Author: jessieknadler

 If you’re like a lot of homeowners these days, you’d probably love to go green. Energy efficiency retrofits, high-efficiency furnaces and solar panels are home improvements that can save thousands and thousands of dollars in energy bills over the years. But high upfront costs have so far kept many folks from adopting practical energy saving improvements—it costs $25,000 to install a solar panel system on a typical residential property, which is out of reach for most homeowners. 

Helping homeowners make those investments is the main mission behind an effort gaining momentum around the country called Property Assessed Clean Energy, or PACE. Nineteen states (at last count), including Virginia, have passed legislation that would allow municipalities to establish PACE programs. The Obama administration has dedicated more than $100 million in stimulus money to fund them. California’s pilot program, like others, has become quite popular. 

PACE works by allowing people to borrow money from municipalities for energy efficiency upgrades and pay it back over 15 to 20 years through a special assessment added to their property tax bill. What this means: Your property taxes will go up but are offset by lower monthly utility bills. So your property tax bill might increase by $100 or so, but your energy bills may drop by $200-$300. In some instances, like with the installation of solar panels, the utility bill becomes fixed. As conventional energy costs continue to rise, the use of solar panels allows you to pay the same amount for energy for the next 20, 30, or 40 years, which is a huge savings over the course of a lifetime. 

The problem with PACE is that the loan is technically a property tax assessment and is therefore regarded as a lien—it must be paid back before existing mortgage debt. So if the homeowner goes into foreclosure—not all that uncommon these days—the energy loan would have to be repaid before the lender gets any money. 

This is why PACE loans are really only an option for people who have equity in their homes, great credit or no mortgage.

Recently, there has been pushback from mortgage insurers Fannie Mae and Freddie Mac, who—perhaps rightly so—don’t want to be on the hook if green-minded homeowners default on their mortgages. The two lending giants have sent letters to local governments across the country, causing many to suspend their PACE programs.

It’s unclear how this will all play out since Fannie and Freddie are owned by the government, which supports the PACE initiative. For now, the Energy Department released guidelines for pilot PACE financing programs that urge municipalities to conduct energy audits to ensure homeowners will see reduced energy costs as a result of upgrades, and that assessments should be limited to 10 percent of the property value.

 It’s been hammered into people’s heads for so long that home ownership is the way to go, that potential buyers forget that’s not always the case. Especially right now, when real estate markets remain shaky in many parts of the country, the home you buy today could fall in value tomorrow.

Of course, the decision to rent versus buy boils down to many factors: how long do you plan to stay in the house? Do you have the required 20 percent down payment? Are you looking for a comfortable retirement home that won’t deplete your life savings? Do you sense housing prices will continue to fall? 

To determine whether it’s more prudent to rent versus buy right now, use the “price-to-rent ratio.” Here’s how it works. Take two houses of similar size and condition—one for sale and one for rent—in the same or comparable neighborhood. Add the total cost of renting the rental property for one year. Divide the price of the home for sale by the annual cost of the rental property. 

If the resulting number is between 1 and 15, it’s much less expensive to own than to rent a home. In other words, the price of the home is most likely near its low, making buying a good choice.  

If the number is between 16 and 20, then buying becomes more expensive than renting (though it still might make financial sense, depending on the situation…keep reading). If the price-to-rent ratio is more than 21, the total costs of owning a home are much greater than the costs of renting. This usually signifies an overheated market where there is a chance the price of housing will fall (maybe, eventually), making renting a better option. 

According to truliablog.com, in the top 10 cities for buying, the price-to-rent ratios range from 8 to 11. Note that a lot of these cities—Miami, Phoenix, Las Vegas—were hit hardest when the housing market collapsed. Subsequently, home prices had to come way down to compete with foreclosures that flooded the market.

In the top 10 cities for renting, ratios range from 33 (New York) to Dallas (19).

So where does our area fall in the rent-versus-buy equation? We looked at a selection of three-bedroom, two-bathroom homes for sale versus rent in Albemarle County. All the homes were roughly the same square footage and built on quarter-acre plots within the last 25 years. The average sale price of the homes was $299,000; the average monthly rent, around $2,400. For all comparisons, the price-to-rent ratio was between 9 and 11, which indicates sale prices are at or near their low, making buying a better option than renting in Albemarle County.  

