Homeowners' tax deduction in danger?

... Reading the other day the headlines in the San Jose Mercury News: "Coveted tax break in peril?"

With the negotiations going on in Washington to avert the "fiscal cliff", we all know that there will be some combination of cost reduction measures and tax increase, whatever this combination will be.  But the tax deduction for homeowners regarding the interest paid on their loan is definitely in consideration.

For the main parts of the nation, this is not an issue, but for the Bay area, where according to this article, 40% of the purchase loans in the Counties of Santa Clara and San Mateo are for more than $500,000, it is a big deal.  13% of those loans were for more than $800,000, and 10% were for more than $900,000.

One way to find money is to reduce this interest deduction.  If the maximum mortgage cap is brought down from the present $1million to $500,000, over 10 years, it would raise $41.4 billion according to this article, which would look good to reduce the deficit of course. 

What would you do, if in the course of reducing the deficit, the politicians were to take away part of the mortgage deduction?  Most likely, if you own a house in the Bay Area, you have a significant mortgage attached to that house.  Would it affect you?  Would you agree with that?

Francis

Silicon Valley real estate

Current Mortgage rates

Non-profit organization worth noting: Partners for New Generations.

Scams of the year…

Scams of the year…

The troubled housing market, an array of new mortgage programs, and general consumer confusion over the new rules set the stage for a host of scams, from Ponzi schemes to rigged bidding at real estate auctions to “reverse staging”, where investors make negative cosmetic changes to a property to get a low appraisal, sell it to a cohort, then flip the property for a higher price.

The big news was the uptick in “foreclosure rescue” companies and mortgage modification scams. In one version, scam artists find victims via foreclosures notices in newspapers, the internet and public records, offer a loan modification for an up-front fee, then disappear with the money. By mid-year, such scams were up 60%, according to the nonprofit Homeownership Preservation Foundation.

State officials also warned of a new scam from callers promising to help owners apply for the Keep Your Home California program for fees of up to $900, although applying is free.

In May, armed forces members were warned of HAMP scams from companies using official government logos, promising guaranteed results and charging high fees for help or information that could be obtained for free.

Prepaid rental listing services also are in question sometimes, as shown in this article from the Department of Real Estate.

As always, in real estate, it is good to conduct your due diligence before hiring services.  Remember to call me for professional contacts, or professional advice.  I do not know everything but I sure will share my knowledge and help you if I can.

Thanks for reading!

Francis

Silicon Valley real estate

Current Mortgage rates

Non-profit organization worth noting: Partners for New Generations.

Should you buy during the Holidays?

Should you buy a home during the holidays?

Once Thanksgiving is over, the real estate world typically starts to wind down for the holidays and doesn’t usually reawaken until after New Year’s. But potential home buyers who are prepared to close in today’s competitive market may want to keep house hunting while everyone else is waiting for spring.

This article from UT San Diego explains that REALTORS® especially recommend that serious home buyers continue shopping if they have repeatedly lost out on deals because of a limited and continually decreasing supply of homes. Buying intensity typically cools down at the start of fall through early January, which could increase the odds for those with more patience.

Would-be buyers historically have bowed out during the winter season because they are overwhelmed by holiday spending and commitments. There’s also the aversion of moving in the middle of a school year. Consumer interest typically picks back up again in the New Year and peaks in the spring.

It is my experience that prices, statistically, go down at the end of the year. (pls refer to this past blog from June). This would be another reason in my opinion for not stopping a house hunting effort. - it is also true, from one of my recent blogs, that prices this year do not seem to abate as they did in previous years. I am afraid of what it may mean for the coming 2 or 3 months.

What does your crystal ball tell you?
Thanks for reading!
Francis

Local market trends

Current Mortgage rates

Non-profit organization worth noting: Partners for New Generations.

South Bay among best US job markets

Reading this little article in the San Jose Mercury News, dated Nov. 30, about the job market in the Bay Area, it strikes me as something of the utmost interest in explaining why the real estate market is so imbalanced in the Silicon Valley. (i.e.: too much demand, not enough supply).

This article, which I will simply paraphrase, while giving all credits to the SJ Merc, explains that according to a report from the US bureau of Labor Statistics, the County of Santa Clara saw jobs increase by 3.5 % in the one-year period ending in October 2012.

The San Francisco - San Mateo - Marin metro region had an annual growth of 3.4 %, and the East Bay 2%. 

Only the Houston region in Texas showed a higher jobs increase: 3.6%

More work means more people attracted to the area. I believe there is also a parallel between freeway traffic and housing prices... Don't you think so? I have never seen 280 so congested after 3pm between Los Altos and San Francisco.

