Why is this happening now?

1.) Hope! Even the smallest signs that the economy and jobs are recovering, gives people a reason to consider making a move. The smallest positive sign makes buyers realize this may be the time to buy. Not to mention Warren Buffet spoke and said now was the time to buy. : )

2.) Low inventory. Bottom of the market (six months ago), keeps regular equity sellers off the market (buy low – sell high mentality) and therefore the only sellers on the market are …BANKS and motivated private sellers. Banks in the form of short sales (lender must approve sale) or REO/bank owned/foreclosure properties and private sellers in the form of relocation and “I’m not going to wait any longer to get the bigger/better house I want” or “I am not going to wait any longer to move on and retire!”.

A brief side step on this topic of “deals” and short sales and bank owned properties. The banks have already taken their losses. We the taxpayers bailed them out of their loss. Now, it is upside time. Most banks are completing full appraisals on short sales and REOs. They know the value. They also know, the market is starting to improve in certain areas (Silicon Valley being one). Therefore, they are countering buyers more often than not and only pricing below market to create a frenzy.

If you are an REO or short sale real estate agent, presenting the best offer out of 10 has a better chance of acceptance than presenting one low ball offer. REO and short sale agents business model is based on volume. They do not have time to keep a home on the market forever. Also, they have no patience for agents and buyers that can follow their rules. If the offer requirement states get a pre-approval through their lender – do so. If their requirement is show a proof of funds to close escrow – do so. If you don’t want to do so, don’t make an offer or don’t assume the agent will place your offer at the top of the pile. The truth sometimes hurts. So recognize the pricing strategy in the market place and become savvy about average price for the neighborhoods you are looking at. If the home is priced 2-10% under market there is a reason why. Oh, by the way, banks do not care what Zillow says the value is for a home. : )

3.) Low interest rates hovering around 4%, homes, sales prices in the bay area being pretty much back to 1998-2000 prices (pre-boom), low inventory particularly in highly desired areas and/or great school score neighborhoods, and you have the complete making of a hot market.

According to Santa Clara County Association of Realtors “re-sale homes continued to rise in April, gaining 3.4% from March, and up 11.2% year-over-year. This is the 4th month in a row home sales have been higher than the year before.”

If you are a buyer, why should you buy now? It is most likely you missed the bottom of the market and therefore you have to decide why you would wait any longer? It is pretty definitive rents will be going up. All indications (cyclic market) interest rates will go up over the next two years. Home prices are going up (slowly in some areas – faster in others). Palo Alto, Mountain View, and Cupertino are all reporting complete rebound in average sales price. What they lost between May 2007 and May 2010 has been recovered and climbing. If you want great schools, be ready to compete and the more money down the better. If you want good schools, be willing to do a little repairs/updates and you can find a solid deal in Blossom Valley, Berryessa, and areas of Morgan Hill. If you want an investment property look to East San Jose and Gilroy. Condos/townhomes have fewer choices because of litigation and non FHA ability in most newer developments. Look to older, stable complexes close to tech for good value.

If you are a seller, why should sell now? The biggest reason to sell now is that you want to buy a bigger/better home in the bay area. If you price your home competitively, you can reap the benefits of low inventory and see multiple offers. The more your home is “Move in ready!’ the better your chances will be to create a frenzy. If you have outdated baths and kitchens, talk with me before completing major updates. Let’s make sure you only invest in items that will get the most return. If you need an updated valuation on your home let me know. Buyer’s have become very savvy about what a flip home means. They would prefer to buy from a seller who has taken care of the home and completed appropriate repairs and updates. Based on a recent article here are the top items to complete that give you the best return on your investment:

1. Cleaning and de-cluttering ($200 cost / $1,700 price increase / 872% ROI)

2. Home staging ($300 cost / $1,780 price increase / 586% ROI)

3. Lightening and brightening ($230 cost / $1,300 price increase / 572% ROI)

4. Landscaping ($320 cost / $1,500 price increase / 473% ROI)

5. Repairing plumbing ($385 cost / $1,250 price increase / 327% ROI)

Let me know how I can help you with your next real estate move!

Now for the numbers!

Sales Price to List and days on average to sale – by city – Detached/Condo/Thome

New listings over last 6 months by neighborhood in San Jose Single Family Detached

Average Sales Price last six months by City Santa Clara County – Detached/Condo/Thome

Average Sales Price by neighborhood last 12 months San Jose Single Family Detached

Average Days to Sale – and List Price to Sales Ratio – year to date Detached/Condo/Thome

Q. We’ve sold our house. We have 30 days rent back. We would like to ask for 4-5 months rent back extension due to the fact we have not bought a house yet. Our agent (seller’s agent) told us that the bank wont allow the buyers to rent out more than 30 days because this will ruin the buyers loan. But lots of our friends had stayed at their houses for 4-6 months after they closed the escrow. We were told that it can be done as long as both buyers and sellers agree. The bank should not be an issue.

Can seller rent back more than 30 days after close the escrow by law?

If there is a contract for rent back (and there should be) the buyer’s lender is privvy to it and can apply its own rules (each lender – potentially different rules). I have seen some lenders only allow a 30 day rent back and I have seen others only allow a 60 day rent back. Nothing more.

In past times, it was not as big of an issue but things have changed and if the borrower signed a loan document that states it is a primary residence, then the lender wants to see them occupy the property as their primary residence.

With all that said, you don’t know until you ask. If the buyer’s are in agreement, write it up and see if the lender says anything. I am not sure where you are in the process but if the loan is already approved it may delay the timeline for closing.

Got a real estate question? Talk to CJ!

Q. Campbell has evolved as an amazing small town, there are still quite a few Fixer Uppers out there and am wondering if now is a good time to invest a bit of sweat equity?

The answer will depend on the actual property. In general, Campbell is a good strong neighborhood. The return will depend on crunching the numbers. Make sure you obtain all the right inspections on the property you are interested in. In this market, many times the seller can be coaxed into paying for all the inspections. Once you know what the repairs are, touch base with a Realtor (or three) to find out the current market value of the home and neighborhood. Most investors look for properties they can get for 30-50% under market value.

