Getting Your Home Ready to List

Here's an article from Realty Times with tips for getting your home ready to list for sale. The one I particularly like is about bathrooms: "The bathroom is one area to really take a close look at before you list your home... If your grout is worn or dirty, spend the money to get it cleaned and sealed or do it yourself. This can be a tedious task but it will help when it comes time to sell your home. Get rid of any countertop clutter like electrical cords and items that somehow wound up in the bathroom but have no reason to be there. Add a couple of mildly fragrant candles and roll your towels (like the hotels do) and set them on a counter or in a basket; it'll give it that welcome feeling -- like visiting a spa." Here's the complete article.

Interest Rates Go Even LOWER!

There's just not much more to say. If you aren't a homeowner and have a job, you should be one. If you already own a home with a mortgage, you should be looking into refinancing. Really!

Full article.

Navigating a Home Loan

In an article from the The New York Times, the topic of closing costs is explained, with emphasis on how to handle high closing costs.

Closing costs can increase the price of a home by as much as $10,000, sometimes more. Borrowers who are “cash-poor” can ask for assistance, or talk to their lender about a lender credit toward closing costs.

Some lenders advertise that if borrowers agree to accept a mortgage interest rate from a quarter to a full percentage point higher than they would ordinarily qualify for, they can receive credit toward their closing costs.

These mortgages are sometimes called no-closing-cost loans, though the term is misleading. The credit usually covers only fees charged by the mortgage broker or bank, like the loan origination fee, the underwriting expense, and the appraisal. That generally leaves title insurance, mortgage-recording taxes, insurance, and escrowed taxes to cover.

The amount of credit depends on total closing costs and other loan details. Generally, for every one-eighth of a point increase in interest rate, borrowers receive a credit worth half a percentage point of the principal amount.

While these mortgages can be helpful to some, borrowers should carefully review all the details. There are pluses and minuses to these loan types. A downside is the higher rate and monthly payments remain in place through the life of the loan.

Doing a side-by-side comparison of loans with and without the credit can be helpful.

Why Home Values Are So Misunderstood

Home values – it's a topic we hear about a lot in the news, and one of great concern to home buyers and sellers, but one I feel many people gravely misunderstand. A survey released last week from Zillow underscores this misunderstanding.

The survey's headline reads: "42% of Home Buyers are Unrealistic About Home Value Appreciation," and goes on to explain that despite the recent economic downturn and volatility in the nation's housing markets, 42% of those surveyed said they believe home values typically appreciate by 7% per year.

On a national level, home values declined for five consecutive years during the downturn. Historically, in a "normal" market, home values tend to appreciate at an average 2-5% per year. What is it that creates such an unrealistic view on home values – even now as much of the economy is still suffering?

Psychology of ownership: I think part of the reason home buyers are so optimistic about values appreciating is because they truly believe in the value of home ownership. In their minds, owning a home is the ultimate economic security, and one that will return financial value to their lives in many ways. Because it is so valuable to them, they feel like the numbers on appreciation move faster than historically they have.

Leftover boom mentality: Many buyers today witnessed the insane appreciation seen during the 10-year housing boom. News headlines constantly read crazy stats like "California home values up 20% from a year ago." I think that collectively, we got used to this and quickly lost sight of history, which shows home values increasing at a much slower pace.

In a fast-moving society, home ownership is a slow means of financial gratification. However, even the stock market requires 10+ years to truly profit for the average investor. But you'd never know that by the programs you see on TV and the offerings of being able to pick and trade stocks online while you eat lunch.

I think it's important as real estate service providers to give consumers the context around home values and what is so-called "normal." Home ownership is a long-term investment that should be made first and foremost as a way to provide a stable place to live, then secondly as a way to create financial security. We can't let consumers assume that buying a house is their ticket to retirement, just like we can't let them assume that values will continue to decline forever.

A house is a different kind of asset than other financial investments. You can't unload a house like you can with other investments. And home values only really matter when it's time to buy or sell anyway. I say we promote the true value of owning a home as what it was always meant to be: owning your own home, the place you live, the place where you build a family and create your life's memories. If its value appreciates in the process (which, historically, it normally does over the long-term), then that's great. But keep those expectations in line with reality and don't make any buying decisions based on what you think the resale value will be a year from now. That's just the kind of boom mentality that got us into this mess in the first place.

We Can Sell Anything ... if the price is right...

Things to do this Halloween Week-End

Questions from Renters Answered

Dennis Rockstroh, from the San Jose Mercury News' Action Line found answers for a tenant who is living in a house that is being forclosed. As with all real estate today, it's complicated, but Dennis and Martin Eichner from Project Sentinel do a good job of explaining it. Read the article here.

There's also an article from Nolo that is very good. When you follow this link you will have the opportunity to purchase a book, California Tenant's Rights, with everything you ever wanted to know about renting and rights in California.

