It’s a red hot seller’s market in Silicon Valley right now, meaning that there are more buyers hunting for just the right property than there are listings available.  The end result is multiple offers, bidding wars, pre-emptive offers and rapidly escalating real estate prices in many areas and segments of the market.

When there are lots and lots of bids on a San Jose area home for sale, what do home sellers do?  Most of the time, sellers begin with an “elimination list”.  That is, they start by deciding what they do not want to deal with. The more offers there are, the more critical this becomes since sellers normally don’t love the idea of reading 10 or more stacks of offers.  (Remember, the confused mind says no!) 

Sellers need to simplify their choices, and one of them is by eliminating the worst offers first.  A question for you to consider, if you’re a home buyer in Los Gatos, Saratoga, Campbell or anywhere in Silicon Valley is this: is your lender keeping your offer from getting accepted?  Does your lender make your offer worse to the seller? Sometimes that is exactly the case.

In some cases, certain banks or even credit unions are falling into the “elimination” list for some sellers as their agents may have advised them those lending institutions are slow or difficult.  Most of the time, these are the big banks – the ones that REO or short sale listing agents are demanding that consumers use for a pre-approval for submitting offers: (more…)

Recently I closed a transaction in which the lender was a total flake.  (The buyer did not find this lender by referral of his Realtor, but instead was induced by the lure of a rebate.) The sale closed almost 2 weeks late because the flaky lender dropped the ball, repeatedly. Needless to say, this caused aggravation but also extra costs.

But there was a saving grace: she and her office were both local.  The buyer’s agent was able to drive over to that flaky lender’s office, and when the lender herself wasn’t in, the buyer’s agent was able to speak with the manager – face to face. And that helped a lot.

Never underestimate the importance of getting a lender who is both local and highly referred – preferably by your agent.  Why? Because you might only have one transaction but that agent or Realtor might be the source of many. The lender will literally try harder since a bad experience will cause referrals to stop but a good one will cause them to flow.

I have found this true even at the handyman level. If I call a handyman once a year, he may not be super interested in doing an outstanding job for me.  But if he thinks I’ll have a lot of jobs for him, that’s another story.

About half the time, my buyers come to the table with their own lenders, people I don’t know at all. Sometimes it’s OK and sometimes it’s a disaster.  But when they work with the lenders I suggest, there’s seldom a big problem, if even a small one. If you are working with a good Realtor, there’s a lot to be said for asking him or her for a list of lenders who are trusted and choosing one of them.  In my experience, the odds are better for a favorable outcome if you do.

Buying a Silicon Valley home? Understand that unless you are buying “all cash“, you will need to show your real estate purchase agreement to your lender, and your lender may want to see inspections, reports or disclosures based on what you’ve written in that paperwork.  And then the bank, credit union or lending institution may ask for repairs prior to close of escrow, even in an “As Is” sale.

This happened to my buyers a few months back.  They were buying  their first home using an FHA backed loan.  In the offer, we indicated that we would be having a few inspections (home, pest, roof, pool). Because financing with FHA backed loans is a tougher road, the lender did, indeed, require certain work to be done prior to close of escrow.  It was supposed to be an As Is sale so the buyers ended up paying for work to be done in order to close (and the seller allowed us to reduce the price somewhat).  Luckily they were all improvements that my clients intended to make anyway – but it was inconvenient and stressful to have to rush to have the work done, and of course this did cause delays.  (We did discuss not having the inspections listed in the offer, but my clients very much wanted them in it.)

For this issue, does it matter which contract you use, PRDS or CAR?

If you are planning to purchase a Los Gatos, Saratoga or San Jose area home, most likely you and your real estate agent will use either the newest PRDS contract (Peninsula Regional Data Service, employed from Los Gatos to San Francisco) or the CAR contract (California Association of Realtors form which is used throughout the state of CA). (more…)

News flash – in case you didn’t know, the current “jumbo conforming” loan rate in Santa Clara County of $729,750 is about to be repositioned (to speak euphemistically) to $625,500. This is all over October 1st, but many banks will stop lending at these rates long before that, perhaps prior to September 1st.

What does that mean to YOU, a San Jose or Silicon Valley home buyer, seller, investor or owner?

For many properties, there will be no change.  But if your property’s value is such that a 20% down purchase (a normal situation) has the loan between $625,500 and $729,750,there’s about to be a painful change.  How painful? About one half of one percent.

Right now a $700,000 loan is a jumbo conforming (good rate: 4.5%).  Under the new limits, it’s a jumbo (good rate: 5%).  The hike means, concretely, $210 per month for that $700,000 loan amount, or about $75,000 over the life of the loan.  That’s some serious dough.

This change probably WON’T impact homes priced lower than $625,000 or greater than $912,187.  But we may be seeing some pressure and price compression in the zone between.  It’s also likely that there will be some pressure to sell but also to buy before this change happens.

