The Bay Area Real Estate Voice

Real-Time Real Estate Market Data from Altos Research LLC

2010-09-09T13:15:00.000-07:00

Real-Time Real Estate Market Data from Altos Research LLC: "

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Burlingame Market Update August 22, 2010

2010-08-29T11:29:00.000-07:00

Sunday August 22, 2010

BURLINGAME 94010

This Week

The median single family home price in BURLINGAME 94010 this week is $1,210,000.

Inventory has been tightening and days-on-market increasing recently. The Market Action Index has been basically flat, not providing strong indication for market conditions.

Price

We continue to see prices in this zip code hovering around these current levels, even though they bumped up a bit this week. Look for a persistent up- shift in the Market Action Index before we see prices move significantly from here.

Supply and Demand

Local conditions are currently quite strongly in the Buyer's Market zone (below 30). The 90-day Market Action Index stands at 17. With several months of inventory available at the current sales rate, buyers should find ample choice.

How Long Before You Can Buy After a Foreclosure?

2010-08-03T13:31:00.000-07:00

Foreclosures really affect your credit and ability to borrow. In fact, it could be 7-8 years before you can get a mortgage to buy a home again.

And, credit scores are only one component of a decision by an underwriter. They will also look back to see if you just walked away from the home while you could have kept paying the mortgage or if the foreclosure was the result of a job loss, health issue, etc. The reason makes a difference. If a strategic decision was made to default, it will work against you.

Underwriters will also look at your current situation – how much money you have in the bank, do you have a current job, what is your current income, etc. They compare that information with your past history – employment, payment history, etc., when assessing whether to give you a mortgage or not.

And, in the end, you will probably need a slightly bigger down payment and you may pay a higher interest rate to get the loan. However, it will be much easier for you if the default resulted from factors that were beyond your control. So, the lesson here is that while walking away may solve a current problem, a price will be paid in the future. Before you just walk away, explore all your options – refinance, loan remodification, etc.

My new listing at 2221 Village Ct Belmont! Incredible Investment Opportunity

2010-06-15T13:58:00.000-07:00

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Market stats for Condo Properties in BURLINGAME, CA 94010

2010-04-30T12:35:00.000-07:00

Market stats for Condo Properties in BURLINGAME, CA 94010: "Market stats for Condo properties in BURLINGAME, CA 94010 as of 23 Apr 2010
Median Price: $532,000
Mean Price: $607,763
Inventory: 41
Market Heat: 8.43
Days on Market: 145
Price per Square Foot: $470
Median Square Feet: 1,170
Median Lot Size: n/a
Average Beds: 1.73
Average Baths: 2.26
Average Age: 27"

Less Players, More Competence Among Lenders

2010-04-30T11:44:00.001-07:00

There has been a dramatic decrease in the number of loan officers in this country. I have seen estimates that show that in 2005 (the peak of mortgage activity) there were 450,000 loan officers, and that by 2009, the number had shrunk to 150,000. Nearly 70% of individuals feeding their families by originating mortgages have left the industry. There are numerous reasons for this occurrence:

Less purchase transactions: Home Sales dropped during the Subprime Meltdown. Homebuyers were scared to buy (or waiting for lower prices) while prices were falling and sellers were slow to reduce their asking prices.
Less refinance business: Simultaneously, refinance activity slowed as rates bumped up a bit and declining home values made extracting equity more difficult.
Less loan products: Gone are the days where lenders gave loans to “anybody”; gone are the loans that didn’t pay attention to a borrowers’ income, assets or credit. We have tougher underwriting guidelines. With a smaller product menu to offer, loan officers struggled to satisfy the consumers’ need.
More regulation: Between new appraisal guidelines and higher standards for approval for warehouse lines, secondary market investors and FHA Authority, mortgage brokers have been practically eliminated as an option for many consumers, and many lenders have exited the business entirely.
Loan Officer Licensing: One of the more welcome regulatory changes that resulted from the challenges of the past few years is a national registry of loan officers. LOs are now required to take classes on a Federal and State level to ensure a minimum competency. The fact is that we are in the middle of this licensing process right now and more than 30% of the people taking the test are FAILING!

Recognize that the market flushed out 70% of the loan officers. Now, testing and licensing requirements appear to endanger even some of the “survivors”…..and THAT IS GOOD NEWS! Why? Because those of us left standing will truly be operating at a much higher level than what used-to-be the typical loan officer. (As a side note, the barrier of entry for new people will make it extremely difficult for them to enter the industry.)

In the end, what will remain are professionals who truly know their products, who know the regulations, who can truly advise customers of options, and who can assess the short- and long- term ramifications of choices borrowers make. What will remain are people who work with the real estate agents, the attorneys, the title companies, and all the other ancillary service providers to serve the educational needs of the public.

The net result of this cleansing we are enduring as an industry is that there will be less competitors, but more demands from our customers. This combination is something to rejoice, because I am confident that, in the future, mortgage loan officers will once again be a respected profession.

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NEWS FLASH: EPA ON LEAD-BASED PAINT

2010-04-29T09:50:00.001-07:00

As of 4/22/2010, home owners must comply with the Lead-Based Paint Renovation Rule of the EPA: Any renovations, repairs or painting projects that disturb lead-based paint in pre-1978 residential properties, child care facilities and schools, are subject to these rules to protect against lead poisoning. These rules are not applicable when homeowners renovate the homes they live in or when minor repairs or maintenance are carried out. Interestingly, window replacement is not regarded as minor maintenance or repair.

The EPA rules could come into play when home owners decide to sell and paint their home to improve the marketability thereof.

Many topics are covered, from who may do the renovations (must be trained and EPA-certified to perform safe work practices to prevent lead contamination) to the definition of “renovation” (a modification of an existing structure that disturbs a painted surface).

Best to check the EPA’s New Renovation, Repair and Painting Rule webpage for complete information.

Who Cares If I Miss Out On The Tax Credit?

2010-04-20T13:11:00.000-07:00

Many people who are looking to buy a home now NEED the Tax Credit to close a gap in their finances. But not everyone feels that way.

As the days tick away, I have started to hear some buyers already begin rationalizing why they have not yet gone to contract. They say things like, “$8,000 isn’t enough money to rush me into buying a home”. I am not sure they are right (especially as you see interest rates on the rise at the same time), but I do know that the people who “discount” the impact of $8,000 need to open their minds to some “out of the box” thoughts.

Here’s One Thought Process

If a customer had sufficient monies to close and cash reserves in the bank after closing such that they didn’t NEED the $8,000, as they contend, I would propose to those clients this strategy: Pay $8,000 in additional Discount Points on your mortgage! You see, by doing this our buyers gain two benefits:

As I am sure we all know, Discount Points are tax deductible as prepaid interest on the mortgage. That means our Buyer (assuming a 28% top Income Tax Bracket) will receive a $2240.00 higher tax refund next year…..that’s good!
By paying 2 points on a $400,000 mortgage (cost $8,000), our borrower is likely to receive approximately a .50% lower interest rate on their mortgage. Over the course of the first five years of homeownership, they would save nearly an additional $8,000 in monthly mortgage payments…that also is good!

Or How About This?

By paying the points for a lower rate, you would reduce your Principal & Interest Payment about $132/month on your $400,000 loan. If you were comfortable with your original payment, you could actually borrow an additional $20-25,000 for the same payment. That’s $20-25,000 that you could put into a 203K loan to finance home improvements OR it’s buying the bigger house OR buying in a better part of town….for the same payment you were willing to accept without the tax credit.

Here’s Another

$8,000 is enough money for a skylight, a living room set, a large Jacuzzi/hot tub, a deck, an awesome barbecue, an above ground pool, a plasma television or one of dozens of other cool things you might want to add to your new home. Or maybe, it’s the money for a vacation or a top notch House Warming Party. Whatever you spend it on, it’s basically a FREE GIFT from Uncle Sam. How many great moments or memories can you “buy” with this gift of $8,000?

Okay, One More

$8,000 untouched in a conservative investment (like Savings Bonds) at 6% would compound to more than $25,000 in 20 years to help pay for college, a wedding, or a car. In 30 years, when you retire, it would blossom to more than $46,000! That’s a lot of trinkets for your grandchildren.

Remember, this is money you didn’t need. This is money that didn’t provide sufficient incentive to force you to BUY NOW. Don’t be silly, take the money and enjoy it! Save monthly, improve your home, improve your lifestyle, or improve your future. Any way you look at it, $8,000 can go a long way.

Interest Rates a Week after the Fed’s Exit

2010-04-10T11:05:00.000-07:00

As the Fed was planning to exit the mortgage market at the end of last month, more and more experts were calling for the exit to be uneventful. Their belief was that there was ample demand sitting on the sideline ready to replace the Fed’s role. Well it is now a week later and let’s examine the situation.

What actually did happen?

RATES ARE UP OVER ONE QUARTER OF A POINT.

The Mortgage Bankers Association’s (MBA) Weekly Rate Survey reported:

The average contract interest rate for 30-year fixed-rate mortgages increased to 5.31 percent from 5.04 percent … for 80 percent loan-to-value (LTV) ratio loans. This is the highest 30-year rate recorded in the survey since the first week of August 2009.

I am sure that there are plenty of economists that will explain that there were other factors besides the Fed exit that caused the jump and that may be true. However, Michael Fratantoni, MBA’s Vice President of Research and Economics mentioned the Fed’s exit in the press release:

“Mortgage rates jumped last week as the Federal Reserve completed their purchases of mortgage-backed securities.”