Thank you for reading!

Francis

Silicon Valley Real Estate

useful links

_____________________________________________________
Coldwell Banker invites you to warm and brighten the spirits of those in our community this holiday season by supporting One Warm Coat, a coat drive that collects and distributes warm coats to the less fortunate in our local community during the cold winter months.

Our office is accepting donations of new or gently used coats for One Warm Coat now until December 14.
To make a donation or for more information, please contact me today.

Things are improving...

It is hard to keep some perspective on the market nationwide, as we keep our eyes on the ball here in the Silicon Valley. While multiple offers rule here and buyers have a hard time finding, then purchasing a home, it is good to keep things in perspective and look at the big picture.
The market is still struggling, and shaky in some areas.

IMPROVEMENT – As of 9/30/12, 1 out of every 8.5 home mortgages (11.7%) in the USA are either delinquent or are in the foreclosure process. Compared with: 12/31/2009, when 1 out of every 6.7 home mortgages (15.0%) in the USA was either delinquent or was in the foreclosure process (source: MBA Mortgage Bankers Association).

While keeping things in perspective, let us remember too that about 1/3 of all houses in the US are owned free and clear:

According to the National Association of Realtors "Economists' Outlook blog":

Nationally, about 32 percent of homes were owned outright—without a mortgage. This varies from state to state. West Virginia has the highest share of homes owned outright, just 2 percent shy of half. This contrasts with California, Colorado, Maryland, DC, and Nevada where less than a quarter of owner-occupied homes were owned outright.

Thank you for reading!

Francis

Silicon Valley Real Estate

useful links

Coldwell Banker invites you to warm and brighten the spirits of those in our community this holiday season by supporting One Warm Coat, a coat drive that collects and distributes warm coats to the less fortunate in our local community during the cold winter months.

Our office is accepting donations of new or gently used coats for One Warm Coat now until December 14.
To make a donation or for more information, please contact me today.

Time to sell: suggestions for removing the clutter

Ah, time to sell the house, and you are still living in it....  What do you do?

 Well, the house is not “your home” any longer, it is a property that you are showing to the whole world, with the purpose of selling it for the higher price, with the least amount of hassle. Here are a few of my suggestions:

* Money and valuables: Cash, checkbooks, coins, jewelry, watches, figurines, anything of value that is small and can be easily removed: it is best to put all these away. It's just better for everyone if it's out of sight (of course, there are some exceptions, depending on the property). Many people will go through your property, kids as well as adults and their agents. Some items which may not have any monetary value, but are very valuable to you (i.e. sentimental value) are best removed too. Why take a chance?

* Personal photos. In some cases, a few pictures of your family can give a feeling that the house is full of love. But if you have pictures everywhere, it is too much. Buyers really get distracted by them. If buyers spend their time looking at your pictures, they will leave the house not remembering the property so well. I can attest to that.

* Bills and personal papers. You may not be able to remove these documents from the home all together, but it is best to take the time to organize them, and put them out of sight, or show them in an organized way. Bills and papers laying around will attract the buyers’ look – it is almost instinctive, isn’t it? Again, there, it distracts the buyers away from looking at the house.

* Guns, weapons. Wherever they are and with any form they take, it's better to remove them from the home prior to listing. For some reason, I have seen buyers become either very distracted, or uneasy.

* Clothes, Shoes! Unless there is a good reason for it, a pile of shoes or clothes gives a buyer two impressions: 1/ that there isn't enough storage in your home. 2/ that the house is messy. So, in order to avoid wondering which one, on the part of the buyer, it is best to put them away.

* Medicine. To avoid any trouble it's best to simply remove medicine from the counters, the cabinets, the bathroom etc… if at all possible.

* Items on your kitchen counter (and bathrooms too). It is best to remove everything from your counters. The cleaner you can leave the counters, the more buyers dream of being in there. Also, if you store things on the counters it gives the appearance that you do not have enough storage space.

* Clean the drawers. Here too, it is best to show them clear of too much stuff, and organized. A good way to look at things is: you are going to move eventually; why not move stuff in boxes ahead of time? Clean drawers are like clean cupboards: when buyers open them, they feel invited to fill them out with their own stuff. – instead of feeling overwhelmed by the move that will need to take place before they buy the house. Perception is as important (if not more) as reality when you show a house for sale. Perceiving an “easy” move is so much more soothing to the mind than perceiving a mayhem to come.

