SLO HomeStore: The Buyers' Resource

central coast homes for sale by lender are explored this week on SLO HomeStore’s voyeur page. All the buzz about real estate these days concerns distressed properties – programs to keep homeowners in them and, if that doesn’t work, why home buyers ought to take advantage of some great deals.

The top of the heap is $7.6 million and the bottom is a paltry $111,514. Take a look.

HARP 2.0: What does it mean for central coast home buyers? First, just what in the heck is HARP 2.0?

The big housing news of the day is President Obama’s rebooting of the home Affordable Refinance Program which is designed to help some homeowners refinance their homes even when they owe more than their house is worth. Begun a couple of years ago, HARP largely failed because it was limited to homes no further underwater than 25%. That eliminate 10-50% of borrowers depending on local market conditions around the nation.

HARP 2.0 lifts that limit. The premise is, if folks can refinance their higher rate loans into ones at today’s historically-low interest rates they can save hundred of dollars per month and thereby hold onto their homes. It is estimated it could help one in five California borrowers do just that.

What this means to homeowners is obvious, but as an exclusive buyers broker we considered what, if any impact, this might have on Central Coast home buyers.

Of all the homes sold in the county so far this year, nearly half – 44% – where distressed properties. These included bank-owned REOs (27%), sold subject to short sale (15%), and those sold under the cloud of a Notice of Default (2%). Considering that another 4% were probate of estate sales, that leaves a bare majority – 52% – that might be considered “normal” sales. What we don’t know is how many of those “normal” sales were optional and how many were forced by illness, divorce or other life-changing occurances.

If more homeowners are able to refinance and hold onto their homes it stands to reason that the number of distressed properties coming onto the market will be reduced at some point. That could slow or stop the price slide and limit the number of great buys on the market. Though good for homeowners and the general economy, it could result in few choices for home buyers.

On the other hand, for HARP 2.0 to work, mortgage interest rates would need to remain low. Going into an election year the administration desperately wants it to succeed so we expect they will be doing everything possible to keep interest rates just as low as possible. Obviously, that’s very good for home buyers.

New laws of interest to home buyers will come into force in California next year. Two bills signed into law by Governor Brown particularly significant to home buyers.

SB 837, introduced by local State Senator Sam Blakeslee, revises the Transfer Disclosure Statement (TDS) for the seller to disclose whether the property has water-conserving plumbing fixtures.  The revised TDS also makes clear that, by January 1, 2017, a single-family residence built on or before January 1, 1994 must generally be equipped with water-conserving plumbing fixtures.

If, however, that single-family home is altered or improved on or after January 1, 2014, the water-conserving plumbing fixtures must be a condition of final permit approval.  Water-conserving plumbing fixtures are low-flow toilets, shower heads, and faucets under section 1101.3 of the California Civil Code.

Of interest to those buying homes in common interest subdivisions served by a homeowners association (HOA) is AB 771 which requires a homeowner’s association to, upon written request, give an estimate of the fee for providing a prospective buyer with the governing documents of the common interest development and other required HOA disclosures.

The fee must be reasonable based upon the HOA’s actual cost for procuring, preparing, reproducing, and delivering the HOA documents.  If the fee is paid, the HOA cannot withhold the required HOA disclosures for any reason.  Moreover, the HOA cannot bundle the fee for providing required HOA disclosures with any other fees, fines, or assessments.

This law will prevent an HOA’s third-party document preparation company from bundling together both mandatory and non-mandatory HOA documents, and charging a higher fee for providing all the documents.  The HOA is also prohibited from charging any additional fees for electronic delivery of HOA documents, which must be available to a requesting party if the HOA maintains the documents electronically.

Additionally, at a buyer’s request, the HOA must provide 12 months of approved minutes of the association’s board of directors meetings (excluding executive sessions).  Delivery of the required HOA documents must be accompanied by a cover sheet itemizing the documents required by law and those provided.

home purchase loans sometimes require persistence. That’s the message in a recent New York Times article, “After a Rejection.”