How high might rates go?
The million dollar question is what will happen to rates throughout the year. Housing Wirein an article Wednesday suggested that rates might continue upward throughout the year:
A number of investors involved on the potential buy side of these deals suggest there remain concerns that the first real private RMBS deal may be a dud … mortgages need to be originated at roughly 6% at least to get any sort of capital flow; this was the case in previous securitization efforts, and it’s likely true now as well.
In an article the same day, MSNBC said:
Many analysts forecast rates will rise as high as 6 percent by early next year.
What will this do to the housing recovery?
Let’s look at how the purchaser’s buying power is impacted by a rise in rates. From theMSNBC article:
For every 1 percentage point rise in rates, 300,000 to 400,000 would-be buyers are priced out of the market in a given year, according to the National Association of Realtors.
And it dramatically affects the buyers whom it doesn’t eliminate:
Taking out a 30-year mortgage for $300,000 at a rate of 5 percent will cost you about $1,600 a month, not including taxes and insurance. But the same monthly payment at a rate of 6 percent will only get you a loan of $270,000.
What does this mean to you?
If you are buying, buy now before rates go any higher. If you are selling, take advantage of the fact that buyers are coming to the market now. Don’t wait until higher rates diminish the buyer pool.
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Buying a Lot

2010-04-05T15:31:00.000-07:00

Before you buy a lot, determine the actual cost of the lot vs. the listed price of the lot. What do I mean by this? You may think that a lot is a great price, and that you are going to save a whole bunch of money by buying this lot over another lot, and building there. However, this may or may not be the case. For example, one lot may be several thousand dollars cheaper, but if you have to put in a new water well and a septic system, you need to add that to the price. Check all of those types of things, and get estimates for everything from utility hookups to tree removal so you have a clear idea of what the lot will actually cost you, before you buy it!

Once you have determined your bottom line on the cost of the building site (purchase price, soil removal or additions, utility hook ups, water, septic, tree removal etc.) it is time to determine if it is worth that price. Don't let cost determine value. You want to save some money, and to do that you have to find a lot that will be a good price, but that will be a good value as well.

After finding a lot that fits your needs, and determining what it is going to cost you and whether or not that is a good value, it is time for you and the seller to determine a price. A real estate agent could really come in handy during this part because they can negotiate for you if necessary, and can help you find comparable sales so you know what a fair market price is for the property.

However, if you find the lot yourself, why pay an agent? You can do a little research and find your own comps, and you can use any improvements that need to be made on the lot to make it buildable, a negotiating point, and make an offer using all the negotiating tactics you can.

In order to get the best price try negotiating using these tactics: Ask all your questions before you make an offer, find out any terms the seller wants, ask what price they will give you for a "cash offer" (even if you are getting bank financing), build your case for why your price is right, have an official and legal contract, make sure the seller knows you have looked at other property, don't be in a hurry, and make sure that your contract protects you.so if the seller says the lot is buildable, get it in writing, that way if it isn't, you don't take a loss.

Once you settle on a price you feel good about, you buy the lot! Of course when you buy anything, especially if it is a major purchase, you want to make sure the contract of sale is legal and binding so the previous owner can't take it back form you after you put a bunch of money into it. To save yourself from any lawsuits etc, either have an agent or an attorney draw up the contract; of course you will want to check to make sure it is fair to both the buyer and the seller, and make sure there are no liens or encumbrances on the property. Once you have done all of that, there is a bunch of paperwork and the site is yours. The paper work is not much fun, but knowing that you just purchased (legally purchased) a lot that you are going to build the house of your dreams on, is exciting, and is also a lot of fun.

A sad reality of some REO agents

2010-03-11T12:02:00.000-08:00

I am not unfamiliar with foreclosures. I have bought and sold more than a few, and I did a short sale last year. I don't for a moment think that selling an REO is simple; yes, they are vacant, but as an investor myself I know that the property has to be managed and overseen. I know some particularly good brokers who sell REO listings. One of them called me once about a year ago and informed me that he was the new agent for a listing I had that was scheduled to close in another 3 days. When I told him this, rather then say "tough luck," he assisted my client's attorney and myself in getting the home reinstated and allowing it to close as scheduled. It cost him a listing, but it earned my gratitude and respect.

That said, some REO agents conduct business in an utterly deplorable manner. You probably know the type in your marketplace: one crappy photo taken from the car, no remarks, and no communication. We've got a few here that absolutely take the cake in this regard. Talking with some is like dealing with the DMV- rude and arrogant. One won't even take a phone call to set an appointment to show- he just published the lockbox combination in the agents remarks. At least I can show his listings. And to get a question answered? Forget it!

To those agents who think that the foreclosure gravy train exempts them from acting like a respectful, competent professional, you reap what you sow. Maybe not today or tomorrow, but at some point what you have sent around will come back to bite you. Maybe your asset manager gets wind of your shenanigans. Maybe the bank reorganizes and they start dealing with other agents. It doesn't matter. At some point, these agents will have to go back to dealing with the rest of us, and it will be that much harder for them because they are no longer practiced in being accountable for their actions.

Like I said, some REO agents are very, very good. But the bad ones are the worst, and their time will come. I just wish it would come sooner in one or two cases!

FHA GUIDELINES ARE GOING TO GET TOUGHER

2010-03-09T22:25:00.000-08:00

The FHA is going to tighten lending standards on January 1, 2010.

The exact extent of the credit tightening is not clear, but the result will be less people qualifying for FHA loans for purchase and refinance. In addition, the FHA will comply with tighter appraisal standards. In the first half of 2009 FHA financing was used in 19% of new home purchase and that number should increase in the second half of this year. The FHA is simply running out of reserves and must slow down the lending by tightening standards.

The rules of real estate are under constant stress and change. Never before has there been such a need for a true real estate expert. Pick your Realtor well.

The Real Estate Investor | The New Scourge of 2010

2010-02-15T19:04:00.000-08:00

The Real Estate Investor | The New Scourge of 2010

It was about a year ago that we started to get phone calls from people who called themselves real estate investors and they all sang me a variation of the same song:

(Hum along to the tune of Fiddler on the Roof's If I were a rich man)

I'm a very well-to-do real estate investor and I'm looking for opportunities in the area. In exchange for giving me names of people you know, I'll make it very worth your while. Then we'll push these homes through foreclosure or a short sale and both of us will be very wealthy.

WTH?

The first few calls didn't go very well because I wasn't fully grasping what these people wanted from me. Now, these calls don't go very well because I fully understand what these vultures want from me. They want to take advantage of a homeowner's financial distress and turn it into a financial windfall for themselves.

These investors are all cut from the same cloth and they are the same people who jump from money-making gimmick to money-making gimmick. Whatever is being infomercialized and marketed as the path to financial freedom is the direction they are following. And, their expertise is based on a seminar, which is normally taught by an ex-con who's figured-out that the seminar gig can payoff big.

The Tenets of the Scam

The investor tells the distressed homeowner that they can solve all of their financial problems and stop the foreclosure process. Sounds philanthropic and generous, right? Actually, the goal is to get ownership of the home and then sell it for a profit. Even if they don't get ownership, they'll put their name on title and claim ownership, and then they'll proceed to negotiate with lenders to whip-out the debt at pennies on the dollar. At the end of the day, the only way the foreclosure is stopped is through the investor's involvement in the sale of the home.

How to spot the scam

There are several tale tells that have quickly become the investors costume of choice including:

They have a website that includes the words stop and foreclosure in the URL
Their car has stop foreclosure information on the back window and bumper
They actually call themselves a real estate investors
They belong to an investment group
They've perviously sold some sort of product online (weight loss, Himalayan berry juice, a patented rack or doohickey
Promises that never materialize and deadlines that are missed, and missed and missed
They advertise on Craigslist and for sale by owner websites. They don't want to involve Realtors or anyone else who will question ownership of the property
And the number one thing red flag, they have little or no experience in real estate

There are exceptions to everything

Of course, there are exceptions to everything I've said and I'm sure there are many compassionate, honest real estate investors who will take exception to this journal entry. If you are an honest investor who would like the opportunity to provide your side of the story, I'd love to talk with you.

Unlicensed and unregulated

Many real estate investors do whatever they can to reach the prize, the money that's hidden in a foreclosed home. There are no regulations, no rules (that they follow) no oversite, and no required training or licensing—it's the wild west out there.

What should you do if your home is headed into foreclosure

If you're already to the point where you're reaching out to an investor, odds are pretty good that you're going to lose your home. As mentioned, investors are investing their time (and sometimes money) that they can get you out of your home and take a portion of the home's final proceeds.

If your goal is to keep your home, you need to be talking with your lender. If you DO NEED to sell, most banks/lenders will work with you through a short sale transaction, and even hold off from pursuing the foreclosure while your property is actively listed with a Realtor.

What is a Real Real Estate investor?

My definition, which may very from many others, sees a true real estate investor as being a person or group who buy residential or income properties for their long term investment opportunity/strategy. The difference here is that they are not trying to steal the home through games and manipulation, they are business people who are working with agents to purchase real property that adds to their real estate portfolio.

San Mateo County Real Estate Report 4th Quarter 2009

2010-02-05T08:40:00.000-08:00

How safe is would your house be in an earthquake?

2010-01-14T08:00:00.000-08:00

"Many thousands of people live in older homes that can and should be seismically strengthened... An earthquake can throw an entire frame off the foundation and turn a house into a heap of rubble. The good news is that this is probably preventable."

~Los Angeles Times editorial March 21, 1994

Earthquake Retrofit.

A home is the most personal element of our lives; it represents the last refuge, the one place where we know we're safe from the outside world. For most of us it's also the most sizable financial investment we'll ever make. The investment is so significant that we don't even want to think about what may happen to that investment, that home, during an earthquake. But we live in an area where the threat of a serious earthquake increases each day. Scientists can only guess, not predict, when the next quake will occur, and we all know that sooner or later the quake is going to be "the big one." It's vital to think about protecting our homes against catastrophic loss.

How safe is your home during an earthquake?

If it's an older home, especially pre-1939, chances are it's deficient with respect to modern building codes. Your home may lack foundation anchorage, framing connections and adequate bracing. During a sizable quake like the 1994, 6.7 Northridge temblor, your home could actually slide off the foundation and experience partial collapse. That's a frightening prospect. Yet, it happens too often for anyone to be complacent. During the 1989, 7.1 Loma Prieta earthquake in Northern California, over 23,000 homes were damaged or completely destroyed. After an extensive study the State Legislature found and declared that "lack of anchorage and cripple-wall failure were the avoidable causes." Simply put, it means foundation bolting & cripple wall bracing.

We know of no properly earthquake retrofitted homes that suffered from sliding or from collapse.

Not until 1941 did building codes require proper anchorage and bracing. Most local jurisdictions began to recognize the new codes as early as 1939. The Northridge quake resulted in a national record of 365,118 applications for federal assistance. While not all of those were for structural damage, you can be sure that the number of homes damaged or completely destroyed will exceed the 1989 Loma Prieta quake figure.

