Archive for the ‘The R/E Business.’ Category

NEW 3% DOWN PROGRAMS

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NEW 3% DOWN PROGRAMS

Great news for a large number of the potential 1st time home buyers who have been locked out of the market for the past few years by over cautious Lenders.

The new programs just announced are aimed at borrowers who have higher than required Income but less than the minimum down payment.

Both FANNIE MAE & FREDDIE MAC are going to accept 3% Down Payment on

FICO logo

FICO logo (Photo credit: Wikipedia)

new fixed rate loans to 1st time buyers.

FICO Scores in the 640 range may be able to qualify if there are compensating circumstances i.e. recently graduated, earning large income, but major debts from Student Loans etc.

Details are still coming in but this is major good news for this underserved segment of the market.

CALIFORNIA IS NOT SILICON VALLEY

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English: This is one of the huge welcoming sig...

English: This is one of the huge welcoming signs for Google plex in the silicon valley. (Photo credit: Wikipedia)

CALIFORNIA IS NOT SILICON VALLEY

The Market Statistics fiasco

I’m continually answering client’s questions about mass media, or on line reports (Case Schiller etc) which claim to give “information” about the California Real Estate Market and which contradict the information I give them.

Here’s the reality:

REAL ESTATE IS LOCAL

Data covering the whole of California is totally useless to anyone considering Buying or Selling property in Silicon Valley.

To get useful information about a specific area why not go to a source which deals ONLY with that area, and has ACCURATE and RELEVANT information on it.

A competent and tech savvy Realtor has direct access to all relevant data bases and can easily provide accurate and current data for individual homes, neighborhoods, Cities, and Counties within minutes, at  no cost to a Client.

Much of this data is either not available to the general public, or costs inordinate time and money to an individual.

ACCURATE MLS DATA OR???

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Real estate agents in Silicon Valley enter their “for sale” listings into the MLS Listings data base as soon as the Paperwork is signed.

These listings are immediately available for the public to see by signing on to MLS Listings.com. or at Realtor.com.

No paid for advertising or promotions, just 100% real time accurate data

The Zillows and Trulias of this world (and dozens of smaller Portals) buy this data from us and put it out on their flashy web sites in order to pull you in and sell you some of their “(For Profit”) services.

What they don’t tell you is that our MLS Listings data base is continually updated in real time as agents make additions and changes.

They can choose how often to update their sites and typically do so every 7 to 10 days.

This means you cannot assume that the information they provide is accurate.  

The information you get at MLS Listings.com, or Realtor.com is updated in real time and will always be accurate.

Your choice:

Free on a very well designed web site where the critical data is often out of date.

OR

Free on a less flashy but 100% accurate site.

HOME BUYERS QUESTIONS

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Absolute_Mortgage

Absolute_Mortgage (Photo credit: kathleenleavitt)

HOME BUYERS QUESTIONS

A recent study by THE INMAN GROUP showed that 90% of 1st Time Buyers felt they were well prepared when they started the home buying process. By the time they finished 56% said they should have known much more about the financial aspects of home buying.

The top problem areas were:

1. The Mortgage Selection options.

2. The Closing Escrow process, especially loan closing.

3. The Offer and negotiation process.

This supports my personal experience and justifies my firm policy of having a typically 2 hour initial meeting with new buyer clients to discuss these and a few similar areas. This allows us to deal with the probability that many hours spent on the Web has given them a toxic mix of good, wrong, ambiguous, and dangerous data, but no framework in which to analyze it.

The biggest single problem in my experience is the idea that house hunting should start with looking at houses.

WRONG

It should start with finding the optimal Mortgage FOR YOU based on your current circumstances and future plans.

When you have determined (accurately) how much you can afford and which type of mortgage is best suited for you, should you be using your valuable time to start viewing only homes which meet your parameters and pockets.

NOTE: It’s worth remembering that the 30 year fixed rate mortgage is seldom the best choice for the majority of buyers. However it is always the most expensive.

 

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API 2015

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We now know that API will no longer be updated, and will in fact be replaced from next year by a more valuable index.

Question is what will replace it for the missing year?

Latest I hear is that for one year only it will be by an index which will cause considerable misunderstanding in the minds of it’s users.

For one year only the index will be the average of the past 3 years API’s!!!

Because of the way API has always been measured 80% of all schools improved every year. Therefore the new score will be lower than 2014 as the calculation will include previous lower scores.

Home buyers checking out the schools which their children will be attending next year are almost certainly going to see that the “API” has gone down from it’s 2014 number.

We should hope that sanity is restored before this change is implemented but I’m not confident.

 

GOODBYE API

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Say farewell to the API as you know it. Welcome to new era of accountability, with at least a couple years of confusion in between. English: San Elijo Hills Middle School

 

The release Thursday of the results on the state’s Academic Performance Index marks the end of a decade of judging student performance based on test scores alone. Within three years, California will have moved to a very different system in which scores on the newly introduced Common Core assessments and other state standardized tests will be but one spectrum in the prism for evaluating schools and districts. 

