Michael Roberts' Blog -San Jose Homes, Real Estate and Houses for Sale

Buying a home means you need to understand your credit score better and how it weighs in and out of your favor. This is true In Los Gatos and the Bay Area, more than most, due to the high priced Real Estate here.  Investors know this and so should you.   What will a finance company consider when you make an offer on that Los Gatos foreclosure you want to buy?

With all the misguided information flying around about loan modifications understanding these myths will prevent some misteps.

“Many Americans hold mistaken beliefs about credit scores,” cautioned  Ethan Ewing, who heads the free online consumer portal at Bills.com. “Misinformation on television and in hearsay from friends and neighbors only compounds the problem.”

Here are the top 10 commonly held myths surrounding credit scores:

Myth #1: A credit score is a credit report. The credit report is a detailed listing of all debts and payments, going back throughout an individual’s entire payment history, Ewing explained. For each entry, it shows the creditor’s name, amount owed, the highest balance owed, the available credit, whether the account is open or closed (and who closed it), the number of late payments and whether the account is in default. A credit score is a number between 300 and 850 that is based on complex formulas incorporating all the data in the credit report.   Most homes for sale in Los Gatos yield many offers so, you need to have the best credit score. Read the rest of this entry »

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Last month BofA chose to work with REOtrans, a leading transaction vendor to the mortgage industry, to advance and streamline foreclosure solutions by reducing them all together.

They are working to move the short sale idea into the mainstream RE sale arena. This is great news no matter what side of the Real Estate market you find yourself standing in.

The traditional Short Sale process has led to immense frustration and outright anger, not only here in California, but throughout the nation for all parties involved. As a Real Estate professional, having to negotiate short sales on behalf of distressed homeowners, I have learned that many people charged with Short Sale approvals agree…the short sale process, as it is implemented now, is ridiculous even archaic.

B of A has been the penultimate banking institution in the United States for decades and it goes without saying their agreement to work with REOtrans is a window into Real Estate sales for the near term. Read the rest of this entry »

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In Part 1 of the series “Is My Agent Lying to Me?” I shared with you that both Realtor and Seller/Buyer (SB) asked themselves if they were being lied to.  If you are a first time buyer you were probably wondering why would the Realtor question the honesty of the Buyer/Seller’?

Have you found the voice in your head keeps asking, with an annoying little spear in it’s hand, “Is my agent lying to me?”  What do you think the agent’s experience might be with S/B? If their experiences have lacked a large dose of trust…maybe your agent is asking….”Are my clients lying to me?”

Consider the time you bought your car or used dinette set from the guy on Craigslist.    If  you are like me you went in with your game face on and planned to pay as little as possible.  You made him an offer and he countered and back and forth it went.  It was hard, but you got the item(s) at your price.  Or did you pay his price?   I bet you never told the Seller what you were, really, willing to pay for it, Right?  Good!  He probably never told you what he was really willing to accept either.

After weeks and weeks maybe months and months you have looked at dozens maybe hundreds of homes and BAM!  There it is, the most perfect neighborhood, the lawn is so nicely manicured and the front door is painted your favorite color.  You walk in and the kitchen and ahhh, the kitchen.  It’s sunny and bright.  Perfect.  You want this house!  As soon as you sit down with your Realtor to make your offer a funny thing happens.  You get ’The Game Face’.  You tell your Realtor you are willing to pay price X for the home.

Your Realtor provides a Market Price Report or Comprehensive Market Analysis (CMA), call it what you want, and the “market” price is between X and Y.   Uh Oh!   Your Realtor thinks you aren’t paying more than X.    Meanwhile, the Purchase Offer is written, with your X price, and your Realtor submits the offer exclaiming to the Seller you will pay not a penny more.  This is the time when you need a large dose of  hope.   Problem is hope won’t buy the perfect house for you. 

Prepare to compromise and discuss your specific options.