The good news is that a home without adequate structural protection can be reinforced. One very effective method is a procedure called "house bolting" and it dramatically increases the safety of your home during an earthquake.

Words of Wisdom:

It's a good idea to have safety equipment in your car, like seat belts, windshield wipers, and maybe a horn; but none of those will do much good if you don't have brakes. Likewise, it is equally important to prepare for emergencies at home by storing extra food and water and strapping your water heater. Sadly, this planning will be a total waste if you lose your whole house because it wasn't bolted. We have seen it happen.

Allan G. Lindh, Chief Seismologist at the U.S. Geological Survey in Menlo Park has stated: "Recent quakes in the Mojave Desert, among the largest in state history, are a 'final warning' that the Big One on the southern end of the San Andreas is just around the corner. In addition, he has said, "It's time to act as if the damn thing will happen tomorrow. For citizens of California or other earthquake-prone regions,” Lindh says, "safety is a simple matter of bolting houses to foundations and paying attention to the 'duck and cover' drills that have been part of Earthquake Preparedness Week every April since 1985".

If most of your assets are in an unbolted home, this is something you need to think about. In most cases, for less than the cost of a paint job you can help protect your investment. What are the odds of your home surviving a large earthquake? If it is an older home - built before 1938 - it may lack vital connections that would keep it on the foundation during the next earthquake.

If you have a raised foundation with poorly braced cripple studs, bolted or not bolted, the severity of the above damage scales would be greater, and could occur in much lower-magnitude quakes.

Just suppose your carefully collected emergency supplies are stored in a poorly protected home, as was the case with some victims of the 7.1 Loma Prieta earthquake of 1989. During a future quake, these supplies could be damaged or contaminated, if they haven't been consumed by fire. Under emergency circumstances, authorities often deny homeowners access to dangerously damaged homes - and stored supplies are worthless if they are unavailable.

Seismic Safety For Your Home

Why should you bolt your foundation?

To avoid struggles with insurance collection,

To lessen a need for temporary housing.

To decrease the load on emergency response personnel.

To avoid those nagging worries of:

"Will it happen tonight?"

"Will it happen while I'm not at home with the family?"

AND Self-recriminations such as:

"I should have called Seismic Safety!"

"I wish I would have called Seismic Safety!"

"I told my wife to call Seismic Safety!"

"I really and truly was going to call Seismic Safety next week!"

6 Questions You Should Ask Your Lender

2010-01-10T22:07:00.000-08:00

More and more, consumers are learning that there is much more to getting a mortgage than just the interest rate and points. A good mortgage planner is more in the advice business than the lowest price business. With tightening guidelines, often the question first is, “Will the loan be approved?” But moreover, the borrowers’ concerns need to involve some of the answers to some of these non-price questions:

1. What type of lender should I use?

There are three basic types of lenders. Mortgage BROKERS promote a broad product menu, competitive pricing, and entrepreneurial approach; however, BROKERS cannot lock, commit, or approve your loan because they are not actual lenders. Banks and Credit Unions rely on financial strength, direct lending capabilities, and stability; however, they have limited product menus and often a “cover my butt” mentality. Mortgage BANKERS blend the best of both: direct lending ability, financial strength and stability, wide product offerings, competitive pricing and the entrepreneurial spirit.

2. What loan products should I be considering?

Make sure your lender has multiple types of products (Conventional, FHA, VA, State Mortgage Agency Products, etc.). While most people today do choose a 30 year fixed, it is not always the wisest choice. Borrowers need to consider how long they will be staying in the home and any changes in their income during that time period before just accepting the same loan as everyone else. Additionally, with many properties in need of some renovations or repairs, you need to explore the FHA 203K Program discussed in one of my earlier articles.

3. Should I lock or float my interest rate?

Most mortgage planners are trained to dodge this question. I believe you should be hiring an expert who should have an informed opinion about the direction of rates….in the short term and the long term. Weighing numerous factors ranging from your projected closing date to upcoming economic reports, a good mortgage planner can counsel a client into saving money. While no one can predict with absolute certainty, you need to reach a comfort level that the lender you choose has the best information and your best interest at heart.

4. What are mortgage rates based on?

There is only one correct answer. It is the pricing of Mortgage Backed Securities. (Unfortunately, too many people answer the 10-year Treasury Bill.) If you get the wrong answer on this basic question, what else don’t they know?

5. What is the next important economic release that can impact rates?

How will a Jobs Report, a Fed Board Meeting or Inflation Number affect your home loan? Your mortgage planner should know, explain it to you, and keep you informed.

6. How can I improve my chances of getting approved and at the lowest possible cost?

Sometimes even minor improvements in a credit score, the amount of your down payment, or how you position your assets can make a big difference. During your counseling sessions, your mortgage planner should be advising you on how the “little things can make a big difference.”

Good advice, whether it’s from your doctor, lawyer, real estate agent or lender, can be invaluable. Finding a lender who is an expert….who has your goals in mind…and who offers creative solutions is one of the most important factors in a successful real estate transaction.

I'll Fix The Roof After Escrow Closes

2009-12-29T11:03:00.000-08:00

Often it may occur that the property you are buying, upon inspection, reveals a problem that needs correcting. The problem may be a leaky faucet, sagging floor, termite damage, defective roof, or any other problems from small to substantial. In the haste to close escrow, a Buyer may agree to let the repair work be done after the escrow has closed. Is there any damage in that? Will the Buyer be protected?

Generally a purchase agreement between Buyer and Seller contains a provision for an inspection of the property, to be made by the Buyer. The Buyer then has a specified period of time, such as ten working days, to approve or disapprove the inspection report. The Buyer most often still wants to go ahead with his purchase, but wants certain defects corrected by the Seller. Some defects the Buyer may be willing to accept.

The best solution is to have the seller correct the problem or defect before escrow closes. Once escrow has closed, it may be very difficult to get the Seller to perform the necessary repairs. The answer to this problem is to have money held back in escrow at closing time. The escrow holder acts as the stake holder of the money, and this money is then be released only after the repairs have been made.

Provision for holding funds in escrow is done by amendments made to the escrow instructions. These amendments must be signed by both the Buyer and the Seller. The escrow closing agent can prepare these amendments for you. The Buyer and Seller could negotiate to split the repair costs, or the Seller may agree to lower the purchase price of the property or the Buyer could agree to accept the property "as is", thereby accepting the items found in the inspection report.

A word of caution is that once escrow has closed, it may be very difficult to go back after the Seller for repairs. Once the deed is recorded, the Buyer becomes the legal owner of the property and responsible for the property in it's condition at that time. Title insurance will not cover building defects. A home warranty policy will typically cover only certain items which are found defective and of which the Buyer was not aware existed before the close of escrow.

REAL ESTATE DICTIONARY

2009-12-27T13:47:00.001-08:00

Real Estate Terminology

Abatement - The termination of an offensive activity, as the abatement of a nuisance.

Abstract of title - A condensed compilation of the history of the title to a piece of property; starts with the original grant and contains all subsequent conveyances, liens, or other encumbrances.

Abut - To be next to or touch another property or body of water.

Acceleration Clause - A provision in a note, such that if payments are in default, the owner of the note can declare the entire balance due and payable earlier than the stated due date.

Acceptance - An act by which a grantor receives a deed with the intention of retaining it in order to vest himself with title to the real estate; an express or implied indication of willingness to be bound to the terms of an offer to contract.

Access - The right of a property owner to have a means of entry and exit from his property to a public street.

Accretion - Addition to land by deposit of soil or sand as a result of natural action by stream, lake, river, or sea.

Accrued Depreciation - The actual depreciation in a property that has already accrued as of a given date; past depreciation.

Acknowledgment - The process whereby a person goes before a notary public or other recognized officer and executes a legal document and at the same time declares that he is executing the document as a free and voluntary act.

Acre - A measure of land equal to 43,560 sq. ft.

Action - A court process to enforce a right.

Actual age - The number of years a building has been in existence; chronological age.

Administrator - A person appointed by a probate court to handle the estate of a deceased person who left no will.

Ad valorem - According to value.

Ad valorem rax - A real property tax based on the value of the property.

Adverse possession - The continuous, visible, hostile use or occupation of the property of another. Title may be acquired by adverse possession for a period prescribed by law.

After Acquired Title - A doctrine under which a prior grantee automatically obtains title to real estate acquired by a grantor who previously attempted to convey title which he did not in fact own.

Agency - The relationship between a principal and agent whereby the agent represents the principal in dealing with third parties.

Agent - A person who has authority to act for another.

Air rights - A landowner's right to the use and enjoyment of the space above his land to the extent that he can effectively enjoy it.

Alienate - To convey or transfer title to property.

ALTA - American Land Title Association.

ALTA title insurance policy - A broad form of title insurance policy, which includes unusual risks such as factors, which could be disclosed by inspection of the land or by a survey.

Amenities - Those qualities which are pleasing and agreeable; intangible benefits of property ownership such as pride of ownership or scenic beauty.

Common elements - Those areas within a condominium which each owner of a condominium unit has the right to use in common with each other.

Common Law - The body of law based on custom and usage, some derived from English law.

Community property - Property owned half by each married partner, if acquired during the marriage period with joint funds or efforts; exists in only a few states.

Concurrent ownership - Ownership where two or more persons possess simultaneous estates in the same property.

Condemnation - The process whereby the government or a quasigovernment ownership takes title to private property for public use in exchange for just compensation under the power of eminent domain.

Conditional - Depends upon the occurrence of certain terms or events.

Condominium - A unit in an apartment or multifamily structure, which is owned by an individual in the same way an individual, can own other real property.

Conservator - A person appointed by a court to take legal charge of the person and property of a person incapable of managing his affairs.

Consideration - Anything of value, whether tangible or not, given by one party in a contractual agreement.

Constructive notice - Other than actual notice- notice given to the public through the process of recording documents in the public records office; notice imputed to a buyer by persons in possession of property.

Consummate Dower - After the death of a husband, the dower interest which the wife had in her husband's estate.

Contiguous - Next to and in actual contact.

Contingent - Dependent upon a future event which is uncertain.

