Dawn Rivera’s Fremont & East Bay Real Estate Blog

Make sure your home is in top condition so you have a better chance to get a good appraisal………

Less than a week after putting his newly renovated house on the market, “Rick” accepted a full-price offer of $242,900 on the 1940 bungalow. But the appraisal on the 1,780-square-foot home came in at just $206,000. The buyer couldn’t come up with enough cash to make up the difference and Rick wasn’t willing to drop the price, so the deal fell through.

On top of sluggish home sales, are appraisals becoming the newest threat to the local housing market?

Real estate experts say sales are collapsing as appraisers are being more conservative and valuing homes for less than what buyers have agreed to pay. Owners can’t refinance because appraisers say their homes are worth less than they had counted on.

In the example of Rick’s home, the low appraisal affected the would-be buyer’s ability to get a mortgage for the contracted price. Their lender naturally, wouldn’t approve that. Many Real estate brokers have seen a number of sales fall through because of low appraisals, and that has the potential to hurt property values, too.

Part of what’s at issue, a new rule that went into effect May 1 prohibiting loan officers, mortgage brokers and real estate agents from selecting appraisers.

The rule falls under the new Home Valuation Code of Conduct, the result of an agreement between Freddie Mac, Fannie Mae, the Federal Housing Finance Agency and the New York state attorney general to enhance the independence and accuracy of the appraisal process. It applies to lenders that sell single-family mortgage loans to the government-sponsored enterprises.

The rule was meant to prevent inflated appraisals like those that proliferated during the housing boom.

Unfamiliar with the area

One of the unintended consequences of this system, however, is the chance that a management company, will hire an appraiser who isn’t familiar with the neighborhood where the house is being evaluated. When you have appraisers coming from different parts of town and not knowing areas, they aren’t doing justice to the people that are trying to refinance or sell, It really skews the whole appraisal process.

Hi loyal readers, here is some new market info for you. Record low mortgage interest rates boosted pending home sales for the third consecutive month, with some benefit now from the first-time buyer tax credit, according to the National Association of Realtors®.

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in April, rose 6.7% to 90.3 from a reading of 84.6 in March, and is 3.2% above April 2008 when it was 87.5.

The Pending Home Sales Index in the Northeast shot up 32.6% to 78.9 in April and is 0.8% above a year ago. In the Midwest the index rose 9.8% to 90.4 and is 11.1% above April 2008. The index in the South slipped 0.2% to 93.0 in April but is 3.5% higher than a year ago. In the West the index rose 1.8% to 94.8 but is 2.9% below April 2008.

There are numerous buyer assistance programs around the country. Some states are offering bridge loans that allow first-time buyers to use the tax credit for downpayment and closing costs, but there are many other local government and nonprofit programs available to buyers, depending on location.

Just last week, HUD announced that qualifying buyers can use the tax credit for closing costs on FHA loans, to buy down the interest rate or make a larger downpayment. Buyers who are wondering about their options should contact a Realtor®, who can advise consumers on the housing assistance programs and resources available in a given area.

NAR’s (national asso. of realtors) Housing Affordability Index is in record territory. The affordability index rose to 174.8 in April from an upwardly revised 171.9 in March, and was the second highest monthly reading on record after peaking at 176.9 in January of this year. The HAI is a broad measure of housing affordability using consistent values and assumptions over time, which examines the relationship between home prices, mortgage interest rates and family income; tracking began in 1970.

A median-income family, earning $60,900, could afford a home costing $296,800 in April with a 20% downpayment, assuming 25% of gross income is devoted to mortgage principal and interest. Affordability conditions for first-time buyers with the same income and small downpayments are roughly 80% of that amount. The affordable price was well above the median existing single-family home price in April, which was $169,800.

The relationship between contracts on pending home sales and closings on existing-home sales is taking longer than in the past for several reasons, Mortgage processing time has increased, it is taking many months to close on those homes requiring short sales with lender approval, and some sales are falling through at the last moment.

The total number of existing-home sales is expected to improve but with dramatic local market variation in the timing of recovery. The market has already bottomed in some areas, but this is an unusual housing cycle with some areas improving rapidly while others languish or decline.

For more information, visit http://www.realtor.org.

Hi all, I just heard June is National Homeownership Month! and, like many other consumer advocates, I urge consumers to get informed as they prepare to buy a home. Today, there are a growing number of obstacles for home buyers, including a higher credit score standard and more restrictions on credit. Despite current challenges in the secondary mortgage market, home loans are available to credit-worthy buyers and banks stand ready to assist prospective home buyers.

