A Piece of the Pie

Great article on the long-term costs of homeownership

Tara-Nicholle Nelson of Inman News has written another great article for first time home buyers.  This time she tackles the questions: what are the long term costs of home ownership and how manageable are they.  Specifically, she discusses taxes, insurance and maintenance.  Enjoy!

New listing in Oakland's Sequoyah neighborhood...

Since I do a lot of free advertising for other agents, I figure I might as well plug my own listing...

9774 Burgos Ave. is a larger 4bd/2ba home in a great neighborhood in the east Oakland Hills above 580 that rarely has homes on the market.  It has been owned by the same family for years and, recently, the owners have upgraded the plumbing, electrical system, windows, kitchen, bathrooms and roof.  It has a larger (approx 8000 square foot) corner lot with both a back patio and a peaceful grassy area. It sits up from the street and there is a great view of San Francisco and the Bay from the dining area.  It is across the street from the Oakland Zoo so the setting is very park-like.   

This is a REGULAR sale! It is owned by a family (not a bank) and they are not underwater on their mortgage. The transaction will have sane and reasonable terms with responsive sellers and an adorable listing agent ;).

I'm having an open house this Sunday from 1-4pm.  Stop by for cookies!  (MLS# 40400247)

I'll post more pics soon!

SF Blogger reports possible bottom in SF market - is Oakland next?

Luba Muzichenko, San Francisco Realtor and blogger, is reporting that there are multiple indications - from an uptick in her business to news reports - that the San Francisco real estate market may have hit bottom.

Of course, there are micro markets in the Bay and even Oakland. However, some things, such as bank policies on foreclosures, mortgage rates, and federal/California law are more far reaching.  I say this to say that if San Francisco starts to rebound, the near East Bay might not be far behind. 

Of course, I'd never want to be accused of spreading false or ill-informed positivity (a la Jim Kramer - ah ha!). So please take this news as only a possible, dim ray of light in a sea of terrible, horrible economic news which indicates that only a few people who socked their money away in secure, non risky places and saved furiously over many many many many years will be safe.

Why are banks so slow/irrational with buyers of their REOs?

I've mentioned over and over again how harsh and irrational the process of buying an REO can be.  I'm closing on one today where it took two months after the verbal acceptance for the seller to send us signed contracts. During this two months, the seller asked me over and over again to resend my client's offer and to have my client sign things that he had pretty much already signed.   I've also had buyers who were willing to offer one price for a short sale only to see the bank foreclose on these properties and, due to the market continuing to decline, the bank later selling the same property for up to over $100K less.  The house on Greenly, that I mentioned a few days ago is a great example.

According to the Atlanta-Journal Constitution, I'm not alone. Investors and other buyers are finding that banks have been unwilling or unable to respond to their reasonable offers; only to be forced to accept much less as the market continues to decline or the property is damaged during the foreclosure process or due to squatters/vandals.

The upside is that some investors who wait for a particular property are able to purchase it for a deal.  The AJC observes that this inability to quickly react to offers, unwillingness to accept reasonable offers on short sales and the generally slow and disorganized manner that banks and loan servicers are using to dispose of inventory, is contributing to and prolonging the real estate market's problems.

Your lender does not care that you're good with your hands

If you're handy or you have a Dad/cousin/sister/friend who has a knack for fixing things, you might be tempted to consider buying a "fixer" or "contractors special."  It's hard to pass up that amazing deal in Maxwell Park or Temescal and you're remembering how, back in the day, you helped your Dad fix the house or build a deck. You might even be a mechanic or have otherwise worked in a industry where you fixed or built things. However, unless you are a licensed contractor, have a lot of money, or you're able to convince the seller to put up 1 1/2 the cost of the repairs, you aren't likely to be able to get a loan to buy a house that needs major work.

What do I mean by major work? I mean that one or more of the "systems" of the house is not fully functional - ie plumbing, electrical, roof, foundation, there's no toilet or hot water, all of the windows are broken, a renovation project isn't completed, the front steps are so eaten by termites that you might fall through, etc...

We all know that lenders have gotten more conservative.  In addition to scrutinizing you and every other buyer more carefully, they are scrutinizing properties more carefully.  They do not want to assume the risk of lending money on a home that the buyer may not be able to afford to repair.  Their fear is that buyers may run out of money while trying to fix the home and they may default on their mortgage. Lenders also worry that if the buyer never has the work done and he or she defaults on the mortgage, they might be forced to foreclose on a home that isn't worth very much and won't be easy to sell because of its condition. 

