

                10% of your credit score is based on whether or not you are currently taking on new credit

                10% of your credit score is based on the types of credit account you have (mortgages, installment loans, revolving accounts, etc.)

It is also important to know what does not go into your credit score:  race, color, religion, national origin, sex, marital status, age, salary, occupation, title, employer, date of employment, employment history, where you live, current interest rate on a credit card, child or family support obligations, rental agreements, or if you are involved in credit counseling. 

But, really, what people want to know most is, “how do I improve my credit score?”  There are some simple things you can do to improve your credit score that really do help:

•       Pay your bills on time!
•       If you have any missed payments, get current and stay current.  The longer you pay your bills on time, the better your credit score.
•       Be aware that paying off a collections account will not remove it from your credit report.
•       If you are having trouble making ends meet, contact your creditors or see a legitimate credit counselor.
•       Keep balances low on credit cards and all revolving credit.
•       Pay off debt rather than move it around.
•       Don’t close unused credit cards as a strategy to raise your score.  Responsible credit card use helps your credit score. 
•       Don’t open a bunch of new credit cards you don’t need just to increase your available credit.
•       Don’t open a lot of new accounts rapidly.  Manage your accounts well, and add only what you need and can continue to manage well.

 

Credit Use Tips:

                Open credit accounts only as needed.

                Have credit cards – but manage them responsibly, which means pay them off every month, on time.

                Note that closing an account does not make it go off your credit report.

If you need further information, or want to further understand credit terms, you can go to myfico.com.

Good News for Real Estate Values in Bothell, Seattle, Everett

According to Kenneth Harney’s article in this week’s Seattle Times, “Equity Makes Return To Homefront,” there may be hope on the horizon for real estate values!  The Federal Reserve measures homeowners’ net equity holdings and have found a recent increase from $5.9 trillion during the first quarter of 2009 – the bottom of the recession – to just under $7 trillion through the second quarter of 2010.  This means more homeowners have more equity in their homes.  Possible causes are increased home values and decreased debt.  Yes, home values are starting to stabilize, even increase in some markets, but more than that, people have started deleveraging, that is cutting debt across the board.  That means credit cards, student loans, and as a result household balance sheets are getting better.  Additionally, lenders have tightened up on high balance credit, restricting home equity lines and have in general made in harder for people to get themselves overextended.  That isn’t necessarily helping those who were overextended when the recession hit hard yet, but the market is showing signs of stabilization, and if that holds, corrections will follow.  Harney asserts, “the latest Fed numbers suggest the equity crash probably is over and that a rebuilding, with healthier credit habits, is under way.” 

A small current running through this article that I want to highlight as it has been a mega theme in some of the other financial reading I have been doing recently is that concerning debt management.  I have recently finished Dave Ramsey’s book, The Complete Money Makeover, and have just started Peter Schiff’s, How An Economy Grows and Why It Crashes.  Ramsey is clear, and although I’m still in the introduction of Schiff’s book, both authors seem to echo the same message.  Debt is a dangerous game.  Going into debt to acquire an appreciating asset is not a bad idea, for example, to buy a home.  However, even that should be embarked upon wisely, with enough down payment to establish enough initial equity to make the payment affordable (no more than 20 to 25% of your monthly income), and have an emergency fund to cover your payments should you lose your job.  Lenders who approve your loan make sure these numbers are in place and line up.  Then, don’t take that equity out to purchase things that depreciate and, Ramsey takes a very hard line on this one, never, never go into debt to acquire a depreciating asset otherwise known as consumer debt most commonly in the form of car payments and credit cards.  He has this crazy notion that you should save the amount you would spend on the payment each month for the car or couch, and over time you will have enough to pay cash for the item, save the interest you would have paid, and avoid consumer debt.  Anyway, it’s a good book I would highly recommend, but I mention it here because debt reduction seems to be one of the contributing factors to the net equity holdings making resurgence, which is good, good news!

A Few Of The New FHA Policies

In an article published in The Seattle Times on August 22, 2010, Dina Elboghdady lays out several of the changes to the FHA’s, Federal Housing Administration, new policy changes and what they mean for home buyers and sellers, which are relevant for those interested in real estate in the greater Seattle, Bothell, Everett area.  The beauty of an FHA loan has always been the low down payment required, but what is often misunderstood is that, “The agency does not make loans.  It insures qualified lenders against losses if borrowers default” (Elboghdady).  It covers these defaulted loans with fees collected from the borrowers at the time the loan is issued.  FHA loans have accounted for roughly 30% of all new single-family home-purchase mortgages in the last year and a half, up from 3% in 2006 (Elboghdady).  But with the recent changes in the real estate markets across the nation, the decline in home values, and the increase in the number of home owners defaulting on their loans, FHA has made some changes to their policies that will affect sellers and buyers differently. 

