Archive for December, 2010

SILICON VALLEY Real Estate UPDATE

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The real estate crisis has gutted house prices, tipped millions into foreclosure, and rattled the global economy to its core. But for many would-be home buyers, the historic boom and bust have been a blessing in disguise. During the first half of the previous decade, easy credit and speculative excitement worked to make houses increasingly expensive. By the fourth quarter of 2005, median home prices had reached 2.77 times median household incomes. That is sharply higher than the 1.92 average of the 15 years ending in 2003 and too expensive for many families. But the subsequent crash in home prices–values have fallen roughly 30 percent at the national level from their 2006 peaks–has helped restore affordability to this once inflated market. By the third quarter of 2009, the price-to-income ratio–a key measure of housing affordability–had fallen below its 15-year average, to 1.84 for the nation as a whole.

Beginning Jan 2010 Silicon Valley Counties (North Santa Clara and Southern Alameda) sales prices have stabilized and some areas are now seeing small increases.

Apart from this being a normal process indicating the last stages of any financial cycle, it has been significantly driven by 5 major sources:

  1. 1st Time Buyer Tax Credits which ended mid 2010.
  2. Extension of FHA and V/A maximum loan limits for High Priced Zip codes.
  3. Historically low interest rates.
  4. Huge increases in the number of 1st Time Buyer programs from Federal, State, County, City, and Employment specific sources. These continue to increase and improve.
  5. Major reductions in Bank Owned (REO), and Short Sale properties coming to market as Banks have beefed up programs designed to keep people in their homes where possible. This has allowed more normal conditions to have control of sales prices.

NOTE: I’m only describing my local Market here in Silicon Valley. I know conditions in other areas have been, and continue to be hit worse than us.  

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Typical Buyer Questions #1

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Here’s a question from a client who has just had an offer accepted on a bank owned (REO)  property.

Question.

Hi Bill, I was talking to a friend about REO and wanted to get your expertise on the matter.  She mentioned recently there were news about how bank were approving foreclosure while owners were doing a refi and other things, so at the end of the day even the bank didn’t own title to the property.  The loan is sold off to multiple lenders and Title is unclear.  Have you heard about it?

My Answer.

Hi Lisa,   As with many things described as “News” in ourMass Media this is just another Urban Legend. In this case one that shows absolutely no knowledge of reality. What it is talking about is a mixture of different situations based on rumours and hearsay, in all cases relating to either Short Sales, or loan modifications, usually from the 29 States where “mortgage” law is different than in California.

It has nothing to do with REO properties which by definition are fully owned by a Bank. There is no other “Owner”. Title is in the name of the Bank and will be delivered by them to the new owner as in any other purchase. An owners Title Insurance  policy will, as always, be paid for by the current owner (the Bank) and given to the new owner through Escrow. There is nothing different today than when you bought your house.

New questions are allways welcome at bmccord@rwnetwork.com

From: Lisa Ly

Sent: Thursday, December 23, 2010 8:11 AM

To: bmccord@rwnetwork.com

Subject: REO Question

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Conversation With A Buyer

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The following is a result of a recent inquiry from a subscriber to the Trulia Voices website. He wanted my opinion on a purchase he was considering. He had picked up a lot of useful information but did not have the experience of the actual steps involved which allows an expert to place multiple bits of knowledge into a clear context, and then into a plan.

                                                             ____________ — _______________

Hello James,

        You are obviously doing a lot of homework yourself, as I would prior to deciding on alternate strategies for a medical problem. However, in both cases accurate information is required in order to make the optimal decision.

I believe you have reached the point of needing accurate current data, placed in its correct context, in order to decide how to proceed.

For example, let’s look at the scenario you described in your question.

Purchase price – $360,000

Loan $288,000 – o.k.

20% down – o.k. but maybe not the best choice, as you are already aware.

6.00% interest – Wrong. Worst case is 5%. (A $200 per month difference in payment)

Property Taxes about $300 per month – Wrong. On $375,000 will be $390:63 per month. A $90:63 difference.

Hazard Insurance $100/m – Wrong. $60 per month is a good estimate. A $40 per month difference.

Just these few differences would allow you to buy up to $400,000 for the same monthly cost. This takes you into the Piedmont High School district with its much superior education system.

You’ve taken the time to build your knowledge and vocabulary well. Now you need real facts and numbers in order to become an educated buyer in a market place where getting it wrong can be very expensive.

I’m not going to base important decisions about my health on “free” research and advice from the Web. I want the alternatives to be explained by a professional, and specifically as they apply to me, not some mythical Mr. Average.

I suggest you take a similar approach and hire a Realtor who will explain the options available to you, and help you understand the pro’s and con’s of each one.

Sorry if this seems “preachy” but I feel very strongly about the mass of incorrect and misleading advice and information being spread throughout Radio, T/V, “News”papers, Magazines, and the Internet. These sources are not interested in supplying information relevant to you and your situation. Their sole motivation is to sell advertising.

Why not hire your own professional who can advise and inform you based on your unique circumstances, at this specific time, and with regard to your medium and loan term plans.

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Another Credit Cotcha

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A recent change to your Mortgage qualifying process has been adopted by all Lenders. Banks now run a NEW Credit Report on the Day your loan is due to fund i.e. ONE DAY BEFORE CLOSING. If you have taken on any new debt since applying you might no longer qualify for your loan and be unable to close the deal. If you have removed your loan contingency this could put your deposit at risk.

This applies to both Purchase and Refinance Loans.

If you have applied for any NEW Credit since you were preapproved the loan underwriter will be required to call the new trade line and get proof that no new credit was extended.

If new credit was extended, they will recalculate the debt to income ratios and the application will need to be re-underwritten. Even if you still qualify THIS WILL CAUSE A SIGNIFICANT DELAY TO CLOSING.

This delay could potentially ruin the whole deal.

I personally have had 3 of these situations happen. Fortunately none of them caused major problems but in all cases caused between 7 and 10 days delay in closing.

 If you have made any new credit application since being qualified,

tell your Real Estate Agent, and Loan Agent right away and deal with it before it becomes time critical.

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