Of course, the sale price of a home doesn’t reflect the total cost of home ownership, points out Jim Duncan, Realtor at Nest Realty and blogger at realcentralVA.com. “You have to factor in all the transactional costs—Realtor’s commission, attorney fees, state transfer taxes—plus property taxes, and homeowners insurance. These aren’t costs renters have to think about.” But given that the local price-to-rent ratio is on the lower end of the spectrum (hovering between 9 and 11), even when those costs are factored in, buying may still be a better choice than renting.

So when does it make sense to rent versus buy around here? The most obvious: When you can’t afford a down payment. Renting is also smarter if you’re only planning to stay two to four years—which is not enough time to build equity or recoup the transactional costs that come with closing on a property. In other words, you’d be throwing money away.

 Even though the word “foreclosure” has lost much of its stigma in recent years, thanks to Wall Street recklessness and subsequent bailouts, it’s still a state most homeowners would prefer to avoid. Not only does foreclosure wreck a homeowner’s credit score for years to come, but the very word conjures up feelings of failure. (Banks’ smoke-and-mirror lending practices have fueled untold foreclosures in the first place, but that’s another story.) 

There is another way out from under a monster mortgage. It’s called a deed in lieu, which is a deed instrument in which the borrower gives the property back to the lender. Borrowers forfeit all equity they’ve earned in the home in exchange for the cancellation of the outstanding debt. They simply walk away from the property as if they were renters returning keys to a landlord. The lender, meanwhile, avoids hefty legal costs related to a foreclosure.  

There are several advantages to this arrangement. The most obvious is that it releases the borrower from future payments, and the lender promises to stop all foreclosure proceedings. It also makes less of a dent in the borrower’s credit score. And it just sounds better than “foreclosure.” 

The disadvantages, however, aren’t insignificant. Walking away from equity can be like walking away from an IRA or a 401(k): The lost investment can be in the tens of thousands of dollars, if not more, depending on how long the borrower has lived there and improvements made to the property. Also, the borrower can expect her credit score to drop by 150 to 250 points. That’s not as low as it would drop through foreclosure, but the hit stays on one’s credit report for around seven years (borrowers have to request to have it removed after that amount of time), which can make applying for a new mortgage before then difficult. Experts say two to three years is the average amount of time to wait before applying for a new mortgage. Also, a borrower cannot get a deed in lieu if there are second or third mortgages, home equity loans or tax liens against the property because the primary lender does not want the complication of multiple lenders attached to the property.

Another drawback: Borrowers can’t force this type of deed on lenders. Typically, lenders require proof that the borrower has been actively trying to sell the property for at least two to four months before they’ll be convinced the delinquency was due to “unavoidable hardship.” That’s three to four more months of late or missed payments, which can make a borrower’s distressed financial situation ever more precarious. Even then, there’s no guarantee the lender will enter into this type of agreement since lenders, especially these days, prefer cash over real estate. They might already be saddled with multiple homes in a similar state. In fact, most lenders won’t agree to a deed in lieu unless it’s the only way to avoid hefty foreclosure expenses or they determine they can turn around and sell the house for a profit. 

The borrower might also have to pay income tax on any resulting equity that went toward anything other than the home itself. The new Mortgage Forgiveness Debt Relief Act of 2007 allows homeowners to exclude up to $2 million in forgiven debt if the loan was used to buy or improve the house. But if equity was put toward the renovation of a second home or buying a new car or saving for a child’s college fund, the homeowner will owe income tax on it, which can run into the tens of thousands of dollars. The only way to get around this is to file for bankruptcy—always the last resort. 

To learn more about a deed in lieu, refer to the U.S. Department of Housing and Urban Development’s “Deed in Lieu of Foreclosure Option.”

 With interest rates still at a historic low, some homeowners may consider refinancing from a standard 30-year fixed rate mortgage to a 15-year mortgage. Nationally, it seems a lot of folks are doing just that—the Mortgage Bankers Association says that one in four refinance applications in March was for a 15-year loan, up from 12.2 percent the year before.