Contingent remainder - An estate in land, the possession and enjoyment of which is delayed until the termination of a preceding estate and the occurrence of a condition. Contour Surface shape of land.

Contract - A legally enforceable agreement.

Contract for deed - See Installment land contract.

Contract rent - The rent stipulated in a lease agreement or contract.

Conventional mortgage - A mortgage other than one guaranteed by FHA or VA.

Conveyance - The transfer of title to real estate from one party to another by written instrument.

Cooperative - An apartment or multifamily building owned by several persons through a corporation, such that each owner is a stockholder and also leases a portion of the building.

Co-owners - Two or more persons who possess simultaneous estates in the same property.

Corporation - An artificial entity created by and under the authority of a state or other government for private or public purposes.

Cost approach - A property appraisal process in which the appraiser estimates building value as replacement cost minus depreciation.

Cul de sac - A circular turn-around street in a property development.

Courtesy - The right which a husband by law in his deceased wife's estate; applicable in only a few states.

Damages - The amount recoverable by a person who has suffered an injury, either in person or property, due to the wrong of another.

Datum - A plan of elevation from which heights and depths are measured.

Debtor - The owner of a property in a security agreement; sometimes called mortgager.

Declaration of restrictions - An instrument other than a deed containing restrictive covenants which is incorporated by reference and made part of a deed.

Decree - A court order as a result of a judicial proceeding.

Dedication - A voluntary giving of property by the owner for use by authorized public officials on behalf of the public.

Deed - A written instrument by which title to real property is conveyed from one person to another.

Default - The failure to fulfill a contractual obligation.

Defeasance Clause - The clause in a mortgage note that allows the mortgager to redeem his property after all payments due the mortgagee are paid.

Deficiency Judgment - A judgment rendered after default when the security pledged for a loan does not satisfy the debt.

Exception - A right or portion of property reserved in the grantor in a conveyance by deed.
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Exclusive agency listing - A listing agreement between a seller and a broker where either has a right to sell the property; if sold by the broker, a commission will be due.

Exclusive right to sell - A listing agreement between a seller and a broker whereby the broker receives a commission, whoever sells the property.

Execute - To sign and deliver an instrument, such as a deed.

Executor - A person specified in a will to carry out the provisions of the will.

Express Contract - A contract whose elements are stated orally or in writing.

Fee on a condition subsequent - A fee simple which is conveyed reserving to the grantor the right of entry upon occurrence of a condition subsequent.

Fee simple - The highest interest a person may have in real property.

Fee simple Determinable - (Qualified fee) Fee simple subject to a condition or limitation, the occurrence of which causes title to revert back to its grantor or his heirs automatically.

FHA - Federal Housing Administration; a federal agency which insures home mortgages.

Fiduciary - A relationship of trust and confidence as between a principal and agent.

Financing statement - An instrument filed with the recorder or register of deeds indicating that personal property is encumbered.

Fixture - An item that was originally personal property but is so attached to the property that it becomes part of the real estate.

Flashing - Sheet metal or other material used around chimneys or other places to prevent water seepage.

Footing - The base on which a home foundation stands.

Foreclosure - A legal proceeding by a lien claimant to force sale of a property to pay the amount due the lien claimant.

Forfeiture - The loss of money or right due to default or failure to perform in accord with a contract.

Foundation - The portion of a structure which supports the first floor and construction above it.

Fraud - Successful deception with the intent of deceiving another person.

Freehold Estate - An estate existing for an indefinite length of time; an estate of inheritance or for life.

Frontage - Property on a street, highway, or lake.

Front foot - A measure of property value where the distance is measured along the street, highway, stream, or other body of water.

Functional Obsolescence - Things internal to a structure that detract from a building value.

General lien - A lien effective against all of a person's property, both real and personal.

Grade - The level of the ground at the structure foundation.

Graduated lease - A lease providing for a variable rate of rend depending upon some future event.

Grantor - A person who transfers property, such as a seller.

Gross lease - A lease agreement whereby the pro0perty owner pays taxes, insurance, repairs, and other costs.

Ground lease - An agreement for rental of land only.

Ground rent - The portion of property income attributed to the ground value itself'; used in a few states whereby a person can own a structure and rent the ground.

Guardian - A person granted power by a court to take care of and manage the property of another person who has been declared legally incapable of administering his own affairs.

Habendum - A provision in a deed, which defines the extent of the ownership to be granted to and enjoyed by the grantee.

Heirs - The persons designated by statute to receive an estate where there is no will.

Highest and best use - The use of a property, which will yield the greatest return on the property.

Homestead - Any real estate where the owner resides and which is exempt from creditor's claims to an amount specified by state law.

HUD - Federal Department of Housing and Urban Development.

Hypothecate - To give something as security without giving up its possession.

MAI - A member of the American Institute of Appraisers qualified to specified requirements.

Marginal land - Land in use which barely pays the cost of working it.

Market approach - The process of property appraisal by comparing it to sales of equivalent properties.

Market value - The highest price which property would be expected to bring in the open market under normal conditions.

Meandered - Area such as a lake on which taxes are not paid.

Meander line - The approximate border of a natural body of water.

Mechanic's lien - A lien which can be filed by mechanics or material men who supply labor or materials for property improvement to secure payment.

Meridian - Map lines running north and south to locate land under the governmental survey system.

Metes and bounds - A method of legal description by use of measurements, boundaries and directions.

Mineral rights - A legal interest in minerals in land, which includes the right to take minerals from land.

Minor - A person not of legal age.

Modernization - Replacement of outmoded fixture, equipment, and other features of an improvement with modern features.

Monument - A fixed object, either natural or artificial, which surveyors use to measure.

Mortgage - A written instrument in which real estate is used as security for repayment of a debt or obligation.

Mortgage - The party who lends money for a mortgage.

Mortgager - The party who borrows money with his property as security.

Multiple Listing - A listing agreement whereby other brokers in an organization are allowed to sell a listed property.

NAR - National Association of Realtors

Navigable water - A waterway capable of passage by watercraft; navigable if so designated on a U.S. Map.

Net lease - A lease agreement in which the tenant pays rent plus all taxes, insurance, repairs, and other costs.

Net listing - A listing agreement whereby the owner receives a set amount and the broker receives all above that amount.

Nominal consideration - Consideration having no relationship to the actual value of the contract or property conveyed.

Nonfreehold estate - An estate in land of a certain duration, i.e., leasehold estate.

Note - A written instrument promising payment.

Notice to quit - Notice given to a tenant to vacate a rented property.

Nuisance - Anything that is offensive to a person or property.

Obsolescence - Loss in value due to obsolete or out-of-date design or construction.

Open end mortgage - A mortgage agreement such that the mortgager can borrow additional funds in the future without rewriting the mortgage.

Open listing - A listing agreement whereby either the owner or the broker can sell the property; if the broker is the procuring cause, a commission is due.

Option - A contractual right given for a consideration permitting a person to lease or buy the property at a specified price within a given period.

Optionee - A person who holds an option.

Optionor - A person who gives an option to another person.

Ordinance - A law passed by the legislative body by a municipal corporation.

Overhang - The portion of a roof extending beyond the walls.

Partition - An action seeking to have property owned by two or more persons sold and the proceeds divided between the parties; or to have the property divided into two or more portions.

Partnership - An association of two or more persons to carry on a business for profit as co-owners.

Party wall - A wall erected on the line between two adjacent properties for the use of both parties.

Replacement cost - The cost incurred in replacing one property with another of similar utility using modernized equipment, materials, and techniques.

Reproduction cost - The cost of reproducing an exact replica property based on current prices.

Rescind - To declare a contract void in its inception and put an end to it as though it never existed.

Reservation - A right kept by a grantor when conveying property.

Restriction - An encumbrance created by deed or special agreement which limits use of the property.

Reversion - The portion of an estate remaining with the original grantor after the termination of a leasehold or life estate.

Right of redemption - A person's right by law to buy back property taken by forced sale for a period of time stated by law.

Right of way - The right to cross over or under another person's property for ingress, egress, utility lines, sewers, etc.

Riparian rights - Rights of an owner of property abutting water to use the water and have uninterrupted flow and drainage.

Rod - A measure of length equal to 161/2 ft.

Rural - Pertaining to the country; rather than urban.

Satisfaction - Discharge of lien upon payment of debt.

Seal - An impression made to attest to the execution of a written instrument; also the word "seal" typed in to form a sealed document.

Section - A unit of land measure one-mile square containing 640 acres.

Security Deposit - Earnest money.

Seize - The possession of land under a claim of freehold estate.

Septic Tank - An underground tank used where city sewage is not available.

Servient estate - An estate burdened by an easement.
Setback - A distance from the curb to the building, often specified by ordinance.

Settlement - The process of completing the sale of real property; same as closing.

Severalty - Sole ownership; by one person.

Sheriff's deed - A deed given as a result of a court order to sell property in satisfaction of a judgment.

Signature - The act of putting down a person's name, mark, or symbol with the intent that it attest the validity of a written instrument.

Site - A plot of ground upon which anything is, has been, or will be located.

Situs - Location.

Special assessment - An assessment against real estate to pay for improvements such as sidewalks, curbs, streetlights, or other things which benefit certain property owners.

Special warranty deed - A form of deed whereby the grantor warrants the title only against claims generated while the grantor owned the property.

Specification - A document describing requirements for a house, subdivision, or other project.

Specific performance - A legal action to compel the performance of the terms of an agreement, such as the sale of a home.

Specific Lien - A lien which affects only a single parcel of property.

SRA - Designates a member of the Society of Real Estate Appraisers.

Statute - State or federal law.

Statute of frauds - The state law which requires that certain contracts, including those for the sale of real property, must by in writing.

Strict foreclosure - A court decree vesting title to mortgaged property in the mortgagee upon the default of the mortgagor without any sale of the property.

Stud - Vertical timbers in a house wall.

Subdivision - A tract of land divided into lots suitable for residential purposes.

Subject to - The purchase of real property subject to a mortgage, whereby the original holder remains personally liable for the mortgage.

Sublease - A lease given to another by a lessee.

Subordinate - To make a mortgage subservient to another mortgage.

Subsequent purchaser for value - A purchaser for value in good faith and without notice of any adverse interest in the property purchased.