When money becomes more expensive, prices usually fall.  But this is an odd situation since not all price points are impacted.  For buyers with large down payments or who purchase their house “all cash”, it’s no difference to them – but it might be a huge difference to sellers.

My best guess: investors will make good use of this opportunity at a vulnerable point in the market.

If you are in the market to buy a Silicon Valley home, you’ve probably noticed that about 1/3 of all real estate listings are distressed sales. Of those, most are short sales but some are REOs or “Real Estate Owned” by a bank or lending institution.  Most Silicon Valley REO listings, and even a few that aren’t bank owned, have comments from the listing agent insisting that the buyer be pre-approved from a direct lender. Some will go so far as to insist that it be Wells, Chase, B of A or some other institution. Or even that the buyer be pre-approved via that listing agent’s hand-picked lender.

Why all the fuss about direct lenders? Isn’t a pre-approval from a mortgage broker just as good? Isn’t that asking a bit much to tell buyers who gets to see their financial info?

Pre-Approval versus Pre-Qualification

Typically, in my experience, when a bank or credit union (both are direct lenders) issue a pre-approval letter, it’s only after the buyer has actually submitted everything (pay stubs, taxes, bank account names etc.) and the info has been verified by the bank, submitted to underwriting and OK’d for a window of maybe 90 days to complete the sale. When they say a consumer is pre-approved, they mean it (the vast majority of the time).  In other words, direct lenders usually don’t write fake pre-approval letters.

Mortgage brokers sometimes do.  (Not the better ones, of course.) What they have in hand may really be enough for only a pre-qualification (or “pre-qual”), not an actual pre-approval.  But sometimes mortgage brokers will issue a pre-approval letter.  We Realtors know that this is not an uncommon problem, and many of us don’t trust a letter from such a lender if the loan agent is an unknown person to us for that reason. With mortgage brokers there’s a crisis of credibility and that’s Problem # 1. (This is not always the case, of course. Many mortgage brokers are very careful and thorough so I am not saying that they are all terrible!) (more…)

If you are like many Americans and are “underwater” with your home – that is, owing more than it’s worth – you may be considering whether or not a short sale or loan modification is for you.

Realtors cannot (should not) advise you whether a short sale is in your best interest. You have many choices and should go over them with tax and legal professionals.

One thing to consider before trying a short sale or attempting a loan modification, though, is the veracity of your original loan application.  Some home buyers here in Silicon Valley submitted loan apps that were for “no doc” loans or “stated income” loans.  If what you stated then does not line up with what you submit now, you could find yourself in a load of hot water.

Unhappy lenders are using short sale and loan modification applications as a reason to audit your original loan application.  If you fudged or misrepresented anything back when you applied for financing, you may find yourself the unhappy recipient of a loan fraud lawsuit now.

Your mother was right: honesty is the best policy.  If your loan papers were truthful, you should have nothing to fear by an audit. If you think they fall short, be sure to weigh that in when you factor what is your best course of action now.

Being an FHA home buyer in Silicon Valley is a challenge right now, especially if you want what everyone else wants: a nicely updated and remodeled home in a good area with no “issues”. (Issues meaning things like high voltage lines, busy roads, flood plains, or being too close to stores or spots not everyone wants to be near.)

The Problem with Condominiums and FHA

I need to start by explaining that things aren’t always the way they look.  We tend to think of condos as looking like apartments, with no yard, for example.  We think of townhomes as a two story or more home with neighbors on the sides but no one above or below.  And we think of houses as freestanding buildings with a yard around it.

That’s really how things look.  But how these different types of homes are owned may be another thing altogether.  For FHA home buyer purposes, this makes a huge difference.

Some townhouses and even some houses are not owned the way they look, but are held in condo ownership.   A good example of this is The Villas of Almaden, a beautiful &  gated community at Meridian and Coleman in San Jose’s Almaden Valley. Structurally, many of the buildings are houses – but they ar “condo ownership” and are stored under the condo label in our local MLS. What makes these buildings be condos? Practically speaking, in addition to their own space for their particular unit, the owners also own a percentage of everything else, such as the pool, grassy areas, tennis courts, private roads, etc. They also have a share of the liabilities of the condo community, too. 

If you are an FHA buyer and you want a San Jose area condo (or any home which is held in condo type ownership), you have to make sure the complex is FHA approved. We had the option of getting individual units spot checked until February 1st, but that has now been eliminated. Getting an entire complex approved takes time, perhaps 60 days, and money – and most buyers don’t want or cannot take on that kind of financial liability (and most sellers don’t want it either). Here is the link for the HUD site which will list for you the condo communities which are FHA approved.   So it is important to know if the townhouse you’re looking at is owned like a townhouse or owned like a condominium.  It can be painfully disappointing to think that a home can be bought with FHA backed financing, only to later discover that it can’t due to the type of ownership and lack of approval of the asociation.

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