* Refrigerator. It is really refreshing to walk into a home that has a clean fridge (and I mean: outside). Buyer's can't imagine their own children's drawing on there if it is covered with yours, and/or covered with magnets. Anything that distracts a buyer’s attention from the house is best left out.

* Furniture. Finally, any furniture that is not essential to you should be removed if at all possible. The property will show larger, more spacious, and buyers can better imagine their own furniture in it. This is why houses for sale often have garages full of furniture and boxes. The move has started !... The type of furniture that stays is a whole other subject… leading to the big “S” word: staging.

Thanks for reading!

Francis

Silicon Valley real estate

Current Mortgage rates

Non-profit organization worth noting: Partners for New Generations.

Foreclosures... any discount?

This article is an  "a propos" follow up on my last blog.  In this article one can see the actual average discount, according to Zillow, for the various areas in the US.  It does not detail the discount for the Silicon Valley, but it does give the figure for San Francisco.  I believe it may be closer to zero in most of the areas between Los Gatos and Menlo Park.

"Foreclosure discount declines to 7.7 percent nationwide in September"

An analysis by Zillow shows that home buyers nationwide could expect a discount of 7.7 percent in September when buying a bank-owned home compared with the same home in a non-distressed sale.

The discount narrowed from 9.1 percent in September 2011 and has fallen dramatically from a peak national discount of 23.7 percent in August 2009. Zillow compared the actual sale price of foreclosed homes nationwide to the estimated price of the same home were it to sell in a non-distressed transaction.

While foreclosure sales continue to offer buyers discounts over traditional sales in the majority of metro areas, some of the areas hardest hit by foreclosures also are those where the price gap between foreclosed and non-foreclosed homes is the smallest. Areas with the smallest foreclosure discounts in September were Phoenix, 0 percent; Las Vegas, 0 percent; Sacramento, Calif., 0.7 percent; and Riverside, Calif., 1.8 percent.

"The smallest foreclosure discount is found in places where competition for homes is so high, people there are willing to pay the same amount for a foreclosure re-sale that they would for a non-distressed home simply to take advantage of historic affordability," said Zillow Chief Economist Dr. Stan Humphries.

Full article from Zillow.

Thanks for reading!
Francis

Silicon Valley real estate
Current Mortgage rates

Non-profit organization worth noting: Partners for New Generations.

Are foreclosures good deals?

Are foreclosure sales good deals??

Favorable home prices and record-low interest rates combined with high demand and a severe shortage of available housing have created a highly competitive housing market in California, with nearly six in ten home sales receiving multiple offers, according to the CALIFORNIA ASSOCIATION OF REALTORS®’ (C.A.R.) “2012 Annual Housing Market Survey.”

More than half (57 percent) of home sales received multiple offers in 2012, the highest in at least the past 12 years, with each home receiving an average of 4.2 offers, up from 3.5 offers in 2011.

Lower priced homes – typically real estate-owned (REO) or short sales – attracted more multiple offers than equity sales ("normal sales"). Seven of 10 REO sales and short sales received multiple offers, while only half of equity sales received more than one offer.  

It is my experience that REO's ( = foreclosure sales) and even short sales, in good areas with good schools, are not bought at a significant discount - if any at all.  On the other hand, in areas which are less desirable, one can find interesting bargains.  As always, where there is more risk, the price is more attractive.

 

For articles detailing better the draw-backs of such transactions, don't hesitate to send me a note.  - yes, there are draw-backs to REO's and short sales.
Thanks for reading,
Francis  

Silicon Valley Real Estate

useful links

A worthy non-profit: CSA

Potential borrowers eager to find lenders with superior service

Potential borrowers eager to find lenders with superior service

A poll by Carlisle & Gallagher Consulting Group found that more than a third of potential borrowers would be willing to pay a higher rate if the mortgage came with superior service. The survey didn’t say how much more the 34 percent were willing to pay, but it did find that this group is a frustrated bunch.

More than half think the process is too slow. A third find it impossible to track the status of their loan application, an equal percentage say it is too difficult to talk with their lenders, and a quarter don’t believe the advice they’re given.

A starting point for borrowers is to ask their real estate agent which lenders offer the best service. Agents know which lenders keep their promises and close quickly without incident. Another option is to ask friends, co-workers, and relatives about their experiences.

Beyond that, prospective borrowers should look for several attributes that will help them find a responsible company or accessible loan officer.

Borrowers should look for a consistent point of contact. Federal regulators have already settled on this as a requirement for loan servicers – the companies that collect payments, disburse funds to cover property taxes, and homowners insurance and otherwise administer loans.

Dealing with a company that provides up-to-date status information also is beneficial. There’s nothing worse than chasing down an unresponsive loan officer to make sure this document or that report has been received, or to find out whether underwriting has looked at the application.

