Fremont’s Mission San Jose Neighborhood

The Mission San Jose area real estate market continues to prove the old real estate adage about “location, location, location”. Driven by the excellent schools in the Mission San Jose school attendance area, the area continues to be high on the list of buyers who are looking for good resale value, proximity of commute to employment centers and high quality public education.

 There are currently 37 single family homes listed in the Mission San Jose area. List prices range from $610,000 to $3,999,888.

Multiple offers are common for well priced, well prepared houses.

Market Activity-Casa Verde, Union City

Still plenty to look at in the Casa Verde neighborhood in Union City. It looks like there are 16 listings in the general area today, including 4 new listings. That should keep any potentiol buyers busy for one day. Prices range from $415,000 to $737,000. Of course, most will not be open this coming weekend, but your REALTOR can probably show you any one that you want to see. I will be holding one open on Sunday.

 This neighborhood is very close to a local park with lots of green area and play apparatus. The neighborhood is also close to the Union Landing Shopping Center. For commuters, proximity to Hwy. 880 and the Dumbarton Bridge is a plus.

B of A + Countrywide!!!

This is a major commitment to the mortgage market by a leading US financial institution. Bank of America is putting its corporate weight, and its money, where its mouth is. By making this acquisition, BofA is saying that they are in the mortgage market for the long run. They will most likely be stuck with some very large losses that are still hiding in the Countrywide portfolio but they will be able to overcome the problem that has caused the cessation of business for many mortgage lenders. Funding! If you are a lender and you have a qualified borrower, but you can’t find cash to fund the loan, you have a problem. BofA has and will continue to have the funds required to be a major player in the mortgage market. My guess is that they bought Countrywide for a price that will make the BofA shareholders very happy in time. Other mortgage providers will be forced to take agressive steps to remain competitive. 

Kim DiBenedetto, a REALTOR with Alain Pinel Realty in Carmel, Ca., seems to agree that competition among lenders will grow. 

This is good news for the real estate market.

For another opinion about the importance of the move by BofA, check out what Darryl Glade, a New Orleans RE/MAX agent has to say.

WORD OF THE YEAR…SUBPRIME!

In its 18th annual words of the year vote, the American Dialect Society has named the word “subprime” as their Word Of The Year for 2007!

Who knew that there was a society dedicated to Dialect but the organization is apparently 118 years old. I wonder why it took them so long to come up with an annual Word Of The Year program since this is only the 18th annual. But, why quibble. 

“Subprime”—an adjective used to describe a risky or less than ideal loan, mortgage or investment—was also named as the winner of the brand new 2007 category for real estate words.

“Subprime” beat out other contenders—green- (used as a prefix); surge; Facebook; waterboarding; Googleganger; and wide stance (to have a)—for the prestigious (?) honor.

Read their press release for all the entertaining details. For instance, do you know what disgraced Senator Larry Craig and “wide stance” have in common?

I have to admit that I need to expand my personal vocabulary. Many of us have heard about liar loans (money borrowed from a financial institution under false pretenses), but I have to admit that a NINJA loan (No Income, No Job or Assets) and ’scratch and dent loan’ are new ones for me.

“Subprime” joins the ranks of former winners of the Word Of The Year award, some of which are chad, Y2K, red/blue/purple states, and metrosexual.

I want to wish a belated Happy Kwanhanamas to all. (Designated as winner of the most unnecessary word of the year.)

A “SHORT SALE” IS NOT A QUICK SALE

My wife was happy when I told her that I was writing an offer for a client.

“The property is a ’short sale’ ” I told her.

 ”Great!” she said. “That means that your commission check will  come quickly. Why don’t you do more transactions like that?”

 Well…she assumed that ’short’ meant short-time-wise. Not so! Short, in this usage, means short of money. If this property sells for the price for which it is listed, the owner will not receive enough money to pay of the lender (or lenders, in many cases) who hold a deed of trust(s) (lien or liens) on the property. If the buyer expects get a grant deed to the property in their name, the lender must reconvey their deed of trust. Since there will not be enough money to repay the lender, will the lender reconvey?

