Elizabeth Watts-Russell’s Blog

Today marks the first day of Fall.  The dictionary definition of Fall is “a time of full maturity, esp. the late stages of full maturity or, sometimes, the early stages of decline: to be in the autumn of one’s life.”  As all the financial behemoths come tumbling down, the backlash from rabid indiscriminate mortgage underwriting, the real estate market is experiencing a massive jolt before the lull.  The long period of rebooting the market has been going through nearly needed this dramatic phenomenon with any luck in the direction of a system restore. 

The valiant rescue efforts by the Fed though both pesky for taxpayers yet critical to the ultimate salvation of the nation’s broad economy are regrettably the only solution deemed practicable by the genius of the establishment. It is imperative that the same genius demonstrates that white crime does not pay as the already saddled taxpayer is caught between a rock and a hard place.  It should be as aggressive in punishing the multi-level perpetrators of this unprecedented economic disgrace as the Treasury Department has been quick to earmarking up to $700 billion to purchase troubled mortgage-related assets.  As someone aptly put it – “No golden parachutes; only golden handcuffs.” 

If you bought your home within the last two to three years, it is likely that your current assessed property value — the basis for your property taxes — is higher than the current market value of your home. In California, the reassessment every year is an automatic increase of 2 percent per Proposition 13. It is not based on an actual reevaluation of fair market value based on current market conditions.  If you disagree with value established by the Assessor, you can appeal that value to the Assessment Appeals Boards which is now accepting applications for changed assessment for 2008/2009.  File an Application for Changed Assessment 2008/09 form with the Assessor’s Office.  Filing dates are July 2 to November 30, 2008 for all real and personal property assessments.

How do you figure out how much your property is worth presently?  Visit the Best Real Estate Report to get your property value.  Another avenue is to call your Realtor to give you a fair market value based on current comparables.  Or you may visit various real estate sites for an ‘estimate’ on your home value.

Beware of unscrupulous entities offering their services to handle this matter for you for a fee.  They’re sending out official looking letters claiming they can help you get a big tax break.  You can handle the application completely on your own. There is absolutely no need for intermediaries.  Just go to this link for Property Assessment Appeals and you will have all the information and the downloadable form you need. 

Attention, bottom shoppers! It is a Buyers’ Market, not a Waiters’ Market!

It is ironic that when the market slows and home buyers are in an enviable position to negotiate, they lose the urgency to seize their opportunities. They are sitting on the sideline waiting for housing prices and interest rates to decline further before they buy.  It’s easy to call a bottom to the housing slump. The tough part is getting the timing right. Unfortunately, there’s no crystal ball to consult.  No one knows when the market hits bottom until it begins a sustained upward turn and you can look back and actually see bottom.  Waiting for the absolute bottom to hit before buying puts you at risk of missing it and getting caught up in a market on the upswing.  There is one absolute certainty — the market will come back up, yes, even in California which has been taking a beating. Does anybody really believe that California won’t bounce back, and with a vengeance?  True, prices have not hit bottom yet - but that doesn’t mean that you can’t get a great deal now.

The house you buy today will more than likely be worth less next year. That could get you thinking about trying to time the bottom. Resist. It’s harder to do than you think, and this is the best buyers have had it in two decades, with inventories up and mortgage rates low. 

Don’t know where to begin looking for your new home?  Get in-depth reports on any neighborhood here. 

J.D. Power and Associates Reports:

Among Home Buyers, Keller Williams Ranks Highest in Customer Satisfaction With Real Estate Companies in Inaugural Study Despite Popularity of Online Home Buying and Selling Tools, Real Estate Agents are Key to Customer Satisfaction 

WESTLAKE VILLAGE, Calif., July 23, 2008 /PRNewswire via COMTEX/ – Keller Williams ranks highest among real estate companies in satisfying home buyers, according to the J.D. Power and Associates 2008 Home Buyer/Seller Study(SM) released today. 

The inaugural study measures customer satisfaction of home buyers and sellers with the largest national real estate firms. Overall satisfaction is determined by examining three factors for the home-buying experience: agent (65%); office (21%); and services (13%).In the home buyer segment, Keller Williams achieves a score of 831 on a 1,000-point scale, and receives highest ratings from customers in all three factors. 

“When buying a home, customers particularly appreciate agent professionalism, responsiveness to calls and e-mails and the agent’s skill in locating and showing properties in the appropriate price range — all areas in which Keller Williams excels,” said Jim Howland, senior director of the real estate and construction practice at J.D. Power and Associates.