Whether you live in California, Oregon, New Jersey, or anywhere else in between, it’s crucial that you have a thorough understanding of the changing market when shopping for a mortgage. Here are seven tips to help you do exactly that:

1. Learn about first-time home buyer programs. Consider taking a first-time home buyers course or visit with your local banker to find out about programs available to you, such as the new federal $8,000 first-time home buyer credit for 2009 home purchases.

2. Get pre-approved. Know the difference between “pre-qualified” and “pre-approved.” Getting pre-qualified is a casual process where the lender tells you how much you should be able to borrow based on how much money you make, how much debt you have and how much you have to put down on a house. Pre-approval occurs only after you actually apply for the loan and the lender gives you in writing the amount you can borrow. A buyer who is pre-approved is more attractive to sellers and their agents than one who is only pre-qualified. Once you find a mortgage that is best for you, get pre-approved before you start making offers on a home.

3. Be honest with the lender and yourself. You don’t want to borrow more than you can afford. Your bank can provide a calculator to determine if you can afford to borrow and if so, how much. The American Bankers Association has several home financing calculators available at www.aba.com/aba/static/calculators.htm.

4. Look at the basics of the loan. Don’t get distracted by all the bells and whistles. Choose the type of loan that makes the most sense for you.

5. Know your credit situation. Obtain a copy of your credit report and FICO score or VantageScore at least six months before you apply for a mortgage. This should give you enough time to challenge and remove any errors on your credit report and take care of anything that’s hurting your credit score. To obtain a free copy of your credit report, visit www.annualcreditreport.com.

6. Consider all the costs. A lender will review costs like fees, closing costs, points, homeowner insurance, and taxes. But consumers should also consider repairs and maintenance costs. As a homeowner, you are responsible for those additional costs – there won’t be a landlord to call.

7. Organize your finances before you go to the bank. While each bank may require different documentation, at a minimum you will need:

- Pay stubs.
- Tax returns.
- Financial statements (one that is less than 60 days old).
- Copies of additional monthly payments such as car loans, credit cards, student loans, etc.
- Any additional information (such as proof of additional income) that you think will help your banker to positively evaluate your credit request.

If your buying a home, you’ll probably be signing up for homeowner’s insurance as well. In fact, many lenders will require that you purchase a homeowner’s policy before your mortgage can be approved.

Most homeowner’s insurance policiesnincludenboth property and liability coverage. The property section covers damage to your possessions, home, garage or other structures on your property. It also covers offsite housing if you must move out of your house while repairs are being made. Personal property coverage will usually pay 50% of replacement value, although there may be a limit on such items as jewelry.

Most lenders require that you have Insurance (which is typically based on market value) before you close. Because the market value is a broad figure that doesn’t take specific features into account, chances are it’s much less than what your actual costs would be. Market value is based on such factors as the age and condition of your home, and the value of comparable homes in your area.

If you have any questions about the real estate industry, call me. As your real estate professional, I would be happy to help you with all of your real estate needs.

 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.

The latest survey by the Pew Research Center finds that 20% of all homeowners-or 30% of mortgage holders-say that if they had to sell their home right now, it would sell for less than they owe. And homeowners who feel underwater on their mortgages report considerably more financial strain that those who do not.

Roughly 6 in 10 (61%) of those who say they are underwater on their mortgage are white, 12% are black and 18% are Hispanic. By comparison, 84% of mortgage holders who say their home would sell for at least the value of their mortgage are white, 6% are black and 6% are Hispanic.

Nearly a quarter (23%) of those who owe more than the current value of their home are under 30 years old, compared with just 10% of those who think they would at least break even if they had to sell today. Those who feel that they are underwater on their mortgage are also much more likely to have children under 18 living in the home than are mortgage holders who don’t feel that way (64% compared with 47%). Those who say their home is paid for tend to be older: 43% are 65 or older and 33% are ages 50 to 64. Consequently, relatively few (19%) say they have children younger than 18.

Overall, homeowners offer mixed ratings of their own personal finances. Nearly half (46%) say they are in excellent or good shape financially, and about the same number (52%) say they are in only fair or poor shape.

Among those who feel that their home would now sell for less than they owe on their mortgage, however, ratings of personal finances are considerably less positive. More than six-in-ten (63%) offer a negative assessment of their personal financial situation, while only 36% say they are in excellent or good shape. In contrast, a majority (54%) of mortgage holders who feel they would at least break even if they had to sell today say they are in excellent or good financial shape.

