Although California is continuously pegged as having some of the highest home prices in the country (an assertion recently reinforced by a CNN study), the State has been making significant strides towards reversing the effects of the housing crisis. Below are highlights from the state’s triumphs:
1. California’s foreclosure filings dropped by 45% last month. Many economists anticipated doom and gloom when the second foreclosure shoe dropped after suits were litigated, and banks reopened the foreclosure pipe line. However, California, at large, has seen a dramatic decrease in the amount of foreclosure filings, and the hope is that perhaps there is no second shoe to drop.
2. San Diego home prices hold onto a 4-year high. People are buying again, and the increase in consumers has pushed home prices up to their newly found high. Many economists expect home prices to continue to climb over the next 2 years, and anticipate that the market will regain a boom-status by 2015.
3. Home sales are up in Sacramento. Although some are concerned that construction projects are still slow to revive, home sales up to the third quarter have already greatly surpassed home sales from all of 2011.
4. General optimism about the future of real estate in California, as well as the United States at large. With the Federal Reserve continuing to push mortgage rates to unprecedented lows, slowing foreclosure rates, and increasing prices, many economists are optimistic as to the state of the real estate market.
This short, but important list isn’t meant to imply that the crisis is over, or to ignore the struggles that many families still face as they contemplate foreclosure or severe equity losses, but to support the progress that California has made and continues to make.
An expensive addition to your home may not be feasible, such as enlarging the kitchen, building an office or adding a room. However, there are tricks to making your home seem bigger, and perception is reality, after all. So below we wanted to share with you a list of affordable solutions to help enlarge your home without breaking new ground or busting through walls.
1. Light and Bright Colors: Light colors reflect more light and thereby make a room seem larger. Instead of turning to intensive reds or majestic purples, try painting a room cream or light blue.
2. Built-ins: Built-in bookshelves, seating, desks, etc. make a home appear to have more space, as it removes the need for clunky furniture that clogs of walkways and overtakes floor space. If you cannot afford to add built-ins, try painting some pieces of furniture the same color as the walls. Done correctly, this can create the illusion of a built-in, and thereby create the illusion of a larger room.
3. Large-Scale Flooring: As reported by Forbes, the World Floor Covering Association, based in Anaheim, CA claims that the larger the flooring tile, the larger a room will seem. This can be an especially useful trick in small bathrooms and kitchens.
4. Glass Furniture: Consider purchasing a glass coffee table, end table, or desk. These pieces provide the same utility as wood or metal tables, but allow for light to filter through the furniture, making the room appear larger and airier.
5. Natural Light: Windows are key to opening up a space, so consider adding windows, or at least, capitalizing on any pre-existing windows. Opt for light colored, thin material curtains, and leave blinds open as often as possible.
Zillow recently released the results of its June 2012 housing survey. The survey polled 114 leading economists, real estate experts, and market strategists about predictions for the S&P/Case Shiller U. S. National Home Price Index over the next five years. It seems for the most part there was general agreement: housing prices will bottom out by the end of 2012 and begin their long awaited incline throughout 2013. There is an estimated 1.4% increase expected during 2013.
- Knowing the jargon is important to being involved with your real estate deals, so Leal Real Estate is putting together a glossary of terms that will be helpful to know when beginning the process of buying, selling, or even renting a home. This glossary, along with other educational material, will be available in its entirety soon, but here is a preview of the information you will be able to find.
Glossary of Terms (First Installment):
Appraisal— A professional analysis of a home’s worth.
Appreciation— Increase in the market value of a home due to market changes or home improvements.
ARM— An Adjustable Rate Mortgage includes an interest rate that periodically adjusts. The adjustment is generally made in relation to the national interest rate.
Assumption— A contract which indicates that the buyer will be assuming all responsibility, financial and otherwise, for the property’s current mortgage. An assumption fee is often charged by the lender for such a transaction.
Building Code— Local regulations set on construction, maintenance, and occupancy of real property.