Mary Weintraub, a leading Real Estate tipster and prolific blogger writes…”Nobody wants an agent who is going to order them around and bark demands, but it is perfectly acceptable for a client to be given all the options by an agent…”

Somewhere, in the vast darkness of unconscious reality, the trust issue has already raised it’s ugly head.  That CMA or Market Sales Report (MSR) your Realtor provided for you…the Seller probably has similar information.  You are about to experience the Deer in Headlights look!

Coming in Part 3 … How you can get what you want!

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I LOVE the video in this link…

• Ski Homes Feel the Economic Chill  abcnews.go.com)

Interesting statistics  published through RISMEDIA, May 25, 2009

I may be tapped into our local market here in Los Gatos and San Jose… it looks like more and more people across the country are feeling the same way as we do here in Santa Clara County.

Fewer homeowners may be starting complete kitchen remodels, but they’re still replacing countertops and re-facing cabinets. They’re also investing in improvements to make their homes more energy-efficient, according to a recent home remodeling and repair report by ServiceMagic.com. Others are splurging on hot tubs and home theaters after realizing that they may be in their homes for some years to come-and want to make them as comfortable as possible.

“People are not going bigger and better, but improving what they have more cost effectively,” said Craig Smith, CEO of ServiceMagic, a website that connects homeowners to prescreened contractors. For instance, instead of buying new furniture, they’re repairing what they have. Or they’re deep cleaning the carpet in lieu of replacing it.

All for good reason: Money is tight, lending standards strict and in a sluggish housing market you might not recoup as much of your remodeling investment at resale.

Home improvement spending is expected to decline 12% in 2009, according to Harvard University’s Joint Center for Housing Studies. Lower financing costs may be starting to stabilize the downturn in existing home sales, but “they have not been enough to offset rising unemployment and falling consumer confidence and encourage homeowners to undertake major home improvement projects,” said Kermit Baker, director of the Remodeling Futures Program at the Joint Center.

It’s much different than the days when home-equity lending was plentiful. Before doing anything, homeowners are carefully considering how they should spend their money.  If you consult with your favorite Real Estate pro before you start your project there is a better chance it will be a recoverable investment.   Besides,  you get to enjoy what you improve!

What would you estimate new Granite countertops (cost about $4000) will give you in return in say 3 years if you were to sell?

Are you a homeowner planning on moving up to a bigger or more expensive home? Here’s a guide for planning the transition in today’s foreclosure heavy market.

Figure out how much your current home is likely to sell for.
Have your real estate professional conduct a comparative market analysis. “Be realistic about pricing the home so it moves quickly,” adds Sandy Guralnik, a broker with Coldwell Banker United in Charlotte, N.C. This will help you avoid a long gap between when you buy your new home and sell your old one.

Consider the market.
If you have only been in the home two or three years and made little or no down payment, you probably do not have have enough equity to sell at a profit in today’s soft market. You might even owe more on the mortgage than the home is worth.  This is far to common in the current foreclosure heavy market.  On the other hand, if your home has appreciated well, it might be easier to move up to a bigger and better home than ever before!  Especially in Cambrian Park, Los Gatos, and Saratoga.  Cupertino has consistantly bucked the market recently.

Consider your finances.
Your overall debt picture is important if you plan to move into a larger, more expensive home. In addition to a higher mortgage, you’ll likely have higher utility, insurance and property taxes as well. If you owe money on a home equity loan, you’ll have to pay that back when you sell the home, which will eat into your profit.

Get preapproved by a reputable lender.
The lender will tell you how much money they’re willing to lend you, which will tell you how much house you can afford. Then, figure out how much you’re comfortable spending. The two numbers are not necessarily the same.  Your comfort zone should be your guide here.

Determine your long-term housing needs.
Will you be starting or expanding your family in a few years? Will the larger home be as teen-friendly as it is toddler-friendly? Is there a place for a home office if one of you eventually works from home?  With the many economy issues this should play a large part in your decision process.   Not to speak of the inventory that is available today.

