Bill Before the House May Make Houses Harder to Afford

From my in-box today:

“A draft bill to be discussed at a House subcommittee hearing today would raise the minimum down payment to 5% and would also make a significant cut to the maximum size of loans backed by FHA in many parts of the country. The maximum FHA loan size in expensive parts of the country is already scheduled to go to $625,500 from $729,750 on Oct. 1. However, in areas where home prices are more modest, that limit is scheduled to fall as low as $271,050. The bill would allow those limits to fall even more—to 125% of a county’s median home price.” -Russell Doi, RPA Mortgage

These changes will be a hurdle for many buyers. Buyers with great cash flow but low assets may find themselves pushed out of the market. Buyers basing their price range on the current $729,750 loan limit may have to lower their sights by more than $100,000.

Buyers searching in the $800,000 price range and looking to use the maximum loan, your window of opportunity is closing. All buyers with low down payments should consider buying now. With buyer-friendly legislation, interest rates below 5% and home prices relatively low, now could be the best time to make the move.

This may also create a temporary market surge for sellers who can come quickly to the market, as buyers look to capitalize on the existing rules. Particularly if your home is in a price range that benefits from the large conforming loan limit (usually properties over $800,000) and for homes in the "starter" price range (under $500,000 in this area) where down payments tend to by lowest. Houses sell for the highest dollar amount when they appeal to the largest amount of buyers. The proposed changes are enough to restrict affordability and move some currently active buyers to the sidelines.

Make your Home Buyer AND Lender Friendly!

The mortgage world has changed. Just as buyers have discovered new hoops to jump through, Sellers are also finding that their properties are under greater scrutiny. Making your property match lender expectations can help increase your pool of potential buyers and ultimately ensure that your home sells for the highest amount possible.

The following checklist is Courtesy of Monica C. Di Perna, Guarantee Mortgage, NMLS #116494/DRE #01244107

A. Ready the Property for an Appraisal (Eyes of the Lender)

1. Chipped paint must be repaired
2. Roof or other useful component/mechanical system (appliance etc.) must have 2 years useful life
3. No Broken windows/No sign of mold (An appraiser can suspect it and state a suspicion on the appraisal)
4. Health and Safety Hazards will be disclosed
5. Large holes must be repaired
6. Safety rails where needed
7. Inoperable Plumbing must be repaired
8. Structural/Foundation problems must be repaired (many 100 year old homes still have existing foundation-big red flag)
9. Water Heaters
10. Any sign of water damage/stains will be addressed
11. If appraiser suspects termite infestation, lender can require Termite Inspection and Termite Clearance of Section 1 items.

B. Permit History:

1. Any additions need permits or will not count as value
2. List of recent improvements from owner so you can match up permits
3. Pull the list of permits if client doesn’t have them to make sure they match improvements
4. Special Agreements with Neighbor that may not show up
5. Best place to go is City’s building & Planning Department. Permits and Property conditions can be viewed online for the City of Berkeley.

C. How does an appraiser determine Value for Lending Purposes? Price Vs. Lender Valuea.

1. Sales within past 90 days
2. No more than 20% difference in square footage/parcel size
3. No more than 1 mile in urban area and 5 miles away in rural market
   

*****Always have ready to give to Appraiser: List of improvements, permits, special agreements, and Condo Packet (CCR’s, Budget, Bylaws, Articles, Master Insurance Policy, HOA Cert)

Can You Have Your Cake and Eat It Too?

by Uma Moldenhawer
(the following is a summary of an article posted by the Hills New Group on May 13, 2011)

A real estate buyer often needs to prioritize between 2 primary attributes – location and features of the property. You have already heard by now that Location, Location and Location (has to be said 3 times for max effect!) is all that matters in real estate. There is proven value in that old saying. While property features (such as the style of the property, number of bedrooms, bathrooms, kitchen size…) often can be changed, convenience and desirability of a location can’t be easily modified, and definitely not over a short period of time.

Buyers don’t always understand the trade-offs associated with prioritizing a great location. We have had buyers say, “Even though we are willing to spend 700K on a home in the Berkeley area, we still feel like we are settling for it rather than getting our perfect home.” A Berkeley location often dictates higher prices and homes that are smaller and older when compared to most of the country. So, how do you avoid compromise? With a little imagination, you can have your cake and eat it too. Think creatively about how to manipulate property features and make a house your own sweet home.

We walk our clients through all the possible rearrangements and renovations for the subject property, to come to a conclusion on whether this is the right property or not. Sometimes fulfilling a dream is more than just finding the right house. It often requires helping buyers visualize some amount of remodeling and rearrangement. Your dreams are unique, so it is difficult to find exactly what you are looking for in the existing inventory of homes. This means either a compromise or a willingness to make changes: Be it a new paint color, a new deck or knocking out a couple walls. I believe that you should compromises only if the changes are not feasible, do not make sense economically or if you do not want to deal with the hassle.

“Think of the possibilities, not just what it is today. This is our philosophy when evaluating the features of the property – think about the possibilities and if that still doesn’t meet your needs, let it go.”

If creative visualization fails, it may be worth compromising a bit on location, especially if it is determined that a particular feature is of greater importance. Recently, we held an open house in Albany, where Mamood and I met a sweet young couple who told us that they were burnt out from searching for a home. They had been out every weekend, and it had already been 4 months since they started their search! When we asked them what feature was most important, their number one criterion was “large lot size” with the ability to garden. I couldn’t stop myself from saying, “then why are you looking in Albany where most of the lots are 5,000 square feet or smaller? You should be looking in Berkeley or Kensington.” They were tiring themselves out by looking in the wrong location. And remember to bring your creativity: If there is concrete or a deck in the wrong place, it can be removed.

For the blueberry cake (pictured above) recipe click here.

Fair Weather and Eco-Friendly Commutes

As a Bay Area Green Business, we think a lot about Eco-friendly homes and Green lifestyles. Using our Realtor cars less is a great way to lower our carbon footprint. It only takes me thirty minutes to walk to work, and I often much more relaxed than after the five minute drive. Still, I am a creature of comfort. I hate to admit to being Mother Earth's fair weather friend, but a nice day just makes it easier to leave my car at home. In May, gorgeous Spring flowers provide an extra treat! Since we have had a number of walk worthy days lately, I would like to share a few links that make planning your trip easier:

Berkeley's Bike/Walk map
Walk Oakland ~ Bike Oakland (May 12th is Oakland's Bike to Work Day.)
Open Street Maps (Zoom in -- This map shows walking paths in Kensington, El Cerrito, Richmond, Berkeley, Oakland, and everywhere else on the planet.)

Happy Cinco de Mayo! Click here for events in the Bay Area. When celebrating, consider leaving the car at home.

Photo courtesy of Robert Mueller.