You have heard he expression, “I am short of cash.” Exactly! In this transaction, the cash is short of the amount needed to gain ownership of the property. In order for this transaction to work, the lender will have to agree to forgive part of the debt. The lender will take what they can get, forgive the difference and reconvey the deed so the new owner can have clear title to the property. This means that the lender will take a partial loss on the outstanding loan. The amount forgiven will be the difference between the purchase price and the amount of the outstanding loan.

 In more and more cases, the lender will, in fact, reconvey (release) the property because (a) the property has dropped in value and no longer provides adequate collateral for the existing loan and/or (b) refusing to co-operate in a short sale transaction will only lead to the lender’s eventual need to foreclose on the property and/or (c) failure to accept a short sale offer will lead to delay in selling the property…perhaps after foreclosure…and risk of further deterioraton in market value for the property.

If the lender must foreclose and become the owner of the property, then the lender becomes responsible for upkeep, taxes, insurance and other carrying expenses. Then, the new owner (the lender) still has to sell the property in a market which is continuing to deteriorate for properties of this kind. Lenders do not make money on foreclosures! They make money by lending money and earning interest…which assumes that the loan is repaid. Repayment is not happening in a short sale.

The lender is in going to take a beating on a problem loan. The owner can not/will not pay. The lender’s income/loan repayment stops. The lender can accept a short sale and take a beating. The lender can wait, foreclose, incur carrying expenses and sell the property to take what may be an even worse beating. Maybe the first beating-the short sale-is the lesser beating.

In any event, the lender is in charge, not the owner of the peoperty. It is the lender who makes the decision to accept the sale price, not the owner. The owner is “upside down” in the property and gets nothing from the sale. The owner has no equity and has probably stopped making payments.

Not a pretty picture for the lender (Why did they make this loan, anyway? But that’s a whole different issue?) or the owner. We have not covered numerous other details relative to short sales: credit harm to the owner/seller, tax consequences to the owner for debt forgiveness, lender’s pursuit of repayment from the owner on a deficinecy basis…and more.

This may be a real good deal for the buyer…or did the buyer just buy a house at its current value in today’s market?

“You Want Me to What…???

My client just closed escrow on the sale of their home. They had lived there many years but felt compelled to sell when their only daughter moved, with their only grandchild, to a town several hours away. Funny, how life changes.

 Anyway…they thought the new owners would appreciate the firewood that was left behind in the shed. Nothing like a warm, cheery fire in the new family room to make you feel comfortable in your new home.

Soon, my phone rang. The buyer’s agent wanted to know what I and the sellers planned to do about the junk that was left behind.

“What junk”, I asked?

“All that old wood in the shed” was the answer.

“Well, that’s firewood”, I said. “The sellers thought that the new owners would appreciate it. They won’t have to go out and get wood for the fireplace.”

“John,” he said, “you don’t understand. My people don’t build fires. That fireplace will never be used. They want that wood hauled away. It is taking up valuable space in the shed and is a termite magnet.”

I rented a pickup truck, engaged the help of a young neighbor for a few $ and hauled the firewood to the dump. (My fireplace is gas!)

Funny thing…when I was dumping the wood at the dump, a guy next to me who was dumping his trash asked if I would mind if he picked up the wood and took it for his fireplace!

No! I don’t really want to sell my house.

If you don’t want to sell your house, try one of more of these strategies:

10. Keep it cluttered.

9. Don’t allow a lock box. Insist that potential buyer or agents see the house by appointment only. 24 hours notice required.

8. Don’t show up for the appointment.

7. Make sure your house has animal smells. (Doggy smells are effective, but cat urine works every time!)

6. Large, barking dogs will keep most people away.

5. Insists on showing property yourself. Offer way too much information. Appear needy.

4. Maintain poor curb appeal. Potential buyers will pull up and leave without getting out of their car.

3. Hire a newly licensed agent, preferably a relative, to handle the sale and save money.

2. No sign, no lock box, no MLS entry. Insist that your agent advertise by word of mouth only.

#1. Overprice!!! This one always works!