Knowing the repairs needed will help you negotiate the price down to the “investment price”. If you are planning on renting the property, make sure you take a peek at Craigslist.org and local papers to see what rents are running. Add in 2-10% maintenance/management costs and make sure the rent can cover this with some additional cash flow. The CAP rate (http://en.wikipedia.org/wiki/Capitalization_rate) is what normally tells the investor whether or not this is a go-no-go. Many times, California properties become long term investments as the CAP rates tend to be pretty low.

Look for properties that have been on the market for a long time. The ones that have been noted on the MLS as pending and then back on the market tend to have motivated sellers. Getting your price may take patience, but it is a big key to getting your money back.

Finally, the cost of repairs depends on how much you can do yourself and how much you have to hire professionals. Be careful with items that require licensed contractors (electrical, room additions) as they will make a difference in what you can ask for in the end. Don’t cut corners with permits. It only bites in the end.

Got a real estate question? Talk to CJ!

1.) Home prices may fall even more! Yes, they may. When you make a stock purchase, you certainly buy with some understanding it may go up, down, up, and down over the course of ownership. The same with the home.  You don’t sell when its low and you hold until its high. Now that the “crash” has passed, do we really believe housing prices could fall another 10-40%? OK, maybe if the entire EURO fails. OK, maybe if the sky falls. But really, unless you plan on putting your money under a mattress (and even that has risks – rodents, fire…) every investment has risk. The real question is how do you reduce your risk? First, understand what you are buying. Much like buying a stock, review the history, check out what the professionals are saying about that market, look at competition, and with your real estate agent pull together some predictions. Know what you’re buying and set reasonable expectations on the holding of that investment. In spite of real estate history between 1992 and 2007, real estate is a “BUY AND HOLD” investment. Long term. Not forever, but not 2 years.

2.) I need a deal or my friends will think I am stupid!  Yes, they may.  There is a huge amount of pressure on any home buyer in this market because whether it is around the water cooler, over dinner, or sporting events, a buyer’s friend upon hearing you are shopping for a home will say, “What? No, don’t do that now!  What do you mean you are writing a full price offer?  You should be getting 10-20% below market!”  Really? Oh yes, I forgot, your friends spend time looking at Zillow and reading the web and believe they know everything about real estate anyone could possibly know.  I understand they mean well.  But I have to ask, do you also take their advice on buying stocks for gospel?  Do you call them before you buy a TV? Maybe you do.  Certainly buying a house in the Bay Area can not be compared to buying a TV but the point is really, know your own stuff.  Advice is nice but knowledge is power.  The best way to respond to the questions you may get from friends and family is to know why you are buying a home and then know the reasons why this is a good deal even if it isn’t 10-20% below market and you are writing a full price offer.  Make sure your real estate agent is helping you pull together this information and support. 

Why are you paying list price? Answer:  Because this is 1 of 1 houses in a good school district and this is the only one that has been updated and I am competing with 4 other buyers.  Why aren’t you buying a foreclosure? Answer: After pulling estimates together on the cost of repairs and remodeling needed, the 10% under market price was not real.  Why are you buying now?  Answer: Because I want a home not a rental.  Rents are projected to increase 4% this year alone!

3.) With all the maintenance of a home, it is better to rent!  Yes, there is maintenance.  If your landlord is completing maintenance (important point: IF), then you will also be paying for that maintenance in increasing rent over the years. You will also be helping to pay the landlord’s taxes.  You will also not be taking advantage of the current mortgage interest deduction (assumed to last for at least some period of time).  You will also not know when your landlord is taking your rent and not paying her/his mortgage and then suddenly you see a for sale sign in the yard or worse, a notice to vacate because the home has been foreclosed upon.  But more importantly, maintenance is a part of anything you own.  Your car needs oil changes but that does not prevent you from purchasing a car.  You can buy service packages that cover your oil changes.  You can also pay for gardeners and handy persons to help maintain the home.  You can also purchase a condo/town home or PUD (planned urban development) and pay a monthly HOA (home owners’ association) dues to maintain the exterior and the like so you don’t have to think about it.  Life requires maintenance. (relationships, cars, skills…)

4.) How do I know I am getting the best loan?  Great question.  Maybe even more importantly, how do you know when you aren’t getting the best loan?  First and foremost, do your home work about loans.  There is a great book called, Mortgage Confidential: What You Need to Know that Your Lender won’t tell you by David Reed.   Great book.  Easy read.  Know the different products and decision points about how to decide on a loan product.  There is not just one product.  Like finding a deal in real estate, you need, must, find a professional that you can trust.  The loan products available are available to almost anyone completing loans.  Whether you work with a broker or a direct lender (advantages and disadvantages to both – read the book), find someone that can review your specific situation, your short and long term financial goals and offer the best options for you.  ALERT:  The lowest interest rate may not be the best product to meet your financial goals.  Seriously, it is not all about rate.  Understand this and you will be 95% closer to mastering an appropriate decision on what loan to choose.

5.) All real estate agents are liars and you can’t trust them!  Yes, the industry has its issues.  There are some really bad, bad agents out there.  I feel your pain.  However, there are those of us who went into the profession to make it better, to really help home owners and home buyers, and we really, really know our stuff.  We are professional, we return calls, we do our home work, we know the neighborhoods like the back of our hands, we see anywhere from 12-50 houses a week (a staggering 3000 homes a year), we drool over MLS (multiple listing data) until wee hours in the morning, and maybe most importantly we believe in the concept of home (read land) ownership.  Tangible dirt ownership.  Tangible memory producing home ownership.  Tangible legacy and generational asset potential.  If you don’t have an agent you feel you can trust, if you don’t believe they have your back; fire them.  Find an agent that supports your goals, places your best interest first, will answer every question with a smile, and addresses every concern before, during, and after the sale.

In summary, caution in any market is prudent and necessary. If you are considering buying a home there must be a reason, an understanding of the reason and a desire to support the  goal with true professionals and knowledge.  Knowledge is simply smart living.  If you have questions or concerns about buying a home contact me.  Whether you buy a home or not, don’t go without addressing your questions and concerns.

