When you and I purchase a new computer we compare the memory, the speed, the screen size: does it come with a camera, DVD player/recorder and more. A home the largest purchase most of us will ever make often is not reviewed with such detail by the people doing the lending and sometimes by the people doing the spending. Yes, they look at the square footage, the general condition, and the location. Appraisers often do not have any idea of the cost of section one termite repairs. The differential in repair costs could be 3%, 5% even 10% of the purchase price. Roofs costs could range between $5000 to $25,000. A home with a two year old roof should be valued higher than one with a 25 year old roof. Appraisers know roughly how old the roof is on the subject property but they don't know the age of the comparables. Same with double paned windows and furnaces. A home with copper piping through out or or with upgraded electric needs to have additional value added to it. All this information does not show up in the MLS. The MLS shows if the kitchen or baths have been cosmetically remodeled but does not go into detail if the cabinets, floors, lighting was all upgraded and how much they were upgraded. Is the home landscaped and does it have automatic sprinklers? This could add $5000, $10,000 up to $50,000 or $60,000. So.. What am I saying. The government has put in all of these new laws to make appraisals non biased but we as an industry have to work together and help them compare apples to apples.
We need to add more info to our MLS data reports. Even comparing selling prices is not a fair comparison if you don't have all of the information. So many purchases have a credit for closing costs and or repair costs. Whole neighborhoods will be overpriced real quick when just a few homes were compared to homes with 3% credit backs. I realize some MLS's are more progressive than others and include some of this information now. Some appraisers call and get this information. We as agents, could make this a very simple process. I suggest we add the following categories to the MLS data: age of roof, furnace, type of plumbing and electric, Cost of section one termite repairs if not completed, Amount of credit back, type of financing. If we put this in an area only available to agents we will be more valuable to our clients and help the appraisers compare apples to apples.
Buyer's Market?You bet it is. I will be speaking about the low end of each market area. On the Peninsula and San Francisco we talk about Single Family homes priced under $700,000. In the East Bay it is below $400,000. Buyer's Market yes but not in the traditional way. Today's buyer cannot expect to purchase a home for 20% off the list price, but they can expect to purchase a home 30-60% off of 2004 prices. Today's buyer cannot expect the seller to take care of all necessary repairs, but the buyer can expect to receive an $8000 Federal Tax Credit and an extra $10,000 State Tax Credit if they are purchasing a brand new home. Today's first time buyer cannot expect to be the only offer, but they can expect to receive the lowest interest rates in 40 years. I think it is just in a different way.
The Real Estate Market in San Bruno, South San Francisco, Daly City, San Mateo is hot just like the weather. Prices are based on supply and demand. Demand is strong as all smart people want to take advantage of the buyers market. By the way the $8000 Federal Tax Credit terminates Nov. 30 of this year. many people do not understand this credit. It is a true gift. When this concept was originally introduced the credit was really a loan and needed to be paid back. In 2009 it became a true credit. You could just amend your 2008 taxes and receive your check in less than 2 months is what many buyers have seen. Other are choosing to claim it when they file 2009 taxes. Inventory is drying up. Please look at the chart. We are seeing less homes for sale today than we had last month or last year. If you remove the short sales that have received offers (maybe 25% of the homes available we are probably close to the inventory of the hot market in 2005. Please not the difference in the higher end and lower end of the markets.
You are among the millions underwater and over stressed. What shall you do.
Your credit will be most negatively affected with a Foreclosure, then a short sale. As long as you stay current on your loan, loan modification should not affect your credit. Your credit score weather it is right or wrong is used by potential employers before hiring, landlords before renting, insurance companies before granting insurance and etc. Depending on your individual situation maybe credit is not important.
My client's father nearing retirement age could live in his son's rental unit and will not be looking for another job said he might pass away before his home in Las Vegas is worth as much as as his loan. He opted for foreclosure.
I had another client, a family with parents and adult children living at home. They came to me for a discussion on their options. They are still working and acquiring things so their credit score is important to them. Being an immigrant family losing their home, the "American Dream", would be extremely emotional and their image amongst friends and family here and back home would be devastated. They struggled making payments, but after family members lost two part time jobs they couldn't do it any more and came to me for help. They pondered the situation. Should they continue making payments on a home that they owe $250,000 more than it is worth. They purchased this home with no money down and realized they would probably never be able to save the 10-20% now required down payment to purchase another home. They opted for a loan modification. They were hoping for some debt forgiveness.