Some borrowers think that because their mortgage application is turned down the first time, they won’t ever be approved. In reality, some borrowers succeed on the second or third attempt, usually with a different mortgage professional, and often several months later, after they have saved more money for a larger down payment or improved their credit score.

The bottom line is, don’t take a home loan rejection at face value. Opportunities may still exist. Advice we share which is contained in The Times article includes:

> Before reapplying for a mortgage, borrowers are advised to look at the reasons they were initially rejected.

> The Equal Credit Opportunities Act requires lenders to give loan  applicants specific reasons in writing within 30 days of their decision. If it’s based on a problem in the borrower’s credit report, the lender must tell the borrower the name and address of the credit agency that provided the information.

> Talking to the loan officer who denied the application to see how close the borrower was to being approved also can be helpful. Sometimes the gap is small and could be bridged with a larger down payment or another home appraisal, for example.

> It also may be worthwhile to shop around for other lenders. Borrowers can work with a mortgage broker or an online network like LendingTree or Zillow’s Mortgage Marketplace.

> A credit union also might be a better bet for some applicants. Credit union loan committees may permit better deals for longtime members; they might also modify loan terms for borrowers they already know.

> However, first-time buyers may need to scale back their aspirations. One reason people get turned down for a mortgage is because they try to buy more property than they can afford based on current incomes.

> Applicants also should look at ways to strengthen their financial picture. If a borrower’s credit is poor, paying down credit-card balances can help to increase a FICO score.

home buyers beware. A recent study by the National Association of REALTORS found that one of the biggest legal problems in the real estate business has to do with agents inadequately representing the interests of their clients and failing to adequately disclose exactly what the agent responsibilities are.

NAR’s biennial “Legal Scan” study based on interviews with real estate commissioners, brokers and attorneys as well a review of cases and new laws found that agency issues rank in the top three legal problem areas. Agency is the legal relationship between the broker and the client.

Generally, agents assume fiduciary responsibility to the client when agency is established, meaning they owe utmost care, integrity, honesty and loyalty to the client. Agents are also required to disclose the exact nature of their relationship to the client.

But consumer complain that they were never told about dual agency or about agency relationships in general. Dual agency occurs when the broker represents both the seller and the buyer in the same transaction.

Lawyers cited in the study expressed concerns ranging from agents not understanding fiduciary responsibilities to accusations of blatant breaches of fiduciary duty.

In California agents are required to provide prospective clients with a legal disclosure detailing the various agency responsibilities. Though the form is generally provided it is unknown whether its importance is explained in detail. And if the concept of agency weren’t complicated enough, the language on the required form makes it more confusing than ever.

It explains that a broker in a dual agency scenario, one representing both the seller and the buyer has the obligation of, “A fiduciary duty of utmost care, integrity, honesty and loyalty in dealings with either the Seller or the Buyer.”

Anyone smart enough to blow is own nose can recognize that the fiduciary duty including utmost loyalty cannot be provided to two competing interests and the legal disclosure confirms that by stating this duty be provided to either the seller of the buyer. Left unsaid is, which one gets the protection of fiduciary and which one doesn’t?

Exclusive Buyer Agents (EBAs) never place clients in the position of being underrepresented because we are steadfastly opposed to dual agency relationships and never enter into them in our representation of clients.

More detailed discussion about the importance of agency relationships can be found at the National Association of Exclusive Buyer Agents.

home buyers need protections in “as-is” sales. Most if not all residential sales in California are “as-is” and have been for many years. However, buyers do have the right to discover, paraphrasing President Clinton’s famous line, what “as-is” is.

The following article from this month’s SLO HomeStore newsletter addresses home buyer protections from a national perspective. In California most purchase contracts do include buyer protections in the form a mandated seller disclosures, inspections rights and contingency periods allowing buyers to simply walk away if something unacceptable is discovered.