 

There will be new, multiple measures that could include high school and middle school graduation rates, rates of absenteeism, reclassification of English learners, passage on Advanced Placement exams or a mix of other indicators.

 

How these measures will fit together, and whether the can even be combined into a single index, will be the State Board of Educations challenge.

 

The law gives them till Oct 2015 to have it in place. 

 

 

 

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FAREWELL A P I

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What is an API according to Heidi

What is an API according to Heidi (Photo credit: h3idi.harman)

Say farewell to the API as you know it. Welcome to new era of accountability, with at least a couple years of confusion in between.

The release Thursday of the results on the state’s Academic Performance Index marks the end of a decade of judging student performance based on test scores alone. Within three years, California will have moved to a very different system in which scores on the newly introduced Common Core assessments and other state standardized tests will be but one spectrum in the prism for evaluating schools and districts.

There will be new, multiple measures that could include high school and middle school graduation rates, rates of absenteeism, reclassification of English learners, passage on Advanced Placement exams or a mix of other indicators.

How these measures will fit together – and whether they can even be combined coherently in one index ­– will be the State Board of Education’s challenge.

The Legislature gave the board until October 2015 to solve it in the law establishing the Local Control Funding Formula, passed in June. By then, it must approve three sets of evaluation criteria that will replace the sole reliance on various standardized tests, including the California Standards Test and high school exit exam, that currently comprise the API (see accompanying story). These “rubrics” will be used by districts to evaluate their own academic progress and by county offices of education and the state superintendent of public instruction to determine if districts and schools could use support or more serious forms of intervention.

The measurements will be drawn from eight priority areas that legislators cited in passing the funding formula, Some of those – student achievement and student engagement, for instance – can be readily quantified through test scores and rates of attendance and absenteeism, while other areas, such as parent involvement and school climate, will be harder to measure. The law gave the State Board latitude to create other indicators.

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THANKS TO BARBARA BOXER

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Barbara Boxer, United States Senator from Cali...

Barbara Boxer, United States Senator from California (Photo credit: Wikipedia)

As of Dec 1st both the IRS and Franchise Tax Board have put in writing that they no longer consider “Debt Forgiveness” resulting from a Short Sale to be taxable income under either State or Federal tax laws.

This removes a huge potential problem from anyone going through a short sale. Until now It has been common to receive a tax bill in the tens of thousands of dollars many months after the property has been sold.

Thanks are due to Barbara Boxer for her part in fighting this battle for us.

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THE $$$$$$$$’s Per/Sq Foot PUZZLE

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A Recent Buyer client was continually comparing different listed houses on the the basis of ASKING PRICE per SQUARE FOOTAGE of living space. At 1st sight this seems perfectly reasonable. He could not understand why there seemed to be NO evidence of this when looking at SOLD prices. i.e. Bigger houses seemed to sell for FEWER dollars per square foot than smaller ones.

However, once we understand how houses are built it really does make sense.

Assume 2 house built at the same time are both 3 bed 2 bath models and 1,200 sq feet living area.

They were both sold new for $400.000. Therefore, when sold, they cost the Buyers $333 per sq ft.

At this time the $$$$$$$$ per sq footage is a valid indication of comparitive value.

Now consider which parts of a new house are the most expensive to build?

How about the Kitchen and Bathrooms with all the high cost plumbing and electrical systems which are not required in the other parts of the house.

1 year later one of the owners decides to add a 400 Sq Ft extension to his family room. As the new consruction does not include any new plumbing and little electrical work the cost per sq ft of the project will obviously be less than that of the complete house.

From this point on the $$$$$$ per sq foot calculation becomes meaningless

The larger house will have a lower $$$$$$$ per sq footage because a a larger part of it cost less to build.

 

 

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PROBLEMS FOR THE 1st TIME BUYER

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Cover of "Buying a Home (Essential Financ...

Cover of Buying a Home (Essential Finance)

Real estate transactions place a particularly complex set of psychological and emotional stressors on buyers and sellers.  Clients are supposed to make wise financial decisions, find (but manage!) their emotional passion for a property, do diligent research, and handle an uncanny list of logistics – all at once.

This has been the case since the dawn of the real estate business. But the last decade has added two line items to this list of stressors that have sent some buyers and sellers over the edge – and pushed many others right to the (deal-breaking) brink:

The biggest recession in American history is one — this has ratcheted up buyers’ and sellers’ financial fears and the pressure to make smart, sustainable decisions.

The advent of the internet is the other — now that every bit of market data and advice is literally at hand, real estate consumers can overwhelm themselves and fall prey to “analysis paralysis” in the effort to get informed.

Client mindsets, unmanaged, kill deals. And you can’t manage what you don’t first understand. Even worse than glitching up your close rate, some of these anxieties can actually cause panic, paralysis and poor decisions. Let’s take a little trip inside the minds of our post-recession, constantly-connected home buyers and sellers, to get a better understanding for their freak-out moments and sticking points.