More on this in this article by Lew Sichelman of the Los Angeles Times

Francis

Silicon Valley Real Estate

useful links

A non-profit worthy of interest: CSA
Collection of food & various items for CSA are made in my office at:
161 S. San Antonio Rd.
Los Altos, CA 94022

2011 vs 2012... 2012 wins.

2011 vs 2012...  

2012 has been a year marked by multiple offers, competitive bids, and rising prices. A seller’s market for sure.
The economy in the Valley is definitely a factor to this situation, as is the lack of inventory – too few homes for sale. There are some short sales and foreclosures, as expected and -alas- promised for the past 2 years. However they are absorbed by a strong pool of buyers, either individuals or investors, who believe in the health and future of real estate in the Silicon Valley.


There is definitely a different trend towards the end of the year, as compared with last year, as evidenced by these graphs that I just made – below we see what last year’s trend was towards the end of the year, and what it is pointing to right now, in 2012:

Thanks for reading!
Francis

Silicon Valley Real Estate

useful links

Current Mortgage rates

A non-profit worth of praise: Habitat for Humanity

Eye Candy - our Previews Magazine

Here is our Coldwell Banker Previews Magazine Fall Edition, with many California Jewels,
- always a pleasure to see!

Thanks for reading!
Francis

Local market trends

Current Mortgage rates

Non-profit organization worth noting: Partners for New Generations.

Real Estate Roller Coaster - the past 4 years...

The folks at RealEstate.com calculated the following info, and made this interesting graphic.

This is what they add: "Here’s a little bit about our methodology: We calculated the total value of the housing market for three separate months – the peak (March of 2007), the trough (Nov of 2011) and the latest (June of 2012). We then calculated the theoretical value of the housing market during each of these periods, by multiplying the average price of a sold home by the estimated number of housing units, using numbers supplied by the U.S. Census Bureau."

This is looking at averages throughout the nation.   Each area is different, and in particular our area would not fit in this mold.  Nonetheless, this gives some interesting perspective.




Francis

Local market trends

Current Mortgage rates

Non-profit organization worth noting: Partners for New Generations.

Shortage of California homes up for sale...

Shortage of California homes up for sale

For those who like to read technical stuff, this is perfect.  This goes into the nitty-gritty of the real estate market in California:
After years of having too many homes and not enough buyers, real estate agents in California now have the opposite problem – too many buyers and not enough homes for sale.


Let's look at the details:

* The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported Monday (9/17) that its statewide inventory of unsold homes index for existing, single-family detached homes fell to 3.2 months in August from 3.5 months in July and 5.2 months in August 2011.

* The index reflects the number of months needed to sell the supply of homes on the market at the current sales rate. A six- to seven-month supply is considered normal. When the number goes higher, inventory is plentiful and it’s considered a buyer’s market. When the number goes lower, the advantage goes to the seller.

* Declining inventory helps explain why the statewide median price of an existing, single-family detached home rose to $343,820 in August, up 3 percent from July and up 15.5 percent from August 2011, according to C.A.R.

* Nationwide, the inventory of homes for sale also has declined. In July, there was a 6.4-month supply of homes compared with 9.3 months in July 2011. The current number is in line with the long-term average, according to the NATIONAL ASSOCIATION OF REALTORS®. However, NAR also acknowledges there are “acute shortages” in places such as California, Arizona, Nevada, and parts of Florida.

* Also constraining supply is the fact that so many homeowners are underwater – or owe more than their homes are worth – and unable to sell without taking a loss. As prices rise, more homes will increase in value, but it’s going to take time. Meanwhile, there are still a lot of homes that are not likely to come onto the market.

* At some point, the balance will tip, but it’s hard to predict when. When banks decide prices are high enough, they will start unloading houses they have been sitting on, according to the chief economist for Trulia.

Read the San Francisco Article on the matter for more details.

Thank you for reading!

Francis

Silicon Valley Real Estate

useful links

A non-profit worth of praise: Habitat for Humanity

Homeownership cheaper than renting nationally

To piggy-back on my last blog, this is another take on the subject, which fascinates me, in this area where most real estate seems so expensive for a lot of people.

Trulia’s Summer 2012 Rent vs. Buy Report, which provides information on whether buying a home is more affordable than renting in America’s 100 largest metropolitan areas, found that homeownership is cheaper than renting in all of the 100 largest U.S. metros by a wide margin.