Q. We are looking to buy a home in good school districts and we have Cupertino/Fremont in mind.
1. Can some one explain the pros/cons of buying in Cupertino vs. Fremont?
2. With very good api scores in Fremont, why are the home prices way less than Cupertino area? Will they appreciate in the future? Also, I have noticed that town homes in Rivermark are expensive than SFR in Fremont good school areas. Is it because of the Rivermark homes being new vs Fremont homes being old? If so, Cupertino even though they are 40 year old homes they are still priced more than the Fremont homes. Why is that?

a) Is demand only factor which drives prices higher in Cupertino?
Demand is definitely a key component. Commute to tech hub of Apple, HP and others makes it a highly desirable area as well of course, recognized schools. Many relocation clients simply go to Cupertino first because if they are not familiar with the area, they know they have a short commute and great schools. IMHO, Cupertino itself is one of the best examples of urban sprawl in our area. Not very walkable, lots of franchise based food and retail (although more ethnic diverse restaurants are making headway) and triangulated by three highways. But, based on Apple’s recent decision to build a new campus I don’t see the desire for Cupertino going away anytime soon.

b) Are there any factors other than shorter commute and demand which differentiates East bay and peninsula
Prestige?
Commute to San Francisco (although that is a perception not reality because of East Side Bart). More greenery? East Hills are nice but brown most of the time. West Hills provide more green feel.

c) Any other major factors which differentiates peninsula from East Bay living
Both sides have some incredible public parks and open space which really make them great places to live. Proximity to other walkable hubs goes to the peninsula (Mtn View, Palo Alto, Stanford, Los Altos etc…) But big houses in more affordable ranges goes to the East Bay. Get away from the hustle and bustle could go to either peninsula or East Bay anytime you get up in the “hills”. I am not sure, but I believe the property taxes for Alameda County may be less than Santa Clara? Transfer taxes on purchase may vary (Fremont no transfer tax but many Santa Clara County cities do.) Also look at who is responsible for paying what in a closing transaction. Alameda – buyer pays escrow title (customary) whereas Santa Clara seller pays.

Got a real estate question? Talk to CJ!

Q. Is there any chance of selling a home in east San Jose (between Story and Tully of Mclaughlin) and getting anything for it?

There is no doubt the East Side is suffering in this market. There are a lot of short sales and foreclosures in the area you mention and that has had a huge effect on prices in the last 6 months. If you take a look at ForeclosureRadar.com you can see up to 20 houses around your location that are in pre-foreclosure or foreclosure. Unfortunately, foreclosures will be playing the biggest role in prices for next period of time.

Whether or not you can get the money you owe out of the home in this market is going to depend on the actual street and surrounding neighborhood, the presentation of the home, and of course -how much you owe. If you purchased your home after 2004 it will be difficult to get the monies back.

Most important is to sit down with a couple of Realtors and see how they value the house. The only way to know what your house is really worth is to talk to professionals in the area. I would be glad to help you evaluate the home.

Got a real estate question? Talk to CJ!

Q. I had a buyer ask for money to repair and or clean things on the day of the walk through. He threatened to stop the closing if I didn’t open my wallet. I called his bluff—I was sick of this guy as he’d already gotten a great deal—and the closing went through. My lawyer and realtor provided no real help other than to ask me if I was willing to let the deal fall through over a few hundred dollars. What should a realtor and lawyer really be doing to guide their client through this kind of scenario?

Recently, I represented a seller and the buyer kept coming back for more and more request after getting a great deal on the house. The buyer went as far as asking for “all debris to be cleaned out from under the crawl space”. Now the crawl space was not in horrible or even cluttered but had a couple of bits of plumbing supplies underneath one area.

At first when the buyer would come back with a request and my client would ask me what she should do , I presented the scenarios as most agents do. It is a buyer’s market, you have a million dollar deal on the table, do you want to risk that over a $150 of clean up?

However, after the 3rd non-standard request, I told my seller that she had every right to be frustrated and the buyer was being unreasonable and ultimately the decision was hers to say yes or no. The seller refused the addendum and the contract was canceled. From the moment the contract seemed stinky, I was on the phone keeping up with other parties that were interested in the house but had not brought an offer forward. I was able to secure a back up offer with 24 hours and closed the sale in the typical time with an AS IS sale. The final buyer was very reasonable with their request and this made the seller even more willing to do a couple of things.

In this market, I try to advise my clients to be as flexible as they can. But in the end, when you feel like the other party is taking advantage of you, I think it is best to stand your ground. If you have a motivated buyer, they won’t walk away. If you have a motivated seller, they will be reasonable with completing request.

With that said and as I told my client – It is her ultimate decision. If I would have advised her to walk away at the first request and not found another buyer for months, would that have been the best for her? It is one of those, pick your battle type situations.

I am sorry you didn’t feel your agent and lawyer did not support your take on the situation. To me that is a very stressful situation to be in and I pride myself on doing everything I can to reduce the stress of the transaction for my clients.

Congrats on closing. Obviously sticking to your guns was exactly what needed to happen in this situation.

Got a real estate question? Talk to CJ!

Q. How do you speed up a short sale? I am already pre-qualified to the price the seller is asking. What is the average waiting period on a short sale?

So many variables. I once had an approval from lender, and they WOULD NOT email/fax etc me the letter insisting that it would be coming in the mail to my client. It took 21 days to get the letter! Really!

On the other hand, I had another short sale approval letter in hand 2 days after the offer was presented.

The variables?
The buyer’s agent
The seller’ agent
The negotiator(s) (How many loans?)
The processor(s)
The investor(s)
The Mortgage Insurance company (if applicable)
The Escrow company
The method of communication (email/fax/equator/slow boat…)
The weather
The stars…

I am being sarcastic but there is no definitive answer. Even if it is the same lender as last time, I have no way of predicting. I simply stay on top of it and make sure it happens as fast as the list above allows it.

Got a real estate question? Talk to CJ!