According to Elboghdady’s article, FHA is reducing seller concessions, the percentage sellers can contribute to buyer’s closing costs.  It used to be sellers could contribute up to 6% to the buyers closing costs.  It is now capped at 3% of the home price.  The reason is that there is a high correlation between high seller concessions and default rates, possibly because seller concessions inflate the home price.

Another change is in the minimum credit score FHA requires for buyers.  “Borrowers with credit scores below 580 would have to make a down payment of at lest 10% instead of the usual 3.5% minimum” (Elboghdady).  This new requirement shouldn’t have a dramatic impact on the number of people being approved for loans as most lenders are already requiring credit scores much higher than 580.  In fact, borrowers with credit scores lower than 620 may have to undergo manual underwriting of their loan rather than automated underwriting for approval, and their debt would not be allowed to exceed 43% of their income.

Increased fees are a reality for FHA borrowers as well.  Upfront Insurance premiums have always been collected by FHA, but they used to be 1.75% of the loan’s value, and they are now 2.25%.  The increase will help FHA recoup losses from the recent increase in people defaulting on their loans.  So, for example, if you take out a $300,000 FHA loan, you would have paid $5,250 in upfront insurance premiums, but now you will pay $6,750.  You can pay the premium up front, or roll it into the life of the loan, but in that case, you will then pay interest on it during the life of the loan as well. 

FHA has also changed its “Flipping” policy.  It used to ban borrowers from buying a home that had only been owned for 90 days or less.  They have, however, now lifted this ban and will lend to borrowers buying a home that the seller is flipping “to encourage investors to buy poorly maintained foreclosures, fix them up and sell them to FHA buyers as soon as they hit the market.  This should help clear the glut of homes for sale” (Elboghdady).

Tipping Point For Seattle, Bothell, Everett Short Sales

Over the last two years, I, like most realtors, have talked to and worked with many clients facing a short sale. A short sale, for those of you who don’t speak realtor, is the sale of a home for an amount that is less than the loan amount on the home – thus they are short on their sale.  Virtually everyone I have talked with and worked with facing this situation is overwhelmed with some aspect of their financial picture, which can be very stressful and that stress can spill into other parts of their lives.  I have noticed many short sale homes have fallen into either a state of disrepair or are no longer being kept up as a result of the stressful situation, so they are certainly not being kept in the staged to wow and woo a buyer condition that is required to attract the best qualified buyers, which leads me to my few pieces of advice for those facing these circumstances.  One of the books I read this summer is The Tipping Point by Malcolm Gladwell (a fascinating book I might add) and it got me to thinking about the correlations between the outrageous crime rate in the 1980′s in New York City that Gladwell describes and the state of many peoples’ homes when faced with a short sale situation.  Gladwell describes the unprecedented numbers of violent crimes in New York City during the 1980′s and the dangerous and dilapidated state of the subway system.  Rather than tackle the murders and drug selling gangs, criminologists James Q. Wilson and George Kelling convinced city authorities to work under ”The Broken Window Theory,” which suggests that if they concerted their efforts to clean up the small evidences of neglect and disarray such as graffiti, the more serious crimes would also decline.  The subway director, David Gunn and future head of NYPD William Bratton saw the wisdom and fought graffiti and fare jumpers vigilantly and the crime rates dropped dramatically.  Rudy Guiliani, when elected mayor, also saw the wisdom of “The Broken Window Theory” and continued the assault on the more minor crimes and not only the minor, but the major crime rates all dropped dramatically.  How does this translate to a short sale?  Well, you may not be able to do anything about the dropping housing values in the Seattle, Bothell or Everett real estate markets, but you can do something about the state of your yard, vacuum your carpet, make all the beds, and wow and woo the buyers who do come to your house.  The declining real estate market may have caught you in a financial bind and left you overwhelmed, but don’t throw up your hands and give up.  Take action and fix the broken windows you do have control over.  Buyers want to fall in love with the house they buy, and they will offer more for a house that is being taken care of, is clean, is staged, and smells good!  Bake some cookies, put flowers in a vase on the table, wash the windows so the sun shines in.  You’ll be amazed at the difference it will make and who knows, maybe your short sale, won’t be as short if the buyer loves the house.  The upsides to having your home in good condition for someone who is selling short are: the reduced impact on your credit from additional months of late or no payments while you house sits on the market unsold, smaller deficiencies to the lien holders, and smaller potential deficiency judgements owed after closing.

