The National Association of Realtors® recently published an article with data from a Redfin study addressing the impact walkability to neighborhood amenities has on home values. Homes within walking distance of workplaces, shopping, parks, schools, etc. rank high on buyer wish lists but will command higher prices.
Homes with in-city locations are often condominiums (stack flats) or attached townhomes. Buyers willing to consider moving to close-in but less walkable, more car dependent neighborhoods, may find more affordable options as well as more single family house choices.
West coast urban markets have seen the premium walkability has on home values. In 2019 the premium for walkability in the Seattle marketplace increased the average price by 15.7% or $86,331. In San Diego urban/walkable homes averaged 10.5% more or $60,225 and in Los Angeles the premium for walkability was 5.8% or $34,583.
It’s that time of year when we start collecting receipts, mortgage interest and property tax statements, all in readiness to work on taxes or at least deliver your box of receipts and statements to your accountant.
Did you know . . . anyone 61 years or older who owns their own home may be eligible for Washington State’s senior property tax exemption. The maximum annual income for this program has been significantly increased to $58,423 which will allow many more people to be eligible for property tax relief.
For more information, to find out if you or a family member qualifies fore a reduction in property taxes, or to apply, visit the King County website at https://www.kingcounty.gov/depts/assessor/tax relief/seniorexemptions .aspx or call 206-296-3920. Anyone who is eligible should take advantage of this tax exemption law.
You might be surprised to find there are many affordable housing options close to downtown Bellevue. Apartments in the city are expensive and it’s likely the rent will increase each time the lease renews. The average monthly rent for a 2 bedroom apartment in downtown Bellevue is $3,250 or more per month (plus utilities). That’s a lot of money for housing with no return on investment.
Last year more than 100 one and two bedroom condos in or near downtown Bellevue that sold with median sales prices* under $475,000 (98004 & 98005 zip codes). Some of these homes were in communities walk-able to downtown, others were less than a 10 minute drive to Bellevue’s workplaces, shopping, dining, arts and entertainment events, parks and sought after Bellevue schools.
With a budget of $550,000, a lot of money but considered affordable in the Eastside real estate marketplace, if you were buying a condo what could you expect to pay for your monthly housing expense?
- A 2 bedroom condo priced at $550,000 with a 5% down payment ($27,500) would have a monthly mortgage expense (PITI) of about $2,850/month
- There are great loan programs available with 3%, 5% and 10% down, but if the down payment is less than 20% the lender will require PMI which will could add $300-$400/month to your mortgage payment. (Consult your lender for more information.)
- Budget $395-$495/month for homeowner’s dues, but that will include the water/sewer utility, garbage/recycle service, master insurance policy and sometimes even basic cable.
With a 5% down payment on a $550,000 purchase the monthly PITI + PMI would be approximately $3,240 – about the same as renting a 2 bedroom apartment downtown, except you would get the benefit of a tax deduction for some of the closing costs and the deduction for mortgage interest and real estate taxes every year.
Before you renew your lease, talk with your lender and Realtor®. This might be the right time to purchase a home and avoid the next rent increase. You would own your home, shelter income and start building equity and wealth. You may even reduce your commute.
* median sales price – half the homes sold for more, half sold for less
The Washington State Legislature has changed the way in which real estate excise taxes taxes (REET) will be calculated. This change will impact real estate sales beginning next year. Starting January 1, 2020, the real estate excise tax, currently a flat 1.78% of the sales price paid by the seller at closing, will be calculated on a graduated scale.
SALE PRICE TAX RATE
$0 to $500,000 1.6%
$500,000 to $1,500,000 1.78% (current rate)
$1,500,000 to $3,000,000 3.25%
Sample calculation for a sales price of $2,000,000:
1.6% for the first $500,000 = $8,000
1.78% for the amount between $500,000 to $1,500,000 = $17,800
3.25% for the amount between $1,500,000 to $2,000,000 = $16,250
Total tax in 2020 = $42,050
Homes sales priced under $500,000 will see a decrease in excise tax; homes priced up to $1,500,000 will see no change to the current real estate excise tax rate.
The tax rates listed above include the municipality tax of 0.50%. Some municipalities have different tax rates. For additional information about the real estate excise tax and local rates for each municipality, visit the Department of Revenue’s website.
Condominiums are an important part of the housing market, especially for first time buyers. Often buyers have the income and credit score needed to purchase a home but lack a substantial down payment which can make entering the housing market prohibitive.
In an effort to promote affordable homeownership for credit worthy buyers, the Federal Housing Administration (FHA) has issued new guidelines that make FHA condo financing an easier, more streamline process. Once a huge part of the first time buyer market, FHA’s strict guidelines made financing a condo difficult, at best. FHA updated its condominium financing rules, effective October 15th, which will loosen requirements for financing condos.
- Low Down Payment Still Available. Buyers can still purchase a home with as little as a 3.5% down payment.
- FHA Loan Limit. In King County the maximum FHA loan amount is $726,525.
- Single Unit Approvals (“spot loans”) Return. If a condo community wasn’t on the approved FHA list, it was difficult, at best, to obtain FHA financing. New guidelines now make it easier for an individual unit to be approved for FHA “spot loan” financing in a community that doesn’t have current FHA approval.
- FHA Certification and Recertification. Many condo communities have applied for and maintained their FHA certification. Having FHA certification makes a community more desirable to buyers and FHA financing much easier. The FHA condo certification now lasts 3 years vs. 2 and the recertification process has been streamlined.
