Posts Tagged ‘Add new tag’

CHOOSING AN AGENT

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There are many different Business Models in the Real Estate Industry. Here’s just a few examples:
 
1. Buyer Only Brokers.
 
2. Buyer Rebate (“Kick Back”) Brokers.
 
3. Virtual Office Brokers. No physical location.
 
4. Reduced Commision Brokers.
 
5. Fixed Price Brokers.
 
6. Transaction Facilitation Brokers.
 
Etc, etc.etc ad infinitum.
 
All of these and many more are proof that we have a lot of competition in our business, and that the Consumer (Buyer or Seller) has lots of choices.
 
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:

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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/.

Mortgage Tax Deduction

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Here we are at the start of the annual self flagellation period otherwise know as Tax Preperation Time.
Given the amount of bad/wrong advice freely floating around on this topic you might find it helpfull to see what the rules really are as the I.R.S. sees it.
Check out this link: http://www.irs.gov/pub/irs-pdf/p936.pdf

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FHA. The “New” Mortgage of Choice.

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An FHA mortgage has not typically been the first thing that came to mind when buying in the Silicon Valley area during the past 25 years or so.

Guess what; with the chaos in the Mortgage Banking industry FHA is now the best program in the market for anyone with less than a 20% down payment looking to buy up to the new conforming limit of $729,500.

With 30 year Fixed and Adjustable programs, as little as 3% down, and generous Seller credit provisions, this is definitely not your Grandfathers FHA Mortgage.

In addition the interest rates are typically better than those offered by the standard Banks, and qualifying parameters are stable and consistent. This can certainly not be said of the rest of the industry.

The $4,000 Question

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The following is a question posted recently by an individual on Trulia Voices

“CAN SOMEONE GIVE ME CONTACTS OF REALTORS WHO ARE WILLING TO TAKE $4,000 AND DO MY PAPERWORK. I HAVE A HOUSE IN

Which i am interested . I have decided and know what i want to offer. I just want a realtor to make my offer and do the paper work. I want the total commission back ( 2.5% – 3%) and I’ll pay the realtor $4000.”

(Unedited for grammar)

This has stirred up a in increasingly strident series of answers from agents, and responses from the originator.

The originator is a rather opinionated, ethically dubious, and extremely ill informed person, but is perfectly entitled to ask the question without being subject to the level of vitriol which has come back.

The question of negotiable Real Estate Commisions continues to haunt our industry. I can’t claim to know the best way to resolve the question. However, I can reliably predict that we are going to have to develop a system which supports and regulates a structured Service Model to allow Buyers and Sellers to choose from a Bundle of Services offered on a sliding scale fee system.

The best Realtors have already left the 20th Century behind and are working co-operatively with a new generation of technology savvy consumers who know that Norman Rockwell is dead.

The $4,000 question is just a request for someone to perform a finite task for a fixed fee.

Is that really such a strange concept.

Silicon Valley Real Estate Blues

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Does this sound like anyone you know?

1. I’m a smart person with good solid  job. I should own a house.

2. That idiot down the street makes less than I do, but he just bought a cool house. He’s a homeowner!

3. I wonder how much house I can afford?

4. I don’t know much about real estate. It sounds complicated, so I’ll talk to someone who does it for a living.

5. Realtors and mortgage brokers know what they’re talking about! (No conflict of interest there, right?) They tell me to spend as much as possible, because housing prices always go up. I don’t have to even research that; it’s so darn obvious!

6. I’ll take out the biggest mortgage the broker will give me. I’m not worried, because they wouldn’t loan me the money if they didn’t know I could afford it. They’re professionals after all.

7. Everybody else is doing the same thing, so I have to be as aggressive as possible. They’re not making any more land and there’s a shortage of housing (again, it’s so obvious!), so I have to get into a house now or the prices, which never go down, will rise out of reach.

8. I make $100,000 per year, which puts me way above average, some might consider me rich. The median price of a house in my area is $700,000. I don’t care if that’s seven-times my income (the rule of thumb is that your house should cost 3 to 4 times your annual income), I’m a rich guy so I should get an $850,000 house. I deserve it!

9. Cool! I just bought my house. It cost me $928,000. I had to bid aggressively because some other jerks were trying to get it and we really love this house. I got it with an interest only adjustable rate mortgage, because the rates on ARMs are one whole percentage point lower than a fixed-rate mortgage (yes, rates are currently at 40-year lows, but I needed that extra percentage point to make the monthly payment).

10. My interest rate doesn’t reset for 3 years anyway, and I’ll certainly be making more than I am now in five years, (even though on average, people are now making less than they were 5 years ago).

