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Three Reasons Why The Facebook Effect May Not be a Windfall For Sellers Who Wait

By David Blockhus on 5.3.12 - Please leave a comment.

Facebook is going public in a mere 15 days. Once it does, there will be hundreds of newly minted millionaires just clamoring for your home. Or at least that is what the press and a many real estate agents want you to think. So if you are thinking of selling your home and have flexibility, now may be the time to put your home on the market rather than waiting in anticipation of future riches that may never materialize. Here are three reasons why:

Currently Housing Inventory is Low -

The Los Altos real estate market has always been inventory driven. Typically, when single family home inventory spikes above 100 active listings, it is a strong buyers market. Conversely, when inventory drops below 30 homes for sale, it is a strong sellers market. Right now we are hovering around 45 active listings or a little over 2 months supply of salable homes. It is strong seller’s market currently.

If enough sellers “time the market” by waiting until the newly minted millionaires cash in on their stock windfall, we may actually see a huge increase in inventory resulting in an unforeseen buyer’s market.

Continued Strong Buyer Demand -

Buyer demand is higher than previously seen. More than two-thirds of the homes that closed escrow in Los Altos in the Month of April had multiple offers. Most of the over bids were in the 100k-130k range but a few topped 300K. Since January, multiple offers have become the norm rather than the exception.

Rather than wait, some of those who will benefit from their company going public have already joined the ranks of home buyers – only increasing the current demand for good homes.

Continued Low Interest Rates -

Twenty-six of the homes that closed escrow in April in Los Altos had financing. Even buyers who can pay cash, are financing. If they used cash to make the initial purchase, they are refinancing because the cost of money is historically low. Buyers are cashing in on the low interest rates by buying and/or refinancing now.

Today’s newly minted millionaires have learned from the “Google Effect” era millionaires. They aren’t going to rush out and buy a house just because they can. Sure, there may be a few who aren’t familiar with having and/or managing large amounts of money who will go out and buy a trophy house. But my bet is that those are few and far between. Many will buy, but when they do, it will be a careful and well thought out lifestyle or investment decision.

Interested in Selling your home?

Give me a call at 650 917-4250

I’ve been licensed and actively selling residential real estate locally since 1993

Six Effective Strategies to Combat a Low Appraisal

By David Blockhus on 2.9.12 - Please leave a comment.

Low property appraisals can occur in any real estate market. In a rising market, multiple offers can create a final contract price higher than current comparable properties. In a declining market, appraisal values may not come in at value. Both buyer and seller want the home to appraise for the negotiated price, but sometimes it doesn’t. What can a buyer or seller do if a property doesn’t appraise at or above the negotiated purchase price?

1. The buyer can bring in additional cash to make up the difference between appraised value and contract value.

2. The buyer and seller can re-negotiate the contract price down to the appraised value price.

3. The seller can hold true to the purchase contract price and possibly carry a 2nd note for the difference between the appraised value and purchase contract value.

4. The lender could order a second appraisal that might come in at value and/or request to appeal the original appraisal. The appeal could be based on the appraiser using wrong or outdated comparable properties, the appraiser’s lack of knowledge of the community (comparing two homes from different school systems etc.) or the appraiser using incorrect information about the home (i.e. size, age amenities etc).

5. The buyer can kill the loan with the original lender and start fresh with a new loan and subsequently new appraisal. The seller must agree, this will take time and it might not yield different results. If there are questions about a property’s ability to appraise, one might double app with two lenders so you have a back-up in place should the first lender (do to low appraisal) not be able to perform.

6. Both parties can agree to cancel the transaction.

Since 1994, I have seen almost all of these strategies in reaction to a low appraisal value used. Renegotiating the purchase price and/or having the buyer bring in more cash seem to be most frequently used strategy for keeping the deal together. However, it really depends on the buyer, seller and real estate agents having a meeting of the mind to make it work.

Should you have questions about buying or selling a home, please call or text me directly at 650 465-0755.

Great Loan Rates Make it an Outstanding Time to Buy or Refinance Your Los Altos Home

By David Blockhus on 9.13.11 - Please leave a comment.

The following video discusses current loan rates and opportunities they may create in our local real estate market.

Click loan rates to see the rate sheet discussed in the video.

Should you have any questions about the value of your home in today’s market or you wish to take advantage of today’s great loan rates and purchase a home, please call or text me at 650 465-0755.

One Reason Explaining Why Waiting to Buy Your Los Altos Home Might be a Mistake?

By David Blockhus on 7.19.11 - Please leave a comment.

Most of today’s home buyers and sellers are apprehensive about our real estate market. Everyone is wondering where prices are going. Are they going to rise, drop, or remain flat? If they move up or down, how much will they adjust and when? Ideally, every buyer and seller wants to time the market.

I’d love to say I could predict where the Los Altos real estate market is heading over the next 90 days, 180 days, 1 year, or 3 years, but I can’t. There is one thing that buyers and sellers should strongly consider, the cost of money, otherwise known as mortgage rates. Here is an example why.