Mortgage holders who are underwater also are more likely to be suffering financially in other ways. They are more likely to have had trouble getting or paying for healthcare for themselves or their family (32% vs. 16% of those who are not underwater) and to report having been laid off (21% vs. 13%).

Nearly all (98%) of those who say their home would sell for less than they owe on their mortgage report having made reductions in spending or changes in their saving or investment patterns lately, as do most (86%) of those who say their homes would sell for more than the value of their mortgage. However, on any given cutback item- outside of adjusting retirement plans- those who are upside-down on their mortgages are at least 15 points more likely than those who are not to report cutting back. For example, 63% of mortgage holders who say they owe more than the value of their home report having delayed or canceled plans to make a major purchase for their household, compared with just 38% of those who do not owe more than the value of their home.

Although a substantial minority (19%) of those who feel underwater on their mortgages cite declining real estate values as their top personal financial worry, this concern runs a distant second to worries about the job situation. Nearly half — 47% — of those who feel upside-down cite jobs as their top concern.

While a plurality of mortgage holders who do not feel upside-down also mention jobs (38%), the second most cited concern among this group is problems in the financial markets (30%); only 11% of mortgage holders who are not underwater say their biggest concern is declining real estate values.

January 10, 2009-As homeowners recommit to their current house in the economic and housing downturn, they’re looking for ways to find more space to make the most of what they have.

"People are saying, ‘We’re here for a while, so what can we do to make this place more usable and give us space?’" says Laura VanSickle who with her husband, Eric, owns Closets by Design in Charlotte, N.C.

The recession has been bringing people to her doors, VanSickle says, as homeowners look for ways to make their cluttered homes feel roomier.

But finding more space is often harder than installing a few bookshelves or cleaning out a closet. We asked area storage and organization experts for their best tricks to adding more square footage to your home without adding a room.

1. Think up. There’s often plenty of space up high in closets and pantries for another row of shelves — and often we don’t fill the ones that are already there.

"We’re really good at maximizing the horizontal space, but we forget about the vertical space," says Carson Tate, founder of the Charlotte organizational services company Living Simply. She recommends using the backs of doors to store items like shoes or accessories, and even the roof of a garage can be fitted with shelves to keep Christmas decorations or rarely used items such as car-top carriers.

2. Try to get some items off the ground if possible to free up floor space and make your rooms seem bigger. Would a lighted wall sconce work, instead of a table with a lamp on it? Do you need an entire bookcase, or would a few wall-mounted shelves suffice? In an office, install shelves 12 to 18 inches below the ceiling and line the walls with books. Add a small ladder and it’ll have a library feel. And wall-mounting a flat-screen TV eliminates the need for a big media center.

3. Have a bonus room? Put every inch to use. "They’re big, odd-shaped rooms and you don’t know what to do with them," Laura VanSickle says. The trick, she says, is to carve them up into smaller spaces. Buy a wrap-around desk and fill it with office supplies to become your kids’ homework corner. Use low shelves to create a nook for toys, and another nook for video games and all the gaming accessories. "It’s amazing how you can squeeze a lot of use into a room," VanSickle says.

4. Transform your guest room into an office, exercise room or living area by adding a Murphy bed. Murphy beds flip up for vertical storage inside a cabinet, and are ideal space savers because they are just 18 to 20 inches deep — in some cases even allowing your bed to transform into a wall of bookshelves.

Today’s Murphy beds are far more comfortable and easy to use than those of decades past, and much prettier, too. Now, Murphy beds accept regular mattresses and can be flipped open or closed easily with one hand. One Charlotte-area Murphy bed retailer, Buy Bye Beds, sells Murphy beds starting at $1,599, including the mattress. The company also sells cabinets that contain fold-away "drop tables" ideal for crafting, sewing or other projects that you don’t need out every minute.

Murphy beds are making a comeback in urban settings — Buy Bye Beds has been hired by developers to install them in some condominiums in uptown Charlotte, says owner London Scialdoni.

5. In kids’ rooms, don’t toss toys into giant toy bins, but instead give them low bookshelves with small containers for different types of toys. Says Tate of Living Simply: Don’t stack books on a bookshelf, because young kids often have trouble inching one book out and putting it back correctly. Instead, place a stack of books in a large square basket where they can be flipped through.

6. Choose furniture wisely. Skirted tables are perfect for stashing almost anything, and can be placed in almost any room of the house. A bench with a hinged lid is perfect for the foot of a bed or under a window, and is nice for storing linens, towels or clothes. Use long, flat storage boxes to keep items under beds or buy a set of ready-made steel bed risers to hike the bed up and allow for more storage. Leather storage ottomans do double duty in family rooms as seating or storage.