Their bank would not hear from that. But with persistence similar to a short sale approval I was able to get the bank to modify their 6.5% fixed interest only loan to a Principal and Interest loan starting at 3% for five years, 4% for 1 year and 5% for the next 34 years. Before that, the second lender agreed easily to modify their 8.5% loan to .31% yes .31% not 3.15 but only for 1 year. We will follow up with them in a few months. With home ownership tax benefits their new payments are now about the same as rent would be. They are thrilled, knowing they will now be able to afford the "American Dream". During these negotiations I had them apply and they were approved for a property tax reduction with annual savings of almost $3,000.
I was told during this process that each loan holder not necessarily the servicing bank has their own set of ratios and criteria for loan modification. This worked out to be win-win situation. Their lender will receive their full payment over a longer period of time rather than losing several hundred thousand dollars during a short sale or incur thousands of dollars for foreclosure expenses.
We have all read that more than 50% of loan modifications are defaulting. Maybe it depends on the modification. I recently reviewed a loan modification for a client that was in default. In November her loan was modified from 8.4% to 7.9%. Maybe $100 reduction and then they had the nerve to add on another $550.00 per month to bring her current. Her payments were $400.00 more than before the modification. If I did not see it myself I would not believe it. What were they thinking? It is no surprise she is in default again only 4 months later.
Many sellers are determined to set their listing price higher than they are willing to accept so they have room to negotiate. With the New Millennium buyers they unfortunately will not get any offers. Today's buyers are more educated than any others. The internet gives the buyers the opportunity to research all public records. They know the price of all the homes in the area that sold recently and are on the market. They know the trends, the cost per square foot; they know what the seller paid for the home and how much they owe and sometimes the improvements the owner has completed. If a home is over-priced the "New" buyer is almost offended that someone would expect them to purchase it at the "Over Valued List Price" so they don't even make an offer. Many don't even waste their time to view the home. That is the old school pricing method. My parents would have done that. Back then information was not so accessible. With today's buyer's research and knowledge they are willing to pay over the list price because they realize they are not paying over the market price. They are just paying over the list price. The old school seller does not understand this new Price it Right philosophy. It is the responsibility and ethical obligation of the professional honest agent to advise the old school seller that their price is too high and to educate them to the New Pricing Philosophy. If not, the seller will not get maximum value. Although the Old School Seller will reluctantly reduce the price after a few weeks it is too late. That property is now stale. It quickly gets a reputation that something must be wrong with it mentality by the buyers and some agents. This property may not deserve the reputation but it sticks. When an offer does come in it will be less than the reduced price and less than the market value. If it was priced right at the beginning most likely they would have received several offers within a week.
Buyers are out there. Homes in San Bruno and South San Francisco priced right are having 75-100 potential buyers view their home during the Sunday Open Houses. Homes not priced right get less than half that. I personally know of eight homes in San Bruno and South San Francisco that went on the market priced right and within the first week received multiple offers and sold at above the Listed Price. Not by much but they sold while others not priced right are still on the market. Sellers must understand that for every week their home does not sell it is costing them .25% or more.
30% of Real Estate Deals Don't Go Thru. Maybe it is more, maybe it is less, but that is a pretty good estimate. So what does that mean to buyers and their agents? It means the property you lost out to in multiple offers or just because someone was faster than you does not mean it is gone forever. We all know that a ratified offer on a short sale means nothing until the lien holders agree. Many REO's and individual sales are falling through today. Many buyers, especially first time buyers get concerned when a property falls out of contract. They think there is something majorly wrong with the property. Properties fall out for various reasons today, some for financing issues, property condition issues and just plain "Cold Feet". One property that fell out and I was able to get into contract for my client was across the street from a school. An elderly couple's offer was originally accepted on it and upon more thought and said at their age they preferred not to be across from the school and cancelled the contract. For my clients being across the street from a school was a benefit. So you never know. Keeping in touch with the listing agent is not enough. It is important to watch the MLS I have found busy listing agents change the status in the MLS and do not call the previously interested agents. I made an offer on an REO. It fell out; I contacted the agent immediately and requested she submit my original offer. She said she had no record of my previous offer and please resubmit. It leads to wonder if my original offer was ever submitted. That is another subject.