Suburb - The area close and adjacent to a city or town.

Survey - The process of measuring land; the resulting map of the property.

Syndicate - A group of persons joining together to deal in real property.

Tangible - Existing physically; that which can be touched.

Strategic Defaults: Naughty or Nice?

2009-12-25T20:05:00.000-08:00

You can’t pick up a paper or turn on a television today without hearing about the foreclosure situation in this country. There is no doubt the current economy and unemployment numbers have devastated the finances of many families and thus made it impossible for them to pay their mortgage.

However, what many don’t realize is that there is a growing number of homeowners who can afford to pay their mortgage – but don’t! They wrote the check for the mortgage payment last month. However, when they sat down to write it this month, they decided not to. They could afford to,but refused to make one more payment.

This phenomena is know as a ’strategic default’ and over 25% of the foreclosures today fall into this category. And that number is on the rise! Below is a graph showing the last several years. As has been reported, the 2009 numbers will show another dramatic increase.

Why are more people walking away from the obligation they created when they agreed to take the mortgage?

The answer to that question seems to be aligned with two issues:

1.) Negative equity is making people question whether making payments on a depreciating asset makes sense.

Many people are beginning to look at their house solely as a financial investment and that investment is turning sour. They are questioning whether it any longer makes sense to make payments on an investment which continues to lose value.

An article in the Los Angeles times addresses this issue:

But research by three academics suggests that the willingness of people to default depends largely on just how far underwater they are. Or, as the study’s authors put it, “People default because of the size of their negative equity, not just because they cannot afford to pay.”

2.) People are questioning if there is an ethical, or moral, imperative to pay back a debt you have entered into.

The ’stigma’ for not paying your debts isn’t as strong as it was even a decade ago. As more and more families are forced into foreclosure, it makes it easier for others to accept that fate.

Earlier this year, a research paper on homeowners with negative equity walking away, entitled Moral and Social Constraints to Strategic Default on Mortgages, stated:

We find that people who have been exposed more to defaults are more willing to strategically default. Holding morality constant, people who know someone who defaulted strategically are 82% more likely to declare their intention to do so.

Couple that with the fact that financial institutions such as Morgan Stanley are now walking away from their mortgage obligations on commercial properties, the moral imperative has almost become obsolete.

Not a decision without consequence.

A foreclosure stays on a consumer’s credit record for seven years and can send a credit score plunging by as much as 160 points . A lower credit score means auto and other loans are likely to come with much higher interest rates, and credit card issuers may charge more interest or refuse to issue a card.

What does that mean for housing in 2010?

I believe there will be a flood of distressed properties already coming to the market in 2010 which will put continued downward pressure on prices. Strategic defaults will just add to those numbers.

Your San Mateo County 3rd Quarter Market Report

2009-12-18T09:32:00.001-08:00

A Love Note to Burlingame

2009-12-16T12:52:00.000-08:00

Burlingame. This is where I live and I really enjoy it.

When I moved to the Bay Area, Burlingame was recommended to me by several people. If you’re not looking for nightclubs or a very active social scene,Burlingame is just about perfect. The weather is superb, and when you want to go to San Jose or San Francisco, freeways and public transport (BART via Millbrae or Caltrain) will get you there quickly.
It is indeed the City of Trees with areas reminiscent of my hometown: Kaliningrad, Russia. It’s safe and the schools are good. Burlingame is the coolest city on the Peninsula. Many of the houses are super cute and date from the 1920s. It has not one, but two cute shopping districts: Broadway shopping district, where the storefronts look like they’ve been there forever, and Burlingame Avenue, where there are so many upscale stores and restaurants I wish I could live next to it.
On top of all that there is a nice old train station, the Pez Museum, the beautiful Orthodox Church of All Russian Saints on El Camino Real, BALCO (home of the Barry Bonds steroid scandal), California Drive with its rows of eucalyptus, and the crazy chain restaurants and hotels out on Bayshore Highway.
Not only that but the amazing smell of brownies floats up from the Guittard chocolate factory to the Millbrae BART station all the way to the center of Millbrae. One could only imagine the entire town of Burlingame might be inundated with brownie smell. It goes without saying that I want to live in a city that smells nice and fudge-y.

Weekly Initial Unemployment Claims Increase to 474,000

2009-12-12T21:09:00.000-08:00

The DOL reports on weekly unemployment insurance claims:

In the week ending Dec. 5, the advance figure for seasonally adjusted initial claims was 474,000, an increase of 17,000 from the previous week's unrevised figure of 457,000. The 4-week moving average was 473,750, a decrease of 7,750 from the previous week's revised average of 481,500.
...
The advance number for seasonally adjusted insured unemployment during the week ending Nov. 28 was 5,157,000, a decrease of 303,000 from the preceding week's revised level of 5,460,000.

Click on graph for larger image in new window.

This graph shows the 4-week moving average of weekly claims since 1971.

The four-week average of weekly unemployment claims decreased this week by 7,750 to 473,750. This is the lowest level since October 2008.

Although falling, the level of the 4 week average is still high, suggesting continuing job losses.

What is a Bedroom | Or, That's not a bedroom!

2009-12-11T10:03:00.001-08:00

What is a bedroom, that is the question.

The Uniform Building Code, which is adopted by virtually all cities and counties throughout California, requires a room to have a closet to be a bedroom. However, some locals have their own definition of what sort of space constitutes a bedroom, which includes a window or some other sort of secondary means of exit. A room that is the only access point to another room is not considered a bedroom, even if it has a closet. Further, if a home addition includes a sleeping area that is not permitted, it cannot be called a bedroom, even if its characteristics meet the definition test.

What about your house, or a house your considering purchasing? Step one is to check with the city to see if the room you're questioning can be counted as a bedroom. When in doubt, check the public records.

Examples of rooms that are probably not bedrooms

garages converted to living space, unless permitted
dens and offices
loft areas

Most sellers know that a three bedroom home has more value than a two bedroom home, which is why we see agents and sellers alike stretching the definition of a bedroom in the listing of the property. From the buyer's perspective, it's all about disclosure. If the seller fully discloses that the extra "bedroom" isn't really a bedroom, then the buyer has the information they need to make an informed purchase decision.

THE GREATEST CHRISTMAS DECORATION EVER !!!

2009-12-09T13:58:00.000-08:00

Make sure to read story at bottom…

"Good news is that I truly out did myself this year with my Christmas decorations. The bad news is that I had to take him down after 2 days. I had more people come screaming
up to my house than ever.
Great stories. But two things made me take it down.

First, the cops advised me that it would
cause traffic accidents as they
almost wrecked when they drove by.

Second, a 55 year old lady grabbed the 75 pound ladder,
almost killed herself putting it against my house
and didn't realize hanging man was fake
until she climbed to the top
(she was not happy).
By the way, she was one of many people
who attempted to do that.
My yard couldn't take it either.
I have more than a few tire tracks where people
literally drove up my yard to rescue the fake hanging man."

Cash Offers: Getting No Respect

2009-11-16T13:04:00.000-08:00

I`ve recently worked with buyers who had a lot of cash on their hands. Wow, lucky you would say! What couldbe better then cash in today`s market? We submitted a fabulous full price/all cash/quick close offer, and yet we got rejected. The seller decided to hold an open house and then look at all offers in anticipation of a multiple interest.

Smart? If you ask me, I do not think so. A lot of sellers out there are still living in a fairy land of multiple offers, but its not always happening they way they want.

So back to my story. We withdrew our offer and my clients took off for the weekend. On Monday around 12pm, while I was out showing properties to another couple, I got a phone call from the listing agent, panicking and almost yelling on the phone that she really hopes that my clients are still interested because she thinks there will be no offers coming in and her client now regrets that he did not accept our offer and he is very frustrated and she does not know what to do.

Okay, I thought to myself, you`ll probably get your offer back, but a few thousand less then what was offered before. Brutal, you`d say? I do not think so. Time was of the essence and they lost their opportunity.

We are in a counter to counter over a few minor items now and my clients could not be happier. But just goes to prove that cash offers, even in today’s market, get no respect.

Congress Passes Tax Credit Extension/Expansion

2009-11-06T11:47:00.001-08:00

More good news for consumers and the housing market recovery. Following the Senate’s favorable vote yesterday, the U.S. House of Representatives just voted 403 to 12 to extend the home buyer tax credit, expanding the parameters to include existing homeowners and not just first-time buyers. As you may know, C.A.R. and our partners at NAR have worked for months urging Congress and the Senate to extend and expand this crucial piece of legislation. We expect President Obama to sign the legislation in short order.

As it now stands, the federal tax credit will be extended through April 30, 2010, with a 60-day extension if a binding contract is in place prior to the deadline. First-time home buyers will continue to be eligible for a tax credit of up to $8,000, while existing homeowners will be eligible for a reduced credit of up to $6,500. To qualify for the $6,500 credit, existing homeowners must have lived in their current residences for at least five years. The bill also increases the qualifying income limits from $75,000 for single tax filers and $150,000 for joint filers to $125,000 and $225,000, respectively. The purchase price of the home is capped at $800,000 in both instances.

Under additional provisions included in the bill, taxpayers can claim the credit on purchases completed in 2010 on their 2009 income tax returns. The legislation maintains the provision that home buyers do not have to repay the credit provided the home remains their primary residence for 36 months after purchase, and waives this requirement for active duty military personnel who move due to a military order.

Is This The House From Hell?:)

2009-11-03T12:35:00.001-08:00

2009-11-03T12:34:00.001-08:00

Fewer short sales are coming up short

2009-10-22T11:33:00.000-07:00

Fewer short sales are coming up short
Carolyn Said, Chronicle Staff Writer

Wednesday, October 21, 2009

(10-20) 20:41 PDT -- Want to hear a real estate agent curse? Just say the words "short sale."

That transaction, in which borrowers sell their house for less than they owe, has earned a reputation as a frustrating morass with banks taking weeks or months to respond to offers and then often rejecting them. Because lenders swallow a loss on short sales, they have the ultimate say.

But now real estate professionals and banks say the logjam is starting to ease, with decisions coming more quickly, more short sales trading hands, and the prospect of a new Treasury plan that will further lubricate the process.

