Debt Ceiling and Real Estate - Brandon Knapp of RPM Mortgage

After months of political grumbling back and forth, the Debt Ceiling was finally raised and the country took a step - albeit a small one - towards lowering our enormous budget deficit.

With the political stalemate behind us, it's time to focus on how the Debt Ceiling deal will impact Bonds and home loan rates.

First, shortly after the deal was announced, Fitch Ratings and Moody's both reaffirmed the United States' AAA rating, citing that the Debt Ceiling agreement virtually removes any threat of default. That was Bond friendly news and helped Bonds and home loan rates improve. But the ratings agencies did leave the door open for a future downgrade depending on how the debt and budget negotiations continue in the future. So the Debt Ceiling may be raised, but the issue of debt and credit ratings is far from over.

Beyond that, the deficit reduction program agreed to in the deal should help strengthen the value of US debt, because there will be less spending. At the same time, less government spending will also weigh on Gross Domestic Product (GDP). And just last month, we saw how weak the GDP already is when the 2nd Quarter GDP came in well below expectations and at the slowest growth rate in 2 years. Additionally, the 1st Quarter GDP was revised sharply lower than it was previously reported. Remember, a weak GDP would make Stocks LESS attractive and Bonds MORE attractive - as Bonds generally perform better during sluggish economic times.

Bottom line… be careful what you wish for. When rates moved sharply higher this past winter, it was due largely to the Fed's second round of Quantitative Easing (QE2). When that ended, the prevailing wisdom was that the only way rates could come back down to levels anywhere near where they were on the eve of QE2 was if the economy "endured more pain." That sure is what we are seeing of late as growing economic uncertainty, persistently high unemployment and rising consumer pessimism is helping Bonds move higher and trade within an earshot of the best levels - ever!

Though Bonds and home loan rates look very attractive right now, we can't be complacent and think rates will stay low or go even lower still. As fast as prices have moved higher, things can change in a heartbeat if the economy starts to see some good news.

And, although there isn't much, there is some good news out there. For example, the most recent reports for Housing Starts and Building Permits were both reported better than expected. While this is only one number and one number doesn't make a trend, this is a good figure, and I will be watching closely for follow through in future readings.

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Los Altos Real Estate Market Snapshot 8/7/2011

by Deniece Watkins Smith, Realtor, ePro, SRES, Previews Specialist

There are thirty-one homes that closed escrow in the past month in Los Altos.

Sixteen sold over their asking price.

Seven had lowered their asking price before they sold.

The average days on market are twenty-three.

Average length of escrow is thirty-two.

Currently, the average price received is 100.005% of asking price. Specifically, average asking price was $1,656,419 and average sale price was $1,665,760.

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New Conforming Loan Limits, How They Effect You

by Deniece Smith, Realtor, ePro, SRES http://www.dsoldit.com/
Conforming loan limits are anticipated to decrease from the now $729,750 to $625,500. What does this mean to you?

The conforming loan limit determines the maximum size of a mortgage that FHA, Fannie Mae, and Freddie Mac government-sponsored enterprises can buy or guarantee. Non-conforming loans, also known as jumbo loans, usually carry a higher interest rate because they do not have this guarantee.

Before 2008 conforming loan limits were at $417,000. In order to stimulate the real estate market, Congress temporarily raised that limit $729,750 through fiscal year 2011. The new limits, scheduled to adjust October 1, 2011, will decrease that to $625,500.

Let's say you, the Buyer, saved up $81,000. With loan limits at $729,750, you could buy a property up to $811,000.

Now, let's say the limits change to what is anticipated. Your $81,000, together with a loan amount of $625,500, would only allow you to purchase a home of $706,500, a difference of $104,500.

It's a change, but the change is not as painful as it would be if it reverted to pre-2008 numbers. In that case, your $81,000, and your loan of $417,000, would only get you a home for $498,000.

So, although we are facing a decrease in conforming limits, which would be better not to have to face, the compromised amount of $625,500 is MUCH better than if it reverted back to the original $417,000 amount.

Interpreting how all of our new rules affect you is my job. As always, I'm here to help. Please contact me with any of your real estate selling and buying needs.