There are a few key advantages to this strategy, says Jason Crigler, residential mortgage specialist with Crown Mortgage in Charlottesville. 

First of all, 15-year mortgages generally have lower interest rates than 30-year mortgages. Right now, interest rates on a 15-year FRM (fixed rate mortgage) stand at 4.4 percent, compared to 5.07 percent for a 30-year FRM, according to the most recent available figures from Freddie Mac. Both rates have been declining on average since January 2009, and may continue to fall.

Why the differing rates? It’s because “the shorter the term, the less likely inflation will become a factor over time—it’s a less risky investment for the lender,” explains Crigler. “But when a loan is spread out over the course of 30 years, inflation becomes a bigger concern. The interest rate has to absorb those fluctuations.”

The second plus to a 15-year FRM is that while the monthly payments are higher—though not double, notably—the term of the loan is half (down from 360 to 180 months), so the borrower saves a huge amount in financing charges. A larger portion of each month’s mortgage goes toward paying down the principle, not interest.

As an example of just how much savings, consider the following: The monthly payment on a 15-year FRM of $200,000 at 4.4 percent is $1,520. The monthly payment on a 30-year FRM for the same amount at 5.07 percent is $1,082. That additional $438 per month for a 15-year FRM might seem painful in the short term until you consider the long term savings. Interest paid over the full term of that 15-year FRM is $73,561 compared to a whopping $189,598—nearly the amount of the loan itself—for the 30-year FRM. 

One would think that the low-low-low interest rates would drive demand for 15-year mortgages, but Crigler says that hasn’t been the case in the Charlottesville area. Not only do a lot of people erroneously assume the monthly payments will be double—they’re not, they’re more like 25 to 40 percent higher—many can’t afford increased monthly payments of anything right now, given the current economy.

But a 15-year mortgage is a great option for those looking to refinance or who’ve already paid down a portion of their 30-year FRM. “I love seeing clients choose a 15-year fixed over a longer term loan, if they can afford it and it makes sense for their situation,” he says.

If you’re concerned you can’t afford a 15-year mortgage, the lender will remove any guesswork by taking you through a much more stringent application process to determine whether your income qualifies. This is a sharp contrast to the application process of years past, when anyone “with a pulse could basically qualify for a loan,” says Crigler. “These days, it’s a lot tougher to get into a real estate situation you can’t afford.”  

For more information about current (and always changing) interest rates on various types of mortgages, check out Freddie Mac’s Primary Mortgage Market Survey at www.freddiemac.com.

 Buyers know they hold the cards in the current lackluster housing market, but there’s one obstacle they might be wary of: misrepresentations by home sellers. 

Nationwide, there have been reports of eager sellers exaggerating square footage and acreage, minimizing property taxes or utility bills, conveniently forgetting about past problems with termites or insisting that charming propane stove in the living room really is capable of heating the entire house.

Former Charlottesville Area Association of Realtors (CAAR) President Michael Guthrie, CEO and principal broker at Roy Wheeler Realty Co., says that while he’s heard of such shenanigans, homebuyers in Virginia are actually less likely to become embroiled in costly real estate mistakes than in other parts of the country. 

For one thing, stiff competition means that “sellers are having to work that much harder to put their homes in much better condition to sell,” he says. “Buyers have the luxury of going back to a home three or four times—often with a home inspector—so any problems that exist are usually found. Deals fall apart if the buyer finds out the seller is being disingenuous or withholding information.”  

Secondly, Virginia’s disclosure laws place the onus of responsibility on the buyer, in what is known as caveat emptor (let the buyer beware). The seller signs a document disclaiming any warranties or representations as to the condition of the house—he or she agrees to sell it “as is.” The buyer is then free to perform his or her own due diligence by bringing in a home inspector, licensed engineer, land surveyor, geologist, insect expert, etc. 

While this may seem like more work and expense for the homebuyer, it also eliminates any gray area. Disclosure laws in more than 30 other states, on the other hand, require sellers to disclose any and all problems—but only those problems they have actual knowledge of. There very well may be issues the seller doesn’t know about, such as hidden mold or a long-ago insect problem, but this technicality may open the door to obfuscation. 