According to mlslistings.com (our local MLS provider) the median priced home in Los Altos for the month of June 2011 was $1,660,000. Assuming a 20% down payment and a current jumbo loan rate of 5%, today’s home buyer would pay approximately $7,100 per month for their loan. If rates were to increase by 1 point, the monthly payment (using 20% down) would increase to approximately $7,922. If rates dropped 1 point (not likely), the monthly payment would drop to approximately $6,320. How does home price fluctuations affect a buyer’s monthly mortgage payment?

Using a 5% jumbo loan rate and a 5% drop in the median home price ($1,577,000 purchase price, $1,261,600 loan), a home buyer’s loan payment would be approximately $6,745 per month. At 6%, the loan payment would be approximately $7,527 per month. Assuming that rates stayed the same as today, a buyer hoping for home prices to drop 5% would save $355 per month in mortgage payment, $16,600 in down payment and $83 in property taxes.

However, loan rates are at historical lows. It is probable that rates will increase. If home prices drop 5% and the jumbo loan rate increases 1 point (jumbo loan rates have hovered around 5.6% over the last three years and as recent as August 2008 were slightly over 7%), a buyer’s monthly payment would be approximately $7,527 or $426 more than buying a $1,660,000 home today at 5%. If rates jumped 2 points (not likely in the near future) the monthly loan payment would be $8,345 or $1,245 per month more.

Buyers and sellers should think about the costs of financing. There are many excellent websites with charts, graphs and analysis that help consumers understand the mortgage markets.

Will home prices adjust more than loan rates or will loan rates adjust more than home prices? My best guess is that any negative adjustments in home prices will be offset by higher financing costs. Should prices continue to rise (the median home price in Los Altos for the first half of 2011 is up 7% over that of 2010 and 10% over that of 2009), buyers will miss the boat. At least that’s what I see for the Los Altos real estate market.

Should you have any questions about the value of your home in today’s market or you wish to purchase a home, please call or text me at 650 465-0755.

Why Loans Aren't Funding in Flood Hazard Areas!

By David Blockhus on 4.13.10 - Please leave a comment.

The National Flood Insurance Program has expired and it was not extended prior to Congress taking its spring break. The absence of this Program may make it difficult if not impossible to secure flood insurance on property located in flood hazard areas. Most institutional lenders will not fund a loan secured by real property in a flood hazard zone without that insurance in place.

It is unknown how quickly Congress will move to reinstate this federal program when they return to Washington on April 12^th. As such, we are facing a minimum of a 2 week gap in the availability of this important federal program.

Buyer Tip: check to see in there is any effect on the funding of your loan with your lender prior to removing the financing contingency. Otherwise you may up a creek without a paddle or a boat.

What's Going to Happen With Jumbo Mortgage Rates?

By David Blockhus on 1.21.10 - Please leave a comment.

I’ve had a few clients ask me what I thought was going to happen with Jumbo Mortgage Rates in the near future. I found this video by Dan Green of the themortgagereports.com that explains it much better than I could. Hint…they are going up!

Los Altos Real Estate Market Update – Personal Property is Causing Financing Problems

By David Blockhus on 10.19.09 - 2 Comments »

An interesting topic came up this morning in our office meeting – The inclusion of personal property in a purchase contract is having a negative effect on property valuation and loan funding. It appears that some Lenders are asking that personal property should not be written into the purchase contract.

In the past, an appraiser would note in his/her appraisal that any personal property included in the purchase does not materially affect the property’s value and the loan would fund. However, some lenders have recently changed this practice.

Personal property becomes part of the contract in Paragraph 4 of the PRDS Real Estate Purchase Contract. The most common type of personal property asked for is kitchen appliances that are not built-in (ie. refrigerator, washer, dryer).

The result of this recent change is that it creates a catch-22 for the buyer as well as an unwanted issue for the seller just prior to close of escrow The buyer should include personal property in the contract, but by writing it into paragraph 4 of the contract, a Lender may not fund the loan. How does a buyer retain the personal property and get the loan to fund?

In short, the best course of action is to check with your lender about any potential red flags prior to writing the purchase contract.

Note: I am not an attorney nor do I play one on T.V. Should you need specific legal counsel on your individual situation, see someone who is an attorney specializing in real estate law.

The Home Valuation Code of Conduct and How it Can Effect Your Home's Financing

By David Blockhus on 7.23.09 - 1 Comment »

There has recently been a lot written about the relatively new appraisal regulation called the Home Valuation Code of Conduct (HVCC). The gist of the HVCC is to ensure that the loan broker/Realtor doesn’t unduly influence the valuation of a property by pressing the appraiser for an artificially inflated value. It does so by preventing those who are most likely to benefit from a home’s inflated value from selecting, retaining, or providing for payment of compensation to the appraiser. Implemented on May 1, 2009, the HVCC has been a less than perfect solution.