Closing— A mortgage closing marks the end of a real estate transaction. A closing requires that all documents have been signed and funds dispersed.
Closing Costs— The fees associated with the closing of a financial transaction. These are initially assumed to be the buyer’s responsibility. However, many real estate negotiations redistribute the closing costs to the seller or a third party.
Closing Date— The date on which a real estate transaction is to be completed and closed.
Comparables— Short hand for “comparable properties.” This term is used to refer to properties used as comparisons during an appraisal. They help to determine the current market value of a home.
Contingency—A condition required for the closing of a contract, such as a home inspection.
FHA— Short-hand for the Federal Housing Association. The Federal Housing Association provides loans, mortgage insurance, and a variety of refinancing programs.
Fixed Rate Mortgage— A mortgage with a fixed interest rate for a stated period of time, after which the interest rate readjusts based on national standards.
Debt-to-Income Ration— The ratio between monthly income and living expenditures, such as house payments, child support, alimony, car payments, and other payments on loans or revolving credit.
Default— A failure to make good on a financial agreement. To default on a mortgage loan usually results in foreclosure.
Equal Credit Opportunity Act (ECOP)— A federal law that requires creditors to make credit readily and equally available to all people, regardless of race, ethnicity, sex, age, religion, or marital status.
Equity— The property value minus current liens against the home.
Foreclosure— A legal process in which a bank regains ownership of the property when a lendee has ceased to make mortgage payments.
Short sale— A sale that does not garner the entire amount owed on the property but releases the lendee from all responsibility for the remainder of the loan not paid by the sale. A short sale requires an agreement between loaner and lendee that the sale amount will release the lendee from liability for the remaining balance of the loan. SB 931 and SB 458 are recent California passed bills that ensure that lendees cannot be sued for the remainder of the loan after a fully agreed upon short sale has taken place.
Title Insurance— There are two types of title insurance: owner insurance to protect the purchaser and lender insurance to protect the bank or lending institution. When purchasing with a mortgage, lender’s title insurance is generally mandatory, but it is fairly common for sellers to pay the premium for an owner’s title insurance policy as part of the purchase contract. The insurance is primarily intended to protect all parties from financial losses due to defects in titles to real property, and it usually insures a purchaser up to the full value of the purchase price. In essence, title insurance assures the purchaser of the validity of the title, specifically protecting against potential errors or omissions in the deed and examining records. For an interesting story about how title insurance could have helped stop one of the largest feuds in American history, see this blog on the Hatfields vs. McCoys: http://www.realestatescoop.net/?p=940
Underwater— When a home is “underwater,” the current value of the home is less than what is owed on the home. Underwater homes often result in short sales.
Categories: Agents, Buyers, General Market Information, Investors, Mortgages, Reference Corner, Sellers Tags: Appraisals, Assessor, Buyers, Conventional Loan Program, Fannie Mae, FHA Loan Program, Forbearance, Foreclosure, Glossary of Real Estate Terms, HUD-1, Property Taxes, Purchase Money, Truth in Lending, VA Loan
On this Father’s Day, I don’t want to offer an analysis of political decisions, a summary of economic changes, or a critique of market practices. Rather, I want to give an account of home. When I say home, I mean both the feeling of home, the community and family of home, the comfort of home, and yet, I also mean the physicality of home, the brick and mortar of home, the grass and trees of home. This blog is a remembrance of a particular home, a home that stayed for many years, and a home that housed an incredible man—my grandfather.