Neurosis #1: Interest Rate Fixation.

The buyer and refi-er with interest-rate fixation checks interest rates online all day, every day. They hang on Bernanke’s every word – and text or call you immediately after his every press conference to see what you think about it. They notice rates rise and fall by .375% one week, and have done the amortization math to reveal that this difference would save them $2,750 over their 30 year loan.  As a result, interest rate fixated buyers and home owners often freeze up when it’s time to lock rates, hesitating out of the hope/fear that rates will decline, even by a smidgen, tomorrow.

As with most human neuroses, interest rate fixation starts from a good place: the desire to be a smart, informed, wise money manager and real estate decision-maker. But it can spiral to a place where it borders on delusional. Something about the ease of access and constant information about every moment’s variation in interest rates makes mortgage borrowers perceive that they have more control over the precise timing of their rate lock and their transaction than they actually do.

How you can help

If you have someone with interest rate fixation on your hands, it might help to keep them mindful of the overall goal of buying the right home at an affordable price and terms, or saving money and paying their home off early, via their refinance.  Explain that they should be aggressive about moving their house hunt and refinance forward. But also inform them that their contingency and underwriting timelines have more impact on the timing nuances that dictate their precise interest rate than obsessively watching CNBC ever will.

Neurosis #2: House-Stalking Syndrome.

Your house stalkers are those buyers who are constantly asking you about homes that are not on the market, having seen a late-night infomercial that urged them to write letters to owners asking them to sell – and finance – their homes.  These are also the buyers who see a ‘Coming Soon’ sign go up on the most luxurious home in town and start checking online, calling the listing agent and emailing you 5 times a day to know the moment it comes on the market. Then, when it is listed at a price far beyond their means, they go to the Open House, put in a lowball offer (with a picture of their Yorkie) and go into mourning when the place sells for hundreds of thousands more than they could every have paid.

Believe it or not, these are the most benign symptoms of house stalking syndrome. I’ve heard of house stalking buyers who track the sellers down on Facebook, knock on their doors, and even attempt to sabotage their open houses. But by and large, house-stalkers reserve their fixation for late-night internet research into a property’s permit history, floorplans, owners and neighbors, estimated value, days on market and listing agent history.

How you can help

Historically, house stalkers were seeking to be the first to hear of a price reduction.  But on today’s seller’s market, house stalkers are often legitimate buyers driven slightly nuts by the prospect of getting outbid (again).

To minimize this mania, it’s essential for you, the agent, to be the calming presence in a crazy market.  Create a sensible house hunting plan and strategy, encourage them to view homes priced low enough that they can compete and stay within budget, and brief them up front about how many offers buyers normally are having to make before snapping up their ultimate home.

Neurosis #3: Home Voyeurism, aka Looky-Loo Syndrome, aka Property Peeping Tom Tendencies.

Home voyeurs are related to the aforementioned home-stalkers, with one big difference: they have no interest in actually buying a home!  Hence, these Property Peeping Tom’s can be the bane of an agent’s existence, because their phone calls, emails and texts place a real drain on the time you could be spending with serious clients.

As long as there have been open houses, there have been looky loos. But the advent of the internet has exacerbated their symptoms and encouraged their bad behavior by rendering so much more information about properties and the people involved with them publicly available.

How you can help

The toughest type of Property Peeping Tom to deal with are those friends and relatives who beg you to use your real estate agent superpowers to constantly pull comps, get insider information or even provide access to listed homes for what you know will turn out to be no good reason. One word: “no”.  Wait – one more word: “boundaries”

Neurosis #4: Décor Expectations Disorder.

Reality TV, real estate shows and design magazines have created some pretty unrealistic expectations about what the interior of a home should look like on any given day. While the average human being isn’t put off by some unopened mail in the basket or a pair of sneakers in the hallway, those with Décor Expectations Disorder are shocked and outraged by even the slightest signs of real life inside the homes they view. They are aghast when every pillow isn’t fluffed and completely incensed by out-of-date appliances.  No window valances? Quelle horreur.

How you can help

Truth is, the ante has certainly been upped. Buyers at all price points do have the right to expect listings to be clean and prepared for sale – and listing agents must know that homes which don’t measure up will not command top dollar. If your buyer client has Décor Expectations Disorder, remind them that the perfectly staged homes tend to get more offers and sell for more, so that a poorly prepared property might present a good opportunity for them.  Encourage them to visualize the place in the pristine condition they’ll keep it, if and when they end up owning the place.

And take every opportunity to remind your home sellers that the competition is fierce. In fact, remind them that they are not just competing against nearby listings, but also against the standard of cleaniness and decor that buyers see in the media. Encourage them to be vigilant about keeping their home pristine and clutter-free while it’s listed and being shown. Stagers, housekeepers and storage units are property preparation investments that can have pay off big, at closing.

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