"A year ago I wouldn't touch a short sale," said Kevin Kieffer, a Realtor with Keller Williams Realty in Danville. "It would be random prices banks wouldn't agree to, you would be tied up six months hoping to get a property sold. But now we're seeing banks up front negotiating prices and giving us criteria. They're getting creative to make things move."

An analysis of Multiple Listing Service records by Emeryville's ZipRealty shows that short sales indeed are gaining ground.

From last September through March, about 600 short sales were completed in the nine-county Bay Area each month, accounting for about 9 percent of existing-residence sales. The monthly short sales topped 700 in April and May and has hovered around 900 to 1,000 a month since then, putting it at about 14 percent of sales. (Zip said the actual numbers may be higher, as not all short sales are flagged as such in the MLS.)

Cindi Hagley, a broker-associate with Windermere Welcome Home in San Ramon, said many banks are getting faster in rendering decisions on short sales, but others still take three or four months.

"The larger banks are coming to the table," she said. "My gut feeling is that short sales seem to be the preferred avenue for distressed property now. It's cheaper for them to do a short sale than go all the way to foreclosure."

For homeowners, a short sale provides a more dignified transition than a foreclosure - and will allow them to return to homeownership sooner. Fannie Mae, for instance, requires at least a five-year wait after a foreclosure but only two years after a short sale - and less if the homeowner wasn't delinquent.

Short sales are also better for the neighborhood because the home stays occupied instead of becoming a vacant foreclosure that may attract crime. And for banks, short sales let them skip the expense and time of going to foreclosure.

Several developments are helping to expedite the sales:

-- Pre-approval. Some banks are proactively deciding what amount they will accept for a short sale house. Sometimes they reveal the amount; sometimes they don't, but either way it expedites the process. Homes with this arrangement are listed as "Lender pre-approved short sale."

"It's an internal reserve price that lets us know the floor we'll accept on a short sale," said Dave Sunlin, senior vice president for foreclosures and real estate at Bank of America, which doesn't reveal the price for competitive reasons.

Considering options
At Wells Fargo, Ben Windust, senior vice president of default operations, said the bank is testing various short-sale approaches, including pre-approved sale amounts that it does reveal. That pilot is only for homes that Wells owns in its portfolio; homes owned by investors require more complex decision-making.

-- Proactive discussion with homeowners. Windust said another Wells pilot is to monitor real estate listings. "If we see we have a (Wells Fargo) borrower who listed property, if it's underwater, we might proactively reach out to them to work with us now on a short sale."

Similarly, JPMorgan Chase spokesman Gary Kishner said, "We are working on a more proactive approach to short sales by obtaining a listing of our delinquent borrowers who have their property listed for sale and then reaching out to help them sell the property."

Wells, Chase and other banks said it benefits homeowners to let their banks know early on that they want to pursue a short sale so the home's value, paperwork stream and other factors can be determined.

-- Treasury plan. In May the Treasury Department said it would offer a streamlined framework for short sales and incentive payments of $1,500 to homeowners, $1,000 to loan servicers and $1,000 to second-lien holders. That plan is supposed to be implemented very soon.

"As we understand it, it allows lenders to work with borrowers to mutually agree on how to market the property, set the price for it, gives us a fixed amount of time to sell the property and if not, converts it into a deed in lieu of foreclosure," said BofA's Sunlin.

-- Technology and staffing. BofA said it recently adopted a Web platform called Equator (formerly REOTrans) for managing short sales, as well as bulking up its short-sale staff.

But despite the progress, many short sales are still exasperating.

"Four of our offers are still out there in home-buying purgatory also known as the short sale," said first-time home buyer Travis Shinkle of Fairfield. He and wife Kasey made some of those offers as far back as May and the homeowner accepted them - but they're still waiting to hear from the banks.

Still obstacles
And even when there is progress, it doesn't always sound like it.

"Before you'd fax something 10 or 15 times before it would get anywhere," said Janelle Boyenga, a Realtor with Intero Real Estate Services in Los Gatos. "Now you only have to fax it in three or four times. And banks are ambiguous when they call: They said I could get back to you in an hour or in a month."

I wouldn’t put this past Apple:) Apple Introduces Revolutionary New Laptop With No Keyboard

2009-09-11T11:31:00.001-07:00

Apple Introduces Revolutionary New Laptop With No Keyboard

Will lenders consider rental income when trying to qualify for a second loan?

2009-08-27T10:43:00.000-07:00

Question: Will lenders consider rental income when trying to qualify for a second loan? My husband and I would like to buy a house and rent out our condo. We can put down 5% and both have over 750 credit scores. Our income is pretty high but we're worried we won't qualify because of our first loan. I understand some lenders used to count 75% rental income towards your income but not anymore. Do any lenders allow a flexible debt/income ratio?

Answer: Lending standards have really tightened up following the economic meltdown. Lenders want more of the borrowers skin in the game. Therefore, required down payments have moved up toward 20%. Each lender has different requirements, and even the same lender may vary depending on their portfolio.

It would be a good use of your time to go to 2 or 3 lenders to get prequalified for a loan. It is then that you will learn the answers to your questions. It's better to work from a place of certainty than guesswork.
McGuire has a vast network of sales associates who deal daily with questions just like this. Our agents tend to know which 'lenders' are best at a given time. Perhaps they'll provide further insight. Good luck.

Don't Look Back, Look Ahead

2009-02-03T21:10:00.000-08:00

Don't Look Back, Look Ahead

The end of the year is usually marked with deep-thought retrospectives, but we might be better off simply glossing over 2008. We all know it has been a train-wreck of a year for housing, so there is no sense in reliving the obvious. At this point, it's more important to move on (without forgetting the lessons learned, of course).
We think 2009 will be a darn-sight better than 2008. The mortgage market has already improved drastically over the past few weeks: More money is available, and more money is available at very good rates. Much of the mortgage activity has been driven by refinances, to be sure, but let's not forget that purchase activity has increased as well. We think purchase activity will continue to increase as more borrowers take advantage of affordable home prices.
The key for housing at this point is price stabilization, and the trends on that front remain discouraging. But like we've said many times in these missives, prices can only fall so low. We can say, with some certitude, that we are definitely closer to a bottom than to a top, which is why we will be surprised if we're not writing about a stable, likely rising, housing market this time last year. After all, people can overlook bargains for only so long, so we expect the number of bargain hunters to swell considerably in 2009.

MARKET RECAP
The markets were in full-holiday mode last week, meaning little was going on. But what was going on was encouraging – and no more encouraging than in the mortgage market. Indeed, applications continued to rise, reaching a new five-year high. A drop in borrowing costs, sparked in part by the Federal Reserve's plan to buy mortgage-backed securities, continues to fuel activity.
If you'll remember back to November, the Fed announced a program to reduce the cost and increase the availability of credit for home buyers. Last week, the central bank selected four firms to manage a $500 billion purchase of mortgage-backed securities, to be completed by June. Only fixed-rate agency mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae are eligible for the program; nevertheless, the program is expected to drive more funds toward mortgage lending.
More funds, in turn, mean lower borrowing costs, and that's been the case in recent weeks. In fact, the prime 30-year fixed-rate mortgage is now hovering around 5.5% while the prime 15-year fixed rate mortgage continues to test 5%. Many parts of the country are availing themselves to mortgage rates unseen in the past five years. The really good news is that these rates are becoming available to a wider swath of the borrowing public.
What's more, the number of borrowers eligible for better rates could rise if recent employment trends hold. Initial jobless claims for the week ending December 13 fell a sharp 94,000, bringing the total seasonally adjusted amount of initial claims to 492,000, the U.S. Department of Labor reported. The drop in claims is the largest in 16 years. Some in the media were incredulous, but a Labor Department official told Reuters that "the numbers seemed unbelievable but the states certified they were correct."
We shouldn't get too ahead of ourselves: The labor market continues to suffer from a troubled economy, but at least there are signs suggesting an improved employment situation heading into 2009.

A Price Hike Would Be Nice

2009-02-03T21:08:00.000-08:00

A Price Hike Would Be Nice

If you are a buyer, lower prices are always welcome. The same can't be said if you are a seller. Many sellers in the housing market would dearly love to see higher prices. And can you blame them? Integrated Asset Services, a provider of residential collateral valuation, reported that home prices posted a 1.7% decline in November, contributing to a 12-month decline of 13.3%. Price declines were steepest in the South and West, posting at 11.5% and 18.4%, respectively (though the rate of decline in both markets has eased in recent months).
Unfortunately, home prices are unlikely to improve much during the first quarter of 2009, given that houses in some stage of foreclosure totaled 303,410 in December, a 17% increase from the previous month and a 41% increase from the previous year, according to the latest data released by RealtyTrac.
At this stage, a sound argument can be forwarded favoring an overall increase in housing prices. An increase would be good for both buyers and sellers, for the simple reason many potential buyers aren't buying because they are concerned that prices will continue to drop after they buy. A steady, sustainable increase would go a long way to assuaging those concerns. In the mean time, it's important to remind buyers that we are much closer to a bottom than to a top. Down trends, like up trends, don't last forever.
Will home prices be higher five years from now? No one knows for sure, but probabilities based on data collected over the past 100 years suggest they will be.

MARKET RECAP
Apologies to Wal-Mart for pinching its slogan, but last week's theme could easily have been tagged "everyday low prices," for prices seemed to be falling everywhere and everyday – both here and abroad.
Outside our domestic boundaries, prices of goods exported to the United States tumbled in December for a fifth consecutive month, falling 4.2%, after a revised 7% drop in November, the Labor Department reported on Wednesday. For all of 2008, import prices declined 9.3%. So if you have been thinking Volkswagens and Louis Vuitton handbags seem a little cheaper than they were this time last year, you're probably right.
Domestically, prices paid to U.S. producers fell 1.9% in December, registering the first annual decrease in seven years. Excluding fuel and food (which is a little silly, considering the importance of fuel and food in everyday production, but economists exclude it nonetheless), the so-called core rate rose 0.2% after a 0.1% increase in November.
Since many of the same variables that impact producer prices impact consumer prices, it's no surprise that consumer prices dipped as well, dropping 0.7% in December after falling 1.7% the prior month. For all of 2008, consumer prices rose a scant 0.1%, posting the lowest annual increase in over 50 years.
The price paid for credit also trended lower last week. Mortgage rates, in particular, trended to a multi-year low. Bankrate's weekly national survey had the prime 30-year fixed-rate mortgage averaging 5.28% (tying a 23-year low), the prime 15-year fixed-rate mortgage averaging 4.89%, and the prime 5/1 adjustable-rate mortgage averaging 5.51%. But keep in mind that Bankrate is presenting averages. Rates of 4.75% and lower for 30-year fixed-rate loans weren't all that uncommon for borrowers with excellent credit scores.
Low prices combined with a stagnating wage market means inflation – a prime determinate of interest rates – will keep mortgage rates at affordable levels into the near future.