“Although the Internet provides home buyers and sellers with the ability to perform some essential tasks — such as listing a home for sale or researching a neighborhood in which to purchase a home, it  still does not replace the importance of a good real estate agent,” said Howland. “Particularly in an uncertain real estate market, professional advice from agents can be especially valuable to buyers and sellers. The knowledge and expertise provided by experienced agents is an important benefit of using a full-service real estate company.” 

On average, home buyers were shown approximately 13 homes before making a purchase.  Home sellers report that, on average, their home was shown approximately 11 times and approximately five open houses were conducted before the sale occurred. 

The 2008 Home Buyer/Seller Study includes 3,670 evaluations from 3,205 respondents who bought or sold a home between April 2007 and June 2008.

Deciding on where and when to buy to get the best value for your investment?  Go to Best Real Estate Report.

At my recent open houses, I have come across quite a number of buyers who are encouraged by the fact that it has remained a buyer’s market but have become particularly apprehensive about obtaining credit. 

While each day seems to bring more bad housing-related news, there is still money available at reasonable rates to finance the purchase of a home or refinance the loan on an existing home — for the right borrowers. Lending institutions have reacted radically to the colossal sub-prime debacle by imposing stricter underwriting criteria and extra fees.  More lenders are no longer offering loans that exceed 90% of the appraised value of the home.  So how does one get credit these days?  A 10-20% down payment, a FICO score of at least 680 but preferably 750 or higher, and full documentation of income and cash you have in the bank.  It is critical you shop around for the best rates. Even local community banks have started to offer competitive rates especially for non-conforming jumbo loans. Credit may be tightened, but lenders are still happy to originate a mortgage loan to those who qualify.  Banks still need to make loans to make money.

The bottom line is mortgage capital is still definitely available despite current insecurities with Fannie Mae and Freddie Mac and over the recent FDIC rescue of IndyMac. Owning a home still provides lucrative long-term value if you are in it for the long haul i.e. up to five years or more. Qualified home buyers certainly have remarkable deals to be had right now.

For more information on mortgage rates, click on Mortgage 101.

David Reed, a mortgage banker with nearly 20 years’ of retail lending experience, author and columnist for newspapers and magazines throughout the country,  has written ten books on real estate finance over the years.  He shares his insights on seller financing and how it can be utilized as a “closer” for sales where the buyer is credit-worthy but is unable to get lender financing. 

Owner financing has been a popular practice in previous real estate downturns. Current market conditions and upheavals in the mortgage industry have given rise to a new-found interest in this idea. If you own your property outright, have a need to sell in a soft market and are interested in converting your sold home into an investment that yields returns, owner financing may be a option worth exploring.

Successful owner financing means that you, the owner of the property, get to widen the potential pool of home buyers by offering to finance the transaction. And since private lending, where you act as the mortgage lender, tends to offer higher than standard interest rates to offset risks, you can also enjoy a nice return on the home loan. Due diligence is the key to successful owner financing. This is not intended as a means to provide financing for those who have damaged credit, little or no income or some other “loan of last resort” characteristic. 

So who is this ideal candidate and how do you, the owner, evaluate such a proposition?Your ideal candidate is someone who has excellent credit but for some reason, lenders aren’t using all or part of the buyer’s income.  For instance, someone that has been an attorney for a legal firm for several years and just last year started their own practice or an experienced mechanic who ventures out on his own to open up his own shop. Lenders like to see two years’ worth of self employment when evaluating a loan application.  You’ll need to check the buyer’s credit and you can do so by getting written permission to pull a credit report.  Or, you can log on together to www.annualcreditreport.com and print off a current report at no charge.  Have the prospect provide you with three months most recent bank statements, personal and business, to show cash flow. To verify employment, dial “411” and ask for the phone number for that person’s business and call the office. 

You can only hold a note on a property that is free and clear.  Any transaction where title changes hands will trigger the “due on sale” clause inserted in mortgage loans.

Finally, and most importantly, get a substantial down payment.  Anything that is 20 percent down indicates that the buyer is serious. Most owner financing arrangements are done on two to three year balloon notes. The idea is that your non-qualifying buyer will have time to establish a track record with their earnings and refinance with a traditional lender. If the market is slowing down the sale of your home, discuss the possibility of adding owner financing to your listing with your agent.

Amazing Real Estate Reports

A recent survey and a rate increase could mean more competition for homes. Recent indication is that first time home buyers are getting tired of sitting on the sidelines. According to a recent online poll taken by the National Apartment Association, 17 percent of renters plan to make the jump to home ownership in the next year; 41 percent of the 2,041 respondents planned to be home owners within two years. Only 31 percent planned to still be paying rent five years from now.