I remember my grandfather in his home, in the house that contained the model trains we used to build together. I remember the smell of his pipe tobacco, IBC rootbeer, and After Eight mints (which I used to snitch in bulk). I remember the creak of the two steps that led down into the living room, and I remember the night I was carrying my baby sister and tripped on those stairs. I recall how cold it could feel in that living room when I was alone playing the piano, doors shut, yet always audible. My grandfather’s study—a pile of books and papers, a computer that always seemed to need fixing, and a closet filled with movies that I helped him label and alphabetize one summer. My grandmother’s sewing room—beautiful fabrics that became dresses and skorts (my fashion statement of the early 90s), bunk beds for sleepovers, and an apple-shaped pin cushion. Aunt Roxanne and Uncle Casey’s room—well, not necessarily their room, but the room they always stayed in when visiting. I remember the pride of getting a driver’s license and the embarrassment of never being able to back out of that crooked driveway. I remember how large the yard seemed—an endless playground of trees to hide behind, pine cones to heave at my brothers, and a rushing creek to watch after a rainstorm. And, I remember how small the yard felt when I returned, much older, for my grandfather’s funeral.
Real Estate marketing strategies often try to appeal to the romantic notion of home, perhaps at times melodramatically, and yet, it seems that such a strategy is rooted in a seemingly real experience that a house—a home—can provide. I often miss my grandfather, but remembering his home helps me to remember him. This blogger—occasional cynic—can often get aggravated by carefully constructed attempts to pull at my heartstrings for the sake of capital. But, on this Father’s Day, I willingly pull my own heartstrings to remember a house and a loving grandfather who lived within it.
The History Channel’s release of its historical drama based upon the famous feud between the Hatfields and McCoys was met with outstanding success this week as it garnered the largest audience ever for a non-sports television event. The three part mini-series depicted the infamous American family feud, begun during the Civil War and lasting well into the 20th century. Although numerous theories abound as to how, exactly, the feud started, The History Channel’s depiction suggested that a primary catalyst had to do with a dispute over timber rights. During this time, timber was a family business, and it is well-documented that Devil Anse Hatfield, the patriarch of the Hatfield clan, was a monetary success in the timber business, while his counterpart and rival, Randall McCoy, continuously failed to secure a profit. The business rivalry eventually resulted in a real estate lawsuit dealing with issues of defining property ownership. I’d like to suggest that this lawsuit could have potentially been avoided, or at least tempered, had title insurance already been developed and distributed as a necessity in real estate transactions.
A specific instance of timber dispute occurred as the result of an oversight in an 1859 McCoy land purchase. The McCoys were logging timber on their land, assuming all rights to the real property encompassed by the purchase agreement. However, the Hatfields claimed that they had purchased the timber rights for that particular land in 1857. The issue went to court, but the McCoys ultimately prevailed, claiming that the seller of the land never informed them that the timber rights were not included in the purchase. Interestingly enough, this sort of dispute would have been avoided with modern day owner’s title insurance, now often considered a requirement for most real estate transactions but not developed until the 1870s.
There are two types of title insurance: owner insurance to protect the purchaser and lender insurance to protect the bank or lending institution. When purchasing with a mortgage, lender’s title insurance is generally mandatory, but it is fairly common for sellers to pay the premium for an owner’s title insurance policy as part of the purchase contract. The insurance is primarily intended to protect all parties from financial losses due to defects in titles to real property, and it usually insures a purchaser up to the full value of the purchase price. In essence, title insurance assures the purchaser of the validity of the title, specifically protecting against potential errors or omissions in the deed and examining records. Understanding and protecting rights to real property is a necessary part of real estate transactions, and although title insurance is not exclusive to the U.S., its development and form were central to the modernization of the real estate market.
Consequently, in the case of the McCoy timber rights, title insurance would have insured the purchased land from claims of ownership from the Hatfields because the purchase agreement did not list timber rights as an exception to the purchase. This is, of course, what was ultimately decided in the lawsuit, but owner’s title insurance would have acted as a barrier between the McCoys and the Hatfields, thereby releasing the McCoys of any potential liability for a title error. Ultimately, while it may be impossible to pinpoint exactly what ignited the Hatfield v. McCoy feud, it certainly seems that modern day title insurance could have deflected at least one catalyst to the outbreak of violence and hatred that plagued the two families into the 20th century.