So you can't just say to your lender, my friend Jojo does this kind of work all the time, we'll have it fixed in no time. They're not trying to hear it. What they often want to see is that there is an estimate for the work that needs to be done from a licensed contractor and someone is willing to put one and a half times the cost of the repairs in an escrow account with a guarantee that the work will be done shortly after escrow closes. Lenders will usually be looking to you to come up with the money. If your down payment and closing costs will exhaust your resources, you may need to secure a gift. If that's not an option, you can ask the seller to put up the funds (you are capped to 6% of the purchase price for funds to repair and any other credits for closing costs if you have an FHA loan) or do the repairs while in escrow. If this property is in a great location, the seller is unlikely to do this since there are plenty of buyers in the Bay with the funds and resources to buy and rehab fixers.

For most first time buyers, fixers are not worth the trouble.  For a property with huge potential (great location, etc), the seller is unlikely to accept an offer from a buyer who cannot prove that they have the capacity and willingness to both secure a loan and pay for the repairs.  Even if the buyer's offer is accepted, it will be challenging to keep the deal from falling apart as the bank's appraiser notes the problems and starts asking the buyer to come up with proof of funds to repair.  For most first time home buyers of average means, it's best to stick to homes that are a bit more expensive but in decent condition.

In this market, a buyer's timing is everything

While there are some great deals to be had in this market, it can be very harsh and timing can make the difference between success or failure.

Before you decide to try to buy a home, it's important to assess whether you are serious about buying a house and are ready to prepare yourself and move quickly when you find the house that you're interested in.  The nicest homes, unless they are overpriced, are earning multiple offers and will only be on the market for a few days.  If you see a house that you really like and you haven't talked to a lender yet, chances are, if it's not a short sale, it will be gone by the time you get preapproved.  After you see the home, you probably won't have a week to think about whether you're interested.

The house that you are most interested in will probably start getting offers on the first or second day that it's on the market.  By the third day, the bank may be asking each of the potential buyers for their highest and best offer.  By the seventh or tenth day, the listing may be pending.

Another timing issue that you are likely to encounter is that banks often want to shorten your time periods for inspecting the property and securing a loan.  You will have to move very quickly to make sure that you meet these deadlines or you might face serious consequences, including fines or losing your deposit. 

Here are some tips for dealing with the timing issues that arise in this market:

-Get preapproved by a bank BEFORE you begin your property search so that you can be ready to make an offer.

-Although it is important not to waive contingencies, write offers with the shortest contingency periods that you feel comfortable with (ie on FHA deals, I leave the 17 day loan/appraisal contingency but change the inspection contingency to 10 days).  You may want to find a lender like John Carnahan from Prospect Mortgage who can close FHA deals in 21 days (although most lenders need 45 days).

-When you locate the home that you're interested in, IMMEDIATELY have your agent call the listing agent to find out if there are any offers on the property.

-If you there are other offers on the property or if you can't find out if there are other offers, you should be ready to make an offer on that day or on the next day (you might have a bit more time if you are looking at homes on the weekend)

-Pay attention to your deadlines and make sure that you secure all home inspections immediately.

-Submit all requests for credits, price reductions or cancellations in a timely manner.

-If your lender needs information to unconditionally approve you for the loan while you are in escrow, you should provide this information as soon as possible.

Ironically, although they often require that buyers move very quickly, banks tend to respond very slowly to buyer requests.

I've found that each deal is very rough and the timing issues can be rough. Try to relax and keep your sanity.  Keep in mind that after this unpleasant but relatively short period, you'll have purchased a reasonably priced home that you will hopefully live in happily for many years to come. 

 

$200,000 is the sweet spot in the East Bay

With most  of my buyer clients looking to purchase an inexpensive first home that they can feel comfortable in for the foreseeable future, I've gotten really good at finding inexpensive homes in neighborhoods that the feel comfortable in.  I'm finding that my clients who can afford at least $200,000 have a lot of options.  Cute neighborhoods like Toler Heights, Eastmont Hills, Millsmont, Melrose, Fruitvale, Allendale, Durant Manor and Lower Laurel are becoming very affordable.