The Puyallup Fair

Western Washington’s largest fair is here.  It runs September 10 through September 26^th and there are so many fun things happening, you don’t want to miss it!

The Puyallup Fair Grounds Address:  110 9^th Ave SW Puyallup, WA 98371

Hours:  Sun. – Thur. 10:00 am to 10:00 pm

                Fri. – Sat. 10:00 am to 11:00 pm

Admission Prices (see discount section for ways to save):

                Adult: $11

                Student ( 6 – 18): $9

                Senior (+62): $9

                Under 5: Free

                Rides: $.75 per ticket, some rides require more than one ticket.

Parking:

                Mon. – Fri. $10

                Sat. – Sun. $12

                There are often less expensive parking options in people’s yards, just make sure they are the home owner and they agree to the arrangement.

Discounts and Deals:

1.  Little Nickel Coupon Saver:  cut the coupon for discounts, good only M – Th
2. Text PRIZES to 75868 to enter drawing for box seats to concerts, fair tickets, free rides, and more.  Grand prize is box seats to all concerts.
3. Fred Meyer Family Discount Package:  only available until 9/10.  $33.95 gets  you 2 gate admissions, $10 worth of food, 6 rides, and 2 for 1 to the Sat. matinee rodeo – a $59 value.
4. Safeway, O’Reilly Auto Parts or Columbia Bank discount admission tickets:
   1. Adult admission $9 instead of $11
   2. Student admission (6 to 18) $7.50 instead of $9
   3. Senior admission (+62) $7.50 instead of $9
   4. Under 5 free
5. Walgreens Season’s Pass:
   1. Adult admission for all 17 days: $29.50 instead of $187.00
   2. Student admission for all 17 days: $19.50 instead of $153
6. Military Appreciation Days:  every Monday all military, retired military and their dependents get in for free.
7. Boy Scout appreciation days:  from 9/17 to 9/19 scouts who go to the fair web site and print the coupon and are in full uniform get in for free.

Concert Series:

                9/10:  Bret Michaels

                9/13:  Kenny Rogers with the Tacoma Symphony

                9/14:  John Legend with Sharon Jones and The Dap Kings

                9/15:  We The Kings with Forever The Sickest Kids, A Rocket To The Moon & Ready Set

                9/16:  Willie Nelson and Family

                9/17:  Chris Botti and Natalie Cole

                9/18:  Dierks Bentley

                9/20:  Queensryche with Tesla

                9/21:  Adam Lambert with Allison Iraheta

                9/22:  Daryl Hall and John Oates

                9/23:  MercyMe and Jeremy Camp

                9/24:  Billy Currington with Uncle Kracker

                9/25:  Heart

                9/26:  Kid Rock 

All the above information was gleaned from the fair website at www.thefair.com.

Keeping Your Credit Status Quo While In Escrow

We’ve all heard of Christmas in July, but around my house, it’s more like Christmas in June.  It’s my second daughter, Carly’s birthday, my wife’s birthday, our anniversary, my dad’s birthday, father’s day, for the last two years we’ve had a daughter graduating from high school, well you’re getting the picture.  Thankfully my wife loves everything about gifts, thinking of what to give, shopping for them, buying them, wrapping them, and most of all giving them – but alas, that also means she loves receiving them, which puts me at the mall in June as well.  It seems every store has a special deal, 20% off your purchase that day and every 5th tuesday of the month when there’s a full moon for the rest of your life.  But I caution you, if you are in the midst of applying for a home loan, do not change your credit status in any way, no matter how insignificant it may seem.  From the day you make loan application for your new home until closing, maintain credit homeostasis!  Anything from a new GAP credit card to a car loan to an increase in the balance on your existing credit cards can delay or disqualify your loan application.  Effective June 1st, the Loan Quality Initiative requires lenders to track changed in borrower circumstances between application and closing, and frequently underwriters re-check credit at the eleventh hour to make sure nothing has changed since the time of application.  These aren’t necessarily new rules, but with the recent mortgae crisis, they are being enforced more consistently and scrutiny is certainly heightened.  This is also true of any kind of job change during the same period of time.  So, no matter how good the deal at the mall sounds, pass it up if you’re waiting for your home loan to close – it isn’t worth the delay or worse yet, not qualifying.