East Bay Realty Pro Blog

On May 25th, I posted my latest article, “Is Waiting to Sell the Best Idea?” The premise was that a number of potential sellers are waiting for the market to improve. Many of these people assume that means a return to a seller’s market, or, at least, a strong “normal” market. I suggested signs that this may not happen any time soon.

Subsequent articles in the media have supported that concept, including one online today, “Signs of Hope in Housing, but a V-Shaped Recovery Is Not in the Cards.”

My advice: If you are thinking about selling, consider whether biting the bullet now might not make more sense than doing the same in a year or two ( or three, or more).

Day two in Sacramento for California Association of Realtors state directors.

Yesterday, 1500 of us went to the Capitol to express our dissatisfaction with certain bills.

Many meetings today. Short sales, REOs and foreclosure process, including new laws, discussed in detail. The public doesn’t realize that many licensees handling distressed propereties are not fully versed in how buyers and sellers can be harmed in these transactions.  As a Bay Area real estate expert witness, I can see these as seeds of future lawsuits.

My first meeting tomorrow morning is 6:30 AM with state expert witness group. We will share tips for preparing cases and getting ready for trial.

About two weeks ago, my buyers made an offer on a home where they were in competition. They did not get it.

I just got a call from the listing agent. Seems the accepted offer is falling apart and she is wondering if my buyers are still interested.

This is a classic situation where the seller had multiple offers, and, probably, with her agent’s acquiescence, chose one that was higher in price. The mistake was not weighing all factors. My buyers were putting down almost 40% on this property, higher than usual for one in its price range, as well as their having other desirable qualifications. A huge down payment makes the buyer almost certain to get a loan, always important, but even more meaningful with the now more stringent lender requirements.

My clients have decided not to renew their offer at this time.

The moral of this story is that the most important criterion in accepting a contract is the buyer’s ability to close the transaction, assuming the offered price is not unreasonably low. I have a feeling that neither the seller, nor her agent, has yet learned this lesson.

Realtors from throughout California, myself included, will be meeting in Sacramento next week for mid-year meetings. Highlighting those sessions will be the June 3rd gathering to make it loud and clear which legislation is on the “oppose” list.

Some of those bills, with explanation from the California Association of Realtors (C.A.R.):

SB 407 (Padilla) Point-of-Sale Plumbing Fixture Replacement - C.A.R. is opposing SB 407, a bill that requires that ALL residential and commercial properties be retrofitted at point-of-sale with low-flow toilets, shower heads and faucets. While C.A.R. appreciates the goal of conserving water, C.A.R. opposes SB 407 because it will not achieve the objective of significantly reducing water consumption and because it will burden escrows and further destabilize the already weak housing market. C.A.R. will oppose SB 407 until it is amended to utilize an approach that does not use point-of-sale as an enforcement tool and instead employs a comprehensive broad-based approach for all homes. SB 407 is pending on the Senate Floor.

AB 603 (Price) Statewide “Just Cause” for REO Property - This bill would prohibit anyone who acquires foreclosed rental property from terminating a tenancy unless the new owner has owned the property for a minimum of one year or can demonstrate a “just cause” (e.g., non-payment of rent, etc.) for the eviction. AB 603 would apply to ANY property that is being leased by a tenant prior to the completion of the foreclosure proceedings, and includes single-family detached homes, condominiums, cooperatives, duplexes, apartments and townhomes. The provisions in AB 603 would sunset January 1, 2013. C.A.R. opposes AB 603 because it will create a disincentive for ANY buyer to purchase an REO home, which will only serve to further delay the recovery of California’s housing market. AB 603 is pending on the Assembly Floor.

AB 902 (Torres) Foreclosed Homes Income Tax Credit - AB 902 would grant purchasers of foreclosed homes, whose annual gross income is no more than 120% of the area’s median income, a tax credit equal to two percent of the cost of the home up to $3,000. The credit will be available to buyers purchasing the foreclosed property as a principle residence if the purchase is made after January 1, 2009, and before January 1, 2012. Unfortunately, AB 902 was recently amended to fund this tax credit by repealing mortgage interest deductions for second homes from January 1, 2010, through January 1, 2012. C.A.R. will oppose AB 902 until it is amended to utilize an alternative funding source for this tax credit. AB 902 was scheduled to be heard by the Assembly Revenue and Taxation Committee on May 18, but was removed from the committee calendar prior to the hearing in order to explore other funding options.

AB 827 (Yamada) Recording Fees to Fund Historical County Records - This measure would authorize county boards of supervisors to impose an additional recording fee of three dollars for the first page and one dollar for each additional page on property related documents. The fee would be used to fund the archiving of historical documents including real property records, local agency meetings and actions, roads and other public works, and other records of general public or historical interest. Current law requires that fee amounts be related to the cost of providing the service for which the fee is collected. C.A.R. opposes AB 827 because the fee collected is not related the cost of recording the affected documents but, instead, will be used to archive historical county records. AB 827 may be voted on the by the entire Assembly this week.