Another protection for Virginia buyers is that if a home is listed with an agent, that agent is required to disclose any problems. Guthrie advises that buyers never, ever waive a home inspection—their only line of defense.

Virginia sellers are also not required to divulge any structural changes—the addition of a bathroom, a new sunroom, etc.—not built to code unless they’ve already been cited in violation of local building laws by the city or county (if a county building inspector hasn’t already discovered that the new deck is held together by duct tape, it’s not up to the seller to share this information). 

Sellers also don’t have to reveal the existence of any historic district ordinances or resource protection areas—in other words, it’s not up to sellers to explain that adding on to a home in historic downtown or in the Chesapeake Bay watershed is not allowed. Nor do they have to alert buyers to the proximity of sexual offenders. 

The same laws apply to bank-owned homes transferred in foreclosures, which now account for a larger percentage of sales. 

Here are a few of the more common misrepresentations a buyer might hear when shopping for a home.

• “This is a really quiet neighborhood.” Noise pollution is subjective, so the only way to determine if it’s too loud is by spending enough time on or around a property at different times of the week—during the day, the weekend, weeknights—to get a sense of whether it’s too loud for you. 

• “We live on three acres.” Just because a fence line looks like it encloses three acres doesn’t mean the property actually is three acres. Request an updated plat or survey. 

• “What flooding?” Signs of past flooding in the basement are usually caught during the inspection, but sometimes they’re missed. Make a point of asking the listing agent directly. If he knows, he’s obligated to disclose the information in the state of Virginia. 

• “No bugs here!” A home inspection generally doesn’t cover insect damage. Hire a pest specialist to go over the home.

• “Taxes are low.” Ask to see recent tax bills, and check with the tax assessor’s office for updated information.—Jessie Knadler

For Kim West and Ed Clark, it was love at second sight—the first sight failed to ignite passion.

One of the most stressful aspects of buying a home? The closing —signing a bunch of documents you may or may not fully understand (are you buying a house or signing away a limb?), forking over a big check, and, perhaps worst of all, discovering your estimated closing costs far exceed what you were originally quoted by the lender.

Closing cost discrepancies occur because what’s written on the Good Faith Estimate (GFE), a tally of lender/broker fees and settlement charges that come with a mortgage loan due at closing, is exactly that—an estimate. It’s a ballpark number, an inadvertent underestimation of fees by the lender. But some unscrupulous lenders have been known to purposely lowball their estimates to lure borrowers away from competitors. And unsuspecting borrowers are hit with an unwelcome surprise at the closing table—sometimes in the thousands of dollars.

But on January 1, the federal government put into effect new rules mandating the use of simplified, redesigned Good Faith Estimate forms in order to curb closing cost surprises.

The new rules require all lenders to use the same standardized three-page form, issued by the Department of Housing and Urban Development, for their Good Faith Estimates. The new forms are designed to facilitate comparison shopping by consumers. The forms contain boxes that allow consumers to compare quotes and estimates of up to four potential lenders at a time. Under the old rules, lenders used their own forms—some more transparent than others—which made it difficult for borrowers to know if they were getting a good deal, or whether all fees were adequately disclosed.

The new rules also mandate that lender fees, such as underwriting charges, can’t change from application to closing. They allow only up to a 10 percent difference for estimates in other areas such as title insurance. If closing costs exceed the estimate, the lender, not the borrower, eats the cost.

Some fees, though, have no cap. These include charges from service providers (for title insurance) chosen by the borrower, but not recommended by the lender—homeowner’s insurance, flood and pest insurance, etc.

Consumer groups have applauded the changes but some lenders say consumers may end up getting hit with costs in other ways since it costs lenders to comply with the new regulations: investing in new software and training employees to use it.

But real estate attorney Richard Carter at Kunka, Milnor, Carter & Inigo in Charlottesville doesn’t see that as a particularly valid concern. “We plan to absorb those costs,” he says. Carter’s firm has only just started using the new forms during closings because they don’t apply to loans made before January 1. “It’s just a matter of getting used to them. They’re very similar to what we had.”