However, relative affordability depends largely on location. Buying a home is 24 percent cheaper than renting in Honolulu, 28 percent cheaper in San Francisco, and 31 percent cheaper in New York, but is 70 percent cheaper in Detroit. However, the actual dollar amount reveals that despite a low 28 percent difference in buying versus renting in San Francisco, the monthly dollar savings is big ($899) because rents and prices are so high in this region.

Note: Cost of homeownership assumes that the home is sold after seven years and includes closing costs, maintenance, insurance, property taxes and other costs. Cost of renting includes security deposit and renters insurance. Monthly costs are based on net present value of costs averaged over seven years, and based on the average across all properties listed in the metro area, including those for sale and those for rent, in summer 2012.

More info on this article from Trulia.

Thanks for reading, your comments are always welcome!
Francis

Silicon Valley Real Estate

Local market trends

useful links

A noteworthy web site: junk mail reducer: Catalog Choice

Renting vs buying... an age-old quandary.

In 75% of the US one gets ahead within 3 years by buying a home vs continuing to rent.

Typically, and historically, it was kind of understood that it takes about 3 years to see the advantages of owning instead of renting.  The first years, most often, it seems a lot more expensive, and you do not see yet the tax advantage, when there is one. Then you settle in and start feeling "at home" vs leasing you space in life, and that adds to the financial aspects of the question.

But now that prices have moved a lot and in different ways throughout the US, it is not so straightforward.  In short, where prices have fallen the most would be where it is most attractive to buy, vs to rent.

This study from Zillow gives more detailed information on the new quirks and wrinkles of this age-old quandary.

Francis

Silicon Valley Real Estate

Local market trends

useful links

Current Mortgage rates

Property tax increase.

Property taxes, as levied by the Counties, cannot go up more than 2% per year, right?

Well, not really.  It is true that Proposition 13 capped the increase of property values at 2% per year, but there is another Proposition, - Proposition 8,  which passed the same year as Proposition 13, which allows the property value to go down if the market tanks.

When the market goes back up, though, that same Proposition allows then the reassessment of the properties by the County to go back up by more than 2%, until it reaches the value that it would have been if it had not gone down in the first place.

A little hard to follow?  Just imagine what would be the potential value of your property, after you bought it, if it had increased by 2% per year (assuming the market was going up).  This is the value that it could be reassessed by the County if the market does go back to that value...

The request for re-evaluation of an assessment by the County can be done electronically now through their revamped web site, which provides easier ways to search for comparables and maps.
Santa Clara County assessor's web site.
and: contesting your assessed value.

If you wish, I can also assist you by providing a study of the recent sales through the MLS - which has saved quite a bit of money to some of my clients in the past few years.

Francis

Silicon Valley Real Estate

useful links

Rates are super low right now! Mortgage rates

Like art?  Participate in the art auction of the Coalition on Homelessness.

Local ratio: sales price / list price.

For the 3 Cities of Palo Alto, Los Altos and Mountain View combined, this is what the ratio of the sales price over listing price looks like, for all houses listed after the 1st of the year 2012.
This graph shows this interesting ratio sliced by list price range.

One of the interesting bars is the one for prices over $5 million:  -- the luxury market has definitely picked up from the past 3 years.

In the price range of $200k to $400k, this is for a (unique) house that, after a price reduction, was listed at $390,000 and finally sold at $335,199 in Mountain View, along 101.
Curious about your specific neighborhood? Let me know!

Thanks for reading!
Francis

Silicon Valley Real Estate

useful links
Rates are super low right now! Mortgage rates

Californians on the move.

When Californians move, where do they go?

It turns out that when a Californian moves, he/she mostly stays in the same County (49%).

So most likely, when people move they just want to move up or move down.

4 years ago, a lot more people were going to an other state; possibly to deal more easily with the crisis, as the cost of living is so high here?  Once that wave happened, it seems that out-of-state moves settled around 20% of the movers.

Consistently, about 1% of the movers go outside of the US.  Funny to note that in 2009, at the worst time for real estate values, twice as many people left to go outside of the US.

Want to receive my posts regularly?  "Like" my facebook page:

Thanks for reading,

Francis

Silicon Valley Real Estate

Local market trends

useful links

Current Mortgage rates

Rents increase, more than home prices.

Rent increases outpace modest home price rises (nationwide)...

Despite widespread national asking price rises, rent increases outpaced price increases in 22 of the 25 largest rental markets, according to the Trulia Rent Monitor. Nationally, rents were 5.4-percent higher in June than they were a year ago, and rents increased year-over-year in 24 of the 25 largest rental markets – all except Las Vegas. Furthermore, rent increases accelerated between March and June in most rental markets, with rents in San Francisco rising 14.7 percent year-over-year in June from 10.9 percent in March.