Q. Do home prices generally rise in the spring months? If so, when is the best time to sell if you are not in a rush?

It is an ‘ole real estate tale to say that there are some months better to sell than others. Maybe there was a time when predictability ruled the market place but not anymore. I have looked at the stats for the last 5 years, the last 3 years and here are the market realities that effect home sales:

1.) Homes sell – when there are a lot of homes on the market (inventory high).
2.) Homes sell – when interest rates are low and more when rates are low AND inventory is high
3.) Homes sell – when government incentives create demand (tax incentives)

In regards to “seasonality” and prices, we are not seeing a trend consistent enough in this market to target a selling period. I would look at your specific neighborhood and run the numbers to see if I could find a trend but speaking generally about the San Jose area, it is not the time of the year but the market dynamics and inventory being sold that is driving average sales prices up or down.

More than the month, the drivers for best price are:
1.) Move in ready – no deferred maintenance and no big ticket repairs
2.) School districts – not only for family demand but for re-sale
3.) Consistency in the neighborhood – pride of ownership throughout the area

Bonus points for:
1.) Updated baths and kitchens
2.) Hardwood floors
3.) Copper plumbing and dual paned windows
4.) Open Floor plan
5.) Shortest commute to tech hub
6.) Convenience to shopping, parks,…coffee

Usually, holidays are a slow time simply because only those who have to sell will interrupt family time for showings. However, this season could go either way. Inventory is climbing, and interest rates are low. On the other hand, the global economy is in “sky is falling” mode, loan limits have taken out 6-14% of the Silicon Valley buying pool (depending on who you talk to), and many believe we may see a third dip.

In my humble opinion, we have only certain things within our control. How the home presents, how the home is priced, and how the home is marketed.

Got a real estate question? Talk to CJ!

1.) Who is the bank and/or lender?

Some banks are simply better at the short sale approval process than others.  Wells Fargo, Chase, and Bank of America have seemingly put the most effort into streamlining the process. Bank of America utilizes EQUATOR (an online transaction management system) and this has definitely helped in reducing the amount of duplicate requests for paperwork.  Wells Fargo and Chase have implemented fast track processes where they don’t require complete financial package documentation if the seller has already attempted a loan modification.

2.) Has the seller submitted all the paper work?

Some sellers are not at good at record keeping and many times, bank statements, pay stubs, and tax returns take time to locate and submit to the lender.  The lenders want all pages and sometimes sellers simply throw documents away.  Requesting back statements and copies of tax returns can take time.  Sellers may also have to provide copies of divorce decrees, alimony and child support statements and all of these documents must be updated at the time an offer is presented to the lender for approval and every 30 days after.

3.) How many loans and/or liens are there?

Every lien must be negotiated in a short sale.  This can be mortgages, HOA (Home Owner Association) dues, tax liens, personal tax liens, mechanics, and utility liens (like garbage or electric).  Liens are negotiated by position.  The senior lien holder gets to decide how much the junior lien holders will receive from the short sale.  This is where conflicts can arise.  Property tax liens take seniority over mortgages as do personal tax liens, child custody and the like.  Many lenders will not pay back HOA dues or penalties and attorney fees related to delinquent bills. The higher the number of liens, the harder and longer a short sale approval can be for all involved.

4.) Is/Are the mortgage(s) is a portfolio lien or an investor(s) held lien?

Many loans were made and then sold in bulk to 3rd party investors.  If the bank/lender actually kept the loan and did not sell it to another bank or investor, it is considered a portfolio loan.  If the loan is held by the lender you only need the lender management to agree to the short sale.  If there is an investor, state entity like Cal HFA, federal entities like Fannie Mae or Freddie Mac, or mortgage insurer involved, approvals can take longer.

5.) Has the lien been discharged?

If the lender or investor has already “written off” the loan as bad debt it is typically sold to a credit collection agency for pennies on the dollar.  Collection agencies are very common for HOA past due amounts.  Since the collection agency has paid for the debt based on a recovery amount in mind they can be challenging to negotiate with when it comes to short sales.

6.) Does the short sale seller qualify for HAFA?

HAFA is a great government program attempting to bring some standardization and incentive to the short sale process.  HAFA (Home Affordable Foreclosure Alternative) provides cash to the lender and the seller to complete a short sale but the program is voluntary.  Many of the big lenders like Bank of America have outsourced the HAFA files to third parties and unfortunately they are not always as organized and appropriately staffed to handle the volume.  Again, it is a voluntary program and investors do not have to accept the HAFA terms of a short sale.  Sometimes the question; Does it qualify as a HAFA short sale? – takes longer to obtain than the actual standard short sale approval.  However, it does provide a $3,000 relocation assistance to the seller and this can be very important to help sellers move out of the home they are losing.

7.) Are the real estate agents involved experienced, organized, diligent, communicative, and polite?

It is so very important the agents involved in a short sale are the very best professionals.  It takes solid experience to know which short sales are likely to succeed and which ones will not.  If the listing agent is not upfront about the sellers situation and poorly organized in the short sale package, the buyer can be waiting a long time simply to find out there is no deal.  Equally, if the buyer’s agent is encouraging buyers to write multiple offers with no real intent to work the deal, sellers can find themselves pulling all of it together for the lender only to find the buyer cancels before a short sale approval is issued.   The short sale process takes commitment from everyone involved to be successful.  Short sales make up nearly 30% of all homes for sale in the Bay Area and only 3 out of 10 actually close.  Ask your agent a lot of questions about their experience, their strategy, and their commitment to the short sale process before selling or buying a home.

8.) Is the buyer’s agent  setting proper expectations with AS IS, market value, and timeline?

Short sales are almost always AS IS.  Many buyers obviously do not want to invest in inspections before knowing their offer has been approved by the short sale lender.  However, an experienced real estate agent can help a buyer anticipate items like termite repairs, roof age, broken furnaces and the like before inspections are ever complete.  Do a thorough walk through of the home before writing an offer on a short sale and calculate a guesstimate on repairs.  Have a contractor walk through with you if possible.  Check light switches, flush toilets, turn on the furnace or AC, look for damaged wood and the like to get a good idea of repairs.  Make your offer based on the current market value minus repairs cost.  Take pictures, write it up and have the agent submit with your offer.  All good short sale agents should be supporting listing price/offer price with market activity, photos, and repair lists.   Nothing is more wasteful then to have a offer fall out because of repairs that could have been anticipated and written into the offer prior to submission to the lender for approval.