Another factor that could very soon contribute to an increase in home buying could be rising mortgage costs. Fixed-rate mortgage rates rose to 6.32 percent, the highest it has been since October. After months of aggressively dropping interest rates, many lenders are worried that the Fed will be forced to raise rates back up. As interest rates rise, so do mortgage rates. According to a press release on freddiemac.com, Frank Nothaft, Freddie Mac vice president and chief economist said that, “Mortgage rates jumped this week after a number of Federal Reserve officials, most notably Chairman [Ben] Bernanke and Vice Chair [Donald] Kohn, expressed concern over a threat of inflation.” We may very well be seeing the beginning of the end of the super-low mortgage and potential buyers may realize that with rising rates, now may be the time to jump in. Nothaft added, “Moreover, pending home sales for April unexpectedly rose by 6.3% and mortgage applications for home purchases … were also up last week.”

To check on current interest rates, click here.

Most buyers today equate foreclosures with “bargain”.  On the surface, it sounds like a no brainer.  However, buying homes in foreclosure and already bank-owned properties (REO’s) can be not only daunting but can also spell financial disaster.  Many owners in the process of foreclosure are under tremendous duress and have been known to be hostile to hovering buyers.  We’ve all heard about how many homes have been seriously trashed by owners prior to the bank taking over. The houses may be in ramshackle condition, requiring a great deal of work. You can get a property way below market value but then have to spend money to bring it up to market value. The bank-owned homes that are priced very low often need so much work that the cost of the repairs is more than the value of the home after the repairs are done. Getting these homes inspected is a challenge because often the utilities have been turned off by the bank. 

Bank asset managers who handle the sale of REO’s are so bogged down by the sheer volume of foreclosures they are charged with that they are excruciating slow to respond to offers causing wearisome delays to find out if the offer was accepted.  In addition, they have no incentive to expedite the sale because they do not receive commissions.

On the other hand, some foreclosure properties can sell quickly, some after multiple offers, so buyers must show solid proof of loan approval from their lenders. Otherwise, they’re swiftly on to the next customer. Buyers should go through painstaking research to ensure that the home does not have builder liens and back taxes owed — for which a buyer becomes liable.

The best bargain in real estate isn’t a foreclosure! It’s the house for sale next to the foreclosure that’s priced low because of the harm done to the local market by all the foreclosed properties in the area.

I am offering a complimentary copy of the book, “Your First Home: the Proven Path to Home Ownership”, packed with inspiring stories and the wisdom of thousands of successful first-time home buyers, it’s a must-read for anyone aspiring to buy a home. It educates readers of the home ownership process in eight simple steps. Click here for your copy.

“What do you think about rates … should I lock in now or wait to see if they fall further?” Think I’ve been asked that a time or two over the past 18 years? You better believe it.  It’s a good question—one that goes through every single buyer’s head at some stage. 

A quoted interest rate is no good unless you’ve confirmed, in writing, that your loan is indeed “locked,” or guaranteed for a designated period of time. You need to be proactive with your locked rate as well and don’t assume that your loan officer already locked you in. In fact, your loan officer shouldn’t lock in your rate without your specific instructions.

If it was locked in and rates went down you’d be pretty mad, wouldn’t you?While neither real estate agents nor loan officers are in the business of predicting the future, it’s still possible to make a prudent choice in the face of uncertainty. Would you rather lock in your rate and watch rates fall or not lock in your rate and see rates go up?

If you decided to lock and rates go down, you’ve secured the market rate that you were happy with. But if rates went up and you didn’t lock, you’d be paying for that mistake for the rest of the loan.There is an even worse possible scenario: After not locking in your rate, rates shoot up and you no longer qualify for the loan. So it’s important to ask yourself:  “Which way would I rather be wrong?”

If you are comfortable with the rate you’ve been quoted, talk to your real estate agent about the possible consequences of waiting to lock it in.

Written by David Reed, author of Mortgage 101 and Mortgage Confidential.

June is National Homeownership Month!  At the core of this celebration is the “American Dream”, home ownership.  It’s time to pick up the pieces  from the countless foreclosures that have swept many parts of the nation, the scores of reckless buyers who were way in over their heads by biting more than they can chew, and the unscrupulous direct lenders and mortgage houses who preyed on the genuinely trusting  buyers who now have lost their lifetime earnings. 

Government initiatives have been reactive with programs that so far have not kept pace with the demand of those in dire need, and have been sluggish in prosecuting those who criminally gained from the mass slaughter. 

Proactive governmental oversight is desperately needed to police an industry that is easy quarry to the corrupt. Fiscal responsibility should be exercised by individuals. The level of literacy on housing and finance should be raised with various educational campaigns conducted by non-self-serving entities and institutions.

The road to the “American Dream” of homeownership should be paved with incentives, and regulations that purge the undesirable elements.