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Fall 2009 Issue
In the News
Welcome to the fall 2009 edition of my real estate newsletter. I've improved the look and feel as well as the format. Instead of the usual six articles per quarter, I plan to get out two or more stories every six weeks, as news hits and the market changes. Also, I'm now posting the newsletter articles on my Web site, so you can easily read earlier stories.
Speaking of my Web site, I've updated the Media Section. It includes links to recent interviews I've done with local and national news media. And you can watch video clips of my appearances on HGTV and CBS.
But enough about me. Let's talk about real estate. The market volatility in San Francisco and most parts of the country has largely settled. Absent any unexpected shocks, I believe the worst is behind us. We've gone from empty open houses to solid activity across many price points. While prices don't appear to be dropping anymore, they're not rising, either. Buyers are back out and looking. But they're cautious and conservative.
There have been many short sales and foreclosures, even in some of our most expensive neighborhoods. These types of sales, where the seller and/or bank is distressed and wants out, have brought the comparable sale prices down. Comparable sales are a key gauge in determining a home's value. So a seller who's moving because of a job transfer, new baby or other life change, is forced to compete on price against any short sale or foreclosure in the neighborhood.
Buyers won't make offers on a home perceived to be overpriced. They'll move on to the more competitively priced homes in a heartbeat. I'm seeing evidence of this in all price points. Homes that show well and priced right will sell quickly; sometimes with multiple offers. See the story below, about the home that just recently had 52 offers.
A new reality has set in with buyers in San Francisco. They've become more selective. Only the best homes sell quickly and for top dollar. Gone are the days when buyers would overlook the avocado green appliances, the busy intersection, an overgrown front lawn or issues with a floor plan. More than ever, sellers need to have their properties showing in prime condition. If you're stuck with a poor location or a home with issues, then you need to adjust your list price to reflect it.
As always, thanks for reading my newsletter. And let me know what you think. Hope you have a great holiday season.
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Home Buyer Tax Credit & Jumbo Loan Extensions Rebooting the Real Estate Market?
Apparently so: One home received 52 offers after just one open house.
November brought some welcome good news for home buyers and home sellers.
The first time home buyer tax credit of $8,000 was extended through April 2010. And the expiration date for the temporary conforming loan limits in high-cost areas such as San Francisco, Los Angeles and New York was extended through 2010.
Conforming Loan Limit Raised from $625,500 to $729,750
In early 2009, Fannie Mae and Freddie Mac permanently raised the conforming loan limit in high cost areas like New York, Los Angeles and San Francisco to $625,500. This was a long overdue step, allowing buyers in more expensive cities to benefit from government-backed loans and lower interest rates.
Given the financial crisis that began in 2008 and the real estate market's subsequent volatility, the Obama administration aggressively raised the conforming loan limit to $729,750. This helped our market grow this past spring and summer, especially in the entry-level price points under $600K, which had been slow for some time.
First Time Home Buyer Tax Credit Extended
In February, the Obama administration, as part of the economic stimulus bill, enacted the $8,000 first time home buyer tax credit. The credit was set to expire Nov. 30.
In addition to extending this credit in November, the government has also added a tax credit of up to $6,500 to current homeowners when they purchase their next primary residence. You must have lived in your home for five consecutive years during the previous eight years to be eligible. To earn this credit, buyers must be in contract for a new property by April 30, 2010 and must close before July 1.
Prices Dropped Up to 30%
Over the past year, real estate values have dropped as much as 30% in San Francisco and across the country. Residential real estate is now more affordable than any time in the recent past.
One Open House, 52 Offers
All these trends, coupled with low interest rates, have helped breathe life back into many real estate markets over the past six months. Confidence in the market is growing. Buyers are aggressively writing offers on homes that are priced to sell and show well.
For example, a three-bedroom home in Daly City's Westlake section received 52 offers after just one open house. This may or may not be a direct result of the government's incentives. But it's a sure sign some people are feeling confident again with the real estate market and their job security.
Extending the first time home buyer tax credit through April 2010 will surely give potential buyers an added incentive to house-hunt. But I'd caution against feeling pressured to act before the clock runs out.
If you've been looking for a while, are pre-approved for a loan, have the down payment and are actively engaged in the process, proceed with caution. You just might find your dream home before the deadlines.
On the other hand, if you've been on the fence or toying with the idea of buying, let it happen on its own time. The worst case would be to purchase a home under pressure, lured by the magic figure of an $8,000 tax credit, only to realize later that you may have made a bad investment.
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Top 5 Tips for Buying a Foreclosure or Short Sale
A reporter for Bankrate.com recently contacted me about the growth in residential foreclosures and short sales.
These types of sales are no longer limited to subprime loans and peripheral markets. I see them in all markets, including the high-end markets such as New York and San Francisco.
Most buyers have come across these options in their searches. If you see a short sale or foreclosure in your market, you may be lured by the low price or the terms "motivated seller" or "bank-owned." It's true: You can get great deals on bank- owned and short sale properties. But my advice is, as always, to make sure you know exactly what you're getting.
Here are my top 5 tips for buying a foreclosure or short sale property:
1. Get a home inspection.
There aren't always the necessary disclosures in short sales or foreclosures. So you may not know what you're getting unless you have a complete home inspection. If possible, get the inspection before you write an offer, but definitely before you close escrow.
2. Knock on the neighbors' doors.
Your potential neighbors are likely to know something about the house or the neighborhood you don't. Remember: the seller isn't there to disclose the crime from last year or the loud music down the block or the sewage that leaked in the backyard last year.
3. Review the preliminary title.
Make sure there aren't any past liens or owners still on title. Also, you want to be assured the bank has paid all taxes and delinquencies before you close escrow. In a condominium, make sure there aren't back homeowner's association dues. Once you close, those liens, unpaid taxes and delinquencies can become your problem.
4. Talk to the local building/planning department.
Make sure there aren't outstanding permits on the house. If it looks like there was a recent renovation, make sure it was done with permits and the city has signed off on them. If not, and there's a problem, the city can cite you. This could result in thousands of dollars in unexpected renovations or "fix it" work.
Also, make sure there aren't any neighbors who have submitted plans to build a mega house or demolish a house nearby. Any nearby plans or work would normally be known and disclosed by the seller, but not always in the case of a foreclosure or short sale.
5. Know the tenants' rights.
If you're buying an investment property occupied by a tenant, you need copies of any leases, knowledge of deposits and length of tenancy. Once the property is sold, the tenant becomes your responsibility. You'll have to adhere to the terms of any outstanding leases. Check your local rent board, because there are some instances where the tenants may have more rights than you think...
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