In addition, C.A.R. has changed its opposition to SB 676 (Wolk) Recording Fees - which would have increased the cost of recording the first page of a document from $4.00 to $10.00 because it was amended to limit the recoding fee to actual costs, up to a maximum of $10.00.

Watch this spot for further blogging about the Sacramento meetings.

After speaking with homeowners who would like to sell, I’ve observed that many are relying on assumptions that once might have been true, but may no longer be valid. The big question is: What if waiting, as opposed to selling now, turns out to be a mistake?

Some are thinking that the local real estate market will be a lot better within the next few years. If you are one of those waiting for the market to “turn around,” how will you know when that time has arrived?

[Read the full article here]

Interest rates are at near-record lows, but actually getting those loans is more of a chore than I can remember. This is so because, after years of granting mortgages to anyone who could fog a mirror (and a few who could not), many banks have become incredibly more restrictive.

Due to well-intentioned legislation intended to protect consumers, the appraisal process is now unnecessarily cumbersome. Instead of being able to call a known, competent and professional appraiser directly, the lender must now use a third party company. This company will then contact yet another company which chooses from a rotating list of approved appraisers. No one seems to know how this list is assembled and used to insure fairness. Some lenders have a chief appraiser who oversees the process.

Regardless, the new system increases the likelihood of the use of appraisers who may not be the most qualified or knowledgeable about a particular locale. I recently heard of a case where the appraiser, despite valid data from agents, refused to modify a clearly low appraisal.

In addition, appraisers are now being paid substantially less for each job, with a fee of approximately $150 going to the firm that acts as the clearinghouse. Unfortunately, this new, multi-layered approach is coming out of the buyer’s pocket. One of my clients just paid $485.00 for an appraisal that, not long ago, would have cost $300.00 to $350.00.

Lenders are more selective and they are providing lower loan-to-value loans. This means many buyers need to make a larger down payment, which they may not have. In particular, condos mortgages are much harder to obtain and include numerous hurdles regarding the number of owner-occupied units and those that are delinquent in their monthly homeowner’s association dues.

Considering the high volume of refinancing and the effect of the new “rules of the road,” Realtors must allow for longer appraisal and loan contingency time frames. Any changes to the transaction after the appraisal has been submitted, such as a price adjustment due to issues encountered during physical inspections, may cause major difficulties for buyers and their agents. This issue can quickly scuttle a sale.

According to a CNNMoney.com article today, “Foreclosures: April Was a Shocker,” U.S. foreclosures were much higher than projected, exceeding even March’s torrid figures with 342,000 homes in financial distress.

In March, a record one of every 374 homes in America received either a notice of default, auction notice or was in the process of bank repossession. According to a tracking service, it appears that the total foreclosure number for 2009 will be well over 3.4 million.

Today’s headlines about dismal, worse than expected, retail sales are another indication of our economic woes. Those who believe the worst is over in real estate or the overall economy might have to reconsider.

Just this morning, I took these photos in our garden to share with you.

Happy Mother’s Day!

Peruvian Lilies

Dwarf Lemon Tree in Bloom

First Figs of the Season

Lesser Goldfinches at One of the Feeders

According to a recent L.A. Times article, “The Obama administration, stepping up efforts to stem foreclosures, will offer lenders and homeowners incentives to cut payments on second mortgages, write down balances on first mortgages that are underwater, and repay loans in a timely fashion.”

About half of all distressed first loans are believed to also have a second loan in place. The plan offers financial incentives to both loan officers and borrowers for successful modifications on second mortgages. The question, of course, is whether lenders will actually take steps to help homeowners who are in trouble with their first and/or second loans.

Statewide figures from the California Association of Realtors (C.A.R.) for March 2009 show a 64 per cent increase in the number of sales and a 39 per cent decrease in median price. Both of these factors are tied into the large amount of bank owned properties and short sales in California.

A possible encouraging sign is that the median price of existing, single family detached homes went up over two per cent when comparing March 2009 ($253,040) to February 2009 ($247,590).

C.A.R.’s Chief Economist, Leslie Appleton-Young, stated: “While we still face continued weakness in the general economy and expect continued foreclosures, the increased incidence of multiple offers indicates that first-time home buyers and investors are responding to dramatically improved housing affordability. Low mortgage rates and house prices, coupled with the federal first-time home buyer tax credit, is having a definite impact on the California housing market.”

For March 2009 data on Oakland’s popular neighborhoods, see my article, “Buyers and Sellers Confused by Contradictory Trends.” There are graphs to go along with the article.