Straight Talk About Real Estate

“We want to buy your property with cash. You will have the money in your hands in 10 days.”

I got one of these letters. To find out how it works, I called the number and asked them. The person told me if after doing a title search they decide they want to buy my property, they will pay me 60% of the appraised value in cash.

They do the title search to make sure the house is sellable. If there are too many liens, a cloud on the title, or anything suspicious, I am sure they will not want to buy it. But if the property is clean with nothing “strange” going on, why would I want to sell my house 40% below market? Even if I am hard up for money, I can get a hard money loan, sell my house quickly on the open market by listing it 20% below market. I will still come out ahead.

A caution about these unsolicated offers: Some may not even have any intention to buy even at 40% discount. They ask you for information to do the title search and use the information for fraud. So do not sign anything or give out any information without looking at every word, every small print. When in doubt, and if seems too good to be true, use your common sense and throw those purchase offer letters away.

You may have heard that the median home price in California dropped. The median price of a home in September was $544,000, down more than 4 percent from August 2005. No, it’s not a slow leak in the bubble.

“The September median home price compared with August has fallen every year since 1993, and in 20 of the last 26 years,” said California Associaton of Realtors. President Jim Hamilton. “This year is no exception and is part of the seasonal shift to an off-peak period in the real estate market as we approach year’s end.

“Despite the seasonal slow down for the market as a whole, the median price in the High Desert, Riverside/San Bernardino, Santa Barbara South Coast and San Luis Obispo regions hit record highs last month,” he said.

We will wait to see what happens in March when peak season hits again.

If you are willing to pay the price the seller is asking for, or on the selling side, if the buyer is willing to pay the price you are asking for, you have a deal, right?

Price is not the only consideration when you make an offer or accept an offer to purchase.

Here are other issues you need to consider:

1. How long is the escrow period? What if the buyer need to move in quickly, but the seller is not ready to move out?
2. What repairs are the seller willing to make? Is he paying for all the repairs of the termite report? How about any other defects?
3. Is the sale contingent on the buyer’s sale of another house?
4. After closing escrow, is the seller allow a few more days to move?
…and much more…

The official purchase contract from the California Association of Realtors is 10 pages long, detailing all the terms.
If you are thinking of buying a property without an agent, make sure you cover all the bases.

Yes, we are still seeing multiple offers.

There is a lack of inventory of decently-priced homes on the market and buyers are waiting to make offers within reason. Houses that sit on the market most likely belong to greedy sellers, who thinks they can sell their home 20% above the last one sold in their neighborhood. They need to come back to earth; this kind of overnight appreciation is not happening anymore.

The way to price a home now is to see what the last home in your neighborhood sold for. The price tag on your home should be in the range of the same price to 5% higher, depending on condtions and amenities. There are always exceptions to this guideline of course, but this will get you a this would put your home at a decent price that will draw multiple offers.

Today’s rate in my market area of Southern California:

30 year conforming - 6%
15 year conforming - 5.75%

30-year rates have been below 6% since last March. So we see interest rates are inching up.
Analysts say they expect housing to slow next year under the impact of rising interest rates.
On the other hand,

The Commerce Department reported Wednesday that construction of new homes and apartments rose by 3.4 percent last month to a seasonally adjusted annual rate of 2.11 million units, the fastest pace since last February. Analysts had been forecasting that housing construction would decline by 1.7 percent in September, believing that increases in mortgage rates would finally start to cool the red-hot housing market. (Associated Press)

Who has a crystal ball? Only in hindsight can we be accurate in our analysis of the housing market.

Not if you are looking at statistics.

Pending home sales have risen to a record level, according to the National Association of Realtors®.

The Pending Home Sales Index, based on contracts signed in August, 2005 rose 3.2 percent to a reading of 129.5, and is 4.7 percent higher than August 2004. The previous record was 128.1 in October 2004.

The index is derived from pending sales of existing homes. A sale is described as pending when the contract has been signed but the transaction has not been finalized. In regions where escrow is used, such as in my area, we would say the property is escrow but not yet closed. Escrow typically close within one or two months of signing the contract.

Read more.

According to the California Association of Realtors:

$568,890 - California median home price in August, 2005
14 percent - Percentage of people who can afford a median price home in California in August, 2005

Santa Barbara South Coast - Region in California with the highest median home price in August, 2005: $1,301,000
High Desert - Region in California with the lowest median home price in August, 2005: $305,700

Statistics don’t tell you everything. We just sold a townhouse for $295,000. So do not be discouraged by the numbers! Get into the market and be a player.

According to the National Association of Realtors, vacation home buyers are a median age of 55, while the typical primary home buyer is 39 years old. Most want a home within 200 miles of their primary residence. Primary home buyers are looking for curb appeal, good school system, and proximity to work but vacation home buyers focus on amenities, such as recreation opportunities, climate, and convenience.

You may think most vacation homes are resort-like get-aways. However, a city condo may be a suitable vacation home for those who live in the suburbs in the boonies. Having a condo in the city allows them to enjoy the entertainment and excitement, and to visit friends who live in the city, rather like an adult retreat.

Sound tempting? Start looking into areas that will suit your fancy.

Another benefit of using a mortgage broker is, he only gets paid when he closes the loan. So, he is very motivated to get a lender that will approve your loan. So if your qualifications are marginal, get a good mortgage broker to work for you. If there is a lender out there who will give you a loan, a hungry broker will find it. A good broker have established relationships with lenders and investors, and they will know where to find a loan suitable for you.

Conforming loan limits are:

one unit: $359,650
two units: $460,400
three units: $556,500
four units: $691,600

This means when you are financing a property, in order to obtain conforming loan rates, your loan amount cannot exceed the above.

If your loan amount exceeds the limits, your loan will go into the “nonconforming” or “jumbo” catagory, which means your interest rates will probably be higher.

Any property over four units has to be financed with a commercial loan.

So when choosing a property to buy, first check out what kind of financing you can get on it. It will make a big difference in your cashflow.