San Mateo county is now experiencing multiple offers again. We are gaining on 2004. This is still the best opportunity we have seen for buyers in years, given the ~3.5% interest rates. I still remember buying a house in 1982 for 17% interest. Given the upswing in commercial rentals, in San Francisco, Bloomberg calls it

Office Space Boom 2.0

and the incredible lack of homes for rent on the peninsula, buyers may miss the boat.

I have been saying since way back in 1987, that this county does not negotiate price much more then between 97 and 103% of list price. This certainly does not mean that all listings sell, but that for a listing to sell it must be priced right. I am aware that many Realtors tend to suggest prices much higher then 103%. I call this buying the listing. They appeal to the seller’s vanity, because all sellers feel their home is the best home on the block. And of course it is for them, or they wouldn’t have purchased it in the first place. But just look at what happened when the inventory fell like a rock this year. I think it speaks for itself.

Condos and Townhouses: Who owns the door?

Many times when describing a condo, I have heard the description, the homeowner owns everything inside the paint. The association owns, and here I am defining “owns” to describe who’s responsible for repairs, the outside paint and of course the commons. Associations are willing to maintain the “commons including painting the doors and walls. Here is the rub: there are lots of things between the paint, in the walls.

In the case I am investigating, the pest operator has called the threshold, door, and door jam as rotting with dry rot, and needs to be removed. He tells the buyer that the subflooring inside the unit feels okay. No rot detected with his probe.

So first, it is moisture that has caused the damage that came from outside, and secondly, it is a particular type of door. The door has windows top to bottom, and is a custom size, smaller then average, and probably requires an association design review to replace with another “look”.

I have learned that in some associations where the door is attached to a townhouse, the association will pay for the door jam and frame, but the actual door is the owner’s responsibility. In other cases where the condo has a specific look, as in this case, the association will own the whole thing as they require a specific type of door.

One more thing for a buyer to think about when purchasing a condo or townhouse, as there is no clear cut answer, unless it is addressed in the association bylaws. Besides doors and windows, there is plumbing, and electrical.

Does your homeowners insurance cover a plumbing leak from the bath tub above your unit? Not necessarily….

Six Must-haves for Mortgage Approval

I saw this article, by Dian Hymer, and liked so much I reproduce it here.

"Interest rates are hovering around historical lows, and low interest rates increase affordability, making it easier for buyers to qualify. Yet stories of buyers waiting months to gain loan approval and home purchase transactions not closing on time due to lender's strict underwriting are all too common.

Some buyers are turned down for illogical reasons. For instance, if you have investments -- even if they're performing well -- an underwriter might deny the mortgage because your portfolio doesn't fall into the underwriter's risk assessment model.

One couple was turned down because the husband had worked at his current job for less than a year -- even though he was making more money at the new job than he was before.

These buyers were well-qualified. The wife had worked several years for one employer and was able to qualify for the loan on her own. So, the transaction closed, although two months late.

Generally, it's more difficult to qualify now than it was a year ago. Most conventional lenders require a 20-25 percent down payment. For the lowest interest rates, your credit scores need to be in the 700 range. You need to have verifiable income and cash reserves in addition to your down payment and closing costs.

You could run into underwriting problems if you're self-employed, as W-2 income is much easier to verify. Other hurdles are lapses in employment and owning a lot of property. Some lenders won't lend to buyers who have more than three or four residential properties.

If you're buying a new home before selling your current home, you'll need to have 30 percent equity in your current home. This needs to be verified by the lender's appraiser. Also, the lender will want to see a copy of the cashed check from the tenant for the first month's rent to verify rental income if needed to qualify.

THE CLOSING: Because of the risk factor, the lender may want you to have a large cash reserve. Your retirement account counts toward this."

Dian Hymer is a real estate broker with more than 30 years' experience and is a nationally syndicated real estate columnist and author.

Home Affordable Refinance Program (HARP)

The industry’s four largest mortgage servicers all say they will be taking part in the revamped Home Affordable Refinance Program (HARP).

Bank of America, Chase, Citigroup, and Wells Fargo have each expressed their support of the program and the changes that will allow more underwater homeowners to refinance at today’s lower interest rates.

Government officials expect the program’s revisions – particularly the GSEs’ waiver on representations and warranties – to increase competition for mortgage refinancing.
An executive with JPMorgan Chase told the company’s investors this week that HARP 2.0 will facilitate “cross-servicing refinancing” because with the rep and warranty waiver, the new lender is not required to assume responsibility for underwriting deficiencies that may have occurred with the original loan.

Chase explains that HARP may be used to replace an adjustable-rate or interest-only loan with a standard fixed interest rate loan, and typically reduces the borrower’s monthly payment.
Frank Bisignano, CEO of mortgage banking at Chase, estimates that with the new HARP guidelines, thousands of Chase customers could lower their mortgage payments by an average of $2,500 a year.
Citi said in an emailed statement that it “supports the program and expects to participate.”
Wells Fargo, likewise, said in a statement that it “welcomes the addition of the new HARP features.”