Real Estate Horror Stories

2008-02-12T18:57:00.000-08:00

We have all heard the horror stories about real estate ownership. It seems people are more likely to share problems than to say, “By the way I made $250,000 in five years on one property.”

Here are a few adventures in property ownership:

The owner above your newly refurbished condo didn’t repair a water leak, causing the walls behind your brand new custom cabinets to become infested with foul smelling mold. A contractor then tells you everything has to be ripped out again.

One Monday morning, you discover an intriguing newspaper article featuring the DEA, the SWAT team, and that nice middle aged couple that rent your home. Reading further, you find that the couple has been arrested for attempted murder, the front door of your property was opened with a battering ram, and stockpiles of assault weapons and cocaine were confiscated during the raid.

Of course, the damage to your property is not reimbursable by the authorities because they wrecked your place “in the line of duty.” Talk about “having a Monday!”

After closing escrow, but before taking possession of a newly acquired condo, you receive a phone call notifying you that the condo has been flooded. The contractors you hire then tell you the hardwood floors and wood cabinets need to be completely replaced, and politely note that the expensive granite countertops will be destroyed in the process.

Your son works for a mortuary, and calls to let you know that he picked up the tenant who’d just renewed his lease for another year.

You often serve your own three-day notices to pay or quit. After serving one such notice alone, at 9 p.m., you are told by a passing squad car that your tenants are member of the Hell’s Angels and hate women.

You receive a frantic phone call from one of your tenants to tell you that, a half hour ago, he discovered his very obese, unkempt and completely nude neighbor trying unsuccessfully to hang herself from the door knob. The woman lived, but your tenant requires counseling.

If the above sound fanciful, believe them. All of them have happened on my own properties. Considering how long I’ve been investing in real estate, the number of problems has been small.

But they do stick in one’s mind!! And you know what? Even with the occasional hassles and scares, I still made a lot of money and I learned some things too!

Six Home Inspection Myths

2007-11-03T21:53:00.000-07:00

Six Home Inspection Myths
Separating fact from fiction will put you ahead of the game

There are many myths and misconceptions associated with hiring a home inspector, which can lead to the buyer having to make costly repairs at a time most people are cash strapped. Be certain to take the time to learn the truth.

The following are some of the most common home inspection myths:

Myth: All qualified home inspectors are alike.
Truth: Just because someone claims to be an inspector -- even a certified one -- doesn't mean he or she is qualified. Not all states require home inspectors to be licensed. Before choosing an inspector, examine the person's credentials and be sure you trust not just the certification but the certifying body. You can check if someone is a member of the American Society of Home Inspectors or the National Association of Home Inspectors at www.ashi.org or www.nahi.org. Another good standard for finding a home inspector is to ask how many inspections they perform a year. At least 200 is a good number.

Myth: The inspection report functions as a list of repairs the seller must complete.
Truth: The seller can choose to use the inspection as a repair list or as a negotiation tool to move the deal forward.

Myth: The home inspection will go fine without your presence.
Truth: You don't need to be there, but it's a good idea and a great way to learn how to operate systems in the home and understand its condition. It also lets you ask the inspector and seller questions.

Myth: You don't have to bother getting a home inspected if it's being sold "as is."
Truth: A home sold "as is" should certainly be inspected, so as the buyer you know exactly what "as is" means. These homes aren't being sold free of defects, only with defects left unrepaired. Many states require the seller to disclose known defects or other conditions that could affect the value of the home, but impose no further obligation.

Myth: A termite inspection is enough.
Truth: A home inspection covers more than looking for termites. Home inspectors look at the home's entire structure and all major systems, such as plumbing, electricity and any internal climate control systems such as heating and central air. If a home inspector does find potential termite problems, or other issues that are dealt with by specialists -- such as chimney or structural problems -- he or she will recommend a qualified inspector.

Myth: You don't need to have an inspection for a newly built home.
Truth: This could be one of the costliest myths of all. A recent Consumer Reports investigation found 15 percent of new homes sold had serious. In another study, 41 percent of the homes examined, constructed by various builders, revealed problems such as mold and moisture. And 34 percent had frame and structural problems.

Home inspectors conduct a visual inspection of all elements of a home and check items such as the water heater and built-in appliances, offering details about the condition of a home's major components. To learn more about home inspection services, please visit www.slavahomes.com

Real Estate Yard Signs

2007-10-03T09:07:00.000-07:00

Yard signs are the most obvious, yet underutilized selling tool in the Realtor's arsenal. If you are one of those Realtors I know who is still married to the gatekeeper business model in which all information about the home should be closely held, you may be missing real opportunities to expand your business. It begins with the ordinary yard sign.

The yard sign is your chance to show neighbors, seller's relatives, buyers and other sellers how you can really pull out the stops to market a home. By festooning the sign with sign riders, feature sheet holders, and email addresses, you make the sign come alive with enthusiasm and energy. Anyone who looks at such a busy sign will see a busy agent who is determined to sell this particular home.

Think about the curiosity factor. Wouldn't you be tempted to stop and look at a home that invites you to "Take One, Please?" By comparison, a sign with only a broker's name and a phone number looks exactly like what it is - an advertisement for the broker, not the home.

The purpose of your sign is to stimulate activity around the home. By making people stop, look and think about this home, you are expanding your customer base. Curious neighbors and Sunday drivers could be your next clients.

I personally use colorful residential yard signs to increase traffic, communicate important information and make a stronger curbside impression. I also use lightweight, curbside signs to list amenities and generate interest in my rental properties.

Make a great drive-up impression with a colorful yard sign and remember, yard signs are the first point of contact you have.

All the best,

Slava Z~

I launched a new group "The Bay Area Russian Language Meetup"

2007-10-02T12:07:00.000-07:00

Hello Everyone! I am happy to announce that today I started "The Bay Area Russian Language Meetup Group".

The Bay Area Russian Language Meetup group is created for Russian speakers & Russian culture lovers living in or near San Francisco, Peninsula or Silicon Valley.

Our happy hours, dinner gatherings or meetings provide a great opportunity where our members can easily meet and learn from each other.

Whether you are looking to practice your Russian or simply meeting people who love Russian culture, you will find this to be a wonderful way of meeting some amazing friends.

Come join us today!

Click here to check out
The Bay Area Russian Language Meetup Group!

Home Loan Rates This Week-GOOD, BAD OR UGLY?

2007-08-06T09:32:00.000-07:00

This morning I recieved a weekly mortgage update from Adam O Donnell at Guarantee Mortgage. I found it very interesting, here is what he had to say:

"GOOD, BAD OR UGLY? All of the above, if we're looking at last week and home loan rates. Good news came in the form of friendly inflation and employment news, which helped rates on conforming home loans improve by about .125% over the course of the week. "Conforming" home loans are those under $417K, and subject to very standard credit, income and asset qualifying, nothing exotic, outside the box or fancy - and there's a reason those are being singled out here as having improved. More on that later.
A little bad news came by way of the Bureau of Economic Analysis, revising previous personal savings rate estimates higher, but showing that Americans still save less than 1% of their income. If you're not sure that you are preparing effectively for your future plans, like retirement or sending your kids to college, please get in touch with me, and let's review your situation to see if I have an idea or referral that might help.

The ugly last week - well, it was really ugly. The media screamed all week about issues in the mortgage industry, particularly impacting what are called "non-conforming" home loans; those that are dollar amounts higher than $417K, or with credit, income or assets not falling under traditional guidelines. Many of those rates got excessively ugly, in many cases, overnight. Why? It's an interesting story, and not one that even the media seems to understand very well. But read on, as this week's Mortgage Market View unpacks all the details...and what you can do now to make sure you won't be impacted.

IN THIS WEEK'S MORTGAGE MARKET VIEW, THE REAL STORY BEHIND THE HEADLINES OF CRISIS AND DRAMA IN THE MORTGAGE INDUSTRY...DON'T MISS IT, AS YOU'LL LEARN WHAT IT'S ALL ABOUT, AND WHAT YOU SHOULD DO RIGHT NOW.