In the past, after the two week contingency period is over we would consider it a solid deal. Not in today's market. Banks are forever requesting more information, buyers continuously get nervous, lose their job or have an accident. One quick story: Two days before closing, loan docs signed and ready to fund the buyer gets a DUI, loses his license and cannot purchase the home because it was too far from his job. I felt like an ambulance chaser but my client jumped at the opportunity to purchase the property he thought was gone. Originally they were upset they lost this home and couldn't get it out of their mind. They compared everything we looked at to that. When I called them with the news they were thrilled and couldn't write the check fast enough. Inspections went smoothly also. I was a hero.
What to do as a listing agent to prevent deals falling out? Keep a record of every agent or buyer that makes contact with you concerning the property and contact them immediately after a deal falls through (maybe even when you get that feeling). When accepting an offer request to see proof of the down payment, question the lender how thorough they were in qualifying the buyer, question the agent as to how serious, motivated and experienced their client is. Have they made other offers? Are they homeowners? How long were they looking for? A listing agent can do and must do the above when they have multiple offers. Price is important but should not be the deciding factor. If you have no other offers ask some questions and keep your fingers crossed.
Top 10 Reasons to Purchase Bay Area Real Estate in Today's Market
•1. Interest Rates arenear 40 year lows. You can lock in your housing costs for the next 30 years if you buy not if you rent.
•2. Property Values are at 5 year lows. Some areas have declined in value as much as 60%. Bay Area Real Estate has a long history of recovering and appreciating.
•3. There is a large inventory of homes to choose from with Motivated Sellers. Individual owners and banks selling today must sell.
•4. Getting a loan today is not difficult. It is easy. Just show you can make the payments.
•5. Conforming Loan Limits have been increased to $729,750allowing for low interest rates on these loans.
•6. FHA has loan programs with a minimum of only 3.5% down. Veterans can take advantage of VA loans with no money down.
•7. First time Home Owners will receive an $8000 Federal Tax Credit. (First time is considered not owning a home in the previous 3 years.) Income restrictions apply.
•8. Any buyer regardless of income or ownership type will receive a $10,000 California State Tax Credit when purchasing a new home or condo.It is suggested to use a Real Estate Agent to assist you in negotiating even more with new home builders. First time New Home Buyers can combine both Federal and State credits for a total of $18,000.
•9. Investors can obtain a positive cash flow in some areas with 25% -30% down.
•10. You will be respected as a good and smart American doing your part to help our economy. You will receive a personalized Thank You note from Pres. Obama, Gov. Schwarzenegger, your Realtor and Lender. Oh! In 5 years you will take me for dinner thanking me for helping you make so much money. It is a Window of Opportunity. This is the Bay Area Real Estate's "Perfect Storm". It will not last forever!!! Don't let it pass you by!!!
"It Is Better To Own Real Estate and Wait, Than Wait to Own Real Estate"
Top 10 Reasons to Purchase Bay Area Real Estate in Today's Market
•1. Interest Rates arenear 40 year lows. You can lock in your housing costs for the next 30 years if you buy not if you rent.
•2. Property Values are at 5 year lows. Some areas have declined in value as much as 60%. Bay Area Real Estate has a long history of recovering and appreciating.
•3. There is a large inventory of homes to choose from with Motivated Sellers. Individual owners and banks selling today must sell.
•4. Getting a loan today is not difficult. It is easy. Just show you can make the payments.
•5. Conforming Loan Limits have been increased to $729,750allowing for low interest rates on these loans.
•6. FHA has loan programs with a minimum of only 3.5% down. Veterans can take advantage of VA loans with no money down.
•7. First time Home Owners will receive an $8000 Federal Tax Credit. (First time is considered not owning a home in the previous 3 years.) Income restrictions apply.
•8. Any buyer regardless of income or ownership type will receive a $10,000 California State Tax Credit when purchasing a new home or condo.It is suggested to use a Real Estate Agent to assist you in negotiating even more with new home builders. First time New Home Buyers can combine both Federal and State credits for a total of $18,000.
•9. Investors can obtain a positive cash flow in some areas with 25% -30% down.
•10. You will be respected as a good and smart American doing your part to help our economy. You will receive a personalized Thank You note from Pres. Obama, Gov. Schwarzenegger, your Realtor and Lender. Oh! In 5 years you will take me for dinner thanking me for helping you make so much money. It is a Window of Opportunity. This is the Bay Area Real Estate's "Perfect Storm". It will not last forever!!! Don't let it pass you by!!!