Be realistic.
Most people will not be able to move up from a starter home into their dream home. It’s a long-term process that occurs over several moves, says Debbie Wong, a certified residential specialist with Prudential California Realty in San Mateo, Calif. Plus, it’s harder to qualify for a loan if the jump in monthly payments is too big, she says. Not to speak of all the hoops many lenders are expecting you to jump through now.

Preview properties in your target price range and location.
Most importantly does that “Super Foreclosure Deal” really translate into a home. Look to see whether the homes match your trade-up goals.

Get your home on the market.
Moving up will go more smoothly if you are able to sell your home before trying to buy another. For one thing, many Sellers are leery of contracts in which the sale is contingent on the Buyer selling their current home. Foreclosures are held by Banks that are not willing to diminish there pool of potential buyers.  If they accept your offer they will be required to place the home on a pending status and other buyers will be considering it. Finances also are an issue.   Bridge loans to carry you from your current home to the next are almost impossible to get today.

Determine the best time for your move.
If you want to move in the summertime, start your other preparations early enough to meet that goal.

This question is asked of me everyday.   A short description of the differences should be addressed first.

Since Short Sales are more prevelant than REOs I will start there.    A Short Sale is , simply, the process of selling a home for less money than is owed to the mortgage company.   Commonly found in San Jose today,  the pitfalls of buying this type of home are many, it is important to realize it can be done however, the final price is determined by the bank.

Once the seller has accepted an offer, the listing agent, subsequent to submitting the third party authorization to communicate on your behalf, will submit it to the banks representative for approval.   The party to which the agent is communicating may only be representing the bank…a servicer.  This means we have now added a new layer.  How many times have you heard “I want it from the horses mouth”?  Well, it is not likey the horses mouth will be speaking.  It takes several days and sometimes weeks for your offer of Short Sale to be assigned to a negotiator (loss mitigation specialist) who will then begin the process of reconciling the numbers.

A BPO (broker price opinion..basically,  a market analysis) will be ordered to learn the market value of the property and a financial statement will be required from the seller.  Actually, what the seller has to produce is a very long list.   None of this can happen until the seller’s agent has packaged the offer correctly.    Mistakes here will set the procees back even further.  An experienced agent is paramount in these sale situations.  This is no place for a newbie.

If all is done well the  sale can proceed per the purchase contract.   The date that the bank approved the short sale is the ”actual date” the contract timelines begin.   This applies to REO sales too.

An REO, on the other hand, removes the seller’s emotions and other complications from the real estate equation.    Getting it “from the horses mouth” is bit more likely.   Still, there are servicing companies negotiating for the bank in most cases.    

Many buyers want to make offers below the asking price of an REO.   This can be fraught with problems.    The bank already priced the property according to a number of BPOs they have ordered and reviewed.    The highest and best price is the only offer they are interested in.  You want to be that offer.  No?  Yes, you do.  

The terms of the contract is where you are going to make your money.     With the bank focused on the price they leave open the terms of the contract for you to get your advantage.  A short escrow period or longer escrow,  escrow fees paid,  loan finance points paid and city or county transfer taxes are a few of the areas to negotiate your way to a great buy.  The question of repairs is asked often….Yes, banks make repairs on REOs!  I know you have heard different.   Clearly stated and evidenced, necessary, cost of repairs can be negotiated after your offer is accepted.   I have experienced this with buyer clients before.  Investors know this very well!  The bank does not MAKE the repairs…They reduce the price in accordance to the evidence and qualified estimates your agent must provide.   San Jose has many single family homes and condos, for sale, that you and your agent should be considering using these tools. 

What frustrations have you had trying to buy one of these homes?

Which season is the best time to be a homeowner? Tax season! Along with the freedom to paint and remodel, tax breaks are one of the many perks of homeownership.

The bad news? Unless you choose to take the standard deduction, your days of “EZ” tax returns are over. You’ll need to pick up the 1040 long form and itemize your deductions on Schedule A. Get IRS forms here.

Most state and local governments charge property taxes, which are an annual tax on the value of your property. You can deduct all of the real estate taxes that you pay.