I was noting in one of my May's blogs that rents were up 9.4% in San Jose.

Home price rises are not so modest, by the way, locally (- but then, ditto for rent increases).

More info on this Trulia press release.

As always, thanks for reading,
Francis

Silicon Valley Real Estate

useful links

Current Mortgage rates

Fences and Neighbors...

A surprising number of homeowners are bucking the notion that good fences make good neighbors and taking down the fences in favor of bigger gardens and more space to entertain.

While some homeowners are turning previously neglected corners into shared garden and dining spaces, togetherness does have its down sides. Gardening expenses can be split evenly, but who pulls the weeds and who gets to pick the fruit? What happens when one neighbor wants to sell? Some people draw up legal contracts to help prevent acrimony and spell out how they will disband.

Additionally, yard-sharing is rare in new developments of single-family homes with privacy fences often required under community covenants and building codes.

A shared yard also could dampen an individual home’s value and prolong the time spent on the market, as potential buyers likely will want to put up a fence instantly, adding costs to the home.

Because of these issues, some real estate agents are advising that neighbors restore fencing when either home is offered for sale. It is best to install the fence before the listing the home, as some buyers will not want to be the bad new neighbor who required a fence.

It is my experience that fences provide ample material for problems during a transaction: over the years, the fence may have been replaced, not necessarily by both neighbors, and it may not always be at the right place. Only a surveyor will help you in that case, to determine exactly where the property line is.  Sometimes, a part of the fence has been moved to accomodate a tree, or a structure.  This brings the need to draft an agreement to recognize that and memorialize it, possibly.  An attorney is best to do that.
Obviously the matter is more present in the Hills, where lots are larger.

More often than not, it is in the front part of the properties that you would find fences that are omitted, and there one might see a "shared" front yard.  Still in that case, I believe that it is good to keep a line on the ground, or another mark of sort, to delineate the separate lots. 
Finally, I would note here to keep in mind that typically, when rebuilding a fence, you need a permit.  The City is the best source of info for this.  This is an advice to both buyers, and sellers.

Do you have an experience, good or bad on the matter?  I'd love to hear it!
Thanks for reading,
Francis

Silicon Valley Real Estate

useful links

Current Mortgage rates 

A noteworthy Association:  American Diabetes Association

Buyers: the advantages of preapproval...

The advantages of preapproval.

The housing market is warming up in many areas, with multiple offers becoming more commonplace. Buyers who want an advantage in the bidding process will need more than a mortgage prequalification – they will need a preapproval.

The differences between mortgage prequalification and preapproval are significant. Prequalifying for a mortgage is based solely on what a borrower discloses to the loan officer or broker about his/her earnings, credit score, and total assets, including what is available for a down payment. By contrast, a preapproval requires a borrower to provide documentation of his/her income and assets and everything else.

The lender typically pulls the borrower’s credit report and score, while the borrower gathers together almost everything else needed for the actual mortgage underwriting: W-2 wage statements; 1099s; recent pay stubs; bank statements; and statements from Individual Retirement Accounts and 401(k)s; and other assets that could show the borrower has the resources to buy and maintain a home. 
-- An important note here: depending on your qualification, the loan will have a different cost !  Shopping for a loan is therefore often elusive: one would have to apply to different lenders to truly know to compare their rates, at the same given time (rates change several times a day, within the same organization).

A preapproval means that the file has gone through the underwriter of the bank/lender.  If approved, it is nearly certain that the loan will be granted to the buyer, subject to the specificities of the property itself, and a few other standard necessary conditions (like proof of insurance, and such...).

With so many homes receiving multiple offers, a preapproval is essential in today’s marketplace.

The preapproval letter should include the amount a borrower is qualified to borrow, as well as the loan officer’s contact information, and mention that the downpayment has been verified.

I personally advise buyers to obtain a preapproval letter for the maximum amount allowed, under the reasoning that the more qualified you are, the better you can negotiate.  If you borrow a lot less than you can, you advertise that there won't be any problem with you getting a loan.  Case in point: a cash offer is going to be always more attractive for the seller, right off the bat: there won't be any problem with obtaining financing....  What the seller wishes is the best assurance that the buyer he/she chooses is going to close the transaction.  Otherwise, the penalty is: wasting precious marketing time, at the beginning of the marketing period, which is the most important period in the property's listing cycle. 

You can see all the details in this article of the New York Times.