9.) How many humans are involved with the file?

People make mistakes, lose paperwork, make the wrong decisions and all can go to Hades in a hand basket. The volume of short sales is staggering with any of the major lenders.  Short sale agents that are good may have taken on too many short sales and can’t keep up with the volume of paper work and constant contact needed to take each sale to close. Fax machines are still in use by many of the lenders and we all know how it goes when faxing 25 pages and page 6 doesn’t make it.  Electronic faxes and files are helping but there are lost pages out there.  Departments don’t always talk to each other and I have seen homes foreclosed upon when the short sale approval was in process and even approved.  Short sale approval letters seem to come by slow boat and many times the anxiety of waiting can challenge the most zen-like person’s patience.  Some agents use 3rd party vendors to “manage” their short sales.  They charge the buyer or the buyer’s agent a fee to do this and I totally disagree with this practice.   A short sale listing agent can either pay the fee for shifting the work of phone calling everyday to someone else or handle the process themselves.  But charging the buyer or buyer’s agent is wrong in my book.  In my humble opinion, those who manage their own short sales are better and more motivated to make it happen and all incentives should be provided to keep the buyer committed to the process.

10.) How many months has the seller missed paying their mortgage?

This is a big one that is many times over looked.  Latest statistics tell us that the average home owner has lived in the home 375 days without making a payment before foreclosed upon.  The more payments missed, the less likely the short sale will be approved.  The more payments missed, the more steps are taken toward foreclosure.  Notice of Default and Notice of Trustee sales are legal actions taken against a homeowner in default.  Sometimes, the train has left the station and is there no way to stop the foreclosure.  Buyers and buyer’s agents should always find out which if any of these notices have been served and whether or not they have been placed on hold.  Some lenders will not approve a short sale within 20 days of a Trustee Sale.

There are many questions to ask when pursuing a short sale. Whether you are a buyer or seller considering a short sale, make sure your agent can give you the right information to make the right decision.  As a Certified Distressed Property Expert (CDPE), Certified Short Sale Negotiator (SSN), HAFA Certified Specialist (CHS), and an experienced, committed professional with success closing short sales transactions for sellers and buyers, I am here to answer any of your questions about the short sale process.  If you would like to talk about your options regarding the selling or purchasing of a short sale home, contact me for a no-obligation consultation.

Tracy Lee is also the founder of Dish Crawl, a wonderful food adventure where people collect and experience various tastings provided by local restaurants and chefs in a quasi flash mob fashion.  I have also attended several of the Dish Crawl adventures and have enjoyed each one.  Not only did I enjoy the wonderful food, but also the chance to meet new people while walking between food spots.  If you haven’t experienced Dish Crawl, check it out and join us next time!

Last night was Pitch Crawl and the concept was to bring together people with ideas and people with money and see what happens.  At the same time, having the opportunity to see new spaces in downtown San Jose and enjoying more great food offered by Tracy’s food partners.  We first began at the San Jose Tech Shop.  From the outside, I thought this was simply a bunch of work benches where people could come and tinker with their toys.  However, the tour showed me so much more.  They offer classes, they offer computers that you can design and print posters, wood working equipment, plastic mold injectors, CAD conversion systems, a machine shop, and even an area to pull out a motor of a car!  If you haven’t had a chance to see this space, stop by and take a tour.  There is no doubt one day you will be reading how the next great thing was started on one of these benches.

Next, we visited Next Space a collaborative work space located at the corner of 2nd and San Fernando Avenue.  Gretchen Baisa, hostess for the evening and Next Space member explained how Next Space worked with open space, private offices, and conference rooms available to members.  Fees vary for space needed and the concept and tag line is simply, “Working alone sucks”.  The concept provides a professional space with utilities, internet, etc and a group of entrepreneurs, free-lancers, consultants with a variety of experiences which creates an environment of support, networking, and a potential referral source.  The membership is growing rapidly and as a member you also have access to other Next Space spaces in Santa Cruz, San Francisco and anywhere else a Next Space  location is present.

Onward to the Irish Innovation Center on Santa Clara Street.  Another incredible space where connecting businesses in an open work space is blossoming. How can you argue with Gigabytes and Guinness, the name of the networking event held routinely at the center?  You can rent a desk, cube, office, or conference room.  Rates are reasonable and also provide you access to funding, legal, and human resource support.  This is an idea past due for the brilliant minds of Silicon Valley.

If you haven’t been downtown lately, check it out.  Not just the Christmas Park or the Shark Tank  but the restaurants like Morroco’s and Vino Vino, visit San Pedro Square Market and the entrepreneurial spots like The Tech Shop, Next Space, and the Irish Innovation Center.  Visit the San Jose Museum of Art, take a moment to sit in the pews of Saint Joseph Cathedral where Pope John Paul II is quoted, “Every city needs a soul if it is to become a home for human beings.” , walk around the campus of San Jose State and enjoy a cup of coffee at Philz coffee shop.   Tour the high rises; The 88 (my favorite), Axis, City Heights, and  then visit the Martin Luther King Library and ponder what you have seen.

Walking back to my car last night, I thought about downtown San Jose and how I have watched it grow.  In spite of these strange economic times, there is a palpable energy pushing up from the sidewalks, busting out of the corporate cubes; a force that is clearly determined to succeed.   Much like our small orchard valley history, this new generation believes in hard work and an attitude to change the world.  There are so many brilliant, beautiful people attracted to our valley, to our downtown, and San Jose is reaching out with open arms to provide them space.  Welcome.

