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

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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.

Silicon Valley Real Estate

Local market trends

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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

Local market trends

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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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Luxury Market - Silicon Valley - an update...

Silicon Valley’s Luxury Home Sales Soar Again in May

Posted on June 20, 2012  - from our Coldwell Banker posts.
Silicon Valley’s luxury housing market turned in another stellar month in May as high-end property sales soared from the previous month and year-ago levels, according to a new report by Coldwell Banker Residential Brokerage.

A total of 148 homes sold for more than $1.5 million in May, up a whopping 59 percent from May 2011, when 93 high-end properties changed hands. Last month’s sales were also nearly 16 percent higher than April’s total. May had the most monthly sales since last November.

The upper end of the luxury market also turned in an extremely strong performance in May with 57 sales above $2 million compared to 42 a year ago, and 14 transactions over $3 million, nearly double the eight sales at that price range last year.

The median sale price for a luxury home was essentially flat from a year ago, measuring $1,887,500 last month and $1.9 million in May 2011.

The figures were derived from Multiple Listing Service data of all homes that sold for more than $1.5 million last month in Santa Clara County.

“Silicon Valley is showing all of the signs of a classic seller’s market with strong buyer demand, a severe shortage of home listings to choose from, and multiple offers on many properties,” said Rick Turley, president of Coldwell Banker Residential Brokerage. “With inventory levels remaining near record lows, I suspect we’ll continue to see this scenario play out, at least for the near term.”

In many areas of the South Bay, inventory is down 30-50 percent from just a year ago, leaving the scales of supply and demand tipped heavily in favor of sellers. Multiple offers are becoming the norm in a number of communities and homes are often selling for more than the asking price – sometimes much more.

Some key findings from this month’s Coldwell Banker Residential Brokerage luxury report:

■The most expensive sale in Silicon Valley last month was a six-bedroom, seven-bath 4,500-square-foot home in Palo Alto that sold for $5,098,000;
■Palo Alto and Los Altos tied for the most luxury sales with 40 apiece, followed by Saratoga with 23, and San Jose and Los Gatos with 15 each;
■Homes sold in an average of 36 days compared to 41 days a year ago and 35 days the previous month;
■Sellers on average received 103 percent of their asking price compared to 101 percent the previous month and 99 percent a year ago.

The Silicon Valley Luxury Housing Market Report is a monthly report by Coldwell Banker Residential Brokerage, a specialist in high-end real estate sales. Through its internationally renowned Coldwell Banker Previews® program, the company is recognized around the world for its expertise in the luxury housing market.

Thanks for reading!
Francis
http://www.frolland.com/

What's going on downtown Los Altos?

People ask me all the time what is going on downtown Los Altos, as it seems the whole town has been a work in progress since last year.
The City started redoing the corners of the downtown streets at the end of last year, 2011, but there are a lot more things that were started then.

I thought I would show something published by the Town Crier about a year ago, which I find myself copying often and sending to the curious inquirers  - ok, this is not recent, but still gives a better idea to the occasional visitor ;-)    Please see below:

and:

Kind regards,
Francis

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