Articles in the San Jose Mercury News and the Seattle Post Intelligencer have explained some of the problems of the HVCC. Appraisals are becoming more expensive for the consumer while the appraiser is paid less because the Appraisal Management Companies (AMC’s) are taking a part of the appraisal fee to process the order.

In addition, some AMC appraisers aren’t necessarily knowledgeable about the subject property’s local market. Just yesterday, an appraiser gave me her card which claimed that she specialized in Alameda, Monterey, San Benito, San Mateo, and Santa Clara counties. Huh, what…that’s five counties and several thousand properties. Wow, she must be a quick study with a photographic memory and reliable car! As a consumer, what can one do?

The system should become more efficient as time goes by. In the meantime, expect delays and budget for higher costs. It might make sense to have a back up lender in place should the first one not be able to perform. If possible, you might consider longer periods for financing contingencies and/or longer escrow periods.

KNOW the values (condition, size, purchase price) of comparable homes in the immediate neighborhood BEFORE you ratify a purchase offer. Have your agent pull up the recently sold properties (within the last 3 months) as well as those that are currently under contract. Try to get the purchase details of the homes under contract from the listing agent (some may discuss this, others won’t).

The premise of the HVCC is excellent, but it will need some more tweaking if it hopes to eliminate the current problems it has created for the appraisal industry and ultimately the consumer.

Note: the most recent update of the HVCC’s frequently asked questions FAQ’s (July 2009) can be found here. The update clarifies two points. First, it states that lenders should use appraisers who have clear experience in the geographic area of the subject property. Second, it clarifies that appraisers are not prohibited from talking to real estate agents.

Final Notice! You're About To Receive 42 Offers To Refinance Your Home Loan

By David Blockhus on 2.4.08 - 1 Comment »

About 2 months ago, I started to receive letters about refinancing my adjustable loan. Apparently, I live in Refi-Hell and every lender in the country is attempting to get my business. In total, I received over 40 solicitations. Some lenders were straight forward, others weren’t. Some were just pathetic. Note, I’m not trying to bash lenders, just some of the bad and deceptive practices that some lenders (as well as real estate agents) use.

Interesting side-note, a size-able portion of the solicitations came from lenders out of the San Diego area. Maybe I should contact Jeff Brown of Bawldguy Talking Blog fame or Kris Berg of San Diego Home Blog fame to get the scoop on why San Diego lenders are soliciting loans in Northern California.

Some solicitations came in standard business envelopes with no return address. Big red flag! These must be junk mail. Remember, I’m a Realtor. Earlier in my real estate career, I got a PHD in junk mail solicitation. I probably threw away a dozen or so of these. Others came in envelopes with over-sized print indicating the contents were “confidential” and were not to be opened by anyone except the addressee. Very important! Still others came in non business sized envelopes and were hand written. Personalized, but misleading. I thought they were Christmas cards from friends and family. I wasn’t too happy when I opened them up and found a solicitation for a loan. Lastly, there were the notices sent in perforated envelopes with large “Personal and Confidential” and/or “Secured Document” and/or “Final Notice” printed on the outside. I guess the larger the print, the more important the contents. On the cover of one, written in bright red letters, was “Warning: $2,000 fine, 5 years imprisonment, or both for any person interfering or obstructing with delivery of this letter U.S. mail…”

Oh by the way, I really hate perforated letters. They take too much time to open because you can’t just tear it open, you must bend each side at the perforation and then tear along the crease. Half the time it doesn’t work and I end up tearing the contents. I digress.

A good portion of these solicitations gave the appearance they were my current mortgage holder and if I just authorize them, they would restructure my loan. Deceptive, straight to the trash. I prefered the straight forward approach like “This is to inform you that your loan will be adjusting as of January 1, 2008″ or “This letter is to inform you that your mortgage loan terms are adjusting next month.”

Some lenders appeared nicer than others. ”After reviewing your loan information, we are providing you with this courtesy notice…” ”We are cordially informing you…” Courtesy and cordial are such nice words. They must want to be my friends!

One letter took a more serious tone. “A recent audit of your loan…” I did not know I was being audited. Note to self, talk to accountant.

Most requested that I call a convenient 800 phone number and ask to speak with an Adjustable Rate Mortgage Specialist or Loan Review Department or Loan Servicing Department, and a few actually included a name of a real live person. FYI, I like speaking to a live people.

When I examined all the solicitations, the one I decided to work with recently wrote me a nice follow up letter. Let me read the first few sentences; Congratulations, your real estate loan has been paid in full. It has been our pleasure to service your financial needs. Please retain this letter for your records. This is one letter I’ll keep!

For future reference. If you want my business, don’t play games. I don’t have time for them. Let me do the analysis I want. Lastly, by giving me information that is relevant and timely, you will earn my business.

Los Altos Real Estate and Home Sales