But this is not simply an issue of value and square footage.  It can be a safety issue.  What may seem like simple updating regarding new electrical receptacles, newly re-plumbed baths with nice new tile, or more extravagant kitchen remodels can look good but have hidden issues.  I see this more and more with “flipped” foreclosures.  Investors comes in, applies granite to the kitchen, and new tile to the bath but disclosure indicate no permits and many times, no documentation the work was completed by a licensed contractor.

The debate goes on regarding the cost of permits for “simple” work but the rules are the rules and sometimes buyers are more concerned with “updated” than permitted work.  There are not enough inspectors to keep up with the number of foreclosed flips and many times non-permitted work has been a part of the house for several decades without any issues.  The obvious converted garage is not the only type of non-permitted work but commonly San Jose residents have made their homes larger without properly following easements, square footage to lot limitations, and many did not use licensed contractors.

If you are buying a house, you can find out about permits through the local municipalities building department.  Some cities in Santa Clara County have online searches and others require a written request.  Not all permits are online and sometimes you will need to go down to the building or planning office and request to see the plans or documents.  Plan to spend anywhere from 1 hour to a day depending on the nature of the building change.  Sometimes the online files are not clear on whether or not the permit was inspected and given final approval.  If it doesn’t have a final sign off, it is not a completed permit.  Ask questions and understand the impact to you as the new owner of the property.  Even if it didn’t effect value ten years ago, it may now, or may in the future.

Here is a list of links for permit searches in Santa Clara County. Also, don’t hesitate to ask your real estate agent to help you.

San Jose
Campbell
Santa Clara
Sunnyvale
Milpitas
Palo Alto
Los Gatos
Mountain View
Morgan Hill
Gilroy
Saratoga

It is now 2 ways past escrow. Since the neighbor does not want to sign the easement, the seller wants to move a portion of the driveway. This house is on a hill, with a steep driveway. We are concerned that if we move the driveway, then fire trucks or any delivery person will not be able to reach the house (the movers, with the existing curvature of the driveway could not reach the house). What are our options if we want to get out of this contract and still get our full deposit back? Thank you.

Answer:
1.) This issue is best resolved before close of escrow.  Understanding the cost, the implications, and possible solutions is critical to making a decision on whether or not to follow through with the purchase.  Since you have already move into the house and I assume some money has been exchanged it is best to resolve it instead of cancelling the deal.  Work it out with the seller to find an acceptable solution to all regarding the easement and/or the driveway.

2.) If a newly disclosed issue and its possible solutions effect the value perception of the property, this could be a solid enough reason to cancel and retain your deposit. However, the only way to be sure that you are not at risk for breach of contract is to consult with an attorney.

3.) If there may also be other methods of keeping the easement under adverse possession and certainly an attorney can help evaluation the situation to see if it applies in this case.  A true survey may be needed as well help from the chain of title via the title company used during the transaction to understand where exactly the property line resides and how it has transferred with either lot.

4.) If the previous owner wants to move drive way it would seem most appropriate to make sure it is a drive way that does not create safety hazards.

I would highly recommend you consult with a real estate attorney immediately before proceeding with close of escrow or canceling the contract.

HIGHLIGHTS:

For the general housing market of Silicon Valley and Central Coast:

The median price of existing single-family homes decreased to $510,000 down -1.0% vs Sep-11.
Existing single-family home sales decreased -13.9% from Sep-11 for a Oct-11 total of 1,722 sold units.
Condos decreased in price to $310,000 down -2.5% vs Sep-11.
Existing condo sales decreased -8.6% in Oct-11 over Sep-11 for a total of 489 sold units.

When you look at San Jose specifically:

San Jose Median Price = $485,000 which is up 2% when comparing October ’11 to Sept ’11
but down 2% when you compare October 2011 to October 2010.
Total volume of sales up 4% for October when compared to Oct 2010.

But San Jose Neighborhoods are the real deal:

Here is a pie graph showing neighborhoods by Sales Volume.  Fairly proportion to neighborhood size except Willow Glen.  Evergreen sales are up mainly due to Silver Creek average price. Total Dollar in Sales since July 2011:

Another graph -  More desired the neighborhood, the higher price and the lower the avg days on market (since July 2011):
Guess where the deals might be?

Finally- in preparation for holiday shopping – increasing inventory.  But remember, this time 2008, we had nearly 4700 home for sale.  (nearly 2x what we have now.)
Amazing how consistent total closed sales run.

I hope these numbers give you a quick glance of our market place.  If you have questions about specific neighborhoods, email CJ@TalkToCJ.com

You have probably heard the saying, “all real estate is local”.  Believe it or not, this is not simply a National Association of REALTOR® tag line.  I know, you don’t believe me.  But really, real estate is so very local you must understand the market neighborhood by neighborhood and more importantly, street by street.  Neighborhood boundaries don’t exactly follow zip code lines.  School boundaries do not follow neighborhood lines. All of those don’t follow generic San Jose reports.  To understand current conditions and/or even attempt to predict where a particular group of housing prices will go in the future, is extremely hyper local and can not be wrapped up into averages.  Speaking of averages, medians, and the like, the one statistical component that the real estate market predictions rarely include is standard deviation.  In my very humble opinion, this is where the rubber hits the road in regards to how a true real estate professional can help buyers and sellers understand the local market.  You need someone seeing homes come and go, understanding how many are distressed, how many are not, how many are positively effected by optimal commutes, high API school scores, pride of ownership, and local amenities to have a chance at predicting stabilization or appreciation of any home’s value.  A real local full-time professional can help you define the standard deviation related to any home’s value.

So with shadow inventory, I argue the information you are hearing and reading does not take into play neighborhood dynamics or more importantly the standard deviation related to the specific market of the home you might be looking to buy or sell.  Shadow inventory, simply defined, are the homes distressed not yet a part of the active real estate market.  They are the homes where the seller is not yet behind on their mortgage but soon will  be and they are the homes the lenders/investors are holding on to for various reasons and therefore have not become  a part of the active housing market.

