Dawn Rivera’s Fremont & East Bay Real Estate Blog

Planning to buy a bank owned home with a FHA loan?    I recommend that you apply for the 203K  loan.  I am a realtor and have recently had two different clients use a traditional FHA  loan.   They were both planning to completely remodel the homes and so wanted to waive the inspections so they could close faster and be able to complete the work themselves, that way they would not have to pay labor expenses to a contractor.  The FHA appraisers came out to appraise the homes.  Both homes were in Hayward Ca., both were bank owned and there were two different appraisers.   One appraiser said that since the buyer waived the termite, roof and home inspections, they would recommend to fund the loan and let the new owner complete any remodeling at their own expense.  The other appraiser said that even though the buyer had signed an inspection waiver andcompleted an addendum stating that they were buying the home in as is condition, and waived all inspections including termite, roof and home inspections, the appraiser would not recommend funding until all inspections were completed and there was a roof and section one clearance.   The seller (bank owned)  said they would not allow any work to be completed by the buyer because of liability issues and the buyer did not want to pay a large sum of money for repairs on a home he/she did not own yet.   The seller was concerned that if they put money into a home before close of escrow the buyer may walk away.   A Catch 22!  If we had gone with the 203K loan we could have done a hold back.  The loan could fund and transaction close with escrow holding back from the seller the funds to complete the repairs. 

Lesson learned!

In the past I have allowed the seller (the banks agent) to choose the escrow.  Although it’s the buyer’s right to choose in Alameda County.  Why you ask?  Well because the bank has said they woulod pay all the escrow and title fees.  I have found thought that even if you put it in the car contract they don’t always pay.  Also whne your client is buying a home in alameda county and the escroe and title companies (plurl) are in bevery hlls 90210 it makes for a much more complicated and expensive closing, with extra fees for a traveling notary.  So, lesson learned, from now on my clients will pick their own escrow not the bank!

Happy thursday! here is some more info on the existing home sales. Some good some bad news.

Sales of existing homes showed another gain in May, benefiting from favorable affordability conditions

and a first-time buyer tax credit, according to the National Association of Realtors®. May’s increase

was the first back-to-back monthly gain since September 2005.

Existing-home sales-including single-family, townhomes, condominiums and co-ops-rose 2.4 percent to a

seasonally adjusted annual rate of 4.77 million units in May from a downwardly revised level of 4.66

million units in April, but remained 3.6 percent below the 4.95 million-unit pace in May 2008.

Historically low mortgage interest rates clearly drew buyers into the market, and housing remains very

affordable even with a recent uptick in rates. First-time buyers also are being drawn off the

sidelines by the $8,000 tax credit, which is helping to absorb inventory. However, the increase in

sales is less than expected because poor appraisals are stalling transactions. Pending home sales

indicated much stronger activity, but some contracts are falling through from faulty valuations that

keep buyers from getting a loan.

Total housing inventory at the end of May fell 3.5% to 3.80 million existing homes available for sale,

which represents a 9.6-month supply2 at the current sales pace, down from a 10.1-month supply in

April.

The appraisal problem is serious. Lenders are using appraisers who may not be familiar with a

neighborhood, or who compare traditional homes with distressed and discounted sales. In the past

month, stories of appraisal problems have been snowballing from across the country with many contracts

falling through at the last moment. There is danger of a delayed housing market recovery and a further

rise in foreclosures if the appraisal problems are not quickly corrected.

A NAR practitioner survey in May showed first-time buyers accounted for 29% of transactions, and that

the number of buyers looking at homes is nearly 10 percentage points higher than a year ago.

The NATIONAL MEDIAN existing-home price for all housing types was $173,000 in May, down 16.8% from a

year earlier. Distressed properties, which declined to 33% of all sales in May from 45% in April,

continue to downwardly distort the median price because they generally sell at a discount relative to

traditional homes.

First-time buyers are concentrated in the lower price ranges, which include most of the distressed

sales.

Single-family home sales rose 1.9% to a seasonally adjusted annual rate of 4.25 million in May from a

pace of 4.17 million in April, but are 3.0% below the 4.38 million-unit level in May 2008. The median

existing single-family home price was $172,900 in May, down 16.1% from a year ago.

Existing condominium and co-op sales increased 6.1% to a seasonally adjusted annual rate of 520,000

units in May from 490,000 in April, but are 8.9% below the 571,000-unit level in May 2008. The median

existing condo price4 was $173,800 in May, down 21.9% from a year earlier.