Thank you for reading, and if you have any particular experience in this domain, good or bad, I'd love to hear it ;-)

Francis

Silicon Valley Real Estate

useful links

Current Mortgage rates 


A noteworthy cause:  Habitat for Humanity

Santa Clara Cty Property Assessment up 3.25%...

I don't know if you have experienced the same thing, but my property value went up according to the County assessor's office - the notice of my property's assessed value that I just received in the mail.  This is not a surprise as we have experienced so many multiple offers since the end of last year, but sometimes reality is not completely reflected in the County's figures, and when the market goes down, one feels the need to fight what seems to be an assessed value that is too high.

In the past few years, I have helped several clients prove to the County assessor's office that their value was overinflated, by providing "comparables" from the MLS data, for similar properties sold that year.

However, when the market goes up, it is a lot more difficult to go about this procedure.

As evidenced by this June 2012 article of the Business Journal , the County is richer now, and things are looking up, at least for the County's coffers ...
My evaluation has gone up by about 2%.  How much did yours go up?

Francis

Silicon Valley Real Estate

Local market trends

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International sales continue to climb in U.S. market..

International sales continue to climb in U.S. market

Due to low prices and the relative weakness of the dollar, international buyers continue to identify the U.S. as a desirable place to own property and make a profitable investment.

According to the NATIONAL ASSOCIATION OF REALTORS® ® 2012 Profile of International Home Buying Activity, total residential international sales in the U.S. for the past year ending March 2012 equaled $82.5 billion, up from $66.4 billion in 2011. Total international sales were evenly split between non-resident foreigners and recent immigrants.

International buyers bought homes throughout the country, but four states accounted for 51 percent of the purchases – Florida, California, Texas, and Arizona. Florida has been the fastest growing destination of choice, accounting for 26% of foreign purchases. California was second with 11% and Texas and Arizona accounted for 7%.

International buyers came from all over the globe, but Canada, China (The People’s Republic of China including Hong Kong), Mexico, India, and the United Kingdom accounted for 55 percent of all international transactions, according to the survey. Canada and China remain the fastest-growing home countries.

Of those international sales:

Canada accounted for 24%
China accounted for 11%, up from 9% in 2011.
Mexico was third with 8%
India and the U.K. both accounted for 6%.


Other figures:
45% of international purchases were <$250k
30% between $250k and $500k
With the average price purchased at $400k (as compared with $212 average for the US as a whole).
62% of these purchases were all cash.

More info on the National Association of Realtors article.

Francis

PS: another article on the subject: on CNN Money: Cheap homes lure foreign buyers.

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Rental market: details...

Renters, owners, the balance of the two is changing:

Freddie Mac releases U.S. economic and housing market outlook

Freddie Mac released recently released its U.S. Economic and Housing Market Outlook for June showing that rental market activity has been a bright spot for the housing market, and due to rental demand by those postponing homeownership, further increases are expected in the coming year.

Highlights from the outlook include:

- Over the year ending March 2012, an additional 1.5 million households moved into rental housing, a 4 % increase in a single year.

- Rental vacancy rates have dropped roughly two percentage points over the past two years.
- While nominal rents rose (2 to 4 %) during the year ending March 2012, average rent on an inflation-adjusted basis remained below where it had been for much of the decade prior to the Great Recession.
- Multifamily property values are up on average about 25 percent during the past two years from their trough during the first quarter of 2010, according to the National Council of Real Estate Investment Fiduciaries index, but still about 14 percent below their peak prior to the Great Recession.
- Starts of buildings with at least five apartments have jumped 48 % in the first five months of this year when compared to the same period a year ago.

Freddie Mac Economic and Housing Outlook.


Francis

Silicon Valley Real Estate

Local market trends

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A noteworthy non-profit charity: Random Acts of Flowers

Low Rates ...

Taking advantage of low rates--


Mortgage rates continue to set new record lows, leaving many home buyers and refinancers wondering how low rates can go and how to capture the best rates now.

- Many economists are forecasting that mortgage rates will rise again later this year as the American economy gradually improves and as more global investors turn to the U.S. as a safe haven for money.

- The average rate on a 30-year fixed-rate mortgage averaged 3.71 percent the week of June 14.

- The rate had averaged 3.9 percent three months earlier and 4.5 percent a year earlier.

- According to one economist, rates could possibly fall further, perhaps as much as a quarter of a percentage point, but it is more likely that they would start a “slow drift” upward.

- Those planning to refinance or buy a home in the next two or three months might want to consider locking in a mortgage rate now.

- Borrowers with rate locks, with a built-in deadline, often receive priority treatment from lenders, because the borrower is telling the lender that he or she is serious about closing soon.