7. Got a small, useless space? Fill it in with cabinets. Master bathrooms tend to be huge in newer homes, and open walls are ripe for an extra cabinet to store necessities such as medicines, towels, linens or bath supplies, VanSickle says. One client asked her to create a built-in vanity in the corner of an odd-shaped closet.

8. Install a hanging bar in your attic. It’s the perfect place to hang tablecloths that are used only a few times a year, Tate says. Buy a canvas bag at a storage or discount store, toss in some cedar chips and hang the linens. "They’re out of the way and they stay nice and crisp and fresh."

9. Create more space in your closet. Tate recommends having just one kind of hanger in your closet, as it makes clothes easier to see. Her choice: the slimline hanger (www.slimlinehangers.com). The hangers are slim, so they take up little space, and they’re covered with a velvet-like material that won’t allow your clothes to slip off. They’re strong, so they won’t bend even under the weight of a winter coat, she says.

There is a plan for the government to partially insure lenders, if they will agree to modify troubled borrowers’ loan terms that could help stabilize housing markets, restore confidence, and bring buyers back into the market.

Federal Deposit Insurance Corp. chairwoman Sheila Bair wants the Bush administration to provide incentives for lenders to do as many as 2.2 million loan modifications.

On Friday the F.D.I.C. unveiled a proposal (see http://www.fdic.gov/consumers/loans/loanmod/index.html) that the government would pay servicers $1,000 for each loan modified to defray their expenses, and then agree to cover up to 50 percent of losses if a loan should re-default.

If we Assume one in three modified loans will re-default, the plan would cost taxpayers $24.4 billion, but prevent 1.5 million foreclosures by the end of next year, the FDIC said.

The plan and others intended to slow or stop foreclosures could help stabilize housing markets, but "speed is of the essence," said Paul Bishop, managing director of research for the National Association of Realtors.

NAR also wants Congress make credit more easily available to would-be homebuyers. One way to do that, the group says, would be to make permanent the temporary increase in the upper loan limits for Fannie Mae, Freddie Mac and FHA. The limits, boosted in February to $729,750 in high cost areas, are set to come back down to $625,500 on Jan. 1.

NAR has also been adamant that the Bush administration use at least some of the $700 billion earmarked for the Troubled Assets Repurchase Program, or TARP, the way it originally said it would: to buy up "toxic" assets like mortgage backed securities. But after earmarking the first $250 billion in TARP funds to buy shares in troubled banks, the Treasury Department now says it does not plan to buy any mortgage-backed securities.

The FDIC’s foreclosure prevention plan and the buyers incentives and access to mortgage credit advocated by NAR are complimentary in what they aim to accomplish.

Limiting the amount of foreclosures not only slows growth in inventory and slows price declines, but it also provides reassurance to would-be homebuyers who are reluctant to buy into a downturn.

Once that happens, the government must also make sure that buyers who are ready to get off the fence have the financing and incentives needed to make that happen.

First-time homebuyers are key to a recovery, because they are the the least encumbered. They don’t have a existing home to sell, and may be able to get out into the market more quickly than a homeowner who needs to sell a home first

Although the Bush administration was said to be weighing Bair’s plan, last week it rolled out a less ambitious loan modification plan involving Fannie Mae, Freddie Mac and the HOPE NOW alliance of 27 loan servicers (see story)(http://www.inman.com/news/2008/11/11/new-plan-seeks-streamline-loan-mods).

The administration’s plan, which FHA Commissioner Brian Montgomery said might help "hundreds of thousands of borrowers," involves a streamlined loan modification process in which borrowers’ loan payments would be reduced to 38 percent of gross monthly income by lowering their interest rate, lengthening the term of the loan, or reducing principal and adding it to the back of the loan.

Having placed Fannie Mae and Freddie Mac in receivership, the government has a large say in how they are run. But while Fannie and Freddie own or guarantee about 58 percent of all single-family mortgages, those mortgages represent only 20 percent of serious delinquencies.

About 60 percent of seriously delinquent mortgages have been sold to investors in private-label mortgage-backed securities who may be less willing to engage in loan modifications.

The FDIC said that while foreclosures are costly to lenders, the pace of loan modifications continues to be "extremely slow." Only 4 percent of seriously delinquent loans are modified each month, the FDIC said.

Fannie and Freddie have boosted loan modifications by 60 percent this year, but are still only averaging 4,600 a month. About 92 percent of borrowers Fannie and Freddie have worked with have been able to keep their homes.