Bill McCord's Blog

I won’t try to explain the pro’s and con’s of any of these options, but will strongly suggest that whichever of them you choose, you consider working with a REALTOR. My reason for this specific advice is as follows:

 

1. There are more than Half a Million Licensed Real Estate Agents in California. This is the minimum required qualification for the job.

2. Only 165,000 of them are REALTORS who have voluntarily agreed to subscribe to a strict Code of Ethics, and are paying members of their Local, State, and National Associations of Realtors.

Amongst many other services Realtors provide to the public is the web site Realtor.com. the most popular of all on-line Real Estate sites. Check out http://www.realtor.com/.

The IRS will be releasing a new version of Form 5405, the First-Time Homebuyer Credit Form, for homebuyers claiming the extended housing tax credit. Homebuyers eligible for the tax credit must use this new version if they:

1. Purchased their homes on or after November 7, 2009,

OR

2. Will claim the housing tax credit on their 2009 tax returns, regardless of when the property was purchased.

The new form was due to be published last December. The old form (currently the only one available on the IRS website) will not be accepted for claiming the tax credit under the extended rules.

NOTE: At this time the IRS requires that owners claiming this tax credit 0n their 2009 tax returns must file on paper. Be sure to check this beforehand if planning to file electronically. It may have changed by then.

In the world of smoke and mirrors called “The Finance System” the word PRIME has two very different meanings.

One is PRIME RATE (the interest rate banks charge their best clients. Normally 3% above Fed Funds Rate.

The other is SUB-PRIME to describe a mortgage (SUB-PRIME MORTGAGE) that should never have made. Hence the “The Sub-Prime Mortgage Crisis“.

In the real world occupied by most of us “Ordinary Folk” the term Sub-Prime should not be linked to a Mortgage; It actually refers to the Borrower of the Mortgage i.e. The person whose Credit, Income, and/or Cash for down payment is not good enough to get a ”Prime” Mortgage. Hereafter referred to as The Sub-Prime Borrower.

This person has always been with us. Until the unbridled greed and avarice of Banks and Wall St intervened with their “No Possible Homebuyer Left behind” programs these folks rented until such time as their financial situation allowed them to qualify for a sensible mortgage.

Let’s be clear on this. The Sub-Prime Mortgages were and are High Risk loans made to High Risk people. These loans could only be made if the Bank knew it could sell them on to a 3rd party before the inevitable late payments started. This way the Banks got their profit with effectively no responsibility for the future performance of the flakey loan.

It was effectively a game of “Pass the Parcel in a Bagdad Pub”.

By the time these loans started going bad they had spread throughout the Worlds Financial systems leading to the current situation so often referred to as the Sub-Prime Mortgage Crisis.

At the end of the day we have a large number of Banks and other Wall Street hot shots who  made enormous profits by selling what they all knew to be an unstable product to an undereducated public.

This is a recurring story in our history.

If you don’t want to become a victim of the next wave then you need to get educated in how the system really works before you meet the next Bernie Madoff.

For some thoughts on how you might do this check out my posts from 04/25/2008 “Kick Start the Kids”.

An increasing number of Listings are stating that they will not accept offers from FHA or V/A Buyers.

When questioned the Agents usually claim that these loans impose additional costs on the Seller. This was true up till a few years ago, but no longer. In fact, they have a huge advantage in today’s world.

 When questioned they claim that these loan impose additional costs on the Seller. This was true up till a few years ago, but no longer. In fact, these loans have a huge advantage in today’s world.

The following explains why this is so:

First a little clarification regarding current appraisal procedures is required.

1. As of July 2009,  for all Conventional loans, the selection of the appraiser is governed by the much despised HVCC (Home Valuation Code of Conduct) guidelines from Fannie Mae. These require that no-one involved in the transaction has any control over the appraiser chosen. This must be done by a 3rd party Appraisal Management Company (A.M.A.) who will collect the full cost of the appraisal plus some profit for themselves. There are no requirements regarding the qualifications of the chosen appraiser except for having the required state license. As the A.M.A. gets to keep the full amount of the appraisal fee, they have a strong interest in giving the job to the lowest bidder regardless of where they live and work, or whether they have any knowledge of the market conditions where the property is located. In recent times I have had one appraiser come from Tracy to value a property in the Hayward Hills, and another come in from Benicia to Tracy. In both cases they brought in a valuation 20% lower than the agreed purchase price and blew the deal away. Both prpoerties went back on the market and closed with FHA Loans using a local appraisor.

2. For Government Loans (FHA, V/A) the appraiser can still be selected by the Lender, The agent, or the Buyer as has always been the case. This ensures that the appraiser will be local to the property and therefore have current knowledge of the neighborhood in which the property is located.

Result is that the appraiser can be selected on their merits and qualifications, rather than based on how cheaply they agree to do the job.

NOTE: There are a limited number of circumstance where FHA & V/A loans cannot be used due to the short time between the last time the property sold and the current date. These a typically “Flippers” bought at foreclosure sales, quickly updated, and put back on the market for an easy profit.

This situation is currently the subject of Bills in both houses of Congress and will most certainly result in new guidelines resulting from law, not in response to pressure from one politicslly motivated State Attorney running for Govenor.

Why do I make more money in December than any other Month of the Year? and why do I expect this year to be even better.
Here’s why.