This light-filled three bedroom home on Lyon Street in Allendale sits up, away from the street and appears to be a good condition just went pending. It was listed at $215,000.

I saw this cute two-bedroom home on Greenly Ave. when it was a short sale and listed at $350,000.  My client loved it but decided that she didn't want to make an offer on a short sale.  It was recently listed for $199,000. 

The question most people want to know is, "how much would my monthly payment be on something like this?"  According to Rachel Chavez from Bank of America, a buyer with an FHA loan would have a monthly mortgage payment of about $1478 (5.5% apr, 30 yr fixed).  Closing costs (including the $7000 down payment) would come to about $13,700. However, some buyers may be able to get the seller to contribute up to 3% of the purchase price towards the buyer's non-recurring closing costs.  For a conventional loan with a 10% down payment, the payments would be approximately $1481 per month.

If that sounds a bit too expensive, there are a few decent homes out there for less. If they aren't in terrible condition, they tend to be smaller.  This adorable little (755 square feet) house on Courtland, on the edge of Maxwell Park, is listed at $102,900.  I saw it this weekend and it appears to be in decent condition.

   

Update: I forgot to mention that some attractive homes in desirable areas of Richmond (i.e. Northeast Richmond), Vallejo (Glen Cove), San Leandro and Hayward are down to this price point.

My Sunday (sort of) day off

After a crazy week of juggling property tours and offers (4 total), I decided to take Sunday off.   Like most of my "days off" I still talked to clients, made calls, sent faxes, e-mailed agents and searched the MLS (and I'm writing this blog article...) but I slept in (woo hoo!!) and spent most of the day doing fun things.

I wanted to wash my hair but I was out of shea butter (a dreadlock essential) so I went to the Ashby flea market and found my girl Britt, owner of Protherose, who makes lotions, soaps and oils.  I had a very Berkeley/East Bay experience, shopping to the beat of African drummers and the smells of incense and oils.  I had planned to only be there for about 5 minutes but I got distracted by the Peruvian, handmade clothing and jewelry booth, and the Hare Krishna lady who was trying to get people to come to a lecture and veggie dinner. The "invitation" was a piece of vegan mystery meat sealed in plastic that, although I feel really bad about it, I'm scared to eat. I also bumped into my friend Murray Muhammad who owns the Oakland store When Harlem Was In Vogue and has an amazing collection of African American historical memorabilia.

In the afternoon, I stopped by the Indie Mart in San Francisco.  The Indie Mart is like a shopping mall for hipsters. It's all local and independent designers and artists.  Basically, everything is super stylish and one of a kind. My friend Chauniqua and I had a great time. The t-shirts at this event are always on point. There were some cute retooled '80s dresses and the art was great. Of course, there were a few weird things about this event. I wasn't feeling the super cheap, cheesy sun glasses (maybe you have to be a SF hipster to appreciate them). There were also the odd fur people selling icky hats and other items made of animal fur (often including the dead animals' faces). I'm a non militant vegetarian so I may be a bit more sensitive to fur, I just don't understand the fascination. Maybe if it snowed in the Bay this would make more sense.

I did have a seriously delicious Basil Lemon Blueberry cupcake from Kingdom Cake.  If they are reasonably priced, I would love to have their cupcakes at my next big open house.

Oakland's Mortgage Assistance Program is almost out of money

I just found out that the City of Oakland only has enough money to make 8 more loans.  After this money runs out, this program will not be funded again until July. 

Since housing prices have been declining, looks like more people have been able to take advantage of this program.  Although this is a good thing, more assistance is needed.  The State has suspended most of its down payment assistance programs and traditional mortgages are requiring much higher down payments than they used to, so this is one of the few programs remaining (with FHA) to help lower and middle income people take advantage of the lower prices on homes.

BWWAAHHHHHAAAHHAAA!!! John Stewart is THE MAN!!

Okay, I'm a bit late on this one but I just watched it and it's hilarious.  John Stewart lights into CNBC and Rick Santelli for (a) not showing up on the Daily Show and (b) spewing all kinds of bull back in the fall about how strong the markets (that continued to tank) and banks (that ended up failing) are and those terrible and evil home owners who are losing their homes.  My favorite quote:  "If I had only followed CNBC's advice, I'd have a million dollars today...provided I'd started with $100 million."  Haa haa!

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