New Initiative Looks Again to Refinancing

By Gino Blefari, President & CEO Intero Real Estate Services, Inc.

The buzz in housing economics this week is all about Obama's revamped home-loan refinancing program and the hope that it will help hundreds of thousands of underwater homeowners. The new program makes significant changes to the original HARP program – viewed as a total failure by most critics because it was supposed to help "millions" of borrowers, but only helped 894,000 to date.

HARP stands for the Home Affordable Refinance Program. It was rolled out in 2009 to help borrowers who owed more on their homes than their current value, enabling them to refinance and take advantage of lower interest rates, which would lower their housing costs and ease their financial burden.

First, let's look at the changes:

• Some fees will be reduced or eliminated
• No more 125% loan-to-value ratio cap
• Streamlines refinancing process by eliminating appraisals and extensive underwriting requirements for most borrowers, as long as they are current on their mortgage payments
• Encourages shorting the mortgage term
• Program now extended to December 31, 2013

What hasn't changed:

• The program is only open to borrowers whose mortgages are owned by Fannie Mae or Freddie Mac.
• Borrowers must be current on their mortgage payments to be eligible. (So this program really is not for homeowners facing foreclosure, but rather aims to stop people from walking away from their underwater mortgages.)

Why refinancing?

Officials estimate that changes to the program will save the average eligible family about $2,500 every year – the equivalent of a substantial tax cut. They anticipate the number of people enrolled will double as a result of the revamp.

A lot of folks have criticized the administration's refinance efforts through HARP because the number of borrowers it has helped pales in comparison to those in need. Five million homes have been lost to foreclosure and another 3.5 million foreclosures are anticipated over the next two years, according to Moody's analyst Mark Zandi. And analysts peg the number of homeowners who owe more on their mortgages than the current market value at 15 million.

The reality, though, is that there's only so much the government can do to help the underwater situation without completely devaluing the mortgage securities market. A mortgage is a contract by which a borrower agrees to pay under specific terms. The government can't just rewrite all these contracts. This is why you see efforts that are met with little fanfare. But we have to remember that one program isn't going to completely fix all of housing's problems.

Will these changes make a difference? I say every home saved from foreclosure – whether it's an owner walking away or an owner who can't pay his mortgage anymore – will make a small difference in some way. That's one less foreclosure on the books and one more family that stays in their home, and there's something to be said for that.

For more information about how to enroll in HARP, visit MakingHomeAffordable.gov. (Note: This page still displays the old requirements and details, not the latest changes.)

How Sellers Can Sharpen Their Competitive Edge

By Gino Blefari
President & CEO
Intero Real Estate Services, Inc.

Selling a home is a hyper-competitive endeavor in many markets across the country. Even here in the Bay Area where many neighborhoods are doing well, we've got pockets of buyers' markets that are posing challenges for home sellers. Here's the full story...

A Quick Pulse on the National Market

The housing market had a glimpse of good news this past week when the latest report on existing home sales showed an increase in sales both from the previous month and compared with a year earlier. There were a lot of things going on this report, so let’s dig in:

• Sales of existing homes increased 7.7% to a rate of 5 million in August, up from 4.67 million in July. Sales were up 18.6% from August 2010. Obviously, this is a great sign. While many news reports early this week focused on the dismal housing starts numbers, existing home sales are a better indicator to watch because as long as there’s a glut of existing home inventory in many markets, starts will remain low. In other words, existing sales need to move first before any improvement in starts will take place.
• Investors continue to gobble up property; the share of investors buying existing homes in August accounted for 22% of total sales, up from 18% in July and 21% in August 2010. Investors are motivated by the incredibly low cost of borrowing right now and the hot rental market that continues to see more demand and rising rents in many areas.
• First-time buyers remained steady, accounting for 32% of home purchases in August. That was unchanged from July, and up slightly from 31% in August a year ago. This is surprising, given the many problems with contracts falling through. But again, it’s a great time to buy for those buyers who are financially ready – rock-bottom interest rates, amazing affordability, and plenty of home inventory to choose from.
• Contract problems persist. The percent of contracts that fell through in August was 18%, up from 16% in July and 9% a year ago. Realtors say cancellations are largely due to declined mortgage applications or problems with appraised values coming back too low to support the negotiated price.

What’s the overall read? Not much has changed, despite the positive growth in sales. Low rates, bargain prices and a healthy rental market continue to lure more investors and first-time buyers. Restrictions in the lending market and problems with fluctuating home values continue to plague a lot of deals. What we’re seeing now is the slow growth many predicted and expected to happen earlier in the year.

What’s next? The Fed’s been discussing its new “Operation Twist” tactic, which basically means it’s going to be manipulating long-term interest rates by buying long-term bonds. The Fed has already said it’s keeping short-term rates low for the next two years – and at zero, they can’t even really do much more on that front. So, you guessed it – even lower interest rates may be on the horizon for home loan borrowers, which should help to fuel demand going into the traditionally slow season.