1. Most Realtors think this is a slow time and choose to take more time off. RESULT; less competition.

2. There are fewer Listings and fewer Buyers, but those who are active  are serious. RESULT; more productive use of time.

But this year things are very different. There will still be fewer Agents working and fewer Buyers looking, BUT there will be many more Listings to choose from.

WHY? Because we will still have all the normal Sellers who are serious, PLUS a large number of REO Properties which are not affected by the holidays. Banks know that each day they own a property costs them a lot of money so they will be putting them on the market as soon as they can regardless of the time of year.

So why be a Buyer now? Because you will have less competition but more properties to choose from. (Not to mention the extended and improved Tax Credit Program).

The rumours and speculation surrounding this Bill are getting increasingly shrill and uninformed ranging from:

1. Extension of the credit is a done deal and will possibly even increase the amount to $15,000.

2. It will be changed to apply to deals that are in escrow before the current Nov 31st deadline and close within 60 days more.

3. It’s dead as of Nov 31st.

4. Etc, etc,etc.

The best site i’ve found for intelligent discussion of this is http://www.californiateachersandemployeeshomeloanprograms.com/update-8000-homebuyer-tax-credit-extension-october-2009/

Scott is a very diligent researcher and reporter on this and more generally 1st time buyer programs.

If you live in Silicon Valley and are thinking about buying your 1^st house this is probably the best ever time to do so. 

1. Santa Clara County has a new 1st time buyer program which gives a 30 year, $40,000, Down Payment Assistance loan at 2% interest, with no payments required for the 1st 4 years. After 5 years the interest rate becomes ZERO. The maximum total interest over the life of the loan can never exceed $3,200. THIS IS FANTASTIC. 

2. 90% of the Cities in Santa Clara County have one or more special 1^st First Time Buyer programs to help get a foot on the Home Ownership ladder. 

3. Federal Government and the State of California have several different 1^st Time Buyer programs. 

4. Many of these programs can be combined to provide affordable ways for the majority of people who at present believe they can’t afford to buy. 

5. The Santa Clara County Association of Realtors has a new program which will provide 6 monthly payments of up to $1,500 per month for a Home Buyer who loses their job. 

6. The IRS is giving an $8,000 Tax Credit to any 1st time Buyer who buys before Nov 31st this year. This is a CREDIT not an allowance. It means that even if total Fed Tax was $6,000, not only would that be wiped out but you would get an additional $2,000 rebate. That’s an $8,000 gift from Uncle Sam. 

In addition to all this Mortgage Interest Rates remain at historically low levels, while home prices have come down substantially from the peaks of 2007. 

There will never be a better time than this for that 1^st purchase.

It’s all about meeting new people and helping them realize their dreams.

From the 1st meeting to the close of escrow, maybe 3-6 months, you go through the equivalent of 20 years of getting to know people well, and developing the ability to work toward a common goal.

 Then you may do nothing more than exchange xmas cards and sending out occasional marketting info. However, if the result of your initial business experience was positive, you will be hearing from their friends and family.

 Then, about 5 years later you will be renewing close aquaintance helping them with their next move.

There is nothing more gratifying than that phone call regarding new business coming from a past client or a referral from them. That is a FUN call.

Many Buyers in my market area (Silicon Valley, CA) will research schools to decide where they want to buy. Unfortunately the Acronym Zoo makes it difficult to actually dig out the truly relevant information. In a small effort to help with this I’ve put together the following basic descriptions of each of the normal acronyms used.

APR (AccountabilityProgress Reporting) is the California State mandated system to measure current performance of schools.

API (Academic Performance Index) is the result of the measurement process and is a unique number for each school.

AYP (Adequate Yearly Progress ) and PI (Program Improvement) reports are the results of a Federally mandated program with a different focus.

API measures the performance and progress of a school based on statewide tests at grades 2 through 12. It produces a numerical rating between 200 and 1,000. Depending on the current rating, each school receives a target for improvement over the following year, expressed as a percentage. The higher the current score the lower the percentage increase required until at 800 the requirement is to maintain that score.

AYP is used to drive and monitor progress toward a common goal for all schools. This goal is that all schools must have 100% of students achieve proficiency in English-language arts, and mathematics by 2014.

To truly understand how to interpret these go to the California Dept of Education site. http://www.cde.ca.gov/ta/ac/ar/ This will give links to details for all these and related systems.

Despite the doom and gloom pouring out from the talking heads and empty suits of the mainstream media we here in Silicon Valley do not inhabit a wasteland of short sales and REO’s. Yes, we do have some in a few pockets of the Valley, but they are not having much affect on the big picture.

The Pending to Listing ratios for Santa Clara Valley continues to get more favourable each month. This is the most credible statistic available for tracking market trends and is currently better than it was 12 months ago. I have seen nothing in the Murky News, or heard it mentioned on the TV or Radio.

The truth is that the current problems are concentrated geographically and have not wiped out Real Estate values all over the State.

Have prices in Silicon Valley gone down. Yes in general, but only to the extent of correcting for a out of control boom.

Is now a good time to buy. Yes, in my part of the world.

NOTE: I’ll follow up shortly with info on some super 1st time buyer programs for the Counties and Cities of Silicon Valley.  These are NOT low income programs. More to follow.