Existing-home sales in the Midwest jumped 9.0% in May to a pace of 1.09 million but are 4.4% below May

2008. The median price in the Midwest was $145,800, which is 10.4% lower than a year ago.

In the South, existing-home sales were unchanged at an annual pace of 1.74 million in May but are 8.9%

below a year ago. The median price in the South was $157,400, down 9.9% from May 2008.

Existing-home sales in the West slipped 0.9% to an annual rate of 1.14 million in May, but are 11.8%

higher than May 2008. The median price in the West was $197,700, down 30.6% from a year ago.

 The Obama Administration has announced efforts to help bring more relief to responsible homeowners under the Making Home Affordable Program. There has been an effort for greater affordability, for homeowners, by reducing interest rates on their second mortgages as well as a set of measures to help underwater borrowers stay in their homes. Treasury secretary Tim Geithner said “With these latest program details, we’re offering even more opportunities for borrowers to make their homes more affordable under the Administration’s housing plan.”  “Ensuring that responsible homeowners can afford to stay in their homes is critical to stabilizing the housing market, which is critical to stabilizing our financial system overall.”

The Second Lien Program, one of the new details, will work together with first lien modifications offered under the Home Affordable Modification Program to deliver a more conclusive, affordability solution for struggling borrowers. Second mortgages can create huge challenges, even when a first lien is modified. Up to 50% of at-risk mortgages have second liens, and many properties in foreclosure have more than one lien. The second mortgage always has a higher interest rate than the first lien.

Under the Second Lien Program, when a Home Affordable Modification is initiated on a first mortgage lien, servicers participating in the Second Lien Program will automatically reduce payments on the second lien according to a pre-set protocol. Alternatively, servicers will have the option to extinguish the second lien in return for a lump sum payment under a pre-set formula determined by Treasury.

Separately, the Administration has also announced steps to join the Federal Housing Administration’s (FHA) Hope for Homeowners with Making Home Affordable. Hope for Homeowners requires the holder of the mortgage to accept a payoff below the current market value of the home, allowing the borrower to refinance into a new FHA-guaranteed loan. Refinancing into a new loan below the home’s market value removes a borrower from a position of being “underwater” to having equity in their home. By increasing a homeowner’s equity in the home, Hope for Homeowners can produce a better outcome for borrowers who qualify.

Under the recently announced changes and, when qualifying borrowers for a Home Affordable Modification, servicers will be required to determine eligibility for a Hope for Homeowners refinancing. Where Hope for Homeowners proves to be viable, the servicer must offer this option to the borrower. To ensure proper alignment of incentives, servicers and lenders will receive pay-for-success payments for Hope for Homeowners refinancings similar to those offered for Home Affordable Modifications. These additional supports are designed to work together and take effect with the improved and expanded program under consideration by Congress. The Administration supports legislation to strengthen Hope for Homeowners so that it can function effectively as an integral part of the Making Home Affordable Program.

Making Home Affordable, a comprehensive plan to stabilize the U.S. housing market, was first announced by the Administration on February 18. The three part program includes aggressive measures to support low mortgage rates by strengthening confidence in Fannie Mae and Freddie Mac; a Home Affordable Refinance Program, which will provide new access to refinancing for up to 4 to 5 million homeowners; and a Home Affordable Modification Program, which will reduce monthly payments on existing first lien mortgages for up to 3 to 4 million at-risk homeowners. Two weeks later, the Administration published detailed guidelines for the Home Affordable Modification Program and authorized servicers to begin modifications under the plan immediately. Twelve servicers, including the five largest, have now signed contracts and begun modifications under the program. Between loans covered by these servicers and loans owned or securitized by Fannie Mae or Freddie Mac, more than 75% of all loans in the country are now covered by the Making Home Affordable Program.

Continuing to bolster its outreach around the program, the Administration also announced a new effort to engage directly with homeowners via MakingHomeAffordable.gov. Homeowners will have the ability to submit individual questions through the website to the Administration’s housing team. Members of the Treasury and HUD staffs will periodically select commonly asked questions and post responses on MakingHomeAffordable.gov.

For more information, visit www.MakingHomeAffordable.gov.

Short sales, they come at a good price but I have to wonder, are they are worth all the hassle and wait to get them? For the consumer who has the time and is willing to be very patience you can get a home which could be in very nice condition for a great price.

REO’s or Foreclosed porperties, Buying a bank owned property is much the same as buying a property from a home owner.  You will get a better price but will have to pretty much buy it as is.  The banks will not fix or repair things as a home owner will, but you can get the home at a price that will allow you to do the repairs yourself.