I KNEW THE DEAL WAS IN TROUBLE WHEN…

I knew the deal was in trouble when the buyer’s agent told me that the buyer was using a lender from Florida! Sure enough, the lender (actually a broker) failed in the first attempt to get financing and moved on to a second source. An appraisal was done that came in as needed. Since the offer was over asking, the lender apparently did not find the appraisal to be creditable, so ordered a second appraisal. It also came in as needed. Long story short…the deal finally closed, but late. The sellers had contracted for their next house, but the close of escrow on the new home was set far enough back from the close of escrow from the sale of the old home that there was no impact except for a few bitten fingernails. The sellers even negotiated a few days of rent-free occupancy in their old home after close of escrow because it was the buyers side that caused the delay in escrow close.

Public Speaking Can Be Too Public

I was reading the business section of my local newspaper the other day. There was a big headline “Home Sales Decline”. Wow! News to me…and to you, too, I’m sure!

 

A smaller headline told us “Mortgage rates remain unchanged”. Good news, but not surprising. In fact, neither of these tidbits was a surprise to most people living within reach of almost any media outlet for the last year or two.

 

Other news filled the page, but what caught my eye was the box next the big headline, with a contrasting color behind the text to make it stand out, that stated “Exec evokes Depression”. Speaking at an investment conference in New York, Wells Fargo President, John Stumpf was quoted as saying that the current real estate conditions are the worst he has experienced during his 30-year career.

 

In a classic example of engaging mouth while forgetting to put brain in gear, Stumpf went on to say, “We have not seen a nationwide decline in housing like this since the Great Depression”.  While I understand Mr. Stumpf’s desire to make a point about the current state of the real estate market, there is no comparison between economic conditions that caused the Great Depression and current economic conditions. Trying to compare the real estate market then to what is going on now ignores the context within which those events took place. What Mr. Stumpf and I each know about what went on during the Depression was learned from our elders, our education, reading…in other words, second hand knowledge. Furthermore, Mr. Stumpf’s 30-year career did not even begin until nearly 30 years after the Great Depression. The fallout from the current travails of the real estate market will have one set of results similar to those found in the Depression…many owners will lose their houses. The reasons for these loses are vastly different from what happened in the Depression. Nevertheless, the headline writer made it appear to the casual reader that we may be in store for another Great Depression.

 

It is a shame that the popular media, which must sell its product in order to survive and which has always used eye-catching headlines and shallow reporting in order to inform (entertain?) its audience had its job made easier by the thoughtless comments that Mr. Stumpf provided.

 

Mr. Stumph has a lot to learn about speaking to the press. The following quote taken from that article made me wonder if Mr. Stumpf’s next career would be as a stand-up comedian.

 

“Stumpf said he didn’t even know about some of the exotic mortgage investments that enticed other banks until he read about them in the newspaper.

 

“‘It’s interesting that the industry has invented new ways to loose money when the old ways seemed to work just fine,’ Stumpf said”

Down Payments Are Back

What happened to the 100% financing that allowed many people to buy houses who had nothing to invest in a house but their hope of watching it increase in value? Gone! Unless you have excellent credit and can document your income there is little chance that you can buy real estate with no down payment. Buyers need a down payment these days. Even with a down payment, you better have decent credit if you want the best financing in today’s wary real estate financing market.

Is that good or bad?

From a lender’s standpoint, a down payment lowers risk. It increases the likelihood that the borrower will repay the loan because the borrower will lose the equity that the down payment bought if he defaults on the loan. It also is likely that the borrower will realize that he is now sharing the risk with the lender. This realization may make the borrower more cautious in assuming this risk, make the borrower a better home shopper and decrease that likelihood that this borrower’s name will be added to the many names on the list of foreclosures across the country.

From the borrower’s standpoint, a down payment should secure a better loan program. Perhaps a lower rate or reduced costs or both. The new homeowner will also be reassured that there is equity in their property to cushion against possible financial emergencies.