Veronica Clemons, a spokesperson for Wells Fargo Home Mortgage, says the company is waiting for specific guidelines and requirements from Fannie Mae and Freddie Mac in order to put the changes into practice.

She adds that once the company’s mortgage servicing team has the guidelines in hand, “it will take us some time – depending on the complexity of the guidelines – to make the necessary systems changes to begin offering the new enhancements to our customers.”

The GSEs’ regulator, the Federal Housing Finance Agency (FHFA), says Fannie and Freddie plan to issue guidance with operational details about the HARP changes by November 15th.

“Since industry participation in HARP is not mandatory, implementation schedules will vary as individual lenders, mortgage insurers, and other market participants modify their processes,” FHFA said.

Bank of America says it will participate in the enhanced Home Affordable Refinance Program announced by the administration, and it expects the new guidelines and eligibility criteria to go into effect after December 1st.

“Despite ongoing economic challenges, nearly 90 percent of our customers remain current on their mortgage,” BofA spokesperson Rick Simon said. “HARP helps these homeowners who remain current on their mortgage with options to lower their monthly payment when, otherwise, conventional funding options are limited.”

The GSEs have removed the 125 percent loan-to-value (LTV) cap under the program. Now any borrower with an LTV ratio above 80 percent is eligible for a HARP refinance, as long as the loan was sold to Fannie or Freddie prior to May 31, 2009, and the borrower is not delinquent on their payments.

Since HARP was launched in 2009, nearly 900,000 loans have been refinanced through the program. Government officials estimate that an additional 1 million homeowners will receive assistance under the new guidelines.

In its announcement of the program changes, FHFA encouraged borrowers to “contact their existing lender or any other mortgage lender offering HARP refinances.”

Copied from DSNews.com

Proposed new mortgage finance rules

You may have seen reports that the federal government is proposing new mortgage finance rules under which only home purchasers who can afford a minimum 20% down payment on a conventional loan would get a shot at the best interest rates and terms. It's true and here are the new guidelines:

Strict mandatory debt-to-income limits. Under the proposal, to get the best mortgage rates, you
would need to spend no more than 28% of your gross monthly income on housing-related expenses, and you couldn't have a total monthly household debt that exceeds 36% of your income. There would be no flexibility to go beyond these ceilings, unlike in today's marketplace in which Fannie Mae and Freddie Mac consider debt-to-income ratios along with other factors through their electronic underwriting systems. At the moment, Freddie Mac has an overall debt ratio limit of 45% of an applicant's stable monthly income.

To refinance your existing mortgage and replace it with one carrying the best interest rate, you'd need no less than a 25% equity stake in your house to qualify. If you sought to take any additional cash through a refinance, you would need 30% equity. Today's requirements are usually not as strict.

Pristine credit standards. For example, if you were 60 days late on any credit account during the previous 24 months, you would be ineligible for a mortgage at the best terms.
These proposals were released at the end of March by banking, securities, and housing regulators, along with the Department of Housing and Urban Development. The agencies were required by the 2010 financial reform legislation to come up with new standards for low-risk conventional mortgages. Under the law, loans that do not meet these strict tests will be pushed into a less-favored, higher-cost category. Banks would need to set aside 5% of loan balances in reserves to cover possible losses from defaults. This extra capital cost would inevitably be passed on to consumers.

While markets like Palo Alto can bear price increases, multiple offers, and a healthy pace of sales, there are several other markets throughout the Bay Area that cannot. In real estate, it is all relative. Each sale needs just one seller and one buyer.

The value is determined by who is selling, the profile and capability of the buyer, the support of the lender, the type of real estate you are buying or selling, inventory, days on the market of the competition, list / sales price of past sales, and whether you are in a negotiating situation or a competitive world fighting against all cash multiple offers. The key to navigating all of this is education. You need to know what market you are selling or buying in and what will it take to get the house sold or to buy one. The rules are not only different in different areas, but they can also change daily based on what is selling and at what price point. Additionally, the media confuses us even more. ZIllow will tell us that home prices fell 3% in the first quarter, the steepest decline since 2008, and Fiserv Inc. is predicting home values still have 5-10% more to decline. Yet, this is not what homebuyers who are trying to buy a home in Palo Alto or the Sunset are experiencing.

So, what does all of this mean? What we can say is that what should be is sometimes, what seems logical is sometimes, and what can be often is just because it can be. We call this latter the emotional approach to value. There are no set rules and the journey is often not the one we expected. In the end, buy in a good location, take out a conservative loan, and wait 5
years. From Palo Alto to Novato, real estate will reward you.