- Lock-in costs and policies vary widely, and are based partly on the time frame the borrower wants covered. Most borrowers will need a 60- to 90-day lock.

If interest rates continue to fall during the lock period, borrowers can ask the lender to rewrite the rate lock at an additional cost, or obtain a “float-down” provision in the original agreement. A lock with a float-down agreement allows the borrower to change the rate, often only once, before closing on the mortgage. This option is generally more expensive than a standard lock.

Read the full story, on this article of the New York Times.

Francis

Silicon Valley Real Estate

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Financial Tips for Homebuyers & Prospective Homebuyers.

A colleague on the other side of the Land shared this information with me, and I thought there was a lot of good info there:


Financial Tips for Homebuyers & Prospective Homebuyers.

On June 2nd, on her radio program, “Eye on Real Estate with Dottie Herman”, Dottie Herman, CEO of Prudential Douglas Elliman, one of New York’s premiere residential brokerages, featured guest Eric Tyson, a personal finance expert, an economist and a bestselling author.

During the interview, Dottie asked Eric if there were some key financial tips (from Eric’s books) that will help you, whether you are thinking about purchasing a home or if you have already bought your home.

FOR THE PROSPECTIVE BUYER

• Your Personal Circumstances – nobody knows your situation better than you do. You know what loans you have to pay back, what it will cost to put your kids through school, to care for elderly parents, etc.

• The Affordability – this is a great time to buy a home but you must take an honest and serious look at your overall financial situation to figure out how much you can realistically afford to spend. Use a worksheet to help you make your decision.

• YOUR Comfort Level – What will you be comfortable with (be realistic)? Your decision making process should be as stress free as possible.

• Research – Do your research. You may or may not need to use all of them, but you can use an expert, who is effective and up to date on all the latest changes in the law - real estate agent, mortgage broker, a real estate attorney (to check the documents), an insurance agent and a financial planner (to assist you plan financially). Be responsible. “Learn enough so that you can evaluate these people and make “a good hiring decision”.

• Mortgage Insurance –Buy a classic life insurance policy as opposed to buying a mortgage insurance policy, recommends Tyson. “The life insurance decision comes down to how many years worth of your income are you trying to replace?”

• “Take Time to Smell the Roses” - Tyson mentions this in reference to Buyer’s Remorse. This is probably the biggest decision that you will make in your lifetime. “It is extremely important to buy something within your comfort level and to practice self – preservation in the process”.

FOR THE HOMEOWNER

Congratulations on taking that giant step to purchasing your own home. Now that you've signed on the "dotted line" and it's a done deal, the handholding is over even though you may still need a little guidance.

• Beware of Solicitors - they want to offer solutions by attempting to sell add on services and products.

• Effective Financial Planner – should do just what the title indicates, help you plan your financials for the coming years

• Electronic Payments – late payments, missing payments, can be quite detrimental to your credit score and can affect future interest rates. Tyson said that he is wary of this but electronic payments are the way to go. “Clearly, automated payments ensure that they are going to be sent on time.”

• Home Receipts – Hang on to ALL of your homeowners documents. Always put them in a place that is easy for you to remember. This is especially helpful for long time homeowners who live in a ‘high cost area’ like New York to “minimize the capital gains tax, should you sell for a profit”.

• Set Aside Cash – Or as the elders used to say “a rainy day fund”. Is there a standard rule of thumb for emergency funds? How much is enough? Tyson stated, “the minimum you want to set aside is 3 months of living expenses. “ If things are more volatile, you should consider at least 6 months worth of living expenses”.

• Tax Assessment – Pay attention to your property taxes, especially if you live in an area where taxes are reassessed periodically and your home value is based on current market values. You can protest your property taxes, “sometimes local towns and municipalities get it wrong”.

• Refinancing – With interest rates so low, people are asking should they refinance. Historically, the motivation to refinance was due to the ability to save money. Refinancing is “a situation that is complicated by all the financing options available”. What you need to determine is 1) is this a worthwhile trade-off? and 2) how many years will it take me to recoup the financing cost (refinancing always cost you money)?


These are just a few helpful tips to help make you aware of what you need to know about buying a home and after you have bought your home.

Eric Tyson worked as a financial advisor in the 1990s, assisting large Fortune 500 companies. Two of Eric’s five national best sellers are “Personal Finance for Dummies” and “Investing for Dummies”. He is the only person to have four out of those five books published simultaneously on Business Week’s book bestseller list.

I hope some of these tips may be of help to you at some point,
Thanks,
Francis

Silicon Valley Real Estate

Local market trends

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Current Mortgage rates