There is some good news about those monthly mortgage bills: A part of the soul-crushing sum can be deducted on your tax return. For most homeowners, the bulk of each payment goes towards interest. That interest is tax deductible, up to a total of $1 million ($500,000 if you are married filing separately) on loans taken out to buy, build or substantially improve a principal residence and a second home. Any type of home is eligible: a mobile home, house, condo or even a houseboat.

In order to deduct mortgage interest on your second home, you must stay there at least 14 days a year or more than 10 percent of the days it is rented during a year. If you don’t meet this requirement, it is considered a rental property rather than a second home.

Also, other rules apply if you rent out space in your primary residence.

“Talk to a tax professional. You have to report the income because that is business use of the home as well as residential,” explains Alison Flores, a research analyst at the H&R Block Tax Institute.

You can also deduct interest on home equity loans of less than $100,000 ($50,000 if single or married filing separately), as long as the first and second mortgages total less than the value of your home.

EXAMPLE: You take out a $40,000 home equity loan to pay for your son’s college tuition. Your home is worth $100,000, and you owe $70,000. You can deduct the interest on $30,000 dollars of the loan, but you’re on your own for the remaining $10,000.

If you deduct enough mortgage interest to get a tax refund, you’ll need to claim that money as income in the year you receive it.

Always consult your tax advisor. For more information, read IRS Publication 936.

Scroll Down for More Tax Tips….

Congratulations — you’re a homeowner! Now that you’ve moved into your new digs, you’ll need to:

• Decide what color to paint the living room
• Sort through those last few boxes (eventually)
• Learn about tax deductions for new homeowners

Even before you sign on the dotted line, you can get a mortgage credit certificate (MCC), which is intended to help lower-income buyers afford homeownership.

If you qualify, you can claim the credit each year to cover part of your home’s interest. The only catch: You must get an MCC before you get a mortgage and buy a home. Contact your state or local housing finance agency for more information.

You’re eligible for a host of tax deductions the minute you get the keys to your front door. Like all homeowners, you can subtract real estate taxes and mortgage interest from your tax tab. Even if you bought a home in December, it’s worth getting a few dollars off your IRS bill.

The year you buy your home, you can also deduct any money paid towards mortgage points. The term “points” refers to charges paid by a borrower to get a mortgage, and can also be called loan discounts, discount points, origination fees or maximum loan charges.

You must meet these criteria to qualify: You are buying (not refinancing) a primary residence. Your loan must be secured by the home you live in most of the time.

·  Your overall cash paid at closing exceeds the points charged. This can include money from you, or points paid by the seller. You can’t deduct points you paid for with borrowed funds from a lender or mortgage broker.

·  You’re not using the points to avoid traditional closing costs. If you paid points in lieu of closing costs, like title insurance and attorney’s fees, you can’t get a tax credit.

If you meet that criteria, the amount on your settlement statement that’s listed as “points charged for the mortgage” can be deducted from your taxes.

If you refinanced your mortgage, the points you paid are not deductible in the year you paid them, unlike the points you paid when you first took out your mortgage. For refinanced mortgages, you have to deduct the points equally over the life of the loan. This also goes for loans you take out to buy a second home or investment property.

HERE’S HOW: Divide the points paid by the number of payments to be made over the life of the loan. EXAMPLE: If you paid $2,000 in points and will make 360 payments on a 30-year mortgage, you can deduct $66.72 [($2,000/360) x 12] each year, assuming you make 12 mortgage payments in a year.

There is an exception: If you use part of the money for home improvements, you can deduct the portion of points related to the improvements in the year you paid them.

EXAMPLE: If you refinanced your $200,000 mortgage with a new 30-year loan of $250,000, paid $2,000 in points and used the extra $50,000 to make home improvements, you can deduct 20 percent or $400 [($50,000/250,000) x 2,000] of points in the year they were paid. The remaining points paid must be deducted equally over 360 monthly payments or $53.28 [($1,600/360) x 12] each year.

NOTE: If your mortgage ends early because you paid it off, refinanced it with another lender or sold the home, you can deduct any remaining points for the mortgage in that year. So, in the above example, if you sold the house the following year, you can deduct $1,546.72 ($1,600-$53.28).