Although it is currently a buyer’s market, in that buyers are more scarce, whereas sellers are plentiful, it is still vital to properly structure an offer. Here is a list of 3 factors that should be considered when you write an offer:
1. Buyers should be well aware of the particular neighborhood’s comps, or “comparables”. Comps inform the buyer as to the average price range that nearby properties have sold for within the past 90 days. These figures help to determine home value, which in turn can dictate property taxes. The comps for a particular neighborhood will compare the selling prices of homes of similar age, size, and condition. Further, home values will be determined by numerous factors that are a result of the location of a home. For instance, good school districts, well-paved sidewalks, and low-traffic streets will have a positive effect on home values, especially if other properties in the area are in good condition and selling for high prices.
2. It is important that you are well aware of any needed repairs to the home. Not only will this play a role in determining the home’s value, but different types of loans will not finance the purchase of a home with certain structural problems. FHA loans are generally denoted as resulting in the strictest appraisals. According to the HUD-FHA website, any needed repairs cannot infringe on the following requirements: safety, security, and soundness. Safety refers to any deficiencies that could cause significant danger to home occupants. Security refers to deficiencies that might obstruct the security of the property. Soundness refers to any issues with the structural integrity of the home. Understanding both the appraisal requirements for your loan type, as well as the needed repairs for the home you are looking to purchase, are crucial components of a well-structured, winning offer.
3. Lastly, be sure to take note of any competing offers. Competition occurs in various ways, including actual price offered, type of deal offered—cash or loan, and how much the buyer is asking the seller to pay for in terms of closing costs and repairs. Understanding competing offers is necessary to writing a successful offer.
The key to writing a successful offer is to make sure your Realtor and lender are productively communicating, so that the previously mentioned components of good offers are thoroughly examined and included within the purchase offer. Therefore, it is often to your benefit to look for realty companies that are partnered with lenders. For instance, Leal Real Estate, a realty company, partners with Bay Equity Home Loans, a direct lender, which means that staff from both companies work together closely to more efficiently and effectively take you through the entire looking, offering, and escrow process. However, regardless of where you choose to do business, paying close attention to these 3 suggestions will aid in the successful completion of an effective and competitive buyer’s offer.
Last month, the Senate voted for a 2-year extension of higher loan limits for government insured mortgages, and encouraged the House of Representatives to follow suit and raise the loan limit from $625,000 (the limit it fell to on October 1, 2011) to as much as $729,750 (the limit prior to October 1, 2011). However, the bill is currently stalled in the House, as lobbyists on both sides of the issue have planted their heels firmly in the ground. Republicans do not want to continue to give taxpayers’ money to Fannie and Freddie, and real estate agents are battling against real estate insurers. The Wall Street Journal claims that what is at stake is a question about the ultimate purpose of government aid in the real estate market. Alan Zibel writes, “Is it best to support the weak sector or at least do no harm to it? Or, should the top priority be reducing the federal government’s footprint in the $10.4 trillion U.S. mortgage market, given that the federal government stands behind more than nine in 10 new loans?” (http://blogs.wsj.com/developments/2011/11/04/lobbying-titans-square-off-over-loan-limits/ ).
Adversaries to the loan limit increase argue that the FHA program was intended to help lower-income families, or first time home buyers, purchase “average” homes. Thus, these politicians claim that an increase to the loan limit is unnecessary to the implicit agenda of the FHA. However, high priced markets, such as San Francisco, boast an average household cost well above the $625,000 mark. According to CityData, in 2009, San Francisco’s average house and condo value was $751,600, just slightly higher than the old loan limit. In a blog earlier this summer I discussed the importance of nuanced politics, a politics that realizes the danger of universal claims. Such universalized politics is currently threatening the health of higher-priced housing markets, as politicians in opposition to the loan limit increase attempt to define what an “average” property should cost across the nation.