Forecast for the Week
Whew...after a busy week of expected and unexpected news last week, the economic report calendar becomes very tame this coming week, only populated with a handful of low-level reports. In fact, the week's only major event takes place on Tuesday with the release of the Fed's latest interest rate decision and monetary Policy Statement. The Fed is expected once more to keep their Fed Funds interest rate "on hold" at 5.25%.
But what will be of particular interest is the tone and wording of the Fed's Policy Statement. Are they feeling more comfortable about inflation, given the inflation friendly news of last week? If this sentiment leaks into the verbiage of the Policy Statement, Bonds may get a ride higher upon the release, and home loan rates would improve. However, if Fed Chair Ben Bernanke and his fellow inflation fighters at the Fed still sound concerned about inflation, Bonds and home loan rates could worsen.
Chart: Fannie Mae 6.0% Mortgage Bond (Friday Aug 03, 2007)
The Mortgage Market View...
Current State of Mortgage Financing...What's Going On?
Anyone watching or reading the financial news over the last few days and weeks has seen a lot of angst and consternation over the state of the mortgage industry. In fact, one of the larger lenders in the US, American Home Mortgage, was forced to shut down operations last week. But why? What is happening, and most importantly, what does all this mean to you? Let's unpack the definitions and details, so that you really understand the truth behind the headlines.
Over the past several years, many loans were made to homeowners with somewhat non-traditional or "non-conforming" situations, be it a poor credit history, inability to document income, or any number of factors that do not fit within the traditional "box" for home loans. These loans are often called "Sub-Prime", or "Alt-A", meaning that they were somewhat riskier in nature than A credit, prime, or traditional loans. Another type of "non-conforming" home loan is one where the credit and income might be perfectly fine, but the loan amount is higher than $417K, which is the current maximum loan that can be done using pools of money from mortgage giants Fannie Mae (FNMA) and Freddie Mac (FHLMC). If the loan amount is higher, it can certainly be done - it's called a "jumbo loan" - but the end money comes from private institutions, not from the large government sponsored entities of Fannie and Freddie.
Most non-conforming loan product rates popped significantly higher in the last week. Here's the scoop.
The end investor for Subprime or Alt-A loans will charge a premium for taking on a pool of these loans, because they know that traditionally, they might have a higher rate of default and delinquent payments within that risky pool. But lately, default and foreclosure has been on the rise - partly due to the fact that with credit tightening and a soft real estate market, many troubled homeowners are unable to refinance or sell in order to get out of trouble. So now, these end institutions are demanding a much higher "risk premium" for taking on these pools of loans, as they see the rates of default are climbing higher.
But since these institutions are purchasing these pools of loans sometimes months after the borrower has actually closed at a given rate, this increase to the risk premium means that instead of paying $101K for a $100K loan that will bear interest, they may only be willing to pay $95K for that $100K mortgage to account for the risk. Multiply that times thousands upon thousands of loans...and you have millions upon millions of dollars in loss for the company trying to sell the pool at a much lower price than they were expecting. This is called a "liquidity crisis", and is exactly what happened to American Home Mortgage - there was no mismanagement, but they simply got caught holding too many "hot potato" loans, forced to sell them at massive losses...and eventually they had to make the decision to close the doors and stop the bleeding.
Further, even when a lender is able to take some losses, they may be subject to a "margin call". This means that as their losses and risk premiums increase, the value of their loan portfolio decreases. As the value decreases, the credit lines that are secured by those portfolios begin to issue margin calls as the value of the asset that they are secured on is now diminished. This is exactly like margin calls in the Stock market. If you have a loan against a Stock that is losing value, you will get a "margin call" and need to pay down the loan, as the underlying Stock is losing too much value to be considered adequate collateral any longer. So for the big lenders, as their portfolio is losing value due to increased risk premiums and losses...the margin calls start coming in, and they are required to pay down their balances. In turn, this means that they have less availability to fund their new loans, which then exacerbates the problem.
In response to seeing this situation play out in the demise of American Home Mortgage, lenders of other non-conforming loan products increased their interest rates dramatically almost overnight to be better prepared - and likely over-prepared - for increased risk premiums down the road. Even though loans above $417K are not presently suffering from increased delinquencies like the Subprime and Alt-A loans are, these rates popped higher as well, because they are being purchased by smaller private entities that can't afford to take on any margin of risk.

What happens next, and what should you do now?

The present situation will likely settle out over the coming year, and the rates on products that have moved so significantly higher now should trend lower down the road as delinquency rates stabilize. But here are a few important things to do right now.
First, even if you are not presently in the market for a home loan of any type, call me to make sure that your credit standing is as solid as possible. Many people I talk to about home loans didn't expect they would have a need, and didn't plan in advance to ensure their credit would qualify them for the best possible financing. With no immediate need for a home loan, time is on your side...why don't we take a few minutes together and just make sure you are prepared, should a need arise down the road?
Next, if you are in the market for a home loan, or know someone who is - know that now is time to be working with a real qualified professional who can keep you informed of changes in the market and get your loan funded quickly. Now is NOT the time to be playing the risky game of trying to scour the entire nation to find someone who promises to save you a paltry amount on costs, or deliver a rate that seems too good to be true. Your home and your financing are just too important, and times have changed. I am here to help and advise during these volatile times - and would welcome calls from you, your friends, family, neighbors or coworkers."

To contact Adam directly please visit his web-site www.adamodonnell.com. Please tell him that you were refered by Slava Zamalin at Prudential Fine Homes and I am sure he`ll take a good care of you.

What is title insurance and do I need one when I buy a house?

2007-07-25T15:39:00.000-07:00

Recently one of my cleints asked me about a title insurance. Just about everybody understands the need to purchase automobile and homeowner's insurance to protect against unexpected losses that are often more costly than most of us can afford to pay. We hope we never have to file such a claim but, just in case, we pay relatively affordable premiums for protection.
However, when buying or selling a house or condominium, there is another type of insurance with which most of us are unacquainted. For a one-time premium at the time of home purchase, the title insurer will protect the mortgage lender and/or the homeowner as long as the mortgage or home ownership is in effect.
To illustrate, when is the last time you heard of a homeowner encountering a title insurance claim? Although I've been buying and selling real estate for a few years, I have never had to file a title insurance claim, nor have I ever heard of a title insurer paying a title policy claim.
Yet, title insurance is a "necessary evil" for real estate owners. Without title insurance, most mortgage lenders won't lend. Smart home buyers won't buy without an owner's title policy to show marketable title. But our chances of ever filing a title claim are minimal.
Title insurers readily admit they pay out less than 10 percent of premiums collected for title claims. By comparison, most auto insurers pay at least 50 percent of premiums collected for policy claims. Instead, most title insurance premiums pay for title research to prevent losses, plus profit, of course.
WHY TITLE INSURANCE IS REQUIRED FOR VIRTUALLY EVERY PROPERTY SALE. Would you buy your house or condo based on the seller's handshake assurance, "You can be sure the title is good"? I hope not.
Instead, as the buyer you should insist on receiving an owner's title insurance policy to protect your equity just in case the title is not "marketable." More important, you won't be able to get an institutional mortgage unless the lender receives a lender's title policy.
Virtually the only real estate sales that do not involve a title insurance policy are transactions between friends or relatives, inherited properties, all-cash sales and foreclosure sales. Although title insurance is available for such title transfers, the buyers often trust the sellers and try to save a few dollars by not insisting on receiving an owner's title policy.
WHAT DOES TITLE INSURANCE INSURE? The exact answer depends on whether you are a mortgage lender or a property buyer. Lender's title insurance offers more extensive coverage, such as for water rights, zoning and conditions obvious from a property inspection, such as an unrecorded, overhead-power-line easement.
But a property owner's coverage is less complete unless the buyer purchases "extended coverage," which is virtually the same as a lender's title policy. Both coverages include protection for title risks, such as forged signatures in the chain of title (the major cause of title losses), encroachments, surveys (if specifically included), recorded easements, mechanics' liens, property tax liens, claims by heirs and ex-spouses, title search errors, and many others.
WHO PAYS THE TITLE INSURANCE PREMIUM? The answer to this question depends on local custom and the terms of the property purchase contract. For example, in the county where I live, the custom is the buyer pays for the lender's title insurance and, if desired, for an owner's title policy. But in the adjacent county to the south, the custom is the seller pays for title insurance.
Local custom is not binding. For example, one of my clients bought a San Francisco apartment building where the custom is the buyer pays for title insurance. As they were short of cash, they wrote in their purchase offer that the seller would pay for the lender's and buyer's title insurance. Their offer was accepted so they saved several thousand dollars for the title insurance premium.
Equally important, whether you are the seller or buyer who is expected to pay for the title insurance, it pays to shop around. Except in a very few states where title insurance premiums are heavily regulated, title premiums vary by title insurer. If you are buying a $100,000 house or condo, you won't save much by shopping among title insurers. However, if you are buying or selling a $1 million house, you can probably save at least several hundred dollars by shopping for title insurance.
If you are buying a new house or a new condo, chances are the developer has negotiated a discount rate with a title insurer. Be sure to inquire if you will receive a title insurance discount by purchasing from the developer's title insurer.
WHEN YOU PLAN TO "FLIP," ASK ABOUT A "BINDER TITLE RATE." Another way to save on title insurance premiums occurs if you plan to make a quick resale (called a "flip") after purchase. Ask if a discount title rate is available in your area.
Perhaps you are buying a fixer-upper house that you plan to upgrade and resell for a huge profit within less than 12 months. You are then a perfect candidate for the discounted "binder title rate."
Where allowed by state title insurance law, the binder rate is usually 110 percent of the regular title insurance premium. However, when you resell the property in less than 12 months (up to 24 months in some states), you will receive a 100 percent title premium refund and the title insurer keeps only the 10 percent extra premium.
THE BIG RISK OF NOT OBTAINING AN OWNER'S TITLE POLICY. Especially in areas where it is customary for the seller to pay for title insurance, home buyers often think, "Well, the seller is paying for my mortgage lender's title insurance policy so the title must be good, and I don't need to buy an owner's title policy."
Wrong. In the rare case where there is a major title defect, such as a home builder has a defective title, or unpaid mechanics' liens," the title insurer will pay the lender's claim up to the insured amount. But nothing will be paid to the homeowners for their lost equity if they didn't obtain an owner's title policy.
TITLE INSURANCE WON'T PAY UNTIL THERE IS A LOSS. Threat of a possible loss is not a valid reason for a title insurer to pay. Only an actual loss requires the title insurer to pay.
Title insurance is called an "indemnity policy," just like your auto or homeowner's insurance.
For example, suppose a neighbor claims your house encroaches on his lot. Until he actually files a lawsuit against you, the title insurer has no obligation to pay for a possible threatened loss. However, after the encroachment is proved, then the title insurer must pay.
SUMMARY: Title insurance is different from virtually every other type of insurance. For a one-time premium, title insurers provide coverage as long as the lender, the insured or his/her heirs own the property. Until a title loss occurs, the title insurer has no legal duty to pay even if a possible title loss might occur. For more details, please consult a local real estate attorney.

I started a blog...

2007-07-24T20:17:00.000-07:00

I met a remarkable person today. She is only 17, but she is a very smart girl, she runs a start up company http://www.startupism.com/ and very enthusiastic about it. We met for coffee in Burlingame. She asked me if I had my own real estate blog or not. "What for?" I said," It`s time consuming and who will be interested in it anyway?" We talked and talked and talked... The result of our meeting-I am running my own real estate blog and I am very excited! I think I have a lot to share about real estate and I am sure that I can learn from you too. Real Estate has always been my passion and I hope to meet more people like myself through my writing. So, let`s start real estate blogging, and again thank you Jessica! You are awesome!