"It Is Better To Own Real Estate and Wait, Than Wait to Own Real Estate"
To Congress Woman Jackie Spier, Senator Diane Feinstein, and Senator Boxer
I am a local realtor specializing in San Mateo and San Francisco Counties Real Estate. I do not think the $15,000 Home Buyer Tax Credit in Economic Stimulus Package is making best use of the tax payers money.
First and Foremost to stop and slow down the hemorrhaging of the Real Estate market we must try to limit foreclosures, short sales and strive to keep the homeowner in the home. A very common situation is a homeowner with a $700,000 mortgage on a home with a $500,000 value in today's market. A loan modification of interest rate reduction will not do the trick. Debt forgiveness or I suggest debt set-aside will make more sense for both the owner and the mortgage holder and the market place. I suggest that the first lender modify the loan principal to the market value as long as the owner is qualified to make those payments. The remaining balance owed will be set aside until the property is sold. When it is sold the owner and lien holders will share in the increased equity 50/50 or maybe 25/75.The owner must be given some incentive to continue making the payments and maintaining the home. The owner is wining from the upside and having a place to live, the bank is wining by converting a non performing loan into a performing loan and also by saving a minimum of $50,000 in the foreclose and resale process, the American People win by having less distressed homes on the market bringing the prices down further. Other positives are homes are not abandoned, homes are maintained, property taxes are being paid, are just a few. The second lien holder may not be satisfied so possibly some money from the Economic Stimulus package could be used to satisfy them. I believe if these homes are held for five plus years all lien holders will get pretty much all of their money back. If not maybe the set-aside principal will follow the owners to their new home.
The present plan of a Home Buyer Tax Credit and waiving any payments after purchase is not a motivating factor to buyers. It is a bonus or a reward but not a stimulus. It is not helping more people purchase homes. If we cannot keep the home from foreclosure the following are suggestions I offer:
•· Use money from The Economic Stimulus Package to let new homebuyers upgrade their home. Many of these distressed homes on the market have lots of deferred maintenance. Many homebuyers presently cannot purchase these homes because after their down payment they do not have money for repairs. Less people able to purchase homes brings values down more making even more homeowners owing more than the home is worth. Let's assume the appraiser says the home needs a new roof or appliances a Federal Grant from the Stimulus Package is given to the buyer at the time of closing for this sole purpose. This might be difficult to monitor but it will add more equity to the property, upgrade neighborhoods, put contractors to work and allow more people to purchase a home.
•· Use money from The Economic Stimulus Package to buy down interest rates creating lower monthly payments and allowing more people to purchase a home.
•· Use money from The Economic Stimulus Package to add to buyers' down payment adding equity and lowering the buyers' payments allowing more people to purchase.
I do not support lowering loan qualification requirements.
I understand there is immediate urgency in getting a plan in place. The present plan as it stands will definitely help and we need that. Please do not delay passing a plan any longer. I might be late with these suggestions but please keep them in mind when a new or revised Stimulus package is discussed.
As parents we all love our children and only want to help them. In the Bay Area parents almost have to help with a down payment. Do you give your children a gift or a loan? Is it better to be a co-borrower with them? Maybe be partners. If you help one child, you have to help the others. California is a community property state and that creates other issues. It is difficult to bring it up but more than half the marriages wind up in divorce and gifting child money to purchase a home is possibly giving your child's ex-spouse a very generous gift. Asking a child to sign a promissory note is not always comfortable. In many families Money is a "taboo" subject. I helped my son purchase a home with the idea he was to pay it back when he could. My wife and I always had a good relationship with my son so we did not see any need to have a signed document. Hope that does not come back to bite us. He got engaged a year later and married a short time later. A wonderful girl and we love her like a daughter. Before he got married I explained to him Community Property laws and advised him if god forbids he got divorced he still owed the money. I probably would not collect it but I wanted him to understand the consequences. It is now almost 3 years later and we are very happy with our decision. I am writing this because most people are like me but some may not be as fortunate. A choice might be a loan and gifting the annual interest, another choice might be to be partners, or an outright gift. Whatever method of help you choose it will have tax and possible legal consequences for you and your child. I think anyone helping a child or any family member should speak with a lawyer and an accountant before loaning, gifting, or cosigning. I will close with what my father always told me; Don't do as I do, do as I say. Wishing you and your children the best. www.leesellsmore.com
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
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