This is right from the Bank of America Press Kit!!!! 

Bank of America’s Nationwide Homeownership

Retention Program for Countrywide Customers

Fact Sheet

§         Countrywide and state Attorneys General has cooperated in the development of a comprehensive home retention program to systematically modify troubled mortgages with aggressive solutions, including interest rate and principal reductions.

§         It is anticipated that the loan modification program in this agreement will result in an estimated $8.4 billion in permanent payment relief to an estimated 400,000 Countrywide borrowers nationwide.

§         In participating states, the agreement provides up to $150 million in payments to borrowers who defaulted early in their loan terms, while committing to a “soft landing” program to help borrowers who are unable to retain their homes with relocation costs.

§         Countrywide will begin its proactive outreach to eligible borrowers on December 1, 2008.

Formalization of Existing Commitments

§         Countrywide no longer offers “subprime,” “high cost” or “negative amortization” mortgages and has significantly curtailed no- and low-documentations loans.

§         Broker compensation will be limited to 4% of the amount borrowed.

§         Countrywide will retain, for at least one year following the acquisition of BAC, a minimum of 3,900 personnel to assist with loan modifications and other foreclosure avoidance measures.

§         We will continue to proactively seek delinquent borrowers and offer streamlined loan modifications and report the progress of this agreement on a regular basis.

Home Retention Programs

§         Beginning December 1, 2008, Countrywide will proactively contact subprime and Pay Option ARM borrowers whose loans are scheduled for an interest rate change. We will invite them to contact us if they believe they will not be able to afford the new payments.

§         Countrywide will not advance foreclosures for eligible borrowers for the time necessary to determine the borrowers’ interest in staying in the home and their ability to afford the new terms as well as the investor’s willingness to accept a loan modification.

§         Countrywide will waive late/delinquency fees for missed payments when modifying loans and will not charge modification fees to borrowers in the participating states.

§         When possible, Countrywide will waive prepayment penalties in connection with any workout or refinance, whether or not the new loan is originated with Countrywide.

Eligibility

Borrowers eligible for loan modifications under this program must have received a qualifying subprime mortgage or a Pay Option adjustable rate mortgage prior to December 31, 2007, and the property must be a 1-4 unit owner-occupied residential property. In addition, certain other requirements are set out in the program:

• The borrower is 60 days or more delinquent and the current loan-to-value ratio is 75% or higher;
• The borrower is current today but becomes 60 days or more delinquent at any time prior to June 30, 2012, and the loan-to-value ratio at the time of the modification is 75% or higher;
• The borrower has a subprime hybrid ARM and the borrower is current but reasonably likely to become 60 days or more delinquent as a consequence of a rate reset, and the loan-to-value ratio at the time of the modification is 75% or higher;
• The borrower has a Pay Option ARM and the borrower is current but reasonably likely to become 60 days or more delinquent as a consequence of a rate reset or payment recast based on negative amortization, and the loan-to-value ratio at the time of the modification is 75% or higher.

In addition, customers may be eligible for the early payment default benefit of this program if: (1) the customer has a Countrywide-originated first lien loan; (2) the loan was on or prior to December 31, 2007; (3) the customer’s primary residence is the property that secures the loan; (4) the customer has made three or fewer payments over the life of the loan (the borrower’s state may expand eligibility); and (5) the customer has either lost his home to foreclosure or is at least 120 days in arrears on mortgage payments.

Loan Modification Program Details

Countrywide will first offer eligible borrowers an FHA refinance under the HOPE for Homeowners Program. If not eligible for that program, Countrywide will offer these specific programs based on product type. 

Subprime 2-, 3- 5-, 7- and 10-Year Hybrid ARM borrowers will receive an unsolicited extension/restoration of the introductory rate for five years and an invitation to contact Countrywide for additional relief if affordability concerns persist. Borrowers who cannot afford the introductory rate will be considered on a streamlined basis for a five-year interest rate reduction to as low as 3.5% (based on the affordability equation) and a conversion to a fixed-rate mortgage at the end of five years.