Still, this serves as a good reminder to buyers that they should carefully review their purchase agreements to assure that their agents have included adequate protections.

Buyer protections in “as is” real estate purchase
By Tara-Nicholle Nelson

Q: What can a buyer do if the seller includes an as-is clause in the contract and “issues” are discovered from the inspection? Will the buyer lose his deposit if he walks away from the deal after the inspection uncovers, let’s say, termites or electrical problems? It would seem to me that a buyer would insist that the as-is clause be removed.

A: In most states, the phrase “as is” has been defined, over time (and lots of lawsuits) as also indicating that the buyer is taking the property in “as-disclosed” condition. These same states tend to have disclosure standards that require sellers to tell buyers, even as-is buyers, about any “material” issues with the property: things that the seller knows about that would have some influence on the decision-making process of a reasonable buyer.

In other states, though, “as is” does not connote any disclosure requirement on the part of the seller. I recall reading an Arkansas case where the seller had known the property’s lot flooded every year for many years, didn’t disclose it to the as-is buyer, and the court sided with the seller. In these areas, “as is” might well be interpreted as “caveat emptor” (Latin for “buyer beware”).

However, in the vast majority of cases, buyers can — and should — insert an inspection contingency into an as-is contract. In fact, the inspection is the vehicle for knowing what exactly is going on with the condition of the property. The inspection, follow-up, or specialty inspections and repair bids or estimates are really the only way for a smart buyer to know whether they should move forward with an as-is deal.

Under an as-is contract with an inspection contingency or an inspection period, the buyer will have a certain period of time to obtain his inspections and decide whether he wants to move forward with the transaction, back out of the transaction and recoup his deposit, or back out of the transaction.

If after inspections, the buyer decides to exercise the inspection contingency and back out of the transaction within the time frame provided in the contract, their deposit money is safe and must be returned by the seller.

If, on the other hand, the buyer receives troubling information during the inspection but would still like to move forward with the transaction as is, he can do that.

Some buyers do this, especially when they feel like they are getting a great deal, even with the repair costs, when they can afford the repairs or anticipated them in advance, and/or when the seller is already making nothing on the property, so a price reduction would turn the transaction into a short sale (which might or might not be allowed by the seller’s bank).

Other buyers who learn of termite or other work that needs to be done choose several tactics. Some request that the seller complete some or all of the repairs, and insist that if the seller refuses, they (the buyers) will cancel the transaction and request their deposit back. Other buyers request a price reduction, on the same condition of canceling the transaction if the seller cannot or will not do so.

I see it as highly unethical to make a “fake” as-is offer, knowing full well that you plan to come back and ask for repairs or a price cut later in the transaction.

But if you get inspections and are surprised at how much work is needed, or at what it will cost, there is no legal or ethical bar from either backing out of the transaction entirely or making an effort to renegotiate the terms of the contract, so long as you do so within the contingency or objection period time frame provided in the contract.

In most states that allow for contingencies and objections, the buyer is legally able to back out of the contract after the contingency or objection period expires, but will forfeit his deposit or other liquidated damages provided in the contract if he does so.

Consult with your local broker or agent, or a local real estate attorney, to determine what avenues are available in your state and under your contract.

Tara-Nicholle Nelson is an author and the Consumer Ambassador and Educator for real estate listings search site Trulia.com.

Foreclosures and other distressed properties control the market on the central coast. That doesn’t bode well for regular folks seeking to sell their homes, but it has been a boon to home buyers.

On October 4, 2011 of 1567 homes listed for sale 254 or 16.2% were distressed properties. “Distressed” indicates those that are bank-owned, for sale with a Notice of Default filed or offered subject to lender approval of a short sale.

Considering all Central Coast home sales for the third quarter of 2011, 371 or 39% of the 953 home sales were distressed properties. That represents more than twice the current distressed inventory meaning that these homes are selling while many non-distressed properties remaining sitting on the market.