How do we predict the impact of shadow inventory on a specific housing market? The ideal would be to identify all distressed homes and request the lenders to publish the homes within their portfolios with a projected release date to the open housing market.  Not easy to find this information.  Imagine the speculation that would come from such a report. However, we can get a general picture from looking at historical data from our very limited statistical resource tools offered by our very expensive local MLS board and see a pattern of predictions based on neighborhoods and zip codes with a sprinkling of lifestyle influences such as schools, jobs, and conveniences offered to predict the future housing depreciation or appreciation.  I am confident this idea will play out no matter what the result of the Greeks role in the European Union or who the president will be in 2013.

Two neighborhoods:

Cambrian Park, known for its high API scoring schools within the Union School District, reasonable commute to the technology hub of Mountain View and Palo Alto, and nestled in between the very desirable communities of Los Gatos and Willow Glen.  Highly desirable, highly likeable, and highly competitive when it comes to home sales.  Here is a chart indicating the year-to-date active and sold listings and the amount of distressed homes in this market both short sales and REO (foreclosures).   On average, 20% short sales and about 5% bank owned properties are actively on the market.  No definitive increasing trends and this is true even when I went back to late 2008.   It appears that REOs move fast in the Cambrian market which keeps the overall active percentage low.

(Blue-Active Pending Short Sales as % of whole, Maroon Sold Short Sales % of whole, Yellow – Active/Pending REOs as a % of whole, and Green – Sold REOs as a % of whole)

Click on the image to enlarge.

Alum Rock, known as the “East Side” of San Jose, not very well performing schools, extremely limited in jobs as well as commute opportunities to the tech hub, inconsistent pride of ownership, and one of the last neighborhood markets to see an increase during the boom years.  Crime rates are higher and shopping, dining, and entertainment are more inconvenient.  This market provided the last opportunities for lower income families to buy a home and unfortunately, many bought with no money down, many with adjustable rates, or negative amortization loan products.  Of course, these home owners where the first home owners to face trouble when the housing values began to fall.   Consistently, 50% on average of distressed homes sales occur in this neighborhood.  The highest rolling average since the bust of foreclosures and short sales.  Longest days on market, lowest average sales price, and many reasons to believe there is more to come.  If you take the simple statistic that only 7 out of 10 short sales close, this large percentage of short sales are very likely to feed the foreclosure pipeline for many months to come.  As market values come down, home owners that did not participate in “exotic” loan products see their home values drop so much that it no longer makes sense to pay on a home worth 50% less than they owe.  The snowball continues.

Click on the image to enlarge.

There is a logical component in predicting how shadow inventory will impact housing prices.  But what percentage of a local San Jose neighborhood market is at risk to shadow inventory?  If you are looking to purchase a home in Cambrian Park, with less that 20% of the homes sales being distressed sales, you can understand why prices are at less risk to go down.  There is actually more opportunity for the average home price to go up because of supply and demand.  As the market prices stabilize or go up even a small percentage, the risk of new distressed homes goes down as well.

For Alum Rock, look for a triple if not quadruple dip between now and 2015.   So many of these home owners bought with riskier loans, are most impacted by job loss, neighborhood housing values will absolutely be further damaged when the banks release any inventory they are holding simply because the distressed market is already such a large percentage of the zip code sales.   However, banks selling bulk REOs to investor could potentially stabilize the neighborhood faster but as a rental neighborhood, may not have a positive effect on appreciation.  Herein lies the standard deviation of housing statistics not discussed on the evening news.  Herein lies the truth to the statement all real estate is local.

What do you think?  Do you think rising interest rates will tip the scales and make all neighborhoods equal?  Do you think expunging shadow inventory in the current weaker zip codes like 95127 will set them up for stronger appreciation later?  Do you think the bottom will never come?  I would love to hear your comments.  Understanding how buyers and sellers see the market helps me understand what tools are best to help them in the buying or selling of their homes.  Oh, and just for the record, I like Alum Rock and believe more local involvement by city government to reduce crime and stronger neighborhood initiatives by long time residents could help turn this area around.  We need to keep this neighborhood an affordable, safe option that provides the best education as any student can obtain in Santa Clara County.

So now, some data to back all these ideas up.

From the LA Times report, “home prices are projected to turn around in 2012 — jumping 11.5% to $321,138 next year, then rising 10% more in 2013 to $353,411. The recovery is expected to run through 2017.”  Here are graphs they showed on their post regarding California Home Price Recovery.

From the California Association of Realtors Economist Leslie Appleton Young’s prediction for 2012, “The California median home price will increase 1.7 percent in 2012 to $296,000 in 2012, according to the forecast.  Following a double-digit increase in the median price in 2010, the median home price will decrease a projected 4 percent in 2011 to $291,000.”

According to The Economist Magazine’s writer Kari Smith, “My concern is over Owner’s Equivalent Rent. The data suggest to me that there is a shortage of housing in the United States. We should expect rents to begin rising in the near term. This will push up Owner’s Equivalent Rent which accounts for somewhere around 35% of core CPI.”

Interest rates are expected to begin creeping up between 0-.25% per month in 2012 according to the the November 2011 Federal Reserve Update.  If you have questions about a specific housing market around San Jose, contact me. If you have questions about real estate, ask me now via my online chat link to the right of this post.

How much are Santa Clara County transfer fees? There are fees related to the transfer the property and in Santa Clara County these are paid by the seller.  However San Jose, Mountain View, and Palo Alto also have a city transfer tax and this is typically split 50/50 by buyer and seller.  Other counties such as Santa Cruz, Contra Costa and Napa do not have city transfer fees.  Normally the transfer tax is calculated by multiplying the rate by sales price per $1000.

An example of  Transfer Tax:

A home with a $500,000 sales price in San Jose would have the seller paying $1.10 per $1000 or $550 for the county transfer tax.

The city transfer tax for this example would be split 50/50 by the buyer and seller and would be at a rate of $3.30 per $1,000 which would equal $825 each.

There are also document recording fees, courier fees, electronic copy fees and miscellaneous fees such as notary and FedEx normally adding up to less than $500.