Los Altos home sales statistics for June 8, 2011 to July 8, 2011

by Deniece Smith, Realtor, ePro, SRES  www.dsoldit.com

37 homes closed escrow in all of Los Altos in the past month.

12 out of the 37 sales, or 32.43%, sold over the original asking price.

4 homes got exactly what they were asking.

9 of the 37, or 24% of the homes reduced their asking price before selling.

The average days on market for all listings that closed escrow in the past months was 31.

Here is a link to the detailed report.

Arbitration and the new PRDS Real Estate Purchse Contract

by Deniece Watkins Smith, Realtor

www.dsoldit.com

New Contract

A new Peninsula Regional Data Service (PRDS) Real Estate Purchase Contract, that is used most frequently in purchases and sales of residential properties up to four units in parts of Silicon Valley, has gotten an overhaul. It is available now for use by all Realtors in our area.

One Example of change from the Contract:  Arbitration

Both versions of the contract have an arbitration clause that, when initialed by both the Buyer(s) and Seller(s), causes for any disputes to be handled by an arbitrator, resulting in a final and binding decision which cannot be appealed.  

The previous PRDS Contract (Version 04/07) had an explanation of arbitration in paragraph 7A which read as follows:

"Explanation: Arbitration is a private dispute resolution process in which Parties (by themselves or through their attorneys) submit disputes to a neutral arbitrator who is charged with rendering a fair and impartial decision as to all issues presented. When arbitration is selected, the Parties give up their rights to trial by judge or jury and to full and formal court process. Basic discovery rights (e.g., depositions, document production) are provided for under California law. Rules of evidence and procedure are less rigid than in trial court. Arbitration fees are typically on an hourly basis. The decision of the arbitrator is final and binding on all Parties to the arbitration agreement (Paragraph 7B). The arbitrator can award compensatory damages, punitive damages, and/or order specific performance, injunctive relief and declaratory relief. No trial or other court process is available to re-try the case or to appeal the merits of the arbitrator's ruling. This means that even when a party claims the arbitrator made a clearly wrong decision, based on a misunderstanding of fact or of law or an unwillingness to follow the law, that decision nevertheless remains final and unappealable. Only in cases of actual fraud in the arbitration process, corruption, bias, lack of due process or jurisdiction, or arbitrator's computation error, can an award be vacated or modified. The Parties are advised to confer with legal counsel for advice before committing to binding arbitration."

Some brokerages advise Realtors not to give advice with regards to arbitration.  It is the Buyer(s) and Seller(s) responsibility to decide if they want to initial this clause, which includes it as part of the contract.  In my experience, when I show the highlighted sentence in the explanation to my clients, most have chosen not to initial the Arbitration clause.

The new PRDS Real Estate Purchase Contract (Version 5/11) has Arbitration moved to paragraph 27B, which consequently, is page 8 of 9 in the contract.  Having it be located later in the contract may cause for less enthusiasm when covering this subject, yet still has heavy implications.  This new section reads:

"By initialing below, Buyer and Seller agree to submit any disputes between them concerning and/or arising out of this Contract to binding arbitration if those disputes are not resolved by mediation. Arbitration is a dispute resolution process in which the Parties, either on their own or represented by their attorney, submit disputes to a neutral arbitrator. The arbitrator shall be a retired Superior Court judge or a licensed California attorney with at least five years’ real estate experience. If the Parties cannot agree on an arbitrator, the Superior Court shall appoint the arbitrator. By agreeing to arbitration, the Parties give up their rights to a trial by judge or jury. The decision of the arbitrator is final and the Parties are giving up their right to appeal, except as provided by California law. Arbitration shall be conducted pursuant to Title 9 of the California Code of Civil Procedure including, but not limited to, the right of discovery under Section 1283.05. The decision of the arbitrator is final and binding on all Parties to the arbitration agreement. The real estate licensees are not required to arbitrate. The Parties are advised to consult with an attorney before agreeing to binding arbitration."

Notice that the highlighted sentence from the older version of the contract has been left out of the new explanation. 

I took the time this week to discuss this matter with two of the attorneys who wrote the contract. The conclusion is that the sentence highlighted above is still implied as truth.  This means that when initialed, arbitration is still final and binding on all parties even when the Arbitrator was unwilling to follow the law!