The third quarter of 2010 was very similar when 39% of the 720 total home sales were distressed.

Where same change has been taking place is with sales prices. The median sales price of distressed homes in the third quarter of this year was 274,000, down from $296,800 the previous year. The median price of currently listed distressed properties is $309,950 which could indicate resulting sales prices could be rising.

Buying a home is better than buying gold. That was one of the findings of the biannual Trulia survey results released recently

Trulia’s American Dream survey, which has tracked American attitudes towards homeownership since 2008. Harris Interactive conducted this online survey on Trulia’s behalf between August 30 to September 1, 2011 among 2,207 U.S. adults aged 18 and over.

KEY FINDINGS:

• Homeownership Remains Central to the American Dream: According to the survey, 70 percent of Americans said homeownership is part of achieving their American Dream. This remained unchanged since January[1] despite record-low home sales and ongoing instability in the today’s financial markets. Notably, more than half (57 percent) of current homeowners said owning a home is among the best long-term investments they could make, ahead of putting money in a 401K or other retirement accounts (52 percent). In fact, 80 percent said they plan to buy another home in the future which includes 69 percent of homeowners aged 55 years old or older. Meanwhile, across all age groups – even among 18-34 year olds, who have the lowest homeownership rates in the country – the majority of respondents said their American Dream includes owning a home.

·         Short-term Obstacles Creating Uncertainty for Most Homebuyers: Falling home prices and low interest rates aren’t enough to overcome the biggest obstacles to homeownership for aspiring homeowners. Among renters who wish to buy a home at this time, more than half (51 percent) said saving enough for a down payment is a major barrier to homeownership. This especially rang true for young adults (18-34 year olds), with 62 percent saying this was what kept them from purchasing a home at this time. Meanwhile, mortgage qualification and having a poor credit history were a bigger concern among 35-54 year olds.

NOTE: Survey respondents were allowed to select multiple responses
in describing the biggest obstacles to homeownership to them.

• American Dream Shifts Away From McMansions and Suburban Living: Reflecting the change in consumer spending habits, homebuyer preferences in today’s post-bubble economy have become more practical and less aspirational. Among Americans who said homeownership is part of their personal American Dream, only 6 percent said their ideal home size is more than 3,200 square feet – a 36.5 percent decrease from 9 percent in 2010[2]. In addition to shunning super-sized homes, future demand may turn away from traditional suburban neighborhoods as Baby Boomers retire and trade down while Millennials move closer to employment hubs and accessible transit. When asked what would be the most important neighborhood amenities if they were in the market for a new home, 56 percent of Americans aged 55 years or older – more than any other age group – say would be being near more restaurants and shops while shorter commutes would be a higher priority for 57 percent of young adults (18-34 year olds).

PRE-APPROVED QUOTES

·         “Despite the slow and weak economic recovery and stumbling housing market, the American Dream of homeownership is alive and well. Given the strong intent to buy a home among today’s renters and homeowners, I am optimistic that long-term housing demand will recover – even though today’s prices tell a different story,” said Jed Kolko, Trulia’s Chief Economist. “But the homes that people will want in the future will look different than today’s housing stock. Retiring baby boomers won’t want big suburban houses: they care more about easy access to restaurants and retail and will be willing to trade down. High gas prices – which make long-distance commuting more expensive – will accelerate this trend especially among Millennials, as would changes to the mortgage interest deduction that reduce demand for expensive homes. But in many cities, regulations against dense development push new construction to outlying, lower-density areas. ”

·         “From saving enough for a down payment to qualifying for a mortgage and having a poor credit history, today’s aspiring homeowners face many financial obstacles in order achieve their American Dream of homeownership,” said Jed Kolko, Trulia’s Chief Economist. “These obstacles keep some would-be homeowners from taking advantage of low mortgage rates; on the other hand, they prevent some people from buying homes they can’t really afford. Government homeownership policies can target some of these obstacles to homeownership, but only stronger economic recovery will help households facing multiple obstacles become better able to buy homes.”