Lender fees include the cost of completing the loan and can include points, processing, and document prep fees.  Extra fees paid can also include appraisal(s), credit reports, and certifications.   A point charged is normally considered an origination fee and represents 1% of the loan amount.  Buyers can pay points to help lower their annual percentage rate (APR).  Each lender and each type of loan can vary in cost and it is best to shop fees for different lenders.  However, the percentage rate of a loan varies mostly by point of time related to the “lock” and not the lender.  Why?  There are major players in the lending industry that set percentage rates for borrowing money.  These rates dictated by a point in time and for the most part, if there is a loan product out there offering 4.0% interest rate on any given hour of the day, almost any loan officer can obtain it.  So when trying to shop your loan product, shop the fees around that loan rate and the lenders services.  Do you want to compare loan products and fees? Here is a downloadable PDF to help you compare side by side loan products and related fees.

What is Mortgage Insurance? This is an insurance policy purchased by the lender on behalf of the borrower to protect the lender against a borrowers default.  This insurance typically has an upfront fee (which can be financed into the loan) and a monthly fee (charged as a part of the monthly house payment).  Mortgage insurance is in play for any home where the borrower is placing less than 20% down or utilizing an FHA loan.  Lenders consider any borrower placing less than 20% down a risk for default in a dynamic free market and therefore insure against default.  There are some lenders who will loan at 10% without a monthly MI but they charge an upfront MI.  Having to carry  mortgage insurance  is a common criticism of FHA loans.  All FHA loans, irregardless of the amount financed will require mortgage insurance; either upfront or monthly.  However, it makes logical sense if a borrower is only able to place 3.5% down it may very well be the only way to buy a home.  If you want to find out more about mortgage insurance check out local mortgage professional, Shashank Shekhar, blog posts on MI FAQs and FHA mortgage insurance qualifications.

Escrow fees charged by a neutral 3rd party to manage the transfer of title and money involved within the transaction.  In Santa Clara County , the seller pays for escrow fees and therefore reserves the right to choose with escrow company is used.  In contrast, Alameda County the buyer chooses and pays for escrow fees.  Most of the companies are only dollars off of each other on what they charge for services but buyer or seller can shop around if they want.   Escrow fees in general range from $800 – $1500 dollars per transaction.  It can vary depending on the sales price and type of sale involved.

Title fees charged to the buyer and seller to secure the title is free and clear of liens and is transferred with no other claims to the property.  This is an insurance policy to protect the seller in the transfer of title from seller to buyer.  A second policy is purchased by the buyer for the lender (unless the deal is all cash) to protect the lender’s collateral; the property.  Title insurance for the seller is paid by the seller and title insurance for the buyer or buyer’s lender is paid for by the buyer.  Policies are priced based on sales amount and loan amount.

HOA Fees can be charged when buying a condo, town home, or PUD (Planned Urban Development) home.  The Home Owner Association can charge for transfer fees, document preparation fees, and certifications.  A recent bill signed by Governor Jerry Brown limited the amount Home Owner Associations and related 3rd party vendors can charge buyers and sellers during the transfer of ownership.

Additional fees can come in form of repairs or inspections billed to escrow.  Some companies who complete inspections are willing to bill to escrow so that the seller pays out of proceeds or the buyer pays at closing.   For the most part the inspection companies will charge more to bill escrow and most real estate agents and loan officers prefer these fees stay out of the escrow to keep the purchase as clean as possible.  This is the same for repairs.  If the seller replaces the roof and doesn’t want to fork out cash until the deal closes, some companies will charge escrow and the seller can then pay out of the proceeds received from the sale at the time of closing.

It is important to understand your cost no matter which side of the deal you are on.  Commissions to the real estate agents are typically paid by the seller or in the case of a short sale the short sale lender(s).  Loan fees are based on your lender, if you don’t have one, find one and they can provide a good estimate on fees related to the loan you qualify for as a borrower. As a seller or buyer you can ask your real estate agent to prepare an estimated cost sheet.  Keep in mind, this is estimated.  Prorated items such as insurance, property taxes, and interest on the loan are determined by the closing date.  The buyer will initially pay a prorated property tax based on the seller’s rate and then receive a supplemental tax bill after the deal closes at the new rate.  For Santa Clara County we use 1.25% of sales price as an estimate for new property tax rates.

Buying a home can be a bit overwhelming to some and it is always best to consult with a professional in the local area to understand all your considerations.  If you have questions about closing costs or other real estate matters, contact me for a no-hassle, no-obligation consultation.

The HARP program has been around for awhile but one of the biggest limiting factors regarding its application is the loan to home value ratio could not be greater than 125%.  In other words as long as your home only lost 25% of its value in the last 4 years you could qualify.  Obviously, many home owners have lost more than 25% and some took out second mortgages that decreased their value up to 50%.  With the revised guidelines, there is no loan-to-value ratio limit.

To qualify for the program you must meet three basic requirements:

1. You must be current on your mortgage and have not been over 30 days late in the last year.
2. Your loan must have been initiated prior to May 31st, 2009
3. Your loan  must be backed by Fannie Mae or Freddie Mac

The biggest challenge to the program for Bay Area homeowners is few of the mortgages made prior to 2009 were backed by Fannie Mae and Freddie Mac.  You can determine whether or not your loan(s) is owned by Fannie Mae or owned by Freddie Mac by entering your loan account number on these web sites.  Also recognize this must be your primary residence and the program only replies to senior liens not home equity lines or second mortgages.  Also, recently maximum loan limits for the Bay Area were reduced from $729,750 to $629,500.  There are efforts to revert this back to the higher limits but the bill currently faces the House of Representatives and many do not believe it will pass.  This means your first loan can not exceed $629,500.  There are also alternative programs if your home is not owned by Fannie Mae or Freddie Mac to refinance or reduce your monthly house payments.

Also, items to consider when refinancing any loan.  You want to protect yourself by maintaining a non-recourse loan if possible.  Also make sure you understand the cost of refinancing any loan verses the benefit.  Finally, if you are behind on  your mortgage and have exhausted all possible solutions to refinancing  current loan(s) you may want to consider short selling the home to avoid foreclosure.  If you want to learn more about short sales or want to discuss your options with no obligation or cost contact me.