- Owner/Occupancy Requirements Eased. FHA now requires a condo community be just 50% owner occupied.
- Commercial/Non-residential Space. The amount of permitted non-residential space (retail, commercial, parking, etc.) has been increased from 25% to 35%
These updated FHA loan guidelines will now allow thousands more condominium units to qualify for FHA financing, opening homeownership opportunities to many more qualified buyers. Opening the window to homeownership will encourage more owners to buy and occupy homes resulting in fewer investor owned/rented units, higher owner occupancy levels and stronger communities.
Condominiums are an important part of the housing market for first time buyers. Too often buyers have the income and credit score needed to purchase a home but lack an adequate down payment which can make entering the housing market prohibitive.
In an effort to promote affordable and sustainable homeownership, especially among credit-worthy first time buyers, the Federal Housing Administration (FHA) has recently issued new guidelines making obtaining FHA financing for condominiums an easier and more streamline process. FHA has issued an update to its condo rules, effective October 15th, that will loosen requirements for financing condominiums. Here are some of the more important changes effective this month:
- Low Down Payments Still Available. Buyers can still purchase a house or condominium with as little as a 3.5% down payment
- FHA Certification and Recertification. FHA requires a condominium community to have obtained FHA certification. It is a detailed process and there is an expense to the HOA involved, but once complete, having FHA certification makes a community more desirable to buyers and FHA financing much easier. The FHA condo certification now lasts 3 years vs. two and the recertification process has been streamlined.
- Single Unit Approvals (spot loans) Permitted. In the past, if a condominium community wasn’t on the approved FHA list, it was difficult, at best, to obtain FHA financing. The new guidelines now make it easier for an individual unit to be approved for FHA “spot loan” financing in a community that isn’t FHA approved as long as no more than 10% of the units in the community are FHA insured. (A buyer must use a FHA approved lender.)
- Owner Occupancy Requirements Eased. FHA now requires that a condo community be just 50% owner occupied.
- Commercial/Non-Residential Space. The amount of permitted non-residential space (retail, commercial, parking) has been increased from 25% to 35%.
These updated FHA loan guidelines will now allow thousands more condominium units to qualify for FHA financing, opening homeownership opportunities to many buyers. Homeowner associations are encouraged to obtain and maintain FHA certification. Opening the window to homeownership will encourage more people to buy and occupy homes resulting in fewer investor owned units, higher owner/occupancy levels and stronger communities.
Washington State Landlord-Tenant Laws were revised in July that include new tenant protection laws relating to rent increase and eviction notices and changes to property use. If you currently have tenants renting your condominium (or house), or you’re thinking about renting your condo, here is a quick look at recent changes to the state landlord-tenant laws.
LONGER NOTICE FOR RENT INCREASES
Landlords must now give tenants 60 days written notice for rental increases. Previously 30 days notice was required for rent increases.
LONGER NOTICE FOR ECONOMIC EVICTION
Landlords are required to give 14 days notice (previously 3 days) before evicting a tenant based on overdue rent. That notice must include information on the tenant’s obligations, rights and options along with the total amount due, broken down by type of charge. Tenants can’t be evicted for failing to pay costs outside of rent and utilities (late fees, deposits, landlord’s legal costs, etc.). Landlords can pursue other ways to collect those costs.
NOTICE FOR CHANGE TO THE BUILDING’S USE OR DEMOLITION
Landlords are required to give tenants at least 120 days written notice to vacate if they plan to change the property’s previous use in any way that would displace the tenants (changes to rules/use regarding pets, smoking, etc.).
For additional information and clarification, landlords should refer to the current State of Washington Residential Landlord-Tenant Act to be sure they, and their tenants, are in legal compliance with state law. Landlords should also check with their condominium association manager to be sure they are in compliance with HOA rules and regulations before moving a tenant into a condominium.
In this fast paced, competitive real estate market, it’s common, in an effort to “win”, for buyers to waive contract conditions such as inspection, financing, appraisal, neighborhood review, etc. Buying a condominium is different than buying a house. With condominiums perhaps the most important contract condition in place to protect a buyer is the homeowner association (HOA) resale disclosure documents. The State of Washington requires a seller to provide the HOA resale disclosure to a buyer upon mutual acceptance and the buyer has the right to review and approve or disapprove based on the information contained in the package.
What is a resale certificate? It is a set of documents typically assembled by the condominium’s association manager that includes the summary “resale certificate” which discloses information about the HOA, delinquencies, pending special assessments, HOA reserve account balance, owner occupied vs. rental units, pending lawsuits, etc. Supporting documents will include detailed information about the HOA’s budget and financial statements, reserve study, meeting minutes, rules and regulations, recorded Bylaws and Declaration and insurance.
This is a large package of detailed information which too often buyers glance at briefly or ignore totally. It’s important to understand the health of the HOA and how well it is functioning, how well funded the reserve account is, and what conditions or community rules and regulations could impact a buyer’s planned use of the property.
What should you look for? The recorded Declarations can be hundreds of pages, which is overwhelming. There are major pieces you should review, but it’s wise to spend some time going through all the documents to understand how the HOA is governed and how owner’s monthly assessment dollars are being spent.
Resale Certificate – A 5-7 page document highlighting the major elements of the HOA (owner occupancy, delinquencies, reserve balance, special assessments, lawsuits, etc.).
Budget and financial statements – Review the annual financial statements and current operating budget to see the line-by-line operating expenses. Is the HOA staying within budget? Is the HOA building adequate reserves? Is the HOA financially healthy? Continue reading