SURVEY METHODOLOGY

The August 2011 survey was conducted online within the United States by Harris Interactive via its Quick Query omnibus product on behalf of Trulia between August 30 – September 1, 2011 among 2,207 adults (aged 18 and over), of whom 1,392 were homeowners and 758 were renters.

The January 2011 survey was conducted online within the United States by Harris Interactive via its Quick Query omnibus product on behalf of Trulia between January 20-24, 2011 among 2,079 adults (aged 18 and over), of whom 1,339 were homeowners and 683 were renters.

The July 2011 survey was conducted online within the United States by Harris Interactive via its Quick Query omnibus product on behalf of Trulia between July 22-26, 2011 among 2,055 adults (aged 18 and over), of whom 1,345 were homeowners and 663 were renters.

Figures for age, sex, race/ethnicity, education, region and household income were weighted where necessary to bring them into line with their actual proportions in the population. Propensity score weighting was used to adjust for respondents’ propensity to be online. These online surveys are not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. For complete survey methodologies, including weighting variables, click here.

ABOUT TRULIA, INC.
Trulia is the fastest growing online real estate resource, empowering buyers, seller and renters with smarter tools to help them find the right home. Trulia gives you the inside scoop to find you find the best place to live. Our smart and personalized real estate search experience brings together vital local information, community insights, market data and national listings all in one place. Trulia is headquartered in downtown San Francisco and is backed by Accel Partners and Sequoia Capital.

ABOUT HARRIS INTERACTIVE
Harris Interactive is one of the world’s leading custom market research firms, leveraging research, technology, and business acumen to transform relevant insight into actionable foresight. Known widely for the Harris Poll and for pioneering innovative research methodologies, Harris offers expertise in a wide range of industries including healthcare, technology, public affairs, energy, telecommunications, financial services, insurance, media, retail, restaurant, and consumer package goods. Serving clients in over 215 countries and territories through our North American, and European offices and a network of independent market research firms, Harris specializes in delivering research solutions that help us — and our clients — stay ahead of what’s next. For more information, please visitwww.harrisinteractive.com.

Teachers buying homes have one less loan option. This morning The Sacramento Bee reported that CalSTRS, the state teachers’ pension fund has suspended its member home loan program effective Monday.

Loan applications that are in the works with the interest rate locked by Friday will continue to be processed.

According to The Bee, the program was suspended because Bank of America, the firm that ran the program decided to sell the unit that oversees it. CalSTRS doesn’t have the means to manage the mortgage program on its own.

CalSTRS “will resume new loan activity as soon as a new partnership can be established,” said Christopher Ailman, the fund’s chief investment officer.

Is it crazy to sell a home in this market? Conventional wisdom would suggest waiting to sell until all the competing foreclosures have worked their way through the system and recovery is underway.

Sometimes, though, conventional wisdom can be wrong. There are circumstances when selling a property in order to buy another makes good financial sense.

For example, consider someone who purchased a rental property in the frenzied and expensive market of 2005 or 2006. If that property is located in California it was reassessed to it’s purchase price. If one were to sell that property today and purchase a like property benefits could include:

Avoidance of capital gains taxes. After all, a loss is not a gain.

Increased positive cashflow due to lower property taxes and lower mortgage payments.

As a savvy investor told me many years ago, “I don’t mind selling in a buyers market or buying in a sellers market as long as I’m buying and selling in the same market.”

Another example is suggested by The Wallstreet Journal’s Smart Money website. In an article titled, “The Case for Downsizing Your Home,” writer Glenn Ruffenach opens with the intriguing suggestion, “Do you love your home? I hope so. That said, chances are good you need to consider leaving it.”

Ruffenach explains that two critical failings in many retirement plans – inadequate nest eggs and premature job loss – might make a downsizing strategy attractive for some.