11. The interest-only part of the mortgage also ends in 3 years, so I’ll just refinance the mortgage. The broker told me that should be no problem. (Unless, of course, there’s a massive global credit crunch that causes the biggest tightening of credit since the 1970s, but that won’t happen).

12. I’m a smart person who owns a house. All is right with the world.

13. Honey, some guy has stuck a notice on our door.

The morale is:

WHAT YOU DON’T UNDERSTAND CAN AND WILL COST YOU.

GET EDUCATED.

A Suggestion For Your 401-k/IRA Money

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The vast majority of money in 401-k type plans, and IRA’s is used to gamble in either Stocks (equities) or Bonds, mostly in the U.S. I use the word GAMBLE quite deliberately.

However,  most people have no choice as the plan administrators only permit these options. You can choose from a small range of Mutual Funds or, more rarely, a Self Directed Option. This means you are investing in individual companies and a good part of your money goes on trading commissions. Always remember that you pay the same commission on a bad trade as on a good one, but you have given up all control of how and when they will be made.

Given this, the challenge is how to make the best selection from the limited options available.

Here’s a little snippet of historical data that might give a reason for my preference:

For the past 30 years (1978-2008) the U.S. Stock Market has undergone 4 different Bear Markets (a loss of at least 20% in the S&P 500 index). Specifically these were 26%, 33%, 20%, and 49%.

Despite this the average return on an investment tied to the S&P 500 index over these 30 years has been 13%. (Source. BTN Research).

Given this record my suggestion is that where possible you put your retirement savings into the fund that most closely tracks this index. My favourite is found here http://www.google.com/finance?q=MUTF:VFINX

Of course, if you can find a Mutual Fund (either Stocks or Bonds) which has done this good over a similar time then go for it.

All Real Estate Is Local

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Most successful Realtors know the truth of my Title (Paraphrased from ex Speaker of the House of Representatives Tip O’Neill “All politics is local”).

Unfortunately many of our clients get most of their information from the talking heads and empty suits of the mass media whose purpose is to sell advertising, with LITTLE or NO REGARD to TRUTH or CONTEXT.

They are therefore led to believe that any house can be bought for at least 20% less than a year ago, anywhere it happens to be located.

Here are a couple of facts that might be thrown into the running conversations about “How’s the market”

Over the past 10 years the average home price has INCREASED by 6.2% Nationwide.

Over the past 20 years the average home price INCREASE has been 4.7% Nationwide.

Source www.ofheo.gov

These are way below the numbers for Santa Clara County (Silicon Valley) where I live and work, and they are way above the numbers for Dallas Texas.

The Morale is “East San Jose is NOT Palo Alto. Sacramento County is NOT Santa Clara County, Southern California is NOT North California”. Florida statistics are not relevant to any other State.

ALL REAL ESTATE IS LOCAL

The Best Legal Self Help Site in the UNIVERSE.

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Based in Berkley Ca, that bastion of Free Thought, The NOLO PRESS is one of the jewels of California. For those who have never heard of it give yourself a treat and see just how much Legal information and advice is freely available at this web site. http://www.nolo.com/index.cfm.

It’s sections relating to landlords and tenants and relevant paperwork are a major resource to myself and many of my clients.

Here is their “Mission Statement”:

Since 1971, Nolo’s goal has been simple:
To make America’s legal system accessible to everyone. With hundreds of top quality, plain-English legal products, we’ve helped make that happen. Every year, over 10 million people turn to Nolo to save billions of dollars. Thank you for your support.

Ralph Warner, co-founder

This is does not allow you dispense with the services of an attorney, but it can help decide if you need one, and to work more productively with them should that need occur.

Be advised that I am not an attorney and do not intend this as Legal Advice.

Here’s The Good News

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These days when every mass media empty suit is competing to see who can spread the most gloom and doom let me point out one very positive outcome of all this, especially for the Real Estate Market.

It’s great for mortgage interest rates. When stock markets go down it’s because a lot of people are selling. Where do you think they put the money received from the sales?

How about the traditional safe haven BONDS? This drives up the prices on Bonds.

When Bond prices go up, interest rates go down. That is exactly what happened yesterday when we saw 2 reductions and modified rate sheets during one day.

If your mortgage was in process you might have received a call late yesterday to discuss locking in the interest rate.

The New Bidding Wars

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Here in Silicon Valley we are in the middle of the most amazing 1st time Buyer market i’ve seen in my 20 plus years working here.

We have an much higher than normal number of Short Sales and REO properties. While for numerous reasons short sales are just sitting out there, the REO properties are flying off the market as quick as they arrive, and in most cases with multiple offers.

For a great summary on this topic check out Scott Schang’s blog at http://www.californiateachersandemployeeshomeloanprograms.com/buying-homes-in-a-bidding-war-understanding-competitive-markets/