Ultimately, the market needs a quick response in order to keep housing prices from slipping even farther in high-priced areas. If loan limits do not increase, families will not have access to enough financial support to be competitive buyers in the market. Without buyers, home prices will fall and the housing slump will continue to drain the rest of the economy. The real estate market needs action that will support their climb back into solvency.
A home appraisal is the lender’s investment inspection. Prior to funding a loan, banks need to make sure that, in the case of default, they can make their money back by selling the foreclosed home. Therefore, it is essential for the bank to establish value and ensure that the loan amount does not exceed the appraised value. Appraisals are done by a third party, financially uninvolved professional, and the appraisal is generally, though not always, paid by the potential buyer. If a property is appraised for less than the contracted purchase price, a lender will lower the amount they are willing to lend. In such a case, the buyer must either come up with the difference in cash, renegotiate the purchase price, or withdraw from the process entirely. Thus, a successful home appraisal is vital to sellers because it can often negate a previously negotiated contract.
In California, purchase contracts generally award buyers a period of 17 days to remove contingencies. During this time, appraisals are completed and analyzed by loan underwriters. In the case that the appraisal negatively effects the granted loan principle, buyers are legally able to withdraw themselves from the contract.
Recently, the Wall Street Journal published an article that detailed 10 tips to improving your home appraisal. Check these out by visiting the Wall Street Journal blogs.
Buying a home for the first time is undeniably a daunting process. Credit scores, differing loan types, mortgages, down payments, and homeowner’s insurance are all looming financial nightmares that complicate and frustrate the buying process, and can be especially unnerving for first time home buyers. So, here is a list of your first steps towards a successful home purchase:
1) Find a good real estate broker. A real estate broker will facilitate the entire home buying process and will act as a negotiator on your behalf when finalizing a deal. In order to buy a home, one must have extensive knowledge in real estate law, financial planning, and a detailed understanding of mortgages. For first time home buyers, especially, having a real estate broker takes the pressure off of you, allowing you to focus on finding your dream home. Brokers will guide you through the paperwork, work with you on loan pre-approval, help you navigate the different types of mortgages, and negotiate you into a great deal.
2) Get pre-approved. Once you decide that you’re interested in buying a home, one of your first steps should be getting pre-approved for a loan. Your real estate broker will usually do this free of charge. It’s an important step to take early in the process because you may have to do some financial homework in order to get your credit score up to a desirable level. Further, getting pre-approved for a certain loan principle allows you to enter the home search with some delimiters already in place. If you already know how much money you can get from a loan, you can begin to narrow your search to houses that fit within that financial range. According to HUD, Housing and Urban Development, here are the following items to make sure you bring to your pre-approval: “1. social security numbers for both your and your spouse, if both of you are applying for the loan; 2. copies of your checking and savings account statements for the past 6 months; 3. evidence of any other assets like bonds or stocks; 4. a recent paycheck stub detailing your earnings; 5. a list of all credit card accounts and the approximate monthly amounts owed on each; 6. a list of account numbers and balances due on outstanding loans, such as car loans; 7. copies of your last 2 years’ income tax statements; and 8. the name and address of someone who can verify your employment. Depending on your lender, you may be asked for other information.” Coming prepared will expedite the process of pre-approval.
3) Use a mortgage calculator to determine what an affordable monthly mortgage payment is for your individual budget. You can find mortgage calculators online in various places, including on the website: Leal Realty
4) Find a lender. Shop around for a lender. Make sure to give 3-6 weeks for a loan approval process. Different lenders will give you different loan packages, and its necessary to allow yourself enough time to examine each offer before making a final decision. Some real estate brokers are already connected to lenders, and thus, using a broker-lender pair may prevent potential communication snags in the escrow process.
5) Begin shopping around. Your broker and real estate agent will help you find the type of neighborhood that suits you and your family’s needs.
Numerous cities across California, including National City, Carlsbad, Chula Vista, and San Diego, have first-time homebuyer programs that can provide you with more detailed information as well as possible financial incentives. Check out these programs by visiting HUD’s website.