Summary

I've highlighted one nuance that stands out in the new contract that has affect on all parties to the contract.  There are 32 paragraphs in the new contract.  It is nine pages long.  Using a Realtor who is absolutely familiar with what your contract really says is essential when you're buying or selling a home in our area.

Maximizing your remodeling dollars

Deniece W. Smith Welcome Home. Phone: 650.483.2055 License #: 01295757 Email: dsoldit@gmail.com Web: www.dsoldit.com

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Considering Selling Your Home?
If you are thinking about selling your home in the near future, I am sure you will find the information in the following article very valuable. If you are interested in finding out how much your home will likely sell for in today's market just give me a call or send me an email and I'll prepare a no-obligation market analysis for your property.

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REMODELING YOUR HOME

The classic way for homeowners to increase the value of their house is by remodeling existing rooms or adding on to its current plan.

Some choose to build recreation rooms and studies while others add new appliances, fixtures and cabinets to enliven rooms and make their home more attractive to future buyers.

But, when should you decide to stop sinking money into a home and buy a bigger place? And how much rehab is too much when it comes time to recovering remodeling costs through a home sale?

For instance, if you’ve just spent $1,000 remodeling your living room and didn’t expand your small bathroom, the chances of increasing the number of interested buyers are slim.

With these concerns in mind, I can offer a few tips for those struggling to add value to their home.

First, always protect the character of your home. Nothing sticks out negatively more than a new addition that is in a completely different architectural style. Be consistent. Recognize your home’s character and stay within its framework.

The most financially rewarding areas to remodel are usually the kitchen and bath. Newly re-done cooking spaces and cabinets can attract more buyers and may command a slightly higher price for the home than a comparable one on the market. Simple repairs that are made to last will bring you the biggest returns upon sale.

Some people think that tubs are not used anymore and remodel them out of their homes.  New families will notice this and wonder where they may bathe their children.  Keep at least one tub in your home, preferably in the master bathroom.

Buyers are, by convention, more interested in aboveground living space – not basements, yards and walkways. Swimming pools can be a poor investment if installed for the sole purpose of increasing a home’s value; it’s rare that a pool’s cost will be recovered in a home sale. It can also be a negative feature for potential buyers with very young children.

Replacing worn carpeting, tiles and wood floors can give your home an immediate advantage over similar properties in the area. Updating paint colors in all areas of your home can also prove beneficial.  Both of these upgrades can be done wisely and inexpensively with the advice of your Realtor.  We have connections to just the right people used to putting in carpet for a sale, and using paint colors that make the features of your home pop out in a positive light.

Stay simple with your remodeling and look at your home as though you were the buyer. Chances are that if you find the upstairs bedroom could be brightened by a larger window, potential buyers will probably feel the same.

Don’t go overboard. Concentrate on improving two or three deficiencies in your home. More than likely, the time and money you spend adding quality to your home will be rewarded with greater profit at selling time.

As always, I'm here to walk through your home with you at no cost to you, and give you a humble opinion of what is the best upgrade for your money.

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I hope you enjoyed this article. Please feel free to forward this on to others that might appreciate the information. As you know, I am a real estate agent specializing in your neighborhood and have access to excellent Realtors in other areas as well. Referrals are extremely important to my business. I would be most grateful if you would put me in touch with people you know that might be selling or buying a home. Thank you for the support.

Cash Buyers, High-End Sales, Local Market Strength

by Deniece Watkins Smith
Realtor, ePro, SRES
Coldwell Banker, Los Altos
www.dsoldit.com


     Six out of twenty-one homes in Los Altos that have closed escrow in the past month have closed over their asking price.  Twelve out of thirty-two homes in Mountain View that have closed escrow in the past month have closed over their asking price.  

     When we hear news on TV about real estate it's mostly for the entire bay area, state, or even nation.  Real estate is extremely localized and only local real estate news can tell you what's happening in your area.  

     For approximately three months now, we have been in a very active, multiple offer market.  Approximately one-third of all primary residences are being purchased with 100% cash.  Approximately one-fourth of all second homes are being purchased 100% cash.  Usually, when the cash buyers are out in force is when the "investors" believe the bottom of the market has been reached.  