Pay Option ARM borrowers accepting a streamlined loan modification option will have the negative amortization feature eliminated from their loan. The mortgage interest rate will be reduced to as low as 2.5%, and the loan will be converted into either a fixed-rate mortgage or a ten-year interest-only loan. For single property owners who currently have no equity in their homes, Countrywide will write-down the principal balance to as low as 95% of the current value of the property to restore an equity position.

“I want to remodel now however, the market is so soft will I waste my money?”   That depends on the property value and what your LTV (loan to value) actually is.   Consider this news from NAHB.  The residential remodeling market declined further during the final quarter of 2008, according to the latest National Association of Home Builders’ (NAHB) Remodeling Market Index (RMI). The current market conditions indicator slid to 27.7, from 33.5 in the previous quarter. Future expectations of remodeling work plummeted to 19.6, from 27.7 in the third quarter. Both these indices descended to historic lows since the start of the RMI in 2001.

Wow!  If you have a low LTV and plan to be in your home fro a few more years maybe a small re-do would be of value now.  I bet some contractors are ready to get any job to keep some cash flow and stay relevant.

The RMI measures remodeler perceptions of market demand for current and future residential remodeling projects. Any number over 50 indicates that the majority of remodelers view market conditions as improving. The RMI has been running below 50 since the final quarter of 2005, following decreasing remodeling expenditures since that time.

“During the last quarter many remodelers were asking if their phones were still working because they received virtually no calls for work,” said NAHB Remodelers Chairman Greg Miedema, CGR, CGB, CAPS, a remodeler from Tucson, Ariz. “The jobs we are getting are for smaller projects and necessary home maintenance.”

 Yep, it is time to make the call.

Nationally, market conditions for major additions and alterations shrank to 20.2 (from 29.4 in the third quarter), while minor additions and alterations conditions slowed to 33.5 (from 38.51). Maintenance and repair dropped to 27.6 from 30.9 in the previous quarter. Overall, major additions and other large remodeling jobs have experienced a greater decline than smaller remodels and maintenance.

“Remodelers suggest that the huge decline in consumer confidence, volatility of the stock market, and uncertainty about the future of the economy have made homeowners delay remodeling decisions,” said NAHB Chief Economist David Crowe. “These anxieties are causing consumers to wait and see if conditions improve before they are willing to commit to home improvement spending.”

All measures for future expectations in the remodeling market (calls for bids, amount of work committed for next three months, backlog of remodeling jobs, and appointments for proposals) dropped. Current market expectations slipped in all regions during the fourth quarter, with the Northeast declining to 24.9 (from 32.9 in the third quarter), the South 30.7 (from 31.5), the Midwest to 28.0 (from 36.2), and the West to 25.0 (from 36.1).

 Ok!  So, If you bought a REO (foreclosure) you know you bought at a super price probably very near the bottom, and you can see yourself living in your home for a few years then it is definetly time to take advantage of the soft remodel market and get your bids.  Good Luck ….and remember I am always a great source for tips.

This Green Co. is flourishing…More jobs maybe?

Sol is for Sun…This company (linked below) appears to be adding some sunlight to our recent rainy days.

SolFocus Inc. raised an additional $19.28 million in its third round of funding on a day when we are all focused on the economic stimulus.

The Mountain View-based company in January reported raising $47.5 million and said it expected to close the third round between $60 million and $70 million.

The developer of concentrator photovoltaic systems said it will use the new funding to accelerate expansion of its manufacturing operations and extend its early base of commercial CPV deployments. The company aims to grow deployments from .5 MW in 2008 to approximately 100MW by the end of 2010. 

This should help add jobs and relieve some pressure in our local real estate market.   Especially where most of the work force lives, San Jose right? 

Does the Green Economy have staying power though?  I think about the wind farm subsidies and how they went away in the 80’s.   I wonder if these new Solar co’s will last. 

 SolFocus Inc.