The last few months I have been talking about moving and vacation and tsunami warning but not much about real estate. The appearance is that nothing is happening in real estate or I am just not participating. Appearances can be misleading! I haven’t been writing about it but real estate is consuming most of my time – which is only fitting since it is the business I am in!
The sales of foreclosure properties is going to be with us for a long time. Many homes that have reverted to bank ownership are still to hit the market. Banks are continuing to hold back putting homes on the market that will flood neighborhoods with inventory and therefore drive the prices lower than they are today. The low end (under $300,000 here in Northern California) had shown signs of firming but there are properties still coming on the market that are indications that we may see another price reduction. The heavy rains of 2010 have had an impact on buyers willingness to go out looking but even with the inclimate weather, homes are selling.
Last week clients closed on a three bedroom/ two bath home in American Canyon for $325,000.
Over the last nine months, I have been working with 2 sets of buyers who could not get their offers accepted due to the multiple offers for lower priced homes in San Jose. Today both are in escrow. This came about through dedication to finding a way to make things happen and creativity in financing.
One buyer is looking for either a home or condo under $200,000. This was unheard of just two years ago but today there are many. The difficulty for my client is one of beating out the cash investor. With 60% down payment, he could still not get an offer accepted. The first hurdle was that he did not have a credit rating. You heard correctly – he did NOT have a credit rating! Here is a person with no debt and a good chunk of change but no bank would lend to him. Working with an ethical and hard working mortgage broker, he was able to establish a credit rating by the use of past rent and utility payments, making routine charges and payments to a credit card and being added as an account holder on one of his parents credit cards. The first is a pretty safe and straight forward action but is not always successful in getting the credit established. The second is simply a demonstration to the credit watching services that if he charges something, he will pay for it. The third is a bit touchy as there needs to be a balance maintained between income and debt. To establish or improve a credit rating (called a FICO score) you should follow the advice of your mortgage broker carefully.
The second buyer was in a very different situation. They each have steady jobs with regular paychecks and excellent credit. But they have a modest nestegg to use as a downpayment and for closing costs. FHA financing is their only option with the 3.5% downpayment. With a maximum purchase price of $280,000, many homes are listed on the market but homes in this price range receive multiple offers from all cash investors. Agents are writing all cash offers for much higher prices than the home will appraise knowing that when the appraisal comes in, they can lower the price. This totally takes the first time homebuyer out of the market. The approach we took to get into contract was to locate a home that was in need of major repair in a very good neighborhood and make the offer contingent upon getting an FHA 203K rehabilitation loan. We located a home that was built in 1901 and has been “improved” over the last century. Specifically, there are two small additions without foundations. This “feature” makes the home unattractive to either a buyer who wants to immediately begin cash flow by renting or a buyer who is getting a conventional or normal FHA loan.
The FHA203K loan program provides purchase money for the buyer plus the needed funds for making repairs and upgrades so that it qualifies for an FHA regular loan. A licensed contractor must provide a bid for the work and the payments to the contractor are administered by the lender and a 203K consultant to insure that the work is satisfactory to the buyer and that the contractor is paid. Yes, it is a lot of work beyond a normal purchase – but the homebuyer will have a home that is safe, not in need of repairs and meets their living needs. It is a great program that is being utilized more than in previous decades.
Putting an FHA 203K deal together is not for the faint of heart. In preparation for this approach, I became certified as a 203K Specialist by RE-Build USA. This is a training on the FHA process and an introduction to the people who can make it happen. I am pleased to partner with Pollie Barnes of Prospect Mortgage and Wells Fargo Bank in this endeavour. Feel free to ask if this loan program can be a way for you to get your dream home.
When I moved to Winding Wood Way, I expected that I would learn to live with neighbors and hear the sounds of human existence over the hoots of owls, growls of raccoon and wind in the redwoods. I have been surprised at how quiet my new neighborhood is. I see folks walking their dog or pulling out in their car but other than those activities, I hardly see anyone and seldom have the chance to meet.
We were finished in no time. I had planned to spend the whole day and decided that I should use this time to work in my own little back yard. It is still a mess so you will not be seeing a picture of it as yet. I planted a rose which generated a tub of topsoil that I have no idea where to dispose. I then decided that it was time for the privet growing along the back fence to go. Soon my yard was not only full of pots, plants and topsoil but the debris of a 10 foot privet! By this time I was totally exhausted and a bit downtrodden. How was I going to dispose of the mess I had just made?
My Wine Country Village 