But some lenders are sidestepping the new standardized forms by coming up with “worksheets” or “loan scenarios,” essentially the same potentially misleading Good Faith Estimates as before. Lenders defend the use of such forms by saying HUD is forcing them to provide ironclad estimates that sometimes can’t be accurately predicted early in the process, such as those involving title and settlement services. 

Be that as it may, if you’re looking for full transparency when shopping for a loan, and want to comparison shop, be wary of any lender who resists using the new standardized HUD forms. You may end up paying more at the closing table.

Find a copy of the form on HUD’s website, hud.gov.

The love story between Wendy Browning and Randy Lynch is one of two ships passing in the night—only these two ships kept narrowly missing each other for more than 15 years before they finally had their first date in January 2007.

The first time they missed each other was in 1993, when Randy lived across the street from Wendy’s sister Celeste in Tampa, Florida. They missed each other again in the late ’90s in New York City, where they lived a mere four blocks from each other and frequented the same bars and restaurants. And it was highly coincidental when it was discovered that Randy at one point lived on the same street (though at different times, but still) as the mother of Wendy’s godson in Rye, New York. They had even met each other in passing at a wedding and an engagement party over the years. So it was nothing but serendipity when the couple, both Manhattanites, were eventually set up on a blind date by mutual friends that fateful January.

They met at Pastis, a raucous French bistro in the Meatpacking District. To help him identify her, Wendy told Randy she had long blond hair and would be wearing black pants and a black top—an intriguing though less-than-helpful description since it fits approximately 94 percent of Manhattan women. It took Randy, who is a managing director at Bank of America Merrill Lynch, a moment to pinpoint his date amongst the throng, but he was aided by Wendy’s eye-catching fire engine red coat. Over burgers and frites, the couple laughed and talked, both delighted by the realization this wasn’t to be a blind date from hell—quite the opposite, actually. They ended up going on four more dates in a week, a somewhat rare occurrence in Manhattan’s cynical dating world, where it’s not uncommon for budding couples to go weeks without seeing each other.

They dated for the remainder of winter and into spring, but their togetherness was cut short. Wendy, a staffing director at Bloomingdales, was set to leave for Tanzania to work as a volunteer for four months, a trip she had paid for a mere nine days before meeting Randy.

“I had lived in New York City for 10 years, and needed a break,” says the 36-year old. “And then I met Randy. It goes to show you find the person when you least expect it. It was incredibly hard to leave town.”

But Randy, who is now 39, was very supportive, and encouraged Wendy to go and have an adventure. While Wendy went to work in an orphanage nearly 8,000 miles away, Randy kept in touch by sending long e-mails and care packages containing goodies like chocolate-frosted donuts. He even traveled to Tanzania near the end of her trip and the couple went on safari.

“The only thing I saw was Randy’s face covered by a camera lens,” she jokes.

They ended the trip back in the village where Randy had the opportunity to meet the children at the orphanage.

When they returned to New York in the late summer of 2007, they dated for six more months before Randy proposed to Wendy on a brisk day in March on the beach in Bridgehampton, New York.

“It was the tail end of winter so we had the entire beach to ourselves,” says Randy.

But Wendy was so caught up in the moment she forgot to say the word “yes.” Randy had to ask if her gasps could be interpreted as an affirmative. They could.

The couple decided to get married in Charlottesville, the home of Wendy’s alma mater. “I have a lot of good memories there,” she says. “My godson lives there. Deep down it’s where I always wanted to get married but I wasn’t sure Randy would agree. But when we visited, he’s the one who initially brought it up, ‘Why don’t we get married here?’ Who was I to argue?”

Wendy and Randy wed on November 22 at St. Paul’s Ivy, attended by 150 friends and family flying in from as far away as Turkey.

The highlight of the wedding was during the reception at Farmington when Wendy, who “loves being the center of attention,” bounded up on stage to sing karaoke. Randy, who is known for hating the limelight, surprised everyone, most of all his bride, by getting up on stage to belt out ’80s hair metal tunes with her.

The newlyweds brought down the house by singing a stirring duet of “Sister Christian” by Night Ranger.