     Thirty-one homes from Sartoga to Atherton have closed escrow over four million dollars.  Those are the ones actually reported on the MLS. Some (like Yuri Milner's Los Altos Hills property rumored to have sold for $100 million) have closed without ever being reported to the MLS. For a long time the high-end market was completely dormant.  Since February of this year that market has woken up.  


     It is my opinion that when the high end market starts up and is active, it is an indication that company leaders are confident in the economy and should, in-turn, be an indicator of hiring in the near future.

     So we have a great start to Spring of 2011 as far as Silicon Valley real estate goes.  Let's hope the ball keeps on rolling!

Considering selling two homes for one

by Deniece Watkins Smith - Realtor, ePro, SRES 
March 8, 2011

Client:
     Unfortunately, when our friend the Realtor came to check out both houses (in Arizona) about a month ago, his suggestion was that we wait another year before we try to sell. He said that at this point we'd be lucky to get what we paid (Not what I wanted to hear, of course.)... In the mean time, I'm trying to be patient and work on the landscaping to improve both the "curb appeal" and, hopefully, the value. I'm taking a Master Gardener class. Something I've always wanted to do.

Deniece:
     Lots of people are wanting to recuperate what they paid for a house and it's very hard after the downfall of the market. So they are hanging on to a smaller house instead of doing their move up now. I think now is a perfect time to move up. 1) Taking a loss on $200K to get the same gain on $300K is a net gain [I'm adjusting prices here fr your area so forgive me], and 2) Interest rates are at the lowest on record ever. So if you pay more in the future in interest, for a bigger home, you lose twice, with price, and with interest rate. Are you more consolidating, or trying to move up?

Client:
     That's a good point. I'm not sure what you'd call it (what we're trying to do) - We each own a smaller home (around 1200 sq. ft.), and are hoping to sell both to buy one larger home, where we can consolidate all of us, our pets, and my business. Do you think improving the landscaping is a good idea? I also plan to do a small renovation to my house to add a 1/2 bath - as Bill (our friend, the Realtor) said that would be a good move..I appreciate your time to comment on this.

Deniece:
     Everything is a matter of the price of sanity in real estate. If you're having to manage two homes and would feel more comfortable in one sooner than later, getting that larger one now would be a good consideration so your payments over the next 30 years are based on record low interest rates. 
Here's an example:
   A $300,000 loan at 4.75% is a payment of $1,564.94
   A $300,000 loan at 6.25% is a payment of $1,847.15
I'm calculating those on principal and interest only, using a website here.  So if you sell your homes now to save that difference in payment, does it seem more beneficial to sell now or later?

     Regarding landscaping, only the front landscaping makes any big deal here.  You try to create a positive first impression with any home.  "Wow, look how fantastic that home is, let's go in," the Buyers say.  Then they get in and smell fresh paint, see fresh carpet or refinished floors and say, "Let's keep looking around, this place seems wonderful."  If you can't get them in the door, all stops.

    Do one house at a time.  Choose the home you use least.  Try the market and how it feels selling one home.  You'll learn a lot about the whole experience that you can transfer to how you choose to prepare and present the second home.

    Call a lender.  A lender will be able to tell you now what you can do with your current financial situation.  They will also be able to tell you what you can do when one home sells, and when the second home sells.  They can use worst case scenarios so you're happily surprised when all comes to fruition.
     You call the lender and say, "We are thinking of selling one or two of our current smaller homes to buy a larger home.  Here's what we have in the bank.  Here's what we make.  Here's what our credit score is.  What are our options now?  What would our options be if we sold one home for $XYZ? (Then give a low estimation of the sale price.)  And lastly, what would our options be if we sold both homes for a total of $XYZa?

     Don't use a Lender/Realtor.  Anyone who thinks they can stay up with the real estate market and the lending market is greedy.  It's like being an expert at commodities and high tech on the stock market.  Too much information!  Use an expert who focuses on lending, and try to get the VP or Broker/Owner of the lending firm.  They tend to know what is happening now and what is forecast in the near future. 
     Use a Realtor who specializes in your area specifically.  If the homes are 30 miles apart, you may want two localized experts.  You can have your friend refer you to Realtors of your choice and he'll get a 25% referral fee paid to him, and you'll get the expertise you need in a very difficult market.  Some people think that an agent won't work as hard for them if that agent has to pay a referral fee to someone else. However, since we spend 90% of our time and money getting leads, it's quite the opposite when we receive a referral. We're overjoyed to help out someone and pay that fee.

Cash buyers lift housing

from the Wall Street JournalBuyers in markets around the U.S. are snapping up homes in all-cash deals, betting that prices are at or near bottom and breathing life into some of the nation’s most battered housing markets.

Read the full story  

Brandon Knapp's Market Update Jan 24, 2010

In This Issue...

Last Week in Review: The US Dollar has dropped. Find out why and what it could mean to home loan rates! Forecast for the Week: A full load of economic reports hits the markets. Read what they are and why they matter. View: How much can you deduct for driving? Discover what’s changed...and how you can benefit! Read Entire Article

When Mortgage Rate Locks Expire

By LYNNLEY BROWNING

Published: January 6, 2011

A lock-in agreement — also called a rate lock or rate commitment — protects against sudden spikes in interest rates by freezing the terms of a loan while it is being processed, which could ultimately save a borrower tens of thousands of dollars in interest costs over the life of the loan.


Read Entire Article

Fewer default notices issued in Santa Clara, San Mateo counties

By Brandon Bailey

bbailey@mercurynews.com

Posted: 01/18/2011 06:49:57 PM PST

Updated: 01/19/2011 10:07:30 AM PST

Lenders issued fewer default notices to homeowners in Santa Clara and San Mateo counties last year, marking the first year-to-year decline since the foreclosure crisis erupted in 2007, according to a report issued Tuesday by a private tracking service.


Read entire article

California median home prices dip in December

Associated Press

Posted: 01/21/2011 12:37:40 PM PST

Updated: 01/21/2011 12:43:28 PM PST

LOS ANGELES -- California's median home price declined nearly 4 percent last month to $254,000 from $264,000 in December 2009, as low-priced foreclosures and other distressed properties continued to dominate the market.


Read entire article

Biz Break: For California's real estate market, hope or despair?

By Frank Michael Russell

frussell@mercurynews.com

Posted: 01/21/2011 01:19:10 PM PST

Updated: 01/21/2011 01:26:38 PM PST

Today: Los Altos, Cupertino and Los Gatos were among the state's 10 most expensive communities last month by median home price, and Santa Cruz and Gilroy were among the 10 with the biggest price gains. Plus: Google tries to block "webspam." And: Silicon Valley's jobless rate falls


Read Entire Article 

Allstate sues Countrywide over toxic investments

NEW YORK -- Allstate has filed a federal lawsuit against Countrywide Financial over $700 million in toxic mortgage-backed securities that the insurer bought beginning in 2005, only to see their value decline rapidly.

Read article »

Mortgage rates: Average on 30-year fixed loans rises to 4.86 percent

NEW YORK -- The average rate on 30-year fixed mortgages rose this week to the highest level in seven months, reflecting higher yields on long-term Treasurys. 

Read article »

Court rules against Wells Fargo U.S. Bancorp in foreclosure case

BOSTON -- The highest court in Massachusetts ruled against U.S. Bancorp and Wells Fargo on Friday in a widely watched mortgage foreclosure case that could have serious implications for the nation's largest banks. 

Read article »

Brandon Knapp's Market Update Jan 10, 2010

In This Issue

Last Week in Review: The labor market continues to improve, and while that’s good news for our economy, what does it mean for home loan rates? Forecast for the Week: Very impactful reports are in store for the week ahead - including a look at inflation, retail sales, and how American consumers are feeling these days. View: Breaking news... you won’t need to sweat the dreaded April 15th date this year. Find out why below. Read full story here

Brandon Knapp's Market Update Jan 3, 2010

In This Issue

Last Week in Review: The labor market continues to improve, and while that’s good news for our economy, what does it mean for home loan rates? Forecast for the Week: Very impactful reports are in store for the week ahead - including a look at inflation, retail sales, and how American consumers are feeling these days. View: Breaking news... you won’t need to sweat the